(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, 2004
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT.
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
Commission file number 000-31380
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ATLAS MINING COMPANY
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(Exact name of registrant as specified in its charter)
IDAHO 82-0096527
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
630 EAST MULLAN AVENUE, OSBURN, IDAHO 83849
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(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 the only class of the issuer's common
equity as of May 7, 2004 is 37,024,017 shares of Common Stock.
Transitional Small Business Disclosure Format: YES /_/ NO /X/
ATLAS MINING COMPANY
FIRST QUARTER 2003 REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Unaudited Consolidated Balance Sheet
March 31, 2004. . . . . . . . . . . . . . . . . . . . . . . . . . .4
Unaudited Consolidated Statements of Operations
Three Months Ended March 31, 2004 and 2003. . . . . . . . . . . . .5
Unaudited Consolidated Statements of Cash Flows
Three Months Ended March 31, 2004 and 2003. . . . . . . . . . . . .6
Notes to Unaudited Consolidated Financial Statements. . . . . . . .9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . .9
Item 3. Controls and Procedures. . . . . . . . . . . . . . . . . . 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 12
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . 13
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . 13
Item 4. Submission of Matters to a Vote of Security Holders. . . . 13
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 14
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
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Atlas Mining Company
Consolidated Financial Statements
March 31, 2004
3
Atlas Mining Company
Consolidated Balance Sheets
ASSETS
March 31, December 31,
2004 2003
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(Unaudited)
Current Assets
Cash $ 1,944 $ 6,814
Accounts receivable (net of allowance of $0) 90,175 32,253
Investments - available for sale 12,363 12,796
Advances 7,696 7,696
Advances - related party 74,825 74,693
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Total Current Assets 187,003 134,252
Property and Equipment, Net 419,492 356,220
Other Assets
Mining supplies 9,000 9,000
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Total Other Assets 9,000 9,000
Total Assets $ 615,495 $ 499,472
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Atlas Mining Company
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2004 2003
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(unaudited)
Current Liabilities
Accounts payable and accrued liabilities $ 248,618 $ 214,855
Line of credit 22,060 23,094
Current portion of long-term debt 642,318 725,131
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Total Current Liabilities 912,996 963,080
Long-Term Liabilities
Notes payable 767,682 729,795
Notes payable - related party 70,829 70,829
Less: current portion of long-term debt (642,318) (725,131)
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Total Long-Term Liabilities 196,193 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 0 0
Common stock, no par value, 60,000,000 shares
authorized, 36,826,222 and 34,725,151 shares
issued and outstanding, respectively 5,237,627 4,994,977
Cost of treasury stock, 1,313,022 and 18,106
shares, respectively (131,221) (131,221)
Retained earnings (deficit) (5,214,709) (4,914,966)
Accumulated comprehensive income (loss) (10,843) (10,843)
Prepaid expenses (2,500) (5,000)
Subscription receivable (424,700) (524,700)
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Total Stockholders' Equity (546,346) (591,753)
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Total Liabilities and
Stockholders' Equity $ 615,495 $ 499,472
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Atlas Mining Company
Consolidated Statements of Operations
(Unaudited)
For the Three Month Ended
March 31,
2004 2003
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Revenues $ 158,629 $ 58,434
Cost of Sales 127,162 41,576
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Gross Profit (Loss) 31,467 16,858
Operating Expenses
Exploration & development costs 2,088 50,268
General & administrative 319,578 271,685
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Total Operating Expenses 321,666 321,953
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Net Operating Income (Loss) (290,199) (305,095)
Other Income(Expense)
Interest income 1 2
Interest expense (11,034) (60,859)
Gain (loss) on sale of investments
available for sale 1,489 -
Gain (loss) on settlement of debt 0 28,500
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Total Other Income(Expense) (9,544) (32,357)
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Income (Loss) Before Income Taxes (299,743) (337,452)
Provision (Benefit) for Income Taxes - -
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Net Income (Loss) $ (299,743) $ (337,452)
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Net Income (Loss) Per Share $ (0.01) $ (0.03)
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Weighted Average Shares Outstanding 35,706,726 11,220,501
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Atlas Mining Company
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
2004 2003
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Cash Flows from Operating Activities:
Net Income (Loss) $ (299,743) $ (337,452)
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operations:
Depreciation 1,526 2,221
(Gain) loss on sale of investments available
for sale (1,489) -
Stock issued for services 242,650 136,800
Amortization 2,500 2,500
Gain) loss on settlement of debt - (28,500)
Change in Operating Assets and Liabilities:
(Increase) Decrease in:
Accounts receivable (57,922) (47,792)
Other current receivables - -
Increase (Decrease) in:
Accounts payable and accrued expenses 33,763 34,312
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Net Cash Provided(Used) by Operating Activities (78,715) (237,911)
Cash Flows from Investing Activities:
Purchases of equipment (64,798) -
Proceeds from advances 99,869 15,938
Proceeds from sale of investments available
for sale 1,921 -
Purchase of investments - -
Payments for advances (100,000) -
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Net Cash Provided (Used) by Investing Activities (63,008) 15,938
Cash Flows from Financing Activities:
Proceeds from notes payable 39,660 -
Payments for notes payable (1,773) (26,484)
Payments for line of credit (1,034) (843)
Proceeds from subscription receivable 100,000 -
Proceeds from issuance of common stock - 250,000
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Net Cash Provided (Used) by Financing Activities 136,853 222,673
Increase (Decrease) in Cash (4,870) 700
Cash and Cash Equivalents at Beginning of Period 6,814 5,246
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Cash and Cash Equivalents at End of Period 1,944 5,946
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Atlas Mining Company
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the Three Months Ended
March 31,
2004 2003
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Cash Paid For:
Interest $ 9,431 $ 48,885
Income Taxes $ - $ -
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
Stock issued for services $ 242,650 $ 136,800
Stock issued for notes payable $ - $ 100,000
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Atlas Mining Company
Notes to the Consolidated Financial Statements
March 31, 2004
GENERAL
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Atlas Mining Company (the Company) has elected to omit substantially all
footnotes to the financial statements for the three months ended March 31,
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
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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.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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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 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.
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In August 2001, we acquired the Dragon Mine in Juab, Utah and began
our halloysite clay exploration. During the first three months of 2004, we
had $2,088 in exploration expenses compared to $50,268 for the same period
in 2003. The difference was because of a drilling program conducted in the
period ending 2003, while minor work was done in 2004.
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. It is our intent to
bring the Dragon Mine into a development and 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 can
not 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.
In anticipation of our clay exploration activities reaching the
development and/or production stages, we have submitted a mining and
reclamation plan to the proper state authorities, and have received
acceptance of our plan. In the future, we may pursue additional
acquisitions and exploration of other properties for metals and industrial
minerals, development of which will require submission of new mining and
reclamation plans to the proper state and federal authorities.
Timber
We will continue to harvest timber on our property. Timber harvesting
will be dependent upon lumber prices and weather. We normally do not log
much in the winter months.
Results of Operations
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Revenues for the three month period ending March 31, 2004 were
$158,629, and $58,434 for the same period in 2003, or an increase of 171%
for 2004. These revenues came mostly from contracting activities. Timber
revenue in the first quarter 2004 was $8,346. There were no timber sales
during this period ended 2003 due to weather restraints.
Gross profit for the three months ended March 31, 2004 was $31,467,
compared to $16,858 for the same period in 2003, or an increase of 86%. The
company recognized more revenues in the period ended 2004, however we found
it necessary to hire a supervisor to assist with the increased workload,
thus reducing our gross profits to revenues from 34% in 2003 to 20% in
2004.
As of the three month period ended March 31, 2004, our general and
administrative expenses were $319,578 compared to $271,685 for the same
period in 2003, or a 17.6% increase. The increase in this category resulted
mainly from increases in professional fees during 2004.
10
Our net income (loss) for the three month period ended March 31, 2004,
was ($299,743)compared to($337,452) for the same period in 2003, a
difference of 11%. This was contributed mostly from higher revenue in the
first quarter of 2004 compared to the same period in 2003.
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 March 31, 2004 contract mining accounted for 95% of the
revenue and 100% of the revenue for the same period in 2003. Due to
weather conditions we normally do not log during the first
quarter. 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,
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, 2004 is $70,829. 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 March 31, 2004 was $22,060. 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 March 31, 2004 the amount owing Universal
funding is 0-. Accounts payable and accrued expenses due as of March 31,
2004 were $248,618 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 March 31, 2004 our current balance, including
interest is $72,338. 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. 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
$119,151 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 $53,527 per month
or $642,318 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.
11
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 2004 was
from Contracting activities which provided an average of $50,000 per month
for the period ended March 31, 2004, and $19,478 per month for the same
period in 2003. 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, 2004 was $136,853compared to $222,673 for the same period in
2003, a difference of $85,820. The major factor for the difference was
additional sales of common stock in 2003.
The Company spent $63,008 from investing activities for the three
month period ended March 31, 2003, compared to receiving $15,938 in the
same period in 2003. This was mostly attributed from transactions with
affiliates.
Cash flow used by operating activities for the three month period
ended March 31, 2004, was $78,715 compared to $237,911 for the same period
in 2003, a difference of $159,196. In the three month period in 2004 net
losses were $37,000 less however cash paid for general and administrative
expenses increased by approximately $47,893.
Item 3. CONTROLS AND PROCEDURES
(a) The term "disclosure controls and procedures" refers to the
controls and procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it
files under the Securities Exchange Act of 1934 (the "Exchange Act") is
recorded, processed, summarized and reported within required time periods.
Within 90 days prior to the date of filing this report (the "Evaluation
Date"), we carried out an evaluation under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer of
the effectiveness of our disclosure controls and procedures. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the Evaluation Date, such controls and procedures
were effective in ensuring that required information will be disclosed on a
timely basis in our periodic reports filed under the Exchange Act.
(b) Changes in internal controls
There were no significant changes to our internal controls or in other
factors that could significantly affect our internal controls subsequent to
the Evaluation Date.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
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Item 2. Changes in Securities
On March 5, 2004, the Company issued 1,071 shares of its common stock for
$150. The issuance was exempt from registration pursuant to Section 4(2) or
rule 506 of Regulation D of the Securities act of 1933.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
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Item 6. Exhibits and Reports on Form 8-K.
(a) EXHIBITS
The following exhibits are included in this Report:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
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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
March 31, 2003:
None.
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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 14, 2004 /s/ William Jacobson
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By: William Jacobson
Chief Executive Officer, Chief Financial
15