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 September 30, 2004
|_| Transition report under Section 13 or 15(d) of the Exchange Act.
For the transition period from ______________ to ______________
Commission file number 000-31380
ATLAS MINING COMPANY
---------------------
(Exact name of registrant as specified in its charter)
Idaho 82-0096527
----- ----------
(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
---------------
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
THIRD QUARTER 2004 REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Unaudited Consolidated Balance Sheet
September30, 2004 . . . . . . . . . . . . . . . . . . . . . . . . .3
Unaudited Consolidated Statements of Operations Three
Months Ended September 30, 2004 and 2003, Nine Months
Ended September 30, 2004 and 2003 . . . . . . . . . . . . . . . . .5
Unaudited Consolidated Statements of Cash Flows Three
Months Ended September 30, 2004 and 2003, Nine Months
Ended September 30, 2004 and 2003 . . . . . . . . . . . . . . . . .6
Notes to Unaudited Consolidated Financial Statements. . . . . . . .7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . .8
Item 3. Controls and Procedures . . . . . . . . . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 11
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . 11
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 11
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 13
Certification under Sarbanes-Oxley Act of 2002 . . . . . . . 14
Atlas Mining Company
Consolidated Balance Sheets
ASSETS
------
September 30, December 31,
2004 2003
------------- ------------
(unaudited)
Current Assets
Cash $ 7,787 $ 6,814
Accounts receivable 20,318 32,253
Investments - available for sale 12,363 12,796
Prepaid expenses 23,871 -
Advances 7,696 7,696
Advances - related party 22,884 74,693
------------- ------------
Total Current Assets 94,919 134,252
Property and Equipment, Net 771,652 356,220
------------- ------------
Other Assets
Mining supplies 9,000 9,000
------------- ------------
Total Other Assets 9,000 9,000
------------- ------------
Total Assets $ 875,571 $ 499,472
============= ============
3
Atlas Mining Company
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 30, December 31,
2004 2003
------------- ------------
(unaudited)
Current Liabilities
Accounts payable and accrued liabilities $ 234,779 $ 214,855
Line of credit 21,706 23,094
Current portion of long-term debt 654,318 725,131
------------- ------------
Total Current Liabilities 910,803 963,080
Long-Term Liabilities
Notes payable 822,174 729,795
Notes payable - related party 82,829 70,829
Less: current portion of long-term debt (654,318) (725,131)
------------- ------------
Total Long-Term Liabilities 250,685 75,493
Minority Interest 52,652 52,652
------------- ------------
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, 37,731,222 and 34,725,151 shares
issued and outstanding, respectively 5,418,627 4,994,977
Cost of treasury stock, 1,313,022 and 18,106
shares, respectively (131,221) (131,221)
Retained earnings (deficit) (5,600,132) (4,914,966)
Accumulated comprehensive income (loss) (10,843) (10,843)
Prepaid expenses (15,000) (5,000)
Subscription receivable - (524,700)
------------- ------------
Total Stockholders' Equity (338,569) (591,753)
------------- ------------
Total Liabilities and Stockholders' Equity $ 875,571 $ 499,472
============= ============
4
Atlas Mining Company
Consolidated Statements of Operations
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenues $ 158,875 $ 81,906 $ 546,600 $ 234,900
Cost of Sales 77,928 121,406 389,930 262,417
----------- ----------- ----------- -----------
Gross Profit (Loss) 80,947 (39,500) 156,670 (27,517)
Operating Expenses
Exploration & Development Costs 93,363 - 148,991 48,824
----------- ----------- ----------- -----------
General & Administrative 214,177 411,764 657,159 882,655
----------- ----------- ----------- -----------
Total Expenses 307,540 411,764 806,150 931,479
----------- ----------- ----------- -----------
Net Operating Income (Loss) (226,593) (451,264) (649,480) (958,996)
Other Income(Expense)
Interest Expense (13,682) (14,018) (37,208) (82,796)
Gain on Settlement of Debt - 18,807 - 47,307
Interest Income 3 3 32 7
Minority Interest - 6,483 - 6,483
Miscellaneous Income (Expense) - 4,016 - 4,016
Gain on Sale of Stock - - 1,489 -
----------- ----------- ----------- -----------
Total Other Income(Expense) (13,679) 15,291 (35,687) (24,983)
----------- ----------- ----------- -----------
Income (Loss) Before Income Taxes (240,272) (435,973) (685,167) (983,979)
Provision (Benefit) for Income
Taxes - - - -
----------- ----------- ----------- -----------
Net Income (Loss) $ (240,272) $ (435,973) $ (685,167) $ (983,979)
=========== =========== =========== ===========
Net Income (Loss) Per Share $ (0.01) $ (0.02) $ (0.02) $ (0.06)
=========== =========== =========== ===========
Weighted Average Shares Outstanding 37,481,777 24,521,056 36,722,853 15,154,897
=========== =========== =========== ===========
5
Atlas Mining Company
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
2004 2003
------------ ------------
Cash Flows from Operating Activities:
Net Income (Loss) $ (685,167) $ (983,979)
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operations:
Depreciation 27,795 6,210
(Gain) loss on settlement of debt - (47,307)
(Gain) loss on sale of investments
available for sale (1,489) -
Stock issued for services 403,650 669,200
Amortization 10,000 7,500
Minority interest - (6,483)
Change in Operating Assets and Liabilities:
(Increase) Decrease in:
Accounts receivable 11,935 (18,233)
Prepaid expenses (23,871) -
Increase (Decrease) in:
Accounts payable and accrued expenses 19,924 40,232
------------ ------------
Net Cash Provided(Used) by Operating Activities (237,223) (332,860)
Cash Flows from Investing Activities:
Purchases of equipment (443,227) -
Proceeds from advances 247,810 200,543
Proceeds from sale of investments available
for sale 1,921 -
Payments for advances (196,000) (184,500)
------------ ------------
Net Cash Provided (Used) by Investing Activities (389,496) 16,043
Cash Flows from Financing Activities:
Proceeds from notes payable 176,660 5,720
Payments for notes payable (72,279) (31,130)
Payments for line of credit (1,389) (3,136)
Payments for treasury stock - (475)
Proceeds from subscription receivable 524,700 -
Proceeds from issuance of common stock - 450,100
------------ ------------
Net Cash Provided (Used) by Financing Activities 627,692 421,079
------------ ------------
Increase (Decrease) in Cash 973 104,262
Cash and Cash Equivalents at Beginning of Period 6,814 5,246
------------ ------------
Cash and Cash Equivalents at End of Period $ 7,787 $ 109,508
============ ============
6
Atlas Mining Company
Notes to the Consolidated Financial Statements
September 30, 2004
GENERAL
-------
Atlas Mining Company (the Company) has elected to omit substantially all
footnotes to the financial statements for the nine months ended September
30, 2004 since there have been no material changes (other than indicated in
other footnotes) to the information previously reported by the Company in
their Annual Report filed on the Form 10-KSB for the twelve months ended
December 31, 2003.
UNAUDITED INFORMATION
---------------------
The information furnished herein was taken from the books and records of
the Company without audit. However, such information reflects all
adjustments which are, in the opinion of management, necessary to properly
reflect the results of the interim period presented. The information
presented is not necessarily indicative of the results from operations
expected for the full fiscal year.
7
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 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
and development work on these properties. We have no assurances that our
exploration will result in proving any commercially viable deposits. We
realize that additional steps will need to be taken to move from an
exploration stage to a development or productions stage.
In August 2001, we acquired the Dragon Mine in Juab, Utah and began our
halloysite clay exploration. During the first nine months of 2004, we had
$148,991 in exploration and development expenses. We also acquired
additional equipment amounting to $361,432 for mining at the Dragon Mine.
The halloysite clay is considered a non-toxic material and, as
commercially viable amounts have been found on the property, 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. We have
been able to formulate development and mining plans. We consider this
property, the Dragon Mine, to be in the development stage, and it is our
intent to bring it into a production stage in the near future. We have
also contacted potential customers, distributors and suppliers in the clay
businesses. 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 developed the mine and become production ready.
We are not aggressively looking for silver properties at this time, as
we have been concentrating on our efforts to bring the clay property from
the exploration stage to the development stage. However once the clay
property is further developed 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 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.
8
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 nine month period ending September 30, 2004 were
$546,600 and $234,900 for the same period ending September 30, 2003, or an
increase of 132%. For the three month period ending September 30, 2004
revenues were $158,875 compared to $81,906 for the same period ending
September 30, 2003 or an increase of 94%. The main difference was caused
by the additional contracting revenues of $233,037 and logging revenues of
$78,565 recognized in 2004 over the previous year.
Gross profit (loss) for the nine month period ending September 30, 2004
was $156,570 compared to ($27,517) for the same period ending September 30,
2003 a difference of $184,087. For the three month period ending September
30, 2004 gross profit (loss) was $80,947 compared to ($39,500) for the same
period ending September 30, 2003 a difference of $120,447. During both
periods in 2004 revenues were enough to cover costs of sales and we were
able to keep the costs of sales lower (71% of sales for the nine month
period and 49% of sales for the three month period) than the same periods
ending September 30, 2003.
Total operating expenses for the nine month period ending September 30,
2004 was $806,150 compared to $931,479 for the same period ending September
30, 2003 or a decrease of 13.4%. For the three month period ending
September 30, 2004 operating expenses were $307,540 compared to $411,764
for the same period ending September 30, 2003 or a decrease of 25.3%.
Although exploration and development expenses in 2004 of $148,991 were more
in 2004 compared to the $48,824 spent in 2003, the company incurred
additional professional expenses in 2003 amounting to approximately
$225,000 compared to 2004 due to costs related to Securities Exchange
Commission filings.
Our net profit (loss) for the nine month period ending September 30,
2004 was ($685,167) compared to ($983,979) or a 30% decrease. The net
profit (loss) for the three month period ending September 30, 2004 was
($240,272) compared to ($435,973) for the same period ending September 30,
2003, or a decrease of 44.8%. As mentioned above, in 2003 the company
experienced more general and administrative expenses due to the costs of
SB-2 filings.
LIQUIDITY AND CAPITAL RESOURCES
To date our activities have been financed primarily through the sale of
equity securities, borrowings, and revenues from AFC 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 September 30, 2004 contract mining accounted for 57% of
the revenue and 100% 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 increased from $875,571 as of September 30, 2004,
compared to $499,472 as of December 31, 2003. The company has decreased
its current assets by $39,333, while acquiring additional equipment for
mining and processing at the Dragon Mine. Total liabilities were
$1,161,488 as of September 30, 2004, compared to $1,038,573 as of December
31, 2003. The company accounts payables balance increased due to
additional activities in contracting work, and there was an increase in
notes payable due to activities at the Dragon Mine.
9
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
September 30, 2004 is $82,829. We have an unsecured line of credit with
Textron Financial at an interest rate of prime plus 6%. The balance of the
line of credit at September 30, 2004 was $21,706. 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. The funds are used
for general working capital. As of September 30, 2004 the amount owing
Universal funding is 0-. Accounts payable and accrued expenses due as of
September 30, 2004 were $234,779 and are the result of daily operations and
taxes owed.
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 September 30, 2004 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 are negotiating a settlement on this debt with the
trustee. 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 $118,955 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 $54,214 per month or
$650,568 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 third quarter 2004 was
from Contracting activities which provided an average of $30,356 per month
for the three month period ended September 30, 2004, and averaged $27,302
per month for the same period in 2003. For the nine month period ending
September 30, 2004 our average monthly cash flow from contracting was
$51,881, compared to $26,100 for the same period in 2003. We recognized
logging revenues during the third quarter 2004 of $67,806, which was used
primarily to pay for an additional piece of property acquired. 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 nine month period ended
September 30, 2004 was $627,692 compared to $421,079 for the same period in
2003, a difference of $206,613. The major factor for the difference was
receipt of proceeds from subscriptions receivable in 2004.
The Company spent $389,496 from investing activities for the nine month
period ended September 30, 2004, compared to receiving $16,043 in the same
period in 2003. This was attributed from purchases of equipment and
transactions with affiliates.
10
Cash flow used by operating activities for the nine month period ended
September 30, 2004, was ($237,223) compared to ($332,860) for the same
period in 2003, a difference of $95,637. In the nine month period in 2004
a decrease in the costs of services, compared to the same period in 2003,
accounted for the major change.
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. Changes in Securities
On July 15, 2004 we issued 100,000 shares of common stock for lease
payment on the Dragon Mine valued at approximately $20,000.
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 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 are negotiating a settlement on this
debt with the trustee.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
11
Item 6. Exhibits and Reports on Form 8-K.
(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
(b) The following reports on Form 8-K were filed during the quarter
ended June 30, 2004:
None.
12
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: November 5, 2004 /s/ William Jacobson
--------------------------------------
By: William Jacobson
Chief Executive Officer,
Chief Financial Officer
13