SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
|_| Transition report under Section 13 or 15(d) of the Exchange Act.
For the transition period from ______________ to ______________
Commission file number ___________
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 each of the issuer's classes of
common equity as of August 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 June 30, 2004 . . . . . . . . 3
Unaudited Consolidated Statements of Operations
Three Months Ended June 30, 2004 and 2003,
Six Months Ended June 30, 2004 and 2003. . . . . . . . . . . . . 4
Unaudited Consolidated Statements of Cash Flows
Three Months Ended June 30, 2004 and 2003,
Six Months Ended June 30, 2004 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
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . .12
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . .12
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . .12
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . .12
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . .12
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . .12
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . .12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Atlas Mining Company
Consolidated Balance Sheets
ASSETS
June 30, December 31,
2004 2003
------------ ------------
(unaudited)
Current Assets
Cash $ 18,429 $ 6,814
Accounts receivable 144,028 32,253
Investments - available for sale 12,363 12,796
Prepaid expenses 2,473 -
Advances 7,696 7,696
Advances - related party 24,824 74,693
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Total Current Assets 209,813 134,252
Property and Equipment, Net 615,951 356,220
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Other Assets
Mining supplies 9,000 9,000
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Total Other Assets 9,000 9,000
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Total Assets $ 834,764 $ 499,472
============ ============
3
Atlas Mining Company
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, December 31,
2004 2003
------------ ------------
(unaudited)
Current Liabilities
Accounts payable and accrued liabilities $ 235,053 $ 214,855
Line of credit 21,757 23,094
Current portion of long-term debt 642,318 725,131
------------ ------------
Total Current Liabilities 899,128 963,080
Long-Term Liabilities
Notes payable 764,471 729,795
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 192,982 75,493
Minority Interest 52,652 52,652
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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, 37,021,222 and 34,725,151 shares
issued and outstanding, respectively 5,276,627 4,994,977
Cost of treasury stock, 1,313,022 and 18,106
shares, respectively (131,221) (131,221)
Retained earnings (deficit) (5,359,861) (4,914,966)
Accumulated comprehensive income (loss) (10,843) (10,843)
Prepaid expenses - (5,000)
Subscription receivable (84,700) (524,700)
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Total Stockholders' Equity (309,998) (591,753)
------------ ------------
Total Liabilities and Stockholders' Equity $ 834,764 $ 499,472
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4
Atlas Mining Company
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenues $ 229,096 $ 94,560 $ 387,725 $ 152,994
Cost of Sales 186,928 99,435 312,002 141,011
------------ ------------ ------------ ------------
Gross Profit (Loss) 42,168 (4,875) 75,723 11,983
Operating Expenses
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Exploration &
Development Costs 53,540 (1,444) 55,628 48,824
General &
Administrative 121,316 199,206 442,982 470,891
------------ ------------ ------------ ------------
Total Expenses 174,856 197,762 498,610 519,715
------------ ------------ ------------ ------------
Net Operating Income
(Loss) (132,688) (202,637) (422,887) (507,732)
Other Income(Expense)
Interest Expense (12,492) (7,919) (23,526) (68,778)
Gain on Settlement
of Debt - - - 28,500
Interest Income 28 2 29 4
Gain on Sale of
Stock - - 1,489 -
------------ ------------ ------------ ------------
Total Other
Income(Expense) (12,464) (7,917) (22,008) (40,274)
------------ ------------ ------------ ------------
Income (Loss) Before
Income Taxes (145,152) (210,554) (444,895) (548,006)
Provision (Benefit)
for Income Taxes - - - -
------------ ------------ ------------ ------------
Net Income (Loss) $ (145,152) $ (210,554) $ (444,895) $ (548,006)
Net Income (Loss)
Per Share $ (0.00) $ (0.01) $ (0.01) $ (0.04)
============ ============ ============ ============
Weighted Average
Shares Outstanding 36,980,055 16,637,134 36,343,391 13,928,817
============ ============ ============ ============
5
Atlas Mining Company
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30,
--------------------------
2004 2003
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Cash Flows from Operating Activities:
Net Income (Loss) $ (444,895) $ (548,006)
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operations:
Depreciation 6,623 4,441
(Gain) loss on sale of investments available
for sale (1,489) -
Stock issued for services 281,650 291,300
Amortization 5,000 5,000
(Gain) loss on settlement of debt - (28,500)
Change in Operating Assets and Liabilities:
(Increase) Decrease in:
Accounts receivable (111,775) (26,633)
Prepaid expenses (2,473) -
Increase (Decrease) in:
Accounts payable and accrued expenses 20,198 68,428
------------ ------------
Net Cash Provided(Used) by Operating Activities (247,161) (233,970)
Cash Flows from Investing Activities:
-------------------------------------
Purchases of equipment (266,354) -
Proceeds from advances 149,870 158,619
Proceeds from sale of investments available
for sale 1,921 -
Payments for advances (100,000) (144,500)
------------ ------------
Net Cash Provided (Used) by
Investing Activities (214,563) 14,119
Cash Flows from Financing Activities:
-------------------------------------
Proceeds from notes payable 39,660 5,720
Payments for notes payable (4,984) (27,497)
Payments for line of credit (1,337) (1,789)
Proceeds from subscription receivable 440,000 -
Proceeds from issuance of common stock - 250,100
------------ ------------
Net Cash Provided (Used) by
Financing Activities 473,339 226,534
Increase (Decrease) in Cash 11,615 6,683
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Cash and Cash Equivalents at
Beginning of Period 6,814 5,246
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Cash and Cash Equivalents at
End of Period $ 18,429 $ 11,929
============ ============
6
Atlas Mining Company
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30,
--------------------------
2004 2003
------------ ------------
Cash Paid For:
Interest $ 20,284 $ 54,369
Income Taxes $ - $ -
Supplemental Disclosure of Non-Cash
Investing and Financing Activities:
Stock issued for services $ 281,650 $ 291,300
Stock issued for notes payable $ - $ 100,000
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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 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 six months of 2004, we
had $55,628 in exploration expenses. We also acquired additional equipment
amounting to $266,354 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.
8
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.
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 six month period ending June 30, 2004, were $387,725,
and $152,994 for the same period in 2003, or approximately a 153% increase.
For the three month period ending June 30, 2004, revenues were $229,096,
compared to $94,560 for the same period in 2003, or approximately a 142%
increase. The company was able to maintain more work during the comparable
periods of 2004, compared to 2003, predominately in its contracting entity.
Thus reflecting an increase in revenues. For the six month period ended
June 30, 2004, the company had timber revenues of $10,758 compared to 0-
for the same period in 2003. In 2003, timber prices did not merit logging,
and fire dangers were extreme during the summer of 2003.
Gross profit (loss) for the six months ended June 30, 2004, was
$75,723, compared to $11,983, for the same period in 2002. This was
attributed to the greater revenue in 2004 compared to 2003. For the three
month period ended June 30, 2004, our gross profit was $42,168 compared to
($4,875) for the same period in 2003. Again greater revenues in 2004
brought gross profits while smaller revenues in the same period in 2003
were not adequate enough to offset costs.
As of the six month period ended June 30, 2004, our total operating
expenses were $498,610 compared to $519,715 for the same period in 2003.
For the three month period ended June 30, 2004, the total operating
expenses were $174,856, compared to $197,762 for the same period in 2003, a
decrease of 4% and 11% respectively. The increase in this category
resulted mainly from increases in professional fees during 2003, because of
the company's efforts to become a fully registered company.
Exploration and Development Expenses for the six month period ending
June 30, 2004 were $55,628 compared to $48,824 for the same period in 2003.
For the three month period ending June 30, 2004 exploration and development
expenses were $53,540 compared to ($1,444) for the same period in 2003.
During 2003 the company conducted a drilling program while work done in
2004 was development of the mine site.
Our net profit (loss) for the six month period ended June 30, 2004,
was ($444,895) compared to ($548,006) for the same period in 2003, a
decrease if 19%. For the three month period ended June 30, 2004, the
figure was ($145,152) compared ($210,554), a decrease of 31%. Increased
revenues and decreased General and Administrative costs in 2004 helped
contribute to this difference.
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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 June 30, 2004 contract mining accounted for 99% 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 $834,764 as of June 30, 2004, compared
to $499,472 as of December 31, 2003. The company has increased its current
assets by $75,561 and has acquired additional equipment for mining and
processing during the first six months of the current year. Total
liabilities were $1,092,110 as of June 30, 2004, compared to $1,038,573 as
of December 31, 2003. The company accounts receivable balance increased
due to additional activities in contracting work and at the Dragon Mine.
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
June 30, 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 June 30, 2004 was $21,757. 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 June 30, 2004 the amount owing Universal
funding is 0-. Accounts payable and accrued expenses due as of June 30,
2004 were $235,053 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 June 30, 2004 our current balance, including
interest is $73,978. 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.
10
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 second quarter 2004 was
from Contracting activities which provided an average of $75,560 per month
for the three month period ended June 30, 2004, and averaged $31,520 per
month for the same period in 2003. For the six month period ending June
30, 2004 our average monthly cash flow from contracting was $64,620,
compared to $25,499 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 six month period ended
June 30, 2004 was $473,339 compared to $226,534 for the same period in
2003, a difference of $246,805. The major factor for the difference was
receipt of proceeds from subscriptions receivable in 2004.
The Company spent $214,563 from investing activities for the six month
period ended June 30, 2004, compared to receiving $14,119 in the same
period in 2003. This was attributed from purchases of equipment and
transactions with affiliates.
Cash flow used by operating activities for the six month period ended
June 30, 2004, was ($247,161) compared to ($233,970) for the same period in
2003, a difference of $13,191. In the six month period in 2004 a decrease
in the accounts payable and accrued expenses accounted for the major
change.
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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
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
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: August 19, 2004 /s/ William Jacobson
------------------------------------------
By: William Jacobson
Chief Executive Officer,
Chief Financial Officer
13