SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
Exchange Act of 1934
For the quarterly period ended March 31, 2005
|_| Transition report under Section 13 or 15(d) of the Exchange Act.
For the transition period from ______________ to ______________
Commission file number ___________
ATLAS MINING COMPANY.
---------------------
(Exact name of registrant as specified in its charter)
Idaho 82-0096527
----- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
630 East Mullan Avenue, Osburn, Idaho 83849
--------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(208) 556-1181
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Issuer's telephone number, including area code
Former name, former address and formal fiscal year, if changed since
last report: N/A
Indicate by check whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES /X/ NO / /
The number of shares outstanding of each of the issuer's classes of
common equity as of November 5, 2004 was as follows: 37,734,017 shares of
Common Stock.
Transitional Small Business Disclosure Format: YES / / NO /X/
ATLAS MINING COMPANY
SECOND QUARTER 2003 REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Unaudited Consolidated Balance Sheet
March 31, 2005. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Unaudited Consolidated Statements of Operations Three Months Ended
March 31, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . .4
Unaudited Consolidated Statements of Cash Flows Three Months Ended
March 31, 2005 and 2003 . . . . . . . . . . . . . . . . . . . . . . .5
Notes to Unaudited Consolidated Financial Statements. . . . . . . . .6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . .7
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Unregistered Sales of Equity Securities and Use of . . . . . 11
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 12
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Certification under Sarbanes-Oxley Act of 2002 . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Atlas Mining Company
Consolidated Balance Sheets
ASSETS
------
March 31, December 31,
2005 2004
------------ ------------
(unaudited)
Current Assets
Cash $ 333,298 $ 206,635
Accounts receivable (net of allowance of $0) 133,755 273,014
Investments - available for sale 19,538 19,538
Deposits and Prepaids 46,721 65,738
------------ ------------
Total Current Assets 533,312 564,925
Property, Equipment, and Mine Development Cost,
Net 906,721 849,746
------------ ------------
Mining supplies 9,000 9,000
------------ ------------
Total Assets $ 1,449,033 $ 1,423,671
============ ============
3
Atlas Mining Company
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
March 31, December 31,
2005 2004
------------ ------------
(unaudited)
Current Liabilities
Accounts payable and accrued liabilities $ 189,495 $ 304,925
Current portion of long-term debt 979,693 1,031,672
------------ ------------
Total Current Liabilities 1,169,188 1,336,597
Long-Term Liabilities
Notes payable 772,447 811,373
Notes payable - related party 237,127 250,354
Less: current portion of long-term debt (979,693) (1,031,672)
------------ ------------
Total Long-Term Liabilities 29,881 30,055
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Minority Interest 52,652 52,649
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Stockholders' Equity
Preferred stock, $1.00 par value, 10,000,000
shares authorized, noncumulative, nonvoting,
nonconvertible, none issued or outstanding - -
Common stock, no par value, 60,000,000 shares
authorized, 42,017,587 and 36,826,222 shares
issued and outstanding, respectively 6,957,077 6,006,657
Cost of treasury stock, 1,313,022 and
1,313,022 shares, respectively (131,221) (131,221)
Retained earnings (deficit) (6,618,718) (5,861,240)
Accumulated comprehensive income (loss) 174 174
Prepaid expenses (10,000) (10,000)
------------ ------------
Total Stockholders' Equity 197,312 4,370
------------ ------------
Total Liabilities and Stockholders' Equity $ 1,449,033 $ 1,423,671
============ ============
5
Atlas Mining Company
Consolidated Statements of Operations
(Unaudited)
For the Three Month Ended
March 31,
2005 2004
------------ ------------
Revenues $ 143,373 $ 158,629
Cost of Sales 150,147 127,162
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Gross Profit (Loss) (6,774) 31,467
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Operating Expenses
Exploration & development costs 165,579 2,088
General & administrative 550,936 319,578
------------ ------------
Total Operating Expenses 716,515 321,666
------------ ------------
Net Operating Income (Loss) (723,289) (290,199)
------------ ------------
Other Income(Expense)
Interest income 167 1
Interest expense (34,561) (11,034)
Gain (loss) on sale of investments available
for sale - 1,489
------------ ------------
Total Other Income(Expense) (34,394) (9,544)
------------ ------------
Income (Loss) Before Income Taxes (757,683) (299,743)
Provision (Benefit) for Income Taxes - -
------------ ------------
Net Income (Loss) $ (757,683) $ (299,743)
============ ============
Net Income (Loss) Per Share $ (0.02) $ (0.01)
============ ============
Weighted Average Shares Outstanding 40,840,731 35,706,726
============ ============
Atlas Mining Company
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Month Ended
March 31,
2005 2004
------------ ------------
Cash Flows from Operating Activities:
Net Income (Loss) $ (757,478) $ (299,743)
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operations:
Depreciation 26,922 1,526
(Gain) loss on sale of investments available
for sale - (1,489)
Stock issued for services 388,421 242,650
Amortization - 2,500
Minority Interest 3 -
Change in Operating Assets and Liabilities:
(Increase) Decrease in:
Accounts receivable 139,260 (57,922)
Deposits and Prepaids 19,017 -
Accounts payable and accrued expenses (115,430) 33,763
------------ ------------
Net Cash Provided(Used) by Operating Activities (299,285) (78,715)
Cash Flows from Investing Activities:
Purchases of equipment (83,898) (64,798)
Proceeds from advances - 99,869
Proceeds from sale of investments available
for sale - 1,921
Payments for advances - (100,000)
------------ ------------
Net Cash Provided (Used) by Investing Activities (83,898) (63,008)
Cash Flows from Financing Activities:
Proceeds from notes payable - 39,660
Payments for notes payable (52,153) (1,773)
Payments for line of credit - (1,034)
Proceeds from subscription receivable - 100,000
Proceeds from issuance of common stock 561,999 -
------------ ------------
Net Cash Provided (Used) by Financing Activities 509,846 136,853
------------ ------------
Increase (Decrease) in Cash 126,663 (4,870)
Cash and Cash Equivalents at Beginning of Period 206,635 6,814
------------ ------------
Cash and Cash Equivalents at End of Period $ 333,298 $ 1,944
============ ============
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
March 31, 2005
NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles of the United States of America for interim financial
information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles of
the United States of America for complete financial statements. In
the opinion of management, all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation have
been included. It is suggested that these condensed consolidated
financial statements be read in conjunction with the December 31, 2004
audited financial statements and notes thereto for Altas Mining
Company and Subsidiary. The results of operations for the periods
ended March 31, 2005 and 2004 are not necessarily indicative of the
operating results for the full year.
a. 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 the best available
measure of progress on contracts.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance, such as 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.
b. 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.
c. Basis of Consolidation
The consolidated financial statements include the accounts of Park
Copper & Gold Mining Ltd. All significant inter-company accounts and
transactions have been eliminated in the consolidation.
7
d. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the
financial statements.
Net Loss Shares Per-Share
(Numerator)(Denominator) Amount
------------ ------------ ------------
For the quarter ended March 31, 2005:
Basic EPS
Net loss to common Shareholders $ (757,683) 40,840,731 $ (0.01)
============ ============ ============
For the quarter ended March 31, 2004:
Basic EPS
Net loss to common Shareholders $ (299,743) 35,706,726 $ (0.01)
============ ============ ============
e. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents. The Company had $233,298
in excess of federally insured amounts in its bank accounts at March
31, 2005.
8
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
March 31, 2005
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. 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.
9
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
March 31, 2005
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Available for Sale Investments
Management determines the appropriate classification of marketable
equity security investments at the time of purchase and reevaluates
such designation as of each balance sheet date. Unrestricted
marketable equity securities have been classified as available for
sale. Available for sale securities are carried at fair value, with
the unrealized gains and losses, net of tax, reported as a net amount
in accumulated other comprehensive income. Realized gains and losses
and declines in value judged to be other-than-temporary on available
for sale securities are included in investment income or loss. The
cost of securities sold is based on the specific identification
method. Interest and dividends on securities classified as available
for sale are included in investment income.
The following is a summary of available for sale equity securities
which are concentrated in companies in the mining industry:
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
----------- ----------- ----------- -----------
March 31, 2005 $ 19,364 $ 174 $ - $ 19,538
December 31, 2004 $ 19,364 $ 174 $ - $ 19,538
h. Mining Supplies
Mining supplies, consisting primarily of bits, steel, and other mining
related equipment, are stated at the lower of cost (first-in, first-
out) or market. In addition, equipment repair parts and maintenance
items are also included at cost.
i. 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.
j. Property and Equipment
Property and equipment are carried at cost. Depreciation and
amortization is computed on the straight-line method over the
estimated useful lives of the assets as follows:
Estimated
Useful Life
-----------
Building 39 years
Mining equipment 2-8 years
Office and shop furniture and equipment 5-8 years
Vehicles 5 years
10
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
March 31, 2005
In accordance with Financial Accounting Standards Board Statement No.
144, the Company records impairment of long-lived assets to be held
and used or to be disposed of when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amount. At March 31, 2005 and
2004, no impairments were recognized. Depreciation expense for the
quarters ended March 31, 2005 and 2004 totaled $26,922 and $1,526,
respectively.
k. 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
March 31, 2005 and 2004. The Company has no investments in derivative
financial instruments.
l. Mining Exploration and Development Costs
The company has elected to expense all mining exploration and
development costs due to the uncertainty of bringing its projects into
production, and in accordance with generally accepted accounting
principles in the mining industry. At such a time as mining continues
in any of the Company's properties, the Company will capitalize costs
of successfully developing the properties, when future benefit of the
costs can be identified.
m. Stock Options
The Company has stock option plans that provide for stock-based
employee compensation, including the granting of stock options, to
certain key employees. The plans are more fully described in Note 7.
The Company accounts for the stock option plans in accordance with the
recognition and measurement principles of APB Opinion No. 25,
"Accounting for Stock Issued to Employees", and related
Interpretations. Under this method, compensation expense is recorded
on the date of grant only if the current market price of the
underlying stock exceeds the exercise price.
During the periods presented in the accompanying financial statements
the Company has granted options under the 1998 Stock Options Plans.
The Corporation has adopted the disclosure-only provisions under
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation." Accordingly, no compensation cost under
SFAS No.123 has been recognized for the stock option plans or other
agreements in the accompanying statement of operations. Had
compensation cost for the Company's stock option plans and agreements
been determined based on the fair value at the grant date for awards
during the first quarter of 2005 and 2004 consistent with the
provisions of SFAS No. 123, the Company's net earnings net of taxes
and earnings per share would have been reduced to the pro forma
amounts indicated below:
2005 2004
------------ -------------
Net Loss As reported $ (757,683) $ (299,743)
Deduct: Total stock-based employee
compensation expense determined under
fair value based method (455,000) -
------------ -------------
Proforma $(1,212,683) $ (299,743)
------------ -------------
Basic earnings per share As reported $ (0.01) $ (0.01)
Proforma $ (0.01) $ (0.01)
------------ -------------
11
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 reduce the
Company's debt through a negotiated settlement with its major creditor
(see Note 9) and the initiation of the operations at the Dragon Mine.
The Company has also negotiated an equipment line of credit in order
to finance the required equipment for the mining operations. Further,
Company has been able to sell shares of its restricted stock to help
support its financing activities. Management believes settlement of
it debts, the mining operations, and the sale of stock will provide
sufficient cash flows to continue as a going concern.
NOTE 3 - LONG-TERM LIABILITIES
Long-term liabilities are detailed in the following schedules:
March 31, December 31
2005 2004
------------ ------------
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, past due. $ 53,455 $ 53,455
Note payable to a lending company, due in
Monthly installments of $688, including interest
at 7.59%. The note matures in March 2010 and
is collateralized by a vehicle. 34,235 35,630
Note payable to a lending company, due
in monthly installments of $578, including
interest at 11.99%. The note matured August
2003, secured by a vehicle, past due. - -
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. 118,823 118,920
Note payable to a lending company, balloon payment
due at maturity, bears interest at 8% per month. The
note is secured by land owned by a related party and
matured in March 2003, past due. 120,700 120,700
Note payable to a mortgage company, principal due at
maturity and bears interest at 3.5% per month. The
note matured in October 2003, secured by property,
past due. 86,100 86,100
Note payable to a lending company, principal due at
maturity and bears interest at 5% per month. The note
matured in May 2003, secured by land, past due. 345,508 345,508
12
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
March 31, 2005
NOTE 4 -LONG-TERM LIABILITIES (Continued)
March 31, December 31
2005 2004
------------ ------------
Note payable to a company, principal due at maturity
with no interest. The note matures in May 2005. - 17,000
Note payable to a company, principal due at maturity
with interest at 10.2%. The note matures in
February 2005. 13,626 34,060
------------ ------------
Total Notes Payable $ 772,447 $ 811,373
------------ ------------
Notes payable - related party:
Note payable to a company with a common officer,
payable on demand and bears no interest $ 162,856 $ 158,866
Note payable to an officer, payable on demand and
bears no interest. $ 74,271 $ 91,488
------------ ------------
Total Notes Payable - Related Party 237,127 250,354
------------ ------------
Total Long-Term Liabilities 1,009,574 1,061,727
Less Current Portion (742,566) (781,318)
Less Current Portion-Related Party (237,127) (250,354)
------------ ------------
Total Current Portion 979,693 1,031,672
------------ ------------
Total Long-Term Liabilities $ 29,881 $ 30,055
============ ============
Future minimum principal payments on notes payable are as follows at
March 31, 2005:
2005 $ 979,693
2006 6,201
2007 6,688
2008 7,214
2009 7,781
--------------
Thereafter $ 1,997
--------------
Total $ 1,009,574
==============
13
Atlas Mining Company and Subsidiary
Notes to the Consolidated Financial Statements
March 31, 2005
NOTE 5 - LINE OF CREDIT
In 2005 and 2004, 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 March 31, 2005 and December 31, 2004 is $0 and $0,
respectively.
NOTE 6 -RELATED PARTY TRANSACTIONS
During 2005 and 2004, the Company paid advances to a company with a
common officer. The balance of the advances at March 31, 2005 and
December 31, 2004 was $0 and $0, respectively.
During 2005 and 2004, an officer loaned the Company $1,165 and
$34,659, respectively. During the first quarter of 2005, the Company
paid off $18,382 in credit card receipts as partial payment for the
note. During 2004, the Company paid cash of $14,000 as partial
payment for the note. During 2003, the Company paid cash of $1,009
and issued 1,000,000 shares of stock valued at $10,000 as partial
payment for the note. The balance of the note payable at March 31,
2005 and 2004 is $74,271 and $91,488, respectively.
NOTE 7 - COMMON STOCK AND STOCK OPTIONS
In 1998, the Company adopted a non-qualified stock option plan
authorizing the granting to officers, directors, or employees options
to purchase common stock. Options are granted by the Administrative
Committee, which is elected by the Board of Directors. The number of
options granted under this plan and any other plans active may not
exceed 10% of the currently issued and outstanding shares of the
Company's common stock. The term of each option granted is determined
by the Committee, but cannot be for more than five years from the date
the option is granted. The option price per share with each option
granted will be fixed by the Administrative Committee on the date of
grant.
The Company adopted an incentive stock option plan in 1998. The stock
option plan permits the Company to grant to key employees options to
purchase shares of stock in the Company at the direction of the
Committee. The price of shares purchased must be equal to or greater
than fair market value of the common stock at the date. At March 31,
2005, no options have been granted under this plan.
During 2004, the company's board of directors approved an option to
the Company's CEO to acquire up to 3.5 million shares of common stock
over a five year period at $0.18 per share under the non-qualified
stock option plan. The options vest 43% on January 1, 2005, and 14%
on January 1, 2006 -2009.
The fair value of each option granted is estimated on the date granted
using the Black-Scholes option pricing model. Assumptions used to
compute the weighted-average grants during the quarter ended March 31,
2005 include risk-free interest rates of 2%, expected dividend yields
of 0%, expected life of 3 years, and expected volatility 150%. During
2004, the Company granted options to purchase up to 3.5 million of its
common shares with a calculated weighted average fair value of $0.13
each.
During the quarter ended March 31, 2005 the Company sold a total of
1,248,000 shares of restricted common stock at prices ranging from
$0.25 to $0.50 per share for a total of $562,000 cash.
During the quarter ended March 31, 2005 the Company issued 867,170
shares of stock in payment of $382,660 worth of services provided to
the company.
14
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, Utah. The Company has the
sole option to renew the lease on an annual basis. The agreement
requires the lease payments be made through the issuance of 100,000
shares of the Company's common stock each year. In July 2004, the
Company issued 100,000 shares of common stock valued at $20,000 to
renew the lease. In July 2003, the Company issued 100,000 shares of
common stock valued at $10,000 to renew the lease. The Company has
the option to purchase the mine for $500,000 at anytime, or when it
sells $1,000,000 of product from the mine during a twelve month
period.
On February 16, 2005, a Settlement Agreement was entered into between
the Company and the court appointed receiver for American National
Mortgage Company regarding the resolution of approximately $711,174
principal debt owed by Atlas plus unpaid interest. According to the
agreement, Atlas is to pay $406,000 plus 175,000 shares of common
stock valued at $78,750. The agreement becomes effective upon
approval by the courts which is anticipated in April, 2005.
NOTE 9 SUBSEQUENT EVENTS
The Company has no significant subsequent events to disclose.
15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
We are a natural resources company engaged in the acquisition and
exploration of our resource properties in the states of Idaho and Utah. We
also provide contract mining services and specialized civil construction
services for mine operators, exploration companies and the construction and
natural resource industries through our trade name "Atlas Fausett
Contracting."
Our primary source of revenue is generated by our Atlas Fausett
Contracting operations. However, we also have exploration targets and
timber. As a result, we are providing Management's discussion on our plan
of operation.
Contract Mining
Our contract mining generates most of our revenues. This may decrease
as we are able to increase operations on our owned properties, and we will
adjust our resources accordingly. At this time, we anticipate that our
contracting will remain a significant portion of our business.
Property Exploration
We intend to continue our exploration activities for halloysite clay
and other minerals, and intend to acquire commercially feasible properties
that can be put into production with minimal environmental problems and
with limited financial resources. We do not intend to seek out and acquire
other properties unless they fit into the parameters we have set. Further,
we will limit our acquisitions based on our ability to conduct our
feasibility surveys and other exploration
work on these properties, and until we have been able to bring our existing
acquisitions into a income generating stage.
In August 2001, we acquired the Dragon Mine in Juab, Utah and began
our
clay exploration. Our exploration and development expenses for the period
ending March 31, 2005 and December 31, 2004 were $165,579 and $340,657
respectively on the halloysite clay project.
The halloysite clay is considered a non-toxic material, and we feel we
can produce a sellable product with minimal environmental consequences
using proper containment and processing techniques. The intended processing
will be the crushing, drying, and packaging of the product for shipment. In
2003 we completed a small diamond drilling program to verify location of
clay beds at the Dragon Mine. With that information we have been able to
formulate development and mining plans.
During 2004 we have worked to develop and bring the Dragon Mine into a
production stage.
In December 2004 we booked our first sale of halloysite clay.
Our halloysite clay marketing efforts include contacting potential
customers and distributors which we have done. Each buyer may have a
different use for the product and the price and quantity will vary as a
result. The sale of product cannot be formalized until we have verified
our ability to provide the quality and quantities as required by the
potential buyers. From results of the product samples distributed we have
numerous potential buyers.
Until the Dragon mine is producing in a profitable manner we are not
aggressively looking for other properties. However it is our intent to look
for other properties that can be acquired, developed and mined with minimal
costs, and environmental problems.
We have a mining plan and reclamation bond approved by the proper
state authorities, have filed and received Mine Safety and Health
Administration (MSHA) registration, and County permitting where applicable.
In the future, we may pursue additional acquisitions and exploration of
other properties for metals and industrial minerals, development of which
will require submission of new mining and reclamation plans to the proper
state and federal authorities.
16
Timber
We will continue to harvest timber on our property. Timber harvesting
will be dependent upon lumber prices and weather. We normally do not log
much in the winter months.
RESULTS OF OPERATIONS
Revenues for the three month period ending March 31, 2005 were
$143,373 and $158,629 for the same period ending March 31, 2004, or a
decrease of 9.6%. The main difference was caused by the less contracting
revenues of $15,256 for this period compared to the previous year.
Gross profit (loss) for the three month period ending March 31, 2005
was $(6,774) compared to $31,467 for the same period ending March 31, 2004
a difference of $38,241. Although there was little difference between
the sales for the two periods, costs of goods sold increased in the three
month period ending March 31, 2005 by 18% over the same period ended March
31, 2004 due to the type of contracting work conducted during that period.
The contract, which created smaller returns, has since completed.
Total operating expenses for the three month period ending March 31,
2005 was $716,515 compared to $321,666 for the same period ending March 31,
2004 or an increase of 122%. The company recognized additional
administrative costs and professional fees in the period ended March 31,
2005 compared to the same period ended March 31, 2004.
Our net profit (loss) for the three month period ending March 31, 2005
was ($757,683) compared to ($299,743) or an increase of 157%. As mentioned
above, the company experienced more general and administrative expenses for
the period ended March 31, 2005 compared to the same period ended March 31,
2004.
LIQUIDITY AND CAPITAL RESOURCES
To date our activities have been financed primarily through the sale
of equity securities, borrowings, and revenues from Atlas Fausett
Contracting and logging operations. We intend to continue pursuing contract
mining work and logging of our timber properties to help pay for our
operations. For the three month periods ended March 31, 2005 contract
mining accounted for 100% of the revenue and 95% of the revenue for the
same period in 2003. We have also borrowed from various sources to finance
our activities. Our current debt structure is explained below.
Our total assets as of March 31, 2005 were $1,449,033 compared to
$1,423,671 as of December 31, 2004, or an increase of $25,362. For the
three month period ended March 31, 2005 the company has decreased its
current assets by $31,613, but increased its fixed assets by $56,975
through acquisitions of additional equipment for mining and processing at
the Dragon Mine. Total liabilities were $1,251,925 as of March 31, 2005,
compared to $1,419,301 as of December 31, 2004. The company has been able
to address some of its debts during the first three months ended March 31,
2005, and intends to do so in the future.
We have a note payable to William Jacobson, an officer and director,
which is payable on demand and bears no interest. The proceeds from this
note were used for general working capital. The current amount due as of
March 31, 2005 is $74,270. Accounts payable and accrued expenses due as of
March 31, 2005 were $189,495 and are the result of daily operations and
accrued taxes.
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We have a note payable to Moss Adams, LLP, an accounting firm, for
$53,250 at 9% per annum, due in monthly payments of $1,000 with a balloon
payment due at maturity. The note was for accounting services provided to
us in 1999 and 2000. As of March 31, 2005 our current balance, including
interest is $76,222. The note matured on August 16, 2001. We have
renegotiated terms of repayment, and can pay this debt for approximately
50% of the amount otherwise due. We have notes payable to American National
Mortgage due in monthly interest installments of $35,788.39. The notes
matured on May 31, 2003, at which time the principal became due, and is
secured by property in northern Idaho. American Mortgage has filed
bankruptcy, and we have negotiated a settlement on this debt with the
trustee and are awaiting court approval. 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 $118,823 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.
If we are unable to reduce our debts or if we do not renegotiate any
of this debt, we would be obligated to pay an average of $81,641 per month
or $979,693 for the next fiscal year.
We may 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 do not have any specific plans or agreements for such funding, except as
noted in the paragraph above. 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.
In anticipation of the above funding sources, we have attempted to
satisfy our debts through a negotiated settlement, and/or ask for extended
terms until we can become more profitable. We cannot assure you that any of
these events will occur or, if they do occur, when they will occur.
Our principal sources of cash flow during the first quarter 2005 was
from contracting activities which provided an average of $47,791 per month
for the three month period ended March 31, 2005, and averaged $50,232 per
month for the same period in 2004. In addition, we rely on our credit
facilities and any public or private sales of equity for additional cash
flow.
Cash flow from financing activities for the three month period ended
March 31, 2005 was $510,051 compared to $136,853 for the same period in
2004, a difference of $373,198. The major factor for the difference was
receipt of proceeds from proceeds from issuance of common stock in 2005.
The Company used $83,898 from investing activities for the three month
period ended March 31, 2005, compared to using $63,008 in the same period
in 2004, a difference of $20,890. This was attributed to purchases of more
equipment in the period ended March 31, 2005 compared to the same period in
2004.
Cash flow used by operating activities for the three month period
ended March 31, 2005, was ($299,490) compared to ($78,715) for the same
period in 2003, a difference of $220,775. In the three month period in
2005 net losses were more significant and costs of services were greater,
compared to the same period in 2004.
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ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
The Company's Chief Executive Officer and its Chief Financial Officer,
after evaluating the effectiveness of the Company's disclosure
controls and procedures (as defined in the Securities Exchange Act of
1934 Rules l3a 14(c) and 15d 14(c) as of a date within 90 days of the
filing date of this quarterly report on Form 10-QSB (the "Evaluation
Date"), have concluded that as of the Evaluation Date, the Company's
disclosure controls and procedures were adequate and effective to ensure
that material information relating to it would be made known to it by
others within the Company, particularly during the period in which this
quarterly report on Form 10-QSB was being prepared.
(b) Changes in Internal Controls.
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect the Company's disclosure
controls and procedures subsequent to the Evaluation Date, nor any
significant deficiencies or material weaknesses in such disclosure
controls and procedures requiring corrective actions.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
- On January 12, 2005, the Company issued 100,000 shares of common stock
to an accredited investor for $25,000.
- On January 27, 2005, the Company issued 110,000 shares of common stock
to an accredited investor for $27,500.
- On February 3, 2005, the Company issued 8,000 shares of common stock
to an accredited investor for $2,000.
- On February 14, 2005, the Company issued 30,000 shares of common stock
to an accredited investor for $7,500.
- On February 22, 2005, the Company issued 1,000,000 shares of common
stock to an accredited investor for $500,000
- On February 24, 2005, the Company issued 50,000 shares of common stock
for services valued at $25,000.
Unless otherwise noted, the sales set forth above involved no
underwriter's discounts or commissions and are claimed to be exempt from
registration with the Securities and Exchange Commission pursuant to
Section 4 (2) of the Securities Act of 1933, as amended, as transactions by
an issuer not involving a public offering, the issuance and sale by the
company of its securities to financially sophisticated individuals who are
fully aware of the company's activities, as well as its business and
financial condition, and who acquired said securities for investment
purposes and understood the ramifications of same.
Item 3. Defaults Upon Senior Securities
We have notes payable to American National Mortgage Partners, LLC
("American Mortgage") due in the amount of $606,608. The notes matured on
May 31, 2003, at which time the principal became due, and is secured by
property in northern Idaho. American Mortgage has filed bankruptcy, and we
have negotiated a settlement on this debt with the bankruptcy trustee in
the amount of $406,000 and 175,000 shares of Company common stock. The
settlement was approved on May 3, 2005 by Superior Court of Maricopa
County, Arizona. We are currently waiting approval of the settlement by the
United States Bankruptcy Court, District of Arizona.
Item 4. Submission of Matters to a Vote of Security Holders
None
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Item 5. Other Information
None
Item 6. Exhibits
(a) EXHIBITS
The following exhibits are included in this Report:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
--------- -----------------------
31.1 Certification pursuant to Rule 13a-14 of the Securities
Exchange Act, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, of the Chief Executive Officer
and Principal Financial Officer
32.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, of the Chief Executive Officer and Principal
Financial Officer
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ATLAS MINING COMPANY
Dated: May 13, 2005 /s/ William Jacobson
--------------------------------------------
By: William Jacobson
Chief Executive Officer, Chief Financial Officer
21