-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QgNaVBDk/p5gF+GkiQGSZ15CtbyWqQlsU4BV++8nkkOnoBPj7WZ2AuGj75KR6pkX zRM2F8QJam+8lDt+nlpRcw== 0001019687-02-000890.txt : 20020514 0001019687-02-000890.hdr.sgml : 20020514 ACCESSION NUMBER: 0001019687-02-000890 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 20020514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLAS MINING CO CENTRAL INDEX KEY: 0000008328 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 820096527 STATE OF INCORPORATION: ID FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-72830 FILM NUMBER: 02645698 BUSINESS ADDRESS: STREET 1: 1221 W YELLOWSTONE AVE CITY: OSBURN STATE: ID ZIP: 83849 BUSINESS PHONE: 2085561181 MAIL ADDRESS: STREET 1: 1221 W YELLOWSTONE AVE CITY: OSBURN STATE: ID ZIP: 83849 SB-2/A 1 atlas_sb2a2-051402.txt AS ORIGINALLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON 11/06/2001 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM SB-2 AMENDMENT NO. 2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ATLAS MINING COMPANY (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER) Idaho 1044 82-0096527 - ---------------------------- ------------------------- --------------------- (STATE OR OTHER JURISDICTION (PRIMARY STANDARD IRS EMPLOYER OF INCORPORATION INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER OR ORGANIZATION) CODE NUMBER) 630 EAST MULLAN AVENUE OSBURN, IDAHO 83849 (208) 556-1181 -------------- (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) WILLIAM T. JACOBSON 630 EAST MULLAN AVENUE OSBURN, IDAHO 83849 (208) 556-1181 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER OF AGENT FOR SERVICE OF PROCESS) Copies to: NIMISH PATEL, ESQ. POLLET & RICHARDSON 10900 WILSHIRE BLVD., SUITE 500 LOS ANGELES, CALIFORNIA 90024 (310) 208-1182 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after the effective date of this Registration Statement. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE - --------------------------- ---------------- ---------------------- ------------------------- ------------------------ PROPOSED TITLE OF EACH CLASS MAXIMUM OF SECURITIES TO BE AMOUNT TO BE AGGREGATE OFFERING MAXIMUM AGGREGATE AMOUNT OF REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE REGISTRATION FEE - --------------------------- ---------------- ---------------------- ------------------------- ------------------------ Common Stock Offered by 6,000,000 $.25 $1,500,000 $375.00* Atlas Mining Company - --------------------------- ---------------- ---------------------- ------------------------- ------------------------ Common Stock Offered by 740,000 $.25 $185,000 $46.25* Selling Securityholders - --------------------------- ---------------- ---------------------- ------------------------- ------------------------ Total 6,740,000 $1,685,000 $421.25* - --------------------------- ---------------- ---------------------- ------------------------- ------------------------
(1) Pursuant to Rule 416 of the Act, this registration statement also covers such indeterminate additional shares of common stock as may become issuable as a result of stock splits, stock dividends or other similar events. (2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c). * Amount was previously paid by Registrant under separate SB-2 Registration Statement filed on November 15, 1999 (SEC File Number 333-90895). The Registration Statement as filed was subsequently withdrawn on October 24, 2001. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHARE THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. The information in this Prospectus is not complete and may be changed. We may not sell these Securities until the Registration Statement filed with the Securities and Exchange Commission becomes effective. This Prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. ii THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE AMENDED. NEITHER WE, NOR THE SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SUBJECT TO COMPLETION, DATED _______________, 2002 PROSPECTUS ATLAS MINING COMPANY 6,000,000 SHARES OF COMMON STOCK OFFERED BY ATLAS MINING COMPANY 740,000 SHARES OF COMMON STOCK OFFERED BY SELLING SECURITYHOLDERS This prospectus covers the sale of 6,000,000 shares of our common stock of Atlas Mining Company. Atlas Mining Company may offer and sell these shares from time to time pursuant to this prospectus. We are offering up to a total of 6,000,000 shares of common stock on a best efforts basis, for maximum aggregate offering proceeds of $1,500,000. The offering price is $0.25 per share and there is no minimum number of shares that we have to sell. There will be no escrow account. We will immediately use all money received from the offering. Concurrent with this offering, we are registering 740,000 additional shares of common stock for sale by selling securityholders who may wish to sell their shares in the open market or in privately negotiated transactions Our common stock is quoted on the OTC Pink Sheet under the Trading Symbol "ALMI". On February 4, 2002, the average of the bid and asked prices of the common stock on the Pink Sheet was $0.08 and $0.11 per share. INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD INVEST IN OUR COMMON STOCK ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. THE DATE OF THIS PROSPECTUS IS ___________, 2002 --------------------- The following table of contents has been designed to help you find important information contained in this prospectus. We encourage you to read the entire prospectus. ATLAS MINING COMPANY TABLE OF CONTENTS PAGE ---- PROSPECTUS SUMMARY............................................................3 RISK FACTORS..................................................................6 USE OF PROCEEDS..............................................................10 SELLING SECURITYHOLDERS......................................................11 DETERMINATION OF OFFERING PRICE..............................................12 PLAN OF DISTRIBUTION.........................................................13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION....................16 DESCRIPTION OF BUSINESS......................................................19 DESCRIPTION OF PROPERTY......................................................24 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.................28 EXECUTIVE COMPENSATION.......................................................29 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................31 MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.....................31 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............32 DESCRIPTION OF SECURITIES....................................................33 LEGAL PROCEEDINGS............................................................34 INTEREST OF NAMED EXPERTS AND COUNSEL........................................34 INDEMNIFICATION..............................................................34 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE........................................................35 INDEX TO FINANCIAL STATEMENTS.................................................36 2 PROSPECTUS SUMMARY THIS SUMMARY HIGHLIGHTS IMPORTANT INFORMATION ABOUT OUR BUSINESS AND ABOUT THE OFFERINGS. BECAUSE IT IS A SUMMARY, IT DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER BEFORE INVESTING IN OUR SECURITIES. PLEASE READ THE ENTIRE PROSPECTUS. Some of the information in this prospectus contains forward-looking statements, including statements relating to anticipated operating results, growth, and financial resources. The forward-looking statements are based on assumptions, including assumptions of future events. It is likely that some of the assumptions will prove to be incorrect for reasons that include those set forth under "Risk Factors." The actual results and our financial position may vary from those projected or implied in the forward-looking statements, and the variances may be material. ATLAS MINING COMPANY We are a natural resource company engaged in the acquisition, exploration, and, if warranted, development of its resource properties in the state of Idaho and Utah. We also provide contract-mining services, specialized civil construction services for mine operators, exploration companies, and the construction and natural resource industries through our trade name "Atlas Fausett Contracting." We were originally incorporated on March 4, 1924 in Idaho and commenced our operation on that date. We are attempting to revitalize several previously owned mines and to explore the resources of newly acquired mines. We intend to acquire additional properties near our current mines and elsewhere. In addition to the exploring potential mineral resources, there are also significant harvestable timber resources on our properties. We also intend to expand our contract-mining services. These services were originally developed and marketed to provide us with operating revenues. We hope to increase the profit derived from these services and to utilize our expertise in this area to explore our own properties. HOW TO CONTACT US Our executive office is located at 630 East Mullan Avenue, Osburn, Idaho 83849. Our telephone number is (208) 556-1181. 3 THE OFFERING
Total shares outstanding prior to the offering ..... 7,006,727 as of December 31, 2001 Shares being offered by Atlas Mining................ 6,000,000 (Maximum) Shares being offered by Selling Security Holders.... 740,000 (Maximum) Total shares outstanding after the offering (assuming full subscription).................................. 13,746,727 Price per share offered to the public by Atlas Mining and Selling Security Holders........................ $0.25 Total proceeds raised by offering................... $1,500,000 gross, less offering related expenses estimated at $100,000. We will not receive any proceeds from the sale of shares by the selling securityholders. Use of proceeds from the sale of the shares ........ We plan to use the proceeds for exploration of existing properties. We will also use the net proceeds to payoff existing liabilities and for working capital. See "Use of Proceeds." Trading Symbol...................................... "ALMI" trading on the OTC Pink Sheet. Termination of Offering............................. Both our offering and the selling shareholder offering will terminate on the ninetieth (90th) day following the effectiveness of this Registration Statement (__________, 2002)
SUMMARY FINANCIAL DATA The information set forth below for the years ended December 31, 2000 and 2001 are derived from the financial statements included elsewhere in this prospectus. The information below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and notes thereto included elsewhere in this prospectus.
YEAR ENDED DECEMBER 31, ------------ STATEMENT OF OPERATIONS DATA: 2000 2001 - ----------------------------- ---- ---- Revenues..................................................... $ 784,314 $ 689,636 Operating Expenses........................................... 522,791 657,496 Net Loss..................................................... (347,243) (578,283) Loss per common share........................................ ($.06) ($.09) Weighted average number of common shares outstanding......... 5,846,472 6,057,758 4 YEAR ENDED DECEMBER 31 ---------------------- BALANCE SHEET DATA: 2000 2001 - ------------------- ---- ---- Working capital...........................................($1,145,274) ($1,302,123) Total assets.............................................. 1,439,196 1,043,376 Total liabilities......................................... 1,595,731 1,557,527 Shareholders' equity ..................................... ($156,535) ($514,151)
5 RISK FACTORS AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING ATLAS MINING AND ITS BUSINESS. ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AS THEY ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS CONCERNING FUTURE EVENTS OR FUTURE PERFORMANCE OF ATLAS MINING. WE ARE CURRENTLY INSOLVENT AND, AS A RESULT, ARE IN DEFAULT ON ONE OF OUR LOANS. We have one note payable which is in default, and intend to negotiate with the creditor to settle our debt. We have a note payable to Moss Adams, LLP for accounting services provided to us in 1999 and 2000. The principal of the note is $53,250, with an interest rate of 9%, due in monthly payments of $1,000. The note matured on August 16, 2001. We have settled a note payable to Fausett International Inc. for $53,500, for equipment and supplies. We settled this note by returning the majority of contracting equipment and supplies. This note is to be repaid from the proceeds of this offering. See "Use of Proceeds." If we are unable to negotiate a settlement of our debt with Moss Adams, LLP, and we are unable to acquire equipment at a more reasonable rate, it would have a material adverse impact on our ability to conduct business, and our financial position. See our discussion in "Management's Discussion and Analysis - - Liquidity and Capital Resources." WE HAVE EXPERIENCED ANNUAL OPERATING LOSSES SINCE SEPTEMBER 1997 AND OUR AUDITORS HAVE INDICATED UNCERTAINTY CONCERNING OUR ABILITY TO CONTINUE OPERATIONS AS A GOING CONCERN We have experienced annual operating losses since our reactivation in September 1997. As of December 31, 2001, we had an accumulated deficit of $2,821,027. We will need to raise additional capital to continue as a going concern. Our auditors have indicated uncertainty concerning our ability to continue as a going concern. We can not assure you that that our proposed projects and services, if fully developed, can be successfully marketed or that we will ever achieve significant revenues or profitable margins. WE ARE AN EXPLORATION STAGE COMPANY, AND THERE IS NO ASSURANCE THAT A COMMERCIALLY VIABLE DEPOSIT OR "RESERVE" EXISTS IN ANY OF OUR PROPERTIES. We are an exploration stage company and cannot assure you that a commercially viable deposit, or "reserve," exists in any of our exploration properties. Therefore, determination of the existence of a reserve will depend on appropriate and sufficient exploration work and the evaluation of legal, economic, and environmental factors. If we fail to find a commercially viable deposit on any of our properties, our financial condition and results of operations will be materially adversely affected. WE HAVE NOT RECORDED INCOME FOR OUR EXPLORATION ACTIVITIES, AND MAY NOT DO SO IN THE FUTURE. To date, none of our exploration properties have warranted further development, and as a result we have not recorded any income from those activities. Additionally, although our timber harvesting activities have generated revenue, we as a company have not yet generated any profit. We may not be able to develop these activities to commercially viable enterprises or to obtain additional properties that are commercially viable. The commodities extracted from our properties may never generate significant revenues or achieve profitability, which will adversely impact our financial condition. 6 WE WILL NEED ADDITIONAL FINANCING TO FULLY IMPLEMENT OUR BUSINESS PLAN, AND IF WE FAIL TO OBTAIN ADDITIONAL FUNDING WE MAY NOT BE ABLE TO CONTINUE OUR OPERATIONS. Since September 1997, we have focused our efforts on developing our business in underground mine exploration, contracting primarily to companies in the mining and civil industries, and other resource development and property acquisitions. We will need to raise additional capital to implement fully our business plan and establish adequate operations. We cannot assure you that we will be able to recover additional public or private financing, including debt or equity financing, as needed, or, if available, on terms favorable to us. Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business and operations. WE REQUIRE SUBSTANTIAL FUNDS MERELY TO DETERMINE WHETHER COMMERCIAL MINERAL DEPOSITS EXIST ON OUR PROPERTIES. Any potential development and production of our exploration properties depends upon the results of exploration programs and/or feasibility studies and the recommendations of duly qualified engineers and geologists. Such programs require substantial additional funds. Any decision to further expand our operations on these exploration properties will involve consideration and evaluation of several significant factors including, but not limited to: o Costs of bringing each property into production, including exploration work, preparation of production feasibility studies, and construction of production facilities; o Availability and costs of financing; o Ongoing costs of production; o Market prices for the minerals to be produced; o Environmental compliance regulations and restraints; and o Political climate and/or governmental regulation and control. WE DO NOT CARRY INSURANCE ON OUR TIMBER ASSETS AND A SIGNIFICANT LOSS OF STOCK DUE TO FIRE, DISEASE OR OTHER CATASTROPHE MAY MATERIALLY REDUCE THE VALUE OF OUR TIMBER ASSETS. We do not carry insurance for fire or disease on its timber reserves due to the prohibitive cost and our limited financial resources. As a result, any catastrophic event may significantly reduce the value of our reserves, and consequently reduce our financial position. The timber industry is affected by lumber price movements and adjustments, downturns in the housing industry, and interest rate movements. These factors can reduce the price of timber and lumber on the open market. A significant decrease in the price of timber may reduce income and therefore reduce the value of our stock. OUR SUCCESS DEPENDS A LARGE PART ON OUR ABILITY TO ATTRACT AND RETAIN OR HIRE KEY PERSONNEL, WHICH WE MAY OR MAY NOT BE ABLE TO DO. To operate successfully and manage our potential future growth, we must attract and retain highly qualified key engineering, managerial and financial personnel. We face intense competition for qualified personnel in these areas, and we cannot assure you that we will be able to attract and retain qualified personnel. If we lose our key personnel, which includes our president, William T. Jacobson, or are unable to hire and retain additional qualified personnel in the future, our business, financial condition and operating results could be adversely affected. We do not have any employment agreements with any of our officers, directors or employees. 7 IF WE ARE UNABLE TO MANAGE THE FUTURE GROWTH OF OUR AGGRESSIVE BUSINESS STRATEGY, IT MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Once we have renegotiated our debt and current liabilities, and have generated enough revenue to create a cache of working capital, we intend to pursue a strategy of rapid growth, and plan to expand significantly our service contracting and acquisition of natural resource properties and devote substantial resources to our marketing, sales, administrative, operational, and financial systems. Such expansion will place significant demands on our marketing, sales, administrative, operational, financial and management information systems, controls and procedures. Accordingly, our performance and profitability will depend on the ability of our officers and key employees to: o Manage our business and our subsidiaries as a cohesive enterprise; o Manage expansion through the timely implementation and maintenance of appropriate administrative, operational, financial and management information systems, controls and procedures; o Add internal capacity, facilities and third-party sourcing arrangements as and when needed; o Maintain service quality controls; and o Attract, train, retain, motivate and manage effectively our employees. We may not be able to integrate and successfully manage new systems, controls and procedures for our business, or that our systems, controls, procedures, facilities and personnel, even if successfully integrated, will be adequate to support our projected future operations. WE MAY NOT BE ABLE TO IMPLEMENT OR MAINTAIN FINANCIAL AND MANAGEMENT SYSTEMS WHICH COULD HAVE A MATERIAL ADVERSE AFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS. If we fail to implement and maintain financial and management information systems, controls and procedures, add internal capacity, facilities and third-party sourcing arrangements or attract, train, retain, motivate and manage effectively our employees, it could have a material adverse effect on our business, financial condition and results of operations. THE VALUE OF TIMBER ASSETS MAY FLUCTUATE DUE TO CHANGING TIMBER PRICES, WHICH MAY ADVERSELY IMPACT OUR REVENUES AND OUR FINANCIAL POSITION. Although we attempt to harvest timber only when the lumber prices merit it, timber is subject to fluctuation in price. To help offset a change in prices, we try to obtain a price agreement with the lumber mills prior to going into any logging program. We do not currently have any agreements with mills. Although we attempt to offset this by obtaining agreements with our purchasing mills prior to beginning our logging, we may not be able to account entirely for price variations, which may result in lower revenues than anticipated. SHARES YOU PURCHASE WILL HAVE A BOOK VALUE LESS THAN THE PRICE YOU PAID FOR THE STOCK. If the offering is fully subscribed, the stock you purchase will have a book value of $0.07 per share. If the offering is not fully subscribed, a lower book value per share will result. The book value will be less than the consideration paid for the shares. 8 THERE IS COMPREHENSIVE FEDERAL, STATE AND LOCAL REGULATION OF THE EXPLORATION INDUSTRY THAT COULD HAVE A NEGATIVE IMPACT OUR MINING OPERATIONS. Exploration operations are subject to federal, state and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Exploration operations are also subject to federal, state and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of exploration methods and equipment. We require various permits from government bodies for exploration operations to be conducted. We cannot assure you that such permits will be received. No assurance can be given that environmental standards imposed by federal, state or local authorities will not be changed or that any such changes would not have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages that we may elect not to insure against due to prohibitive premium costs and other reasons. Management is aware of the necessity of obtaining proper permits prior to conducting any exploration activity. However, at this point we are not close enough to the production stage to start the permitting process. See our "Description of Business - Government Regulation" for further discussion. APPLICABILITY OF "PENNY STOCK RULES" TO BROKER-DEALER SALES OF OUR COMMON STOCK COULD HAVE A NEGATIVE EFFECT ON THE LIQUIDITY AND MARKET PRICE OF OUR COMMON STOCK. Our common stock is listed on the Over-the-Counter Pink Sheets. It is not quoted on any exchange or on NASDAQ, and no other exemptions currently apply. Therefore, the SEC "penny stock" rules govern the trading in our common stock. These rules require, among other things, that any broker engaging in a transaction in our securities provide its customers with the following: o a risk disclosure document, o disclosure of market quotations, if any, o disclosure of the compensation of the broker and its salespersons in the transaction, and o monthly account statements showing the market values of our securities held in the customer's accounts. The broker must provide the bid and offer quotations and compensation information before effecting the transaction. This information must be contained on the customer's confirmation. Generally, brokers subject to the "penny stock" rules when effecting transactions in our securities may be less willing to do so. This may make it more difficult for investors to dispose of our common stock. In addition, the broker prepares the information provided to the broker's customer. Because we do not prepare the information, we cannot assure you that such information is accurate, complete or current. 9 USE OF PROCEEDS We will not receive any proceeds from the sale of shares by the selling securityholders. Assuming the sale of the maximum number of shares offered by Atlas Mining, the net proceeds to us from the sale are estimated to be $1,500,000 before deduction of estimated placement expenses of $100,000. However, we can not assure you of the amount of proceeds that will be raised, if any at all, since this is a best efforts, no minimum offering. The first $100,000 raised from this offering will be applied to legal and accounting fees relating to this offering. The remainder of the proceeds will be applied in the following manner, in the approximate percentages identified in table below: 1. Existing Liabilities. If we raise the full amount, we intend to reduce and/or pay down approximately $400,000 in debts. In descending order of priority we will pay down the following existing debts: 1. $120,000 to CLS Mortgage Co. for a real estate mortgage collateralized by our Shoshone Co. property 2. $100,000 of related party debt, the first $53,500 to Fausett International and the remaining $46,500 to William Jacobson 3. $180,000 of current accounts payable, the first $32,000 to Textron Financial and the remainder to accounts payable For further description of the material terms of these debts see our discussion in "Managements Discussion & Analysis - Liquidity and Capital Resources." If the offering is less than fully subscribed, we will pay as many debts as possible to reduce our payments. 2. Exploration of Dragon Mine. When all current liabilities are paid down, we will commence exploration work on the Dragon Mine to confirm the existence of the clay, and to determine whether or not we have a commodity in commercially viable quantities. We intend to drill at least 3 exploration holes to verify previous work done on the property, and complete some engineering work to determine if the property can be mined economically. 3. Working Capital. We will keep an amount in our working capital account to make sure that we can meet our day-to-day obligations in a timely manner over the next 12 months. Please see Risk Factor titled, "If we are unable to manage the future growth of our aggressive business strategy, it may have a material adverse effect on our business, financial condition and results of operations."
MAXIMUM 75% OF 50% OF 25% OF 10% OF OFFERING OFFERING OFFERING OFFERING OFFERING -------- -------- -------- -------- -------- PROCEEDS $1,500,000 $1,125,000 $ 750,000 $ 375,000 $ 150,000 APPLICATION OF PROCEEDS LEGAL, ACCOUNTING AND OTHER FEES $100,000 $100,000 $ 100,000 $ 100,000 $ 100,000 PAYOFF EXISTING LIABILITIES $400,000 $400,000 $ 350,000 $ 150,000 EXPLORATION OF DRAGON MINE $250,000 $200,000 $ 150,000 $ 50,000 WORKING CAPITAL $750,000 $425,000 $ 150,000 $ 75,000 $ 50,000 TOTAL APPLICATION OF PROCEEDS $ 1,500,000 $ 1,125,000 $ 750,000 $ 375,000 $ 150,000
10 While we currently intend to use the proceeds of this offering substantially in the manner set forth above, we reserve the right to reassess and reassign such use if, in the judgment of our board of directors, such changes are necessary or advisable. At present, no material changes are contemplated. Should there be any material changes in the above projected use of proceeds in connection with this offering, we will issue an amended prospectus reflecting the same. If we are unable to generate enough proceeds with this offering to repay our current liabilities, we may use some of the registered shares in exchange for the retirement of existing debt in following descending order of importance: 1. Legal fees, accounting and other fees related to offering 2. Other debt, as indicated above SELLING SECURITYHOLDERS The following table provides certain information with respect to the selling securityholders' beneficial ownership of common stock as of March 31, 2002 and as adjusted to give effect to the sale of all of the shares in the offering. None of the selling securityholders currently is an affiliate of Atlas Mining and none of them has had a material relationship with Atlas Mining during the past three years, except for William Jacobson, who has been a director since 1993 and CEO since 1997. See "Plan of Distribution." The selling securityholders possess sole voting and investment power with respect to the securities shown.
NUMBER OF SHARES BENEFICIALLY NUMBER OF SHARES OWNED AFTER OFFERING(1) BENEFICIALLY OWNED NUMBER OF SHARES ----------------------------- NAME BEFORE OFFERING BEING OFFERED NUMBER OF SHARES PERCENTAGE ---- --------------- ------------- ---------------- ---------- William T. Jacobson (2) 697,660 300,000 397,660 3.0% David W. Keaveny (3) 140,000 140,000 0 0% Jason Genet (3) 140,000 140,000 0 0% Michael Garza (3) 140,000 140,000 0 0% Pollet & Richardson (4) 20,000 20,000 0 0% TOTAL 1,137,660 740,000 397,660 3.0%
- -------------- (1) Assumes that all shares being offered pursuant to this prospectus will be resold by the selling shareholders and none will be held by the selling shareholders for their own accounts. (2) Mr. Jacobson is our CEO and Chairman of the Board. The shares being offered were issued to Mr. Jacobson in lieu of partial salary. (3) Messrs. Keaveny, Genet and Garza, are employees of Breakout Investment Marketing Group who have provided certain marketing and advisory services to us. The shares being offered to Messrs. Keaveny, Genet and Garza were issued pursuant to an Investment Marketing Agreement dated October 26, 2000. (4) Pollet & Richardson is our legal counsel. The shares being offered were issued to Pollet & Richardson under the Attorney Client Fee Agreement dated September 19, 2001. 11 DETERMINATION OF OFFERING PRICE OFFERING BY ATLAS MINING: There is a limited established public market for the common stock being offered under this prospectus. We are not currently registered on the Over-the-Counter Bulletin Board system or any national exchange. We intend to trade on the OTC Bulletin Board system. However, we are unable to determine the price at which the stock will trade if and when we become eligible on the OTCBB. We determined the offering price of the common stock based on several factors: (1) potential investor interest, (2) our current capital needs, and (3) our ability to pay future dividends, although no dividends are contemplated at this time. The offering price should not be considered to bear any relationship to our assets, book value or net worth and should not be considered to be an indication of our value. OFFERING BY SELLING SECURITYHOLDERS: Each selling securityholder is free to offer and sell his or her common shares at such times, in such manner and at such prices as they may determine. The types of transactions in which the common shares are sold may include transactions in the over-the-counter market, if or when it develops, negotiated transactions, the settlement of short sales of common shares through the writing and exercise of options or a combination of such methods of sale. The sales will be at market prices prevailing at the time of sale or at negotiated prices. Such transactions may or may not involve brokers or dealers. The selling shareholders have advised us that they have not entered into agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their shares. The selling shareholders do not have an underwriter or coordinating broker acting in connection with the proposed sale of the common shares. The shares may not be offered or sold in any jurisdiction or qualified for sale in that jurisdiction unless the selling security holders coupled with any exemption or qualification we will pay all of the expenses of the selling security holders, except for any broker dealer or underwriter commissions, which will be paid by security holders. DILUTION Our net tangible book value before taking this Offering into consideration at December 31, 2001, was ($514,151) or ($0.07) per share of common stock. The "net tangible book value" represents the amount of the total tangible assets less the total liabilities of Atlas Mining as of December 31, 2001. Our net tangible book value per share represents the net tangible book value of Atlas Mining divided by the total number of shares of common stock outstanding as of December 31, 2001. The holders of such shares of common stock are referred below as the "Existing Stockholders." Without taking into consideration any change in the net tangible book value of Atlas Mining after December 31, 2001 and assuming subscriptions are received and accepted for the maximum number of shares of common stock offered (6,000,000 shares), our adjusted net tangible book value as determined after the receipt of net proceeds from such maximum offering amount, totaling $885,849, will be $0.06 per share of common stock. This represents an immediate increase in our net tangible book value of $0.13 per share of common stock to the Existing Stockholders, and an immediate dilution of $0.19 per share to the investors purchasing shares of common stock in this Offering (the "New Stockholders"). 12 The following table illustrates this per share dilution at December 31, 2001: Offering Price per share of Common Stock.............................. $0.25 Adjusted net tangible book value per share of Common Stock at December 31, 2001 before this Offering.................................................. ($.07) Increase attributable to the Offering................................. $0.13 Adjusted net tangible book value per share of Common Stock after this Offering............................................. $0.06 Dilution in adjusted net tangible book Value per share of Common Stock to New Stockholders............................................. $0.19 In addition, further dilution could occur in the future due to any contracts we may enter into with third party entities for consulting or other services. Should any additional common stock shares be issued for consulting or other services, you may, after the close of this Offering, continue to experience additional dilution to your investment in Atlas Mining Company. The dilution amount may also increase if less than a maximum offering results, as any number of shares sold will increase the pro forma book value per share. PLAN OF DISTRIBUTION OFFERING BY ATLAS MINING: We are offering up to 6,000,000 shares of our common stock at a price of $0.25 per share to be sold directly by the company, as represented by President, Chief Executive Officer and Director William Jacobson, and will be a self-underwritten best efforts offering. The shares will not be sold through any independent broker dealer or underwriter, so no compensation will be paid with respect to those sales, except for reimbursement of expenses actually incurred on behalf of our company in connection with such activities. There is currently a limited market for our shares and no assurances can be given that a more liquid public market for such securities will develop after the closing of this offering or be sustained if developed. While we intend to procure or encourage one or more broker or dealers to act as a market maker for our securities following this offering, no such efforts have yet been undertaken and we cannot assure you that any such efforts will prove successful. As of the date of this prospectus, we have not retained a broker for the sale of securities being offered. In the event that we retain a broker dealer who may be deemed an underwriter, an amendment to our registration statement will be filed. The offering will remain open for a period of 90 days, unless the entire maximum offering has been sold prior to that time, or we decide, in our sole discretion, to cease all selling efforts. Our officers, directors and stockholders and their affiliates may purchase shares in this offering. At this time there are no known arrangements with our officers, directors or affiliates to purchase shares in this offering. There is no escrow for any of the proceeds of this offering. Accordingly, we will have use of any proceeds received once a purchase order is received and funds have cleared. The proceeds shall be non-refundable except as may be required by applicable law. 13 Subject to the requirements of the Securities Act and applicable state securities laws, we plan to offer and sell the units in Idaho, California, Arizona and Florida, however, we may consider accepting subscriptions from interested investors in other states if it is not unreasonably burdensome to comply with applicable securities law requirements in such states. We plan to promote the offering by issuing press releases and advertising in newspapers and on the radio, and we may distribute request cards and mail copies of our press releases, advertisements and this prospectus to prospective investors in those states. Any radio or television broadcasts and written materials used in connection with the offering and not accompanied or preceded by a prospectus will include only such limited information as is permitted under federal and applicable state law. We also plan to hold informational meetings for potential investors at sites in and around our principal business offices in Idaho. Attendance at a meeting will not be required to purchase shares. The informational meetings are intended to give investors an opportunity to ask questions of the directors and officers and, if they choose, to bring their legal or financial advisors to ask questions and obtain information about our business. All attendees at the informational meetings will receive a prospectus. We are selling the units through the efforts of our President Mr. Bill Jacobson, without the use of a registered broker-dealer. Consequently, there may be less due diligence performed in conjunction with this offering than would be performed in an underwritten offering. We consider Mr. Jacobson not to be broker under the Securities Exchange Act of 1934 because he has not been, and will not be in the business of effecting transactions in securities for the accounts of others. His participation in our offering is limited to this transaction, and is not part of a general business of effecting securities transactions. We also believe that he individuals is not a brokers or associated person of a broker under Rule 3a4-1 of the Securities Exchange Act of 1934, for the following reasons: - - He is not subject to a statutory disqualification under the Exchange Act at the time of his participation in the sale of our securities; - - He will not be compensated for his participation in the sale of our securities by the payment of a commission or other remuneration based either directly or indirectly on transactions in securities; - - He has not been, for the past 12 months, and is not presently an associated person of a broker or dealer; and - - He has not participated in the offering of securities for any issuer more than once every 12 months. Mr. Jacobson may have assistants who may also provide ministerial help, but their activities will be restricted to the following: - - Preparing written communications and delivering such communications through the mails or other means that does not involve oral solicitation of potential purchasers, provided that such written communications have been approved by us; - - Responding to inquiries of potential purchasers in communications initiated by potential purchasers, provided that the content of such communications is limited to information contained in our registration statement; or - - Performing ministerial and clerical work in effecting any transaction. 14 SUBSCRIPTION PROCEDURES ----------------------- HOW TO SUBSCRIBE If you desire to purchase our shares of common stock you should: 1. Complete, date and sign the subscription agreement you received with this prospectus, and a form of which is attached as an exhibit to this document; 2. Make a check, bank draft or money order payable to "Atlas Mining Company" in an amount equal to the subscription price of $0.25 times the number of shares you wish to purchase; and 3. Deliver the completed subscription and payment to Atlas Mining at the following address: William T. Jacobson Chairman and Chief Executive Officer 630 East Mullan Avenue Osburn, Idaho 83849 (208) 556-1181 You will not be able to revoke your subscription after you have delivered your executed subscription agreement and payment to us. However, we reserve the right, in our sole discretion, to accept or reject any subscription, in whole or in part for any reason whatsoever, and no subscription agreement is binding on us until accepted. If the offering is over-subscribed, we reserve the right to give preference to subscribers who are residents of the Idaho. We also reserve the right to accept subscriptions on a first-come, first-serve basis or on a prorated basis if we receive subscriptions for more than 6,000,000 shares. If we do not accept all or a portion of a subscription, we will return the unaccepted portion of your subscription funds without interest. We will notify you promptly following the closing of the offering whether your subscription has been accepted. If we reject your subscription, we will promptly return your subscription agreement and payment, without interest. If we accept your subscription, your check will be deposited in our general account and will become immediately available for use by us for the purposes described in our "Use of Proceeds" discussion. The closing of the offering is subject to our determination to terminate the offering, which is subject to our sole discretion, and we will return your investment with any interest accrued should we decide to terminate the offering prior to closing. If we close on the offering, we will deliver a certificate or certificates representing your ownership of our common stock within 60 days of the initial closing. Our officers and directors and their affiliates may purchase shares in this offering on the same terms as other investors. There is no limit to the amount of securities our officers and directors and their affiliates may purchase in this offering, and any such purchases will be investment purposes only and not with the intent of resale. If you have any questions about the offering or how to subscribe, please call Mr. William Jacobson, our Chairman and Chief Executive Officer, at (208) 556-1181. You should retain a copy of the completed subscription agreement for your records. You must pay the subscription price at the time you deliver your subscription agreement. 15 OFFERING BY SELLING SECURITYHOLDERS: The selling securityholders may sell their shares directly to purchasers or to or through broker-dealers, which may act as agents or principals. These broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling shareholders. They may also receive compensation from the purchasers of common shares for whom such broker-dealers may act as agents or to whom they sell as principal, or both. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION Our primary source of revenue is generated by our AFC operations. As a result, we are providing Management's discussion on our plan of operation. PROPERTY EXPLORATION We are currently considered an exploration stage company. There is no assurance that a commercially viable mineral deposit exists on any of our properties, and further exploration will be required before any evaluation as to the economic and legal feasibility is determined. We realize that additional expertise will be needed to proceed with the proper steps to move from the exploration stage to development and production stages, as warranted. This will include additional exploration and engineering expenditures. Exploration expenditures the past two years for the San Acacio mine were $313,426 in 1999, $48,750 in 2000, and $51,525 in 2001. In 2001 we also had expenditures of $42,882 on the Dragon mine. Due to costs of development and exploration, we have not mined the Atlas, Aulbach and Sierra Mines for over 20 years, and further exploration of these properties is required. At this time, we would prefer to conduct a feasibility study estimated at $250,000 on the Dragon Mine in Juab County, Utah. We consider the Dragon Mine an exploration stage project. Our entry into the industrial minerals area has just begun. We have furnished samples of halloysite clay extracted from our mine to at least three potential buyers and two distributors. As mentioned in other discussion about the Dragon Mine, we do not intend to start a development or production stage on this property until we can be assured that we have adequate sales to justify a startup. TIMBER We do not intend to acquire any additional timber property at this time. With the amount of timber remaining on Atlas property, we can supplement our revenue stream for the next couple of years. CONTRACT MINING Our contract mining currently constitutes 85% of our revenue. This may decrease as we increase operations on our other owned properties, as warranted, and we intend to adjust our resources accordingly. However, our contract mining will remain a significant portion of our business. 16 RESULTS OF OPERATIONS Please refer to our discussions in the sections entitled "Risk Factors" and "Certain Relationships and Related Transactions," as well as the notes to our Financial Statements, for further descriptions of the financing and debt transactions described below. FISCAL YEAR ENDED 31, 2001 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 2000. Our operations for the period ended December 31, 2001, and the period ended December 31, 2000 consisted mostly of our contracting work and some exploration activities. Our total revenues for the period ending December 31, 2001 were $689,636, which is a 12% decrease from the same period the previous fiscal year. The reason for this is due to fewer revenues received in 2001 from both the contracting entity and logging. Our contract mining revenue for the period ending December 31, 2001 was $632,480, a decrease of 2% from the same period of the previous year. Our timber revenue for the period ending December 31, 2001 was $53,144, which is 60% less than the same period the previous year. We logged less in 2001 because the lumber mills were paying less for logs during part of 2001 than in previous year. We had no capital expenditures for the period ending December 31, 2001 and December 31, 2000. Our interest payments for the period ending December 31, 2001 were $126,870, which is an 8% increase from the same period the previous fiscal year. The reason for this is due to the additional borrowing we have had to do in order to continue operations. In September 2001, we borrowed $120,000 from CLS Mortgage for an additional $6,400 in 2000, and an additional $16,400 cost in 2001. Our general and administrative expenditures for the period ending December 31, 2001 were $542,127, which is a 8% increase from the same period the previous fiscal year. The reason for this is attributable to additional costs in 2001 not incurred in 2000 of $20,396 in professional fees, and $21,397 in promotional expenses. Our exploration expenses for the period ending December 31, 2001 were $115, 369, which is a 58% increase form the same period the previous fiscal year. In 2001 we expensed additional costs on the Dragon Mine, in Juab County, Utah, a property we picked up in the same year. Our net losses for the period ending December 31, 2001 ($578,283), is 1.66 times more than the same period the previous fiscal year. The reason for this is attributed to less revenue in 2001 than in 2000 ($94,678 less), more exploration expenses in 2001 ($66,619 more), and additional general and administrative expenses in 2001 of $38,041. Gross profit on revenues however was 3% higher in 2001 then 2000 (30% in 2001 and 27% in 2000). LIQUIDITY AND CAPITAL RESOURCES To date our activities have been financed primarily through the sale of equity securities as well as revenues from AFC and logging operations. We intend to continue pursuing contracting work and to log our timber properties to help pay for our operations. In 2000 and 2001 the contracting work accounted to about 85% of the total revenues. We have also borrowed from various sources to finance our activities. Our current debt structure is explained below. We have a note payable to William Jacobson, an officer and director of the company, payable on demand and bearing no interest. The proceeds of this obligation were used for general working capital. The current amount due as of December 31, 2001 is $114,648.09. We have an unsecured line of credit for 17 $50,000 with Textron Financial at an interest rate of prime plus 6%. The balance of the line of credit at December 31, 2001 and 2000 was $32,517 and $39,503, respectively. The current balance as of March 31, 2002 is $30,969.37. The funds were used for general working capital and are on a revolving credit line. In 2000, we entered into an agreement with Universal Funding for a secured revolving credit line, immediately payable by accounts receivable. At December 31, 2000, and 2001 the balance of the advances were $38,715 and 0, respectively. The current balance at march 31, 2002 is $0. Interest is payable after 90 days at 0.17% daily. The proceeds of this loan are used for payroll. Accounts payable and accrued interest due as of December 31, 2001 are $290,068 for daily operations and taxes owed. We have a note payable to Moss Adams, LLP, an accounting firm for $53,250 due in monthly payments of $1,000 with a balloon payment due at maturity. The note matured on August 16, 2001. We intend to negotiate with them regarding terms of repayment. The note was for accounting services provided to us in 1999 and 2000. We also have a note payable to CLS Mortgage Company, due in monthly installments of $1,614, including interest at 16%. The note has a current balance of $119,606.24 and is due in August 2005, secured by the proceeds of our logging activities and collateralized by land and a building on our property in northern Idaho. See "Description of Property - Shoshone County, Idaho." The funds were used for working capital and will be repaid from logging income. We had a note payable, in the amount of $15,000 to Lovon Fausett, a director of Atlas Mining, payable on demand and bearing no interest The proceeds of this note were used for working capital. We also had a note payable to Fausett International due in monthly payments of $15,000, including interest at 8.75% and collateralized by equipment and supplies. This note matured on August 22, 2001. The balance as of December 31, 2001 was $782,741. We settled both notes by returning the majority of equipment and canceling all Fausett related obligations for $53,500 which is to be repaid from the proceeds of this offering. We will acquire other equipment at a more reasonable rate in order to continue our operations. Our principal sources of cash flow are from our timber properties, which averaged $10,000 per month in fiscal year 2000 and $4,400 per month in 2001, and our contract mining, which averaged $53,000 per month in fiscal year 2000 and 2001. In addition we also rely on our credit facilities and any public or private equity issuances we may conduct in the future. As of April 1, 2002 we rent office space at 630 E. Mullan Avenue in Osburn, Idaho for $300 per month, on a month to month basis from the Lutheran Church. We do not have a written rental agreement. In 2000 and 2001 we rented from Fausett International, Inc., owned by Lovon Fausett, and paid $2,200 and $15,400 respectively. We agreed to sell shares of Atlas common stock for proceeds of up to $2 million to Summa Metals, a Nevada corporation, at approximately $0.33 per share. During April 2001, we received $95,000 in proceeds from the sale of the common stock. No further payments were made, and we issued 271,430 shares to Summa and cancelled the remainder of the agreement. If we do not reduce any of this debt from proceeds of our offering, or if we do not renegotiate any of this debt, we would be obligated to pay approximately $5,540 per month or $66,500 for the next fiscal year. We will need to obtain additional funding to pursue our business strategy during the next fiscal year. At the present time, we anticipate seeking additional funding through additional private placements, joint venture agreements, production financing, and/or pre-sale loans although we have no plans to conduct any of these activities at this time. Our inability to raise additional capital to fund operations through the remainder of this year and through the next fiscal year could have a detrimental effect on our ability to pursue our business plan, and possibly our ability to continue as a going concern. 18 If we receive less than the full offering we will attempt to satisfy these debts through a negotiated settlement, and/or ask for extended terms until which time we can become more profitable or until we can conduct an additional offering to help satisfy these debts. We cannot assure you that any of these events will occur or, if they do occur, when they will occur. See our "Use of Proceeds" discussion. DESCRIPTION OF BUSINESS We are a natural resource company engaged in the acquisition, exploration, of our resource properties in the state of Idaho and Utah. We also provide contract-mining services, specialized civil construction services for mine operators, exploration companies, and the construction and natural resource industries through our trade name "Atlas Fausett Contracting." We were originally incorporated on March 4, 1924 in Idaho and commenced our operation on that date. In the future, we intend to be able to acquire additional properties near our current mines and elsewhere. However, we have no plans to acquire properties for the immediate future. In addition to the mineral resources, we also have harvestable timber resources on our properties. We also intend to expand our contract-mining services. These services were originally developed and marketed to provide us with an operating revenue. We hope to increase the revenue derived from these services and to utilize our expertise in this area to explore our owned properties. From 1980 to 1997, we had no activities. In 1997, we acquired the equipment of Fausett International, Inc. for $1,416,099 and began our contracting business. In 2002 we cancelled this agreement and returned the equipment. We were not able to utilize this equipment enough to justify the cost related to owning it. In 1998, we acquired the Sierra Silver Lead Mining Company, an Idaho corporation for $276,157. This merger added an additional 329.18 acres of mineral rights to our current holdings. In 1999, we also acquired the majority outstanding shares of Olympic Silver Resources, Inc., a Nevada corporation for $288,566. The acquisition of Olympic gave us control of an Olympic subsidiary mine in Zacatecas, Mexico. In 2001 our agreement on the mine in Zacatecas expired and we no longer have any interest there. In 1999 we acquired the Aulbach mining claims for $ 50,000, approximately 100 acres of timber and mineral property in northern Idaho. In 1999 we acquired 54% interest in the Park Copper Mining Company for $72,825, which holds 100 acres of timber and mineral property in northern Idaho. In 2001, we entered into a lease purchase agreement on the Dragon Mine in Juab County, Utah for $100,000. We believe this property may contain a deposit of high quality clay, which we plan to explore further. We have also harvested timber on approximately 320 acres of our previously owned and newly acquired properties. CONTRACT MINING Because of exploration and other budget constraints, exploration on our properties has remained idle since the 1980s. However, on August 10, 1997 our board met and approved a plan to revitalize Atlas Mining for the purpose of increasing shareholder value and, in the long term, of making us an operating company with producing mines. The first step in this process was to form a contract mining service under the trade name of Atlas Fausett Contracting, which we refer to as AFC. We acquired equipment and tools, we also hired key employees from Fausett International ("Fausett"), a privately held mining contracting firm with over 30 years experience in the mining business. These employees brought with them extensive knowledge and expertise in all aspects of underground mining. 19 AFC began contracting work on August 15, 1997. Among its many services, AFC performs site evaluation, feasibility studies, trouble-shooting and consultation prior to the undertaking of exploration and mine development. AFC's projects include all types of underground mine development, rehabilitation and specialized civil construction. In addition AFC provides mine closures services. Services are contracted for either individually or as joint ventures depending on the requirements of a particular project or the specific needs of an individual client. AFC also handles work under contract from government agencies. AFC crews are experienced and have worked on projects in Idaho, Montana, Oregon, Washington, Nevada, Colorado, Arizona, New Mexico, and British Columbia. AFC has the required licenses to work in Idaho, Washington and Montana and has the ability to license in most states in the western United States. AFC operates under a permit from the Mine Safety and Health Administration and also possesses a permit to handle explosives from the Bureau of Alcohol, Tobacco and Firearms. AFC was the main contractor at the Mayflower Mine, a Brimstone Gold Corp. project, outside of Whitehall, Montana, and for the Holden Mine closure, a U.S. Government and U.R.S. Corporation project on Lake Chelan, Washington. AFC must also compete with other smaller companies that provide contract services related to underground mining. However, AFC has experience in a number of different mining techniques. Besides normal underground mining activities, AFC pursues projects in civil construction which require its expertise in ground stabilization (such as grouting, shotcrete, and rock bolting). AFC has provided tunnel construction expertise for hydroelectric work. AFC also works with government agencies and other mining companies with respect to mine closures to help with industry efforts to alleviate potential hazards from abandoned mines. Since AFC mainly concentrates on underground mining activities, there is very little surface disturbance, which is the main environmental concern faced by mining companies whose activities are centered on surface mining. TIMBER Our entry into the timber industry was commenced primarily as a means of generating cash flow from our exploration properties in northern Idaho. Our intention is to remain in this industry only to the extent that it supplements our revenue while we are conducting our exploration activities. With the amount of timber remaining on Atlas property, we can supplement our revenue for the next couple of years. As we harvest this timber, we will continue to seek out additional exploration properties with harvestable timber. It takes approximately fifteen to twenty years for a tree to mature in northern Idaho, and our current goal is to acquire enough harvestable land to enable us to rotate our logging activities on a yearly basis to allow previously harvested areas the time to grow and mature marketable trees. When we sell or timber we contract our logging to a qualified logger, Randy Mattson, whose experience and reputation in the industry qualifies him to negotiate the sale of our timber to various lumber mills in the area. We do not have a written contract with Mr. Mattson, but rather hire him on an as needed basis. As with most commodities, timber is subject to price fluctuations and by government regulation. See "Risk Factors." 20 The timber business is a cyclical business with lumber prices that fluctuate based on a number of factors including new housing starts, imports, and government regulations. North Idaho is predominately held by the U.S. government, either by the Forest Service or by the Bureau of Land Management. When these agencies decide to harvest timber the excess timber can affect the price the mills are willing to pay. In recent years there have been less government sales of timber due to the environmental and bureaucratic policies related to these sales. This has put more demand on the privately held timber. We do not hold any contracts with any particular mills. We do, however, supply timber to Louisiana Pacific, a local mill, which constitutes 80% of our annual timber revenues generated, and maintain a good relationship with them. Other factors which create the cyclical nature of this business is the weather. North Idaho has a heavy snowfall each winter, making logging difficult during those months. Consequently we do the majority of our logging efforts in the summer and fall. Our property consists primarily of pine, fir and larch, which is used predominately in the building industry. Our logging activities are regulated by the Idaho State Department of Lands. They inspect our logging practices and inform us of any activities that may cause either a safety or an environmental problem. Our logger carries workers compensation and liability insurance, and falls under the guidelines of Occupational Safety and Health Act of (OSHA). EXPLORATION We intend to conduct our exploration activities for silver ore and halloysite clay, and intend to acquire commercially feasible properties that can be put into production with minimal environmental problems and with limited financial resources. We do not intend to seek out other properties to acquire until we have finished conducting our feasibility surveys and other exploration work on our current properties. Although we have not yet generated income from these properties, we are continuing our exploratory work on these properties. In 1999, we spent $362,520 on our silver exploration, and $48,750 in 2000. In August 2001, we acquired the Dragon Mine in Juab, Utah and began our clay exploration. Our exploration expenses for the period ending December 31, 2001, were $115,369. We spent 51,525 on our silver exploration, and $63,844 on our clay exploration. The halloysite clay is considered a non-toxic material and with proper containment and processing techniques that, if commercially viable amounts are discovered on the property, we feel we can produce a sellable product with minimal environmental consequences. The intended processing will be the crushing, drying, and packaging of the product for shipment. As this is a process that will be achieved only after the exploration stage and development stages are completed, we have not formalized any plans for mining and processing the clay. We do not have any customers, suppliers or contracts relating to the silver or clay businesses and are still attempting to complete our exploration of our properties. Should production be warranted in either operation, we intend to generate a list of potential buyers. Each buyer may have a different use for the product and the price and quantity will vary as a result. Should any of our exploration activities reach the development and/or production stages, we intend to submit a mining and reclamation plan to the proper state and federal authorities, and will proceed with our activities upon acceptance of our plan. Realizing that this process is sometimes time consuming, if we find that we will be moving forward on this or any other exploration project, we will begin this process as soon as possible. 21 BUSINESS STRATEGY As was noted above, the creation of AFC was done for the purpose of creating an operating revenue for us. We intend to expand our exploration, and our timber production. To date our activities have been financed primarily through the sale of equity securities and the issuance of equity for the acquisition of mining property. See "Management's Discussion and Analysis of Financial Condition - Results of Operations." We will need to obtain additional funding to pursue our business strategy during the next fiscal year. At the present time, we anticipate seeking additional funding through additional private placements, joint venture agreements, production financing, and/or pre-sale loans, although we have not entered into negotiations for any of these sources at this time. Our inability to raise additional capital to fund operations through the remainder of this year and through the next fiscal year would have a detrimental effect on our viability and capability to pursue our business plan. COMPETITION CONTRACT MINING A review of Dun and Bradstreet shows that the main competitors of AFC in the contract mining business are: American Mine Services, Inc.; Dynatec Mining Corporation; Tyson; J.S. Redpath and Small Mines Development. Each of these companies are larger corporation or part of a larger company which gives them the depth to take on larger projects that require large capital investments. Similarly, AFC must compete with other companies that provide contract services related to underground mining. AFC has had the opportunity to compete outside of this area on occasion in that it has used its underground mining expertise in different ways. Such related use of this expertise has been in such things as rock bolting, shotcrete, and grouting for ground support. AFC has also acquired and completed mine closure projects under the jurisdiction of the Forest Service and State and Federal Environmental Agencies. The amount of underground contracts for which AFC could bid fluctuates greatly depending and the economic climate of the industry. However on average the total contracts offered are generally between $100 to $120 million per year. The major competitors to AFC, Redpath, Dynatec and Tyson and Small Mines Development, get the largest projects, which probably accounts for 80% to 90% of all projects available. The remaining projects are spread out between American Mine Services, AFC and a few others. However, we believe we are in a unique position due to our manpower and mining knowledge and experience. AFC has the ability to compete on larger projects because of its expertise. However, the issue of whether to compete on larger projects depends on our willingness to devote the necessary capital, bonding, and other resources to larger projects when these resources might be better used in the exploration of our own properties. The goal of our management at this time is to show continued growth and profitability in AFC in order to support the total corporate structure, and to utilize the talents and resources of the AFC for our own exploration projects when those resources are available. We have noticed less activity in the mining industry in the United States over the past three years. During this period the price of metals has declined while additional costs due to regulations imposed on the industry have driven mining costs upward making mining less profitable. Consequently, the ability to generate a sustainable revenues source from AFC has been hampered. Because we do not know if and when this trend will end management has decided to find mineable resources on its own to utilize the manpower and expertise available to the company. 22 EXPLORATION We face a large number of competitors with respect to our exploration activities. Although we may have some advantage with respect to companies smaller than ours, we also face the common disadvantage against larger companies with more available capital. Consequently we have limited our exploration activities to the clay property (Dragon Mine). TIMBER We face large numbers of competitors in this industry, and our competitors include individuals who may own property in northern Idaho and wish to sell their lumber at market prices to local mills. We are affected by market prices, and as prices fall and competitor suppliers increase, our revenues from this business may fall significantly. Logging activities in northern Idaho are seasonal due to the large amount of snow we accumulate during the winter. We do most of our logging activity in the summer and fall. GOVERNMENTAL REGULATION CONTRACT MINING We are subject to the following state and federal regulations with respect to this aspect of our business: Most states require a contractors' license before conducting business in their state. Each state has a different procedure for licensing. We estimate the annual cost to maintain our state contractors licenses to be approximately $500 per year. We obtain and pay workers compensation insurance, unemployment, and state withholding in all states in which we work. We handle these functions as a part of our normal clerical process, but estimate that we spend approximately $5,500 per year to maintain this function. Several states that we operate in require a permit to handle explosives, and we maintain such a license under the U.S. Bureau of Alcohol Tobacco and Firearms (ATF, USC18, Chapter 40). This license is renewed every three years for $50.00. If we hire new employees that will handle our explosives, we are required to submit information to the ATF. Over the past year, the ATF has asked that we keep in contact with them regarding any projects that require the use of explosives. We estimate our cost each year to be approximately $50 to keep this license in good standing. We have always required that the mine owner permit his project with the proper regulatory authority prior to beginning work, which relieves us of liability for this. We are licensed under the Mine Safety and Health Act of 1997 (MSHA) (License number: VL-2). We are required to submit quarterly reports of our activities the MSHA and to conduct annual refresher courses for our employees. The annual cost of these functions varies based on the amount of activity; however, we estimate that in the past two fiscal years we have had an annual expenditure of approximately $700 per year, and anticipate the next fiscal year's cost to be the same TIMBER We are subject to the following state and federal regulations with respect to this aspect of our business: 23 We are regulated by the Idaho state Department of Lands under at the Idaho Forestry Act Title 38, Chapter 1. Under this regulation, the logger must apply for and obtain a Notification of Forest Practices prior to starting a logging project. This permit requires the logger to maintain proper logging practices, including erosion abatement, and fire prevention. The State of Idaho retains $4 per thousand board feet from all logs hauled to the mill, and once the project is completed along with a State inspection verifying that the project was completed according to Idaho Forest Practices Act, the logger applies a release of these funds. Although we contract out our logging, we may be liable for problems created by the logger as the landowner. However, we take measures to ensure that our contracted loggers are reputable and incidents do not occur. We do not currently have any direct costs related to this regulation. EXPLORATION We are subject to the following state and federal regulations with respect to this aspect of our business: Should we decide to conduct exploration activities in Idaho, we will notify the Idaho State Bureau of Mines as required under Title 47, Chapter 1, the Department of Lands, and the federal Mine Safety and Health Administration of our intent. If we produce any ground disturbance, we will then need to notify the State Department of Environmental Quality to ensure that we are working within their guidelines. However, we do not intend to conduct any exploration in Idaho at this time. We do intend to conduct some exploration at the Dragon Mine in Juab County, Utah. The Utah Department of Natural Resources sets the guidelines for exploration based on provisions of the Mined Land Reclamation Act, Title 40-8, Utah Code Annotated 1953, as amended, and the General Rules and Rules of Practice and Procedures, R647-1 through R647-5. We intend to apply for an exploration permit in the near future, which will cost $100 annually. We will also apply for authority from the Utah Department of Commerce to conduct business as a foreign corporation in the state as required by Utah Code, Title 16-10A-1501. We will pay $50 for this application and $50 annually thereafter. We do not plan to hire any additional people for his process at this time, but will utilize existing employees already covered by Idaho State employment regulations. EMPLOYEES As of December 31, 2001, Atlas Mining and its subsidiaries have five employees. We have also outsourced some of our logging work to a logging contractor who employs approximately ten people. In addition, we periodically utilize the services of various individuals on a consulting basis. In 2001 we paid a geologist, Richard Tschauder, $36,000, and an industrial minerals consultant, Phlogiston Company, $30,000 for their consulting services. We do not have employment agreements with any of our employees. None of our employees are covered by a collective bargaining agreement, we have never experienced a work stoppage, and we consider our labor relations to be excellent. DESCRIPTION OF PROPERTY We have assets of real property, mineral leases and options. The following section describes our right, title, or claim to our properties and each property's location. This section also discusses our present plans for exploration of the properties, and an estimate of mineralized material located on each property. Please refer to our Glossary at the end of this section for definitions of technical terms used in our discussion. 24 PRINCIPAL OFFICE - ---------------- We rent office space from the Silver Valley Christian Academy in Osburn, Shoshone County, Idaho. The address of the property is 630 East Mullan Avenue, Osburn, Idaho 83849. The property is a two room office, containing approximately 800 square feet, in a business complex in the downtown area of Osburn, Idaho. The rent is $300 per month and there is no rental agreement. SHOSHONE COUNTY, IDAHO EXPLORATION ----------- We own approximately 800 acres of fee simple property and patented mining claims, and 260 acres of mineral rights and unpatented claims, located in the Coeur d'Alene mining district in Shoshone County, Idaho, commonly referred to as the Silver Valley of North Idaho. Atlas was originally incorporated to pursue mining activities on the Atlas mine property near Mullan, Idaho. This property had some past production of silver, lead, zinc and copper in the early 1900's. However, the existence of minerals on this property cannot be determined without extensive exploration. We have no plans for exploration of the Shoshone County mines at this time, and the property is currently mortgaged to CLS Mortgage. See "Management's Discussion of Analysis of Plan of Operation - Liquidity and Capital Resources." If all of our offered shares of stock are sold, then we plan to explore the Dragon Mine in Juab County, Utah. Any revenues we may eventually generate may be used to further explore mines within the Shoshone County area or to acquire new properties wholly unrelated to its Shoshone County properties. See "Use of Proceeds." Our properties are divided into five separate tracts. These sections are named for the mines located in that specific section. The section location and estimated acreage are as follows: SECTION OF THE COEUR D'ALENE MINING DISTRICT ESTIMATED ACRES Atlas Mine 540 acres fee simple and patented, 180 unpatented Sierra Trapper Creek 80 acres patented Aulbach, Section 6 & 7 100 acres patented Sierra Silver, Woodland Pk & 9 Mi 60 acres patented, 80 acres mineral rights Sierra Hardscrabble 20 acres patented The largest section is the Atlas Mine. The underground Atlas Mine, idle since the early 1980's due to exploration budget restraints, is located on the east end of the Coeur d'Alene Mining District in Shoshone County. The property is accessible by interstate freeway and a county maintained road. Geologically, the property lies just south of the Osburn Fault in the Wallace and St. Regis formations. The Mine has over 7,000 feet of tunnels with a rail system and a 2,000-foot internal shaft which can be accessed for future exploration. The other properties in Shoshone County have no accessible workings. All the properties are accessible either by state highway, county road or forest service roads. TIMBER ------ We estimate that the five properties listed above contain approximately 2 million board feet of harvestable timber. Atlas contracts independent loggers to harvest the timber and deliver it to the mill. The current return to Atlas is approximately $150 per thousand board feet. A board foot of lumber is one foot by one foot by one inch. We implement reforestation techniques to replenish its timber supply. We contract our logging activities to Randy Mattson, who has over 20 years of experience in the industry. 25 We acquired our Sierra property through the acquisition of Sierra Silver Lead Mining Company. Through this purchase the Company acquired approximately 329 acres of mineral rights that include approximately 250 acres of surface and timber. Although there was a small amount of zinc mined on the Sierra Silver property, there has been no mining activity for over forty years. Subsequent to the purchase we sold approximately 100 acres. The majority of the Sierra property lies south of the Osburn Fault in the Wallace formation, and has no reserves. The property does have approximately 500,000 board feet of timber, which we value at approximately $75,000, which is included in the total timber value estimate in the paragraph above. We acquired its Aulbach claims in March 1999 from Trail Gulch Gold Mining Company. Through this purchase, we acquired approximately 100 acres of surface and mineral rights which included timber. We have logged approximately 650,000 board feet of timber on the property with an approximate net value of $105,000. JUAB COUNTY, UTAH - ----------------- DRAGON MINE The Dragon Mine property, located in Juab County, Utah near the City of Eureka (Tintic Mining District) has been principally exploited for halloysite clay, a rare and high unit value clay mineral. The property consists of 38 patented mining claims, approximately 230 acres, located in the following sections: T10S, R2W, sections 29, 30, 31, and T10S, R3W, Section 36, all relative to the Salt Lake Meridian. Atlas Mining Company currently controls the property through a lease purchase agreement executed on July 10, 2001, with Conjecture Silver Mines, Inc., whose address is P.O.B. 14006, Spokane, Washington 99214. Conjecture Mines acquired the claims through a Quit Claim deed and share exchange with Grand Central Silver Mines, Inc. We signed a lease purchase agreement with Conjecture Silver Mines in August, 2001. Under the lease purchase agreement, we paid 400,000 shares of common stock valued at $100,000 for a one year lease. Under the terms of the lease agreement we have the right to renew the lease annually for the payment of 100,000 additional shares or may buy the property for $500,000 if we have $1,000,000 in sales from the mine in a 12 month period. Should we mine the property, if warranted, before we have bought it we are liable to pay a 3% royalty on the gross sales of product from the property.Prior to the ownership mentioned the Dragon Mine was owned by Anaconda and operated by Filtrol Corporation from 1950 to 1977. Examination of the mine maps, the open pit and surviving correspondence, coupled with informal interviews of former employees, all lead us to the conclusion that mining techniques were likely inefficient. A combination of developments of synthetic catalysts (the halloysite was mined for petroleum cracking) and production inefficiencies led the mine to price itself out of business. The property has been idle since 1977. Previous owners records indicate that over 1.1 million tons were mined at the property from 1950 until it closed. Those records also indicate approximately 300,000 tons of mineralized material remain on the property. The previous owners also conducted some exploration core drilling and some reverse circulation drilling, however those records are incomplete. These figures are dependent on the assumption that the old records and maps are accurate. Our analysis of the surviving maps and record lead us to believe that their estimates of 300,000 tons of materialized material is still in place. Their area of influence were no more than 80 feet along strike and 100 feet along dip. There was no chemically quantifiable cutoffs to the mineralized material. It appeared that the most distinguishable factors were visual indicators. The specific gravity they used was a density of 17 cubic feet per ton. Until we are able to conduct our own exploration drilling program, we can not confirm this information. If these records are not correct we may be overstating the estimated mineralization material left in the mine. 26 The property is located in the arid mountains approximately 2 miles west of Eureka, Utah and can be accessed via state highway and county road. The property has been mined in the past, however the only evidence of mining is an open pit area and an abandoned head frame. The Union Pacific Railroad has a spur approximately 2 miles from the property. Power is approximately 1.5 miles from the site, and there is no available water on the property at this time. We believed the halloysite material was formed through the alteration of a shale bed lying between a limestone bed and igneous rocks. The base of the limestone was selectively replaced by iron oxide material with abundant manganese. The shale was altered to halloysite. This unit is evident in the open pit. Following the alteration event, halloysite was squeezed into northeast-striking faults upward through the limestone to the top of the bedrock in places. Our geologists see added potential to the northeast along these faults and in the replaced beds to the east and northeast. This potential has not yet been quantified. Samples taken from surface exposures of the halloysite material have been made available to parties interested in conducting suitability tests. Samples have been taken from seven areas within the open pit. On the surface, the halloysite material is chalky white, often stained by iron leaking downward from the iron cap, but a few inches beneath the surface, the halloysite material turns to soft, wet-looking and soapy feeling, often with a bluish tinge. However, this material loses its water content and turns chalky within a few days of exposure to air. DESCRIPTION OF PROPERTY GLOSSARY -------------------------------- Adit: A nearly horizontal passage from the surface by which a mine is entered. Alteration: Changes in chemical or mineralogical composition of a rock generally produced by weathering or hydrothermal solutions Clay: A size term regarding particles, regardless of mineral composition, with a diameter of less than four microns, or a group of hydrous alumino-silicate minerals related to the micas Cross Section: A profile portraying an interpretation of a vertical section of the earth explored by geophysical and/or geological methods. Development: The preparation of an established commercially minable deposit (reserves) for its extraction which are not in the production stage. Diapir: A structure formed by the squeezing of plastic material into the overlying rock - usually results in a dome in the overlying rock Exploration: The search for mineral deposits (reserves) which are not in either the development or production stage. Fault: A fracture or fracture zone along which there has been displacement of the sides relative to one another parallel to the fracture Formation: The primary unit of formal mapping or description Grout: A form of ground stabilization where in cement is pumped into the rock formation Halloysite: A clay mineral related to kaolin with essentially the same chemical composition, but has crystals which are slender hollow tubes 27 Mineral: A naturally formed chemical element or compound having a definite range in chemical composition and usually a characteristic crystal form Mining Claim: That portion of mineral lands that a miner takes and holds in accordance with mining laws Open Pit: A hole in the ground left by the extraction of material Potassic: Of, pertaining to, or containing potassium Reserve: That part of an identified resource from which a useable commodity can be economically and legally extracted at the time of determination Resource: A concentration of naturally occurring materials in such form that economic extraction is currently or potentially feasible Reverse Fault: A fault on which the hanging wall has been raised relative to the footwall Shaft: An excavation of limited area compared to its depth Shotcrete: A form of ground stabilization where concrete is sprayed on the rock to give it strength. Vein: A body long in two dimensions and short in a third, usually used to describe a steeply dipping mineral deposit with the same characteristics DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The directors, executive officers and significant personnel of Atlas Mining Company and their ages are as follows: Name Age Position - ---- --- -------- William T. Jacobson 54 President, CEO, Director Jack Harvey 78 Vice President and Director Kurt Hoffman 34 Treasurer and Director Thomas E. Groce 79 Director Marqueta Martinez 51 Secretary INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS None of the foregoing Directors or Executive Officers has, during the past five years: (a) Had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (b) Been convicted in a criminal proceeding or subject to a pending criminal proceeding; (c) Been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; and (d) Been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. 28 WILLIAM T. JACOBSON has been president of Atlas Mining Company since August 1997. He has had a fifteen year career in the mining industry and spent fifteen years in the banking industry. Prior to joining the Company, Mr. Jacobson was a president and director of the Silver Trend Mining Company, located in Kellogg, Idaho. Mr. Jacobson holds a business degree from the University of Idaho. Mr. Jacobson does not hold a board seat in any other public company. JOHN "JACK" HARVEY has been vice president of Atlas for 17 years. He received his mining engineering degree from Montana Tech. He worked in Butte, Montana with Anaconda and Arco until he retired about 15 years ago, after a 41 year career. Mr. Harvey does not hold a board seat in any other public company. KURT HOFFMAN is the treasurer of Atlas Mining Company and has been the the president of Trend Mining Company since 1998 which is a publicly traded company traded on the over the counter bulletin board under the symbol TRDM. Mr. Hoffman also owns and has operated Hoffman Mining and Land Services since 1995. Other than TRDM, Mr. Hoffman does not hold a board seat in any other public company. THOMAS E. GROCE received a metallurgical engineering degree from Montana Tech. He retired 16 years ago, after a 30- year career at Kaiser Aluminum. Mr. Groce held the position of secretary treasurer for 16 years. Mr. Groce does not hold a board seat in any other public company. MARQUETA MARTINEZ is the secretary for the corporation, and works as a full time employee for the Company. She has worked in the mining industry since 1991. Ms. Martinez does not hold a board seat in Atlas Mining or any other public company. Marqueta is also the treasurer for the Shoshone County Habitat for Humanity. All directors hold office until the next annual meeting of shareholders and the election and qualification of their successors. Officers are elected annually by, and serve at the discretion of, the Board of Directors. Board members are not presently compensated, but are reimbursed for their expenses associated with attending Board meetings. EXECUTIVE COMPENSATION SUMMARY OF COMPENSATION The following executive compensation disclosure reflects all compensation awarded to, earned by or paid to the Named Executive Officers, as defined below, for the fiscal years ended December 31, 2001, 2000 and 1999. The named executive officers (the "Named Executive Officers") are Atlas Mining's Chief Executive Officer and the other executive officers of Atlas Mining who each received in excess of $100,000 in total annual salary and bonus for fiscal year 2001. Compensation is shown in the following table: 29 SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation ------------------- ---------------------- Awards Payouts ------ ------- Restricted Securities Name and Principal Fiscal Other Annual Stock Awards Underlying All Other Position Year Salary ($) Compensation ($) Options/SARs (#) Compensation - -------- ---- ---------- ------------ --- ---------------- ------------ William T. 2001 78,000 Jacobson(1) 2000 72,000 CEO 1999 72,000
- ------------------ (1) Mr. Jacobson's employment began in 1997. STOCK OPTION GRANTS The following table shows all individual grants of stock options to the Named Executive Officers during the fiscal year ended December 31, 2001. Option/SAR Grants in Last Fiscal Year
Number of Percent of Total Securities Options/SARs Underlying Granted to Options/SARs Employees in Exercise or Base Expiration Name Granted (#) Fiscal Year Price ($/SH) Date - ---- ----------- ----------- ------------ ---- None
- ------------------- OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL-END OPTION VALUES Set forth below is information with respect to exercises of stock options by the Named Executive Officers during the fiscal year ended December 31, 2000, and the fiscal year-end value of all unexercised stock options held by such persons. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Number of Securities Underlying Unexercised Value of Unexercised, Options Held at In-the-Money Options at Fiscal Year-End# Fiscal Year-End ($)(1) ---------------- ---------------------- Shares Acquired on Value Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable - ---- ------------ ------------ ----------- ------------- ----------- ------------- None
EMPLOYMENT AND CONSULTING AGREEMENTS We do not have any written employment/consulting agreements with our executive officers and directors. COMPENSATION OF DIRECTORS Members of the Board of Directors are not compensated for serving as directors of Atlas Mining, however expenses may be reimbursed. 30 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS We engage in a number of transactions with interested parties. We make every effort to ensure that these transactions are conducted as arm length transactions. However, at this time we do not have a formal conflicts of interest policy. Fausett International, Inc. sold operating equipment and supplies to us in 1997 for a purchase price totaling $1,416,094. The valuation of the operating equipment was done by appraiser Clyde James of Professional Adjusters, Inc. The owner of Fausett International is Lovon Fausett who is also a director for Atlas Mining. The purchase price was paid in cash, capital stock (875,000 shares of common stock valued at $350,000), and a note payable which terms of settlement are discussed below and are described in our discussion entitled "Management's Discussion and Analysis - Liquidity and Capital Resources." As part of the purchase of Fausett International Inc.'s assets, we engaged Fausett International in a consulting agreement, beginning in 1998, to be provided by Lovon Fausett, the majority stockholder of Fausett International Inc., and payable at $1500 per month. We discontinued payments after the first year due to lack of activity in the industry. During 2000, Lovon Fausett loaned Atlas Mining $15,000 for use as working capital. The note has been settled with Fausett International according to the terms mentioned below and described in our discussion entitled "Management's Discussion and Analysis - Liquidity and Capital Resources." Atlas Mining leased office space from Fausett International for $1,100 per month, on a month-to-month basis. In each of 2001 and 2000, we paid $2,200 and $15,400 respectively. We have recently terminated are lease agreement with Fausett International, and will be renting office space for significantly less. We have settled all of the above-mentioned notes relating to obligations to Fausett International and Lovon Fausett for the equipment purchase, the loans and the remainder of outstanding rent. And as of this filing we have only a promissory note of $53,500 to be repaid from this offering to Fausett International. During 2001 and 2000, William Jacobson loaned Atlas Mining $31,300 and $36,000, respectively, for use as working capital. The total balance remaining as of December 31, 2001 is $114,648 and $114,501 respectively. The note is payable upon demand and bears no interest. Further discussions of these transactions are described in "Management's Discussion and Analysis of Plan of Operation - Liquidity and Capital Resources." MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Our common stock is traded on the OTC Pink Sheets under the symbol "ALMI." The following table sets forth the high and low bid prices of our common stock, as reported by Pennaluna and Company, Coeur d'Alene, Idaho, for each quarter for the years 1999 and 2000, and the first, second and third quarters-through September 30, 2001. The quotations set forth below reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. 31 HIGH LOW ---- --- 1999 First Quarter....................................... $.25 $.18 Second Quarter...................................... $.25 $.18 Third Quarter....................................... $.25 $.04 Fourth Quarter...................................... $.25 $.04 HIGH LOW ---- --- 2000 First Quarter........................................ $.25 $.12 Second Quarter....................................... $.25 $.12 Third Quarter ....................................... $.12 $.06 Fourth Quarter ...................................... $.12 $.06 HIGH LOW ---- --- 2001 First Quarter........................................ $.09 $.02 Second Quarter....................................... $.25 $.07 Third Quarter ....................................... $.25 $.10 Fourth Quarter....................................... $.15 $.08 As of December 31, 2001, there were approximately 1,690 holders of record of our common stock. We have not paid any dividends on our common stock during the past two years. We expect to continue to retain all earnings generated by our operations for the development and growth of our business, and do not anticipate paying any cash dividends to our shareholders in the foreseeable future. The payment of future dividends on our common stock and the rate of such dividends, if any, will be determined by our board of directors in light of our earnings, financial condition, capital requirements and other factors. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information concerning the beneficial ownership of our shares as of March 31, 2002, for (i) each current Director and each nominee for Director (ii) each officer of Atlas Mining, (iii) all persons known by us to beneficially own more than 5% of the outstanding shares of Atlas Mining shares, and (iv) all officers and Directors of Atlas Mining as a group. Unless otherwise noted, we believe that all shares are beneficially owned and that all persons named in the table or family members have sole voting and investment power with respect to all shares owned by them. A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from the date hereof upon the exercise of warrants or options. Each beneficial owner's percentage of ownership is determined by assuming that options or warrants that are held by such person (but not those held by any other person) and which are exercisable within 60 days from the date hereof have been exercised. As of the date of this Registration Statement, no options, warrants or rights to acquire shares have been granted. 32
NUMBER OF SHARES TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF TOTAL - ------------------------------- ------------------------------------------- ---------------------- ------------------- Common William T. Jacobson, 697,660 10.0% Chairman, CEO 630 East Mullan Avenue Osburn, Idaho 83849 - ------------------------------- ------------------------------------------- ---------------------- ------------------- Common Jack Harvey 60,767 * Vice President, Director 630 East Mullan Avenue Osburn, Idaho 83849 - ------------------------------- ------------------------------------------- ---------------------- ------------------- Common Kurt Hoffman 2,500 * Treasurer, Director 630 East Mullan Avenue Osburn, Idaho 83849 - ------------------------------- ------------------------------------------- ---------------------- ------------------- Common Thomas E. Groce 121,340 1.7% Director 630 East Mullan Avenue Osburn, Idaho 83849 - ------------------------------- ------------------------------------------- ---------------------- ------------------- Common Marqueta Martinez 25,300 * Secretary 630 East Mullan Avenue Osburn, Idaho 83849 - ------------------------------- ------------------------------------------- ---------------------- ------------------- Common Fausett International, Inc. 500,000 7.1% P.O. Box 968 Osburn, Idaho 83849-0968 - ------------------------------- ------------------------------------------- ---------------------- ------------------- All Officers and Directors as a Group (6 persons) 943,347 13.5% - ------------------------------- ------------------------------------------- ---------------------- -------------------
* represents less than one percent of the total outstanding shares. DESCRIPTION OF SECURITIES GENERAL Our authorized capital stock consists of 60,000,000 shares of common stock, no par value, of which 7,006,727 are issued and outstanding as of December 31, 2001 and 10,000,000 shares of Preferred Stock, par value $1.00, of which none are issued and outstanding as of December 31, 2001. COMMON STOCK All of the authorized voting common shares of Atlas Mining are of the same class and, once issued, rank equally as to dividends, voting powers and participation in assets. Holders of common shares are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders. Holders of common shares are entitled to receive such dividends as may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available there from. No shares have been issued subject to call or assessment. There are no preemptive or conversion rights and no provisions 33 for redemption or purchase for cancellation, surrender, or sinking or purchase funds, nor any cumulative voting rights. The Directors of Atlas Mining may from time to time declare and authorize payment of dividends, as they deem advisable. Subject to the rights of members, all dividends on shares shall be declared and paid according to the number of shares held. No dividends have been declared since incorporation. The outstanding shares are fully-paid and non-assessable. PREFERRED STOCK Although we are authorized to issue noncumulative, nonvoting, nonconvertible preferred shares, we have not yet done so, and have not determined any specific terms for any such shares we may offer in the future. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the shares of common stock is Cottonwood Stock Transfer Company, 5899 South State Street, Salt Lake City, Utah 84107. REPORTS TO SHAREHOLDERS We intend to furnish annual reports to shareholders, which will include certified financial statements reported on by our certified public accountants. In addition, we will issue unaudited quarterly or other interim reports to shareholders pursuant to the federal securities laws. LEGAL PROCEEDINGS We are not a party to any legal proceeding or litigation, and none of our property is the subject of a pending legal proceeding. Further, the officers and directors know of no legal proceedings against us or our property contemplated by any person, entity or government authority. INTEREST OF NAMED EXPERTS AND COUNSEL The Balance Sheets as of December 31, 2000 and 1999 and the statements of operations, stockholders' (deficit) equity and cash flows for the years then ended, included in this prospectus, have been included herein in reliance on the report of Chisholm & Associates, independent auditors, which includes an explanatory paragraph on Atlas Mining Company's ability to continue as a going concern, given on the authority of that firm as experts in accounting and auditing. The legality of the securities offered hereby has been passed upon by Pollet & Richardson, A Law Corporation, Los Angeles, California. INDEMNIFICATION The Idaho Revised Statutes and certain provisions of Atlas Mining Company's Articles of Incorporation and Bylaws under certain circumstances provide for indemnification of our Officers, Directors and controlling persons against liabilities that they may incur in such capacities. A summary of the circumstances in which such indemnification is provided for is contained herein, but this description is qualified in its entirety by reference to our Articles and Bylaws and to the statutory provisions. 34 In general, any Officer, Director, employee or agent may be indemnified against expenses, fines, settlements or judgments arising in connection with a legal proceeding to which such person is a party, if that person's actions were in good faith, were believed to be in our best interest, and were not unlawful. Unless such person is successful upon the merits in such an action, indemnification may be awarded only after a determination by independent decision of the Board of Directors, by legal counsel, or by a vote of the stockholders, that the applicable standard of conduct was met by the person to be indemnified. The circumstances under which indemnification is granted in connection with an action brought on behalf of Atlas Mining Company is generally the same as those set forth above; however, with respect to such actions, indemnification is granted only with respect to expenses actually incurred in connection with the defense or settlement of the action. In such actions, the person to be indemnified must have acted in good faith and in a manner believed to have been in our best interest, and must not have been adjudged liable for negligence or misconduct. Indemnification may also be granted pursuant to the terms of agreements that may be entered in the future or pursuant to a vote of stockholders or Directors. The statutory provision cited above also grants the power to us to purchase and maintain insurance which protects our Officers and Directors against any liabilities incurred in connection with their service in such a position, and such a policy may be obtained by Atlas Mining Company. Article VII of the amended Articles of Incorporation state: "A director shall not be held liable to the company or its shareholders for monetary damages for any action taken or any failure to take any action as a director except to the minimum degree required under Idaho law as it now exists or hereafter may be amended. Further, the company is authorized to indemnify, agree to indemnify, or obligate itself or advance or reimburse expenses incurred by its directors, officers, employees, or agents to the full extent of the laws of the state of Idaho as may now or hereafter exist; excepting incidents involving intentional violation of criminal law." Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE We have experienced no recent change in or disagreement with our accountant. Our present auditor, Chisholm & Associates, Box 540216, No. Salt Lake, UT 84054, has been the Company's auditor since 1999. Management of the Company intends to keep Chisholm & Associates as its auditor for the foreseeable future. 35 INDEX TO FINANCIAL STATEMENTS ATLAS MINING COMPANY CONSOLIDATED FINANCIAL STATEMENTS December 31, 2000 and 2001 Independent Auditor's Report................................................. 37 Consolidated Balance Sheets.................................................. 38 Consolidated Statements of Operations........................................ 40 Consolidated Statements of Stockholders' Equity.............................. 41 Consolidated Statements of Cash Flows........................................ 43 Notes to The Financial Statements............................................ 45 36 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders of Atlas Mining Company We have audited the accompanying consolidated balance sheets of Atlas Mining Company as of December 31, 2001 and 2000 and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well a evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Atlas Mining Company as of December 31, 2001 and 2000 and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses from operations which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Chisholm & Associates North Salt Lake, UT January 23, 2002 37 ATLAS MINING COMPANY Consolidated Balance sheets ASSETS ------ December 31, ------------------------------ 2001 2000 ------------ ------------ CURRENT ASSETS Cash - checking $ - $ 27,847 Certificate of deposit - 50,000 Investment securities available for sale 11,464 3,274 Trade accounts receivable 29,667 148,881 Notes receivable - current - 5,000 Other current receivables 1,136 126 Deposits and prepaids 26,523 28,995 ------------ ------------ Total Current Assets 68,790 264,123 ------------ ------------ PROPERTY AND EQUIPMENT Land and tunnels 345,159 345,159 Buildings and equipment 77,680 77,680 Contracting equipment 1,080,750 1,080,750 Office equipment 10,000 10,000 Vehicles 72,972 72,972 ------------ ------------ 1,586,561 1,586,561 Less: Accumulated depreciation (819,098) (643,657) ------------ ------------ Total Property and Equipment 767,463 942,904 ------------ ------------ OTHER ASSETS Contracting supplies 207,123 207,123 Notes receivable - noncurrent - 25,046 ------------ ------------ Total Other Assets 207,123 232,169 ------------ ------------ TOTAL ASSETS $ 1,043,376 $ 1,439,196 ============ ============ The accompanying notes are an integral part of these financial statements. 38 ATLAS MINING COMPANY Consolidated Balance Sheets (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------
December 31, ------------------------------ 2001 2000 ------------ ------------ CURRENT LIABILITIES Bank overdraft $ 10,395 $ - Accounts payable and accrued expenses 290,068 273,951 Accounts payable - related party 44,534 48,557 Line of credit 32,157 78,218 Current maturities on long-term debt 993,759 1,008,671 ------------ ------------ Total Current Liabilities 1,370,913 1,409,397 ------------ ------------ LONG TERM LIABILITIES Notes payable 189,249 203,845 Notes payable - related party 912,389 912,242 Less current maturities on long-term debt (993,759) (1,008,671) ------------ ------------ Total Long Term Liabilities 107,879 107,416 ------------ ------------ MINORITY INTEREST 78,735 78,918 ------------ ------------ STOCKHOLDERS' EQUITY Common stock, no par value; 60,000,000 shares authorized; 6,997,283 and 6,009,853, respectively 2,387,445 2,277,421 Preferred stock, $1.00 par value 10,000,000 shares authorized, noncumulative nonvoting, nonconvertible, none issued or outstanding - - Additional paid-in capital - - Retained earnings (deficit) (2,821,027) (2,242,744) Accumulated comprehensive income/(loss) (30,569) (30,051) Less cost of treasury stock, -0- and 324,852 shares respectively - (161,161) Prepaid expenses (50,000) - ------------ ------------ Total Stockholders' Equity (514,151) (156,535) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,043,376 $ 1,439,196 ============ ============ The accompanying notes are an integral part of these financial statements.
39 ATLAS MINING COMPANY Consolidated Statements of Operations
December 31, ------------------------------- 2001 2000 --------------- --------------- REVENUES $ 689,636 $ 784,314 COST OF SALES 482,305 572,164 --------------- --------------- GROSS PROFIT 207,331 212,150 --------------- --------------- EXPLORATION EXPENSES 115,369 48,750 GENERAL AND ADMINISTRATIVE EXPENSES 542,127 504,041 --------------- --------------- TOTAL OPERATING EXPENSES 657,496 552,791 --------------- --------------- OPERATING INCOME (LOSS) (450,165) (340,641) OTHER INCOME AND (EXPENSES) Interest income 2,330 2,161 Miscellaneous income (expense) 1,535 (33) Interest expense (126,870) (116,451) Gain (loss) on sale of available for sale investments - (25,598) Gain on sale of assets (5,296) 150,159 Minority interest 183 113 --------------- --------------- Total Other Income and (Expenses) (128,118) 10,351 --------------- --------------- INCOME (LOSS) BEFORE INCOME TAXES (578,283) (330,290) PROVISION (BENEFIT) FOR INCOME TAXES - 16,953 --------------- --------------- NET INCOME (LOSS) $ (578,283) $ (347,243) =============== =============== NET INCOME (LOSS) PER SHARE $ (0.09) $ (0.06) =============== =============== WEIGHTED AVERAGE OUTSTANDING SHARES 6,057,758 5,846,472 =============== =============== The accompanying notes are an integral part of these financial statements.
40 ATLAS MINING COMPANY Consolidated Statements of Stockholders' Equity December 31, 2001 and 2000
Common Stock Additional Retained Treasury Stock Accumulated ----------------------- Paid-In Earnings ----------------------- Comprehensive Prepaid Shares Amount Capital (Deficit) Shares Amount Income Expenses ------------ ---------- ----------- ---------- ----------- ---------- ------------- ---------- Balance, December 31, 1999 5,716,761 2,253,144 - (1,895,501) (324,852) (161,161) (67,811) - 2/15/00 - Issuance of common stock for services at $.25 400 100 - - - - - - 3/13/00 - Issuance of common stock for services at $.13 82,692 10,750 - - - - - - 8/11/00 - Issuance of common stock for services at $.05 75,000 3,750 - - - - - - 8/11/00 - Issuance of common stock for cash at $.07 135,000 9,677 - - - - - - Net change in unrealized gains (losses) on available for sale securities - - - - - - 37,760 - Net loss for the year ended December 31, 2000 - - - (347,243) - - - - ----------- ---------- ---------- ----------- --------- ----------- -------------- ---------- Balance, December 31, 2000 6,009,853 2,277,421 - (2,242,744) (324,852) (161,161) (30,051) - 3/27/01 - Issuance of common stock for services at $0.10 6,000 600 - - - - - - 4/6/01 - Issuance of common stock for services at $0.07 300,000 21,000 - - - - - - 4/17/01 - Issuance of common stock for services at $0.10 10,000 1,000 - - - - - - 6/30/01 - Issuance of common stock for cash at $0.35 271,430 95,000 - - - - - - 7/10/01 - Issuance of common stock for lease at $0.25 400,000 100,000 - - - - - (100,000) 8/13/01 - Issuance of treasury stock for services at $0.18 - - - - 305,852 53,585 - - 8/13/01 - Difference in issue price of treasury stock and original repurchase price - (97,899) - - - 97,899 - - 8/13/01 - Cancel treasury stock - (9,677) - - 19,000 9,677 - - Net change in unrealized gains (losses) on available for sale securities - - - - - - (518) - Amortization of prepaid expenses - - - - - - - 50,000 The accompanying notes are an integral part of these financial statements. 41 ATLAS MINING COMPANY Consolidated Statements of Stockholders' Equity December 31, 2001 and 2000 Common Stock Additional Retained Treasury Stock Accumulated ----------------------- Paid-In Earnings ----------------------- Comprehensive Prepaid Shares Amount Capital (Deficit) Shares Amount Income Expenses ----------- ---------- ----------- ------------- ----------- ----------- ------------- ---------- Net losses for the year ended December 31, 2001 - - - (578,283) - - - - ----------- ---------- ----------- ------------- ----------- ----------- ------------- ---------- Balance, December 31, 2001 6,997,283 $2,387,445 $ - $(2,821,027) - $ - $ (30,569) $ (50,000) =========== ========== =========== ============ =========== =========== ============= ========== The accompanying notes are an integral part of these financial statements.
42 ATLAS MINING COMPANY Consolidated Statements of Cash Flows
December 31, --------------------------- 2001 2000 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (578,283) $ (347,243) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation 175,440 176,140 Bad debt 5,296 - Gain on sale of equipment - (79) (Gain) loss on sale of investments - 25,598 Shares issued for services 76,185 14,600 Amortization of prepaid expenses (equity) 50,000 - Note issued for wages - 36,451 Minority interest (183) (113) (Increase) decrease in: Trade accounts receivable 119,214 (141,671) Contracting supplies - 567 Deposits and prepaids 2,472 (712) Other current receivables (1,010) 80 Deferred taxes - 16,953 Accounts payable and accrued expenses 22,489 131,298 ------------ ------------ Net Cash Provided (Used) by Investing Activities (128,380) (88,131) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from notes receivable 24,750 2,897 Proceeds from sale of investments - 38,567 Purchase of investments (8,700) - Proceeds from sale of property and equipment - 6,276 ------------ ------------ Net Cash Provided (Used) by Investing Activities 16,050 47,740 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable 31,300 395,943 Payments on notes payable (45,749) (304,420) Proceeds from line of credit 8,795 - Payments on line of credit (54,863) - Proceeds from issuance of common stock 95,000 9,677 ------------ ------------ Net cash Provided (Used) by Financing Activities 34,483 101,200
The accompanying notes are an integral part of these financial statements. 43 ATLAS MINING COMPANY Consolidated Statements of Cash Flows (Continued)
December 31, ----------------------------- 2001 2000 -------------- -------------- Net increase (decrease) in cash and cash equivalents $ (77,847) 60,809 Cash and cash equivalents at beginning of year 77,847 17,038 -------------- -------------- Cash and cash equivalents at end of year $ - $ 77,847 ============== ============== Supplemental Cash Flows Information: Cash paid for interest $ 52,500 $ 84,422 Cash paid for income taxes $ - $ - Supplemental Schedule of Non-cash Investing and Financing Activities Common stock issued for services $ 76,185 $ 10,750 Common stock issued for prepaid expenses $ 100,000 $ - The accompanying notes are an integral part of these financial statements.
44 ATLAS MINING COMPANY Notes to the Financial Statements December 31, 2001 and 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Organization Atlas Mining Company, ("the Company") was incorporated in the state of Idaho on March 4, 1924. The Company was formed for the purpose of exploring and developing the Atlas mine, a consolidation of several patented mining claims located in Coeur d' Alene mining district near Mullan, Idaho. The Company eventually became inactive as a result of low silver prices. In September 1997, the Company became active and purchased substantially all of the operating equipment and contracting supplies from Fausett International, Inc., a related party. The purchase price was $1,416,099 which consisted of $50,000 cash, 875,000 shares of the Company's common stock valued at $350,000 and a note payable of $1,016,094. After the purchase, the Company commenced contracting operations through the trade name, Atlas Fausett Contracting. Through Atlas Fausett Contracting, the Company provides shaft sinking, underground mine development and contracting primarily to companies in the mining and civil industries. The Company also pursues property acquisitions and resource development projects. In 1997 and 1998, the Company was to exchange 844,560 shares of its common stock for all of the outstanding shares of Sierra Silver Lead Mines, Inc. (Sierra), an Idaho corporation. As of December 31, 1999, 391,114 shares of the Company's common stock had not been exchanged. The Company was unable to locate some of the shareholders of Sierra. Therefore, the Company agreed to transfer the stock to an Atlas Mining Company Trust account in trust for the unlocated shareholders of Sierra Silver. The acquisition of Sierra has been recorded as a purchase. The purchase price was $276,157. All of the assets and liabilities of Sierra were transferred to the Company and Sierra ceased to exist. In April 1999, the Company exchanged 741,816 shares of its common stock and paid cash of $15,770 for all of the outstanding shares of Olympic Silver Resources, Inc. (Olympic), a Nevada corporation. The purchase price was $228,566. The acquisition has been recorded as a purchase and all of the assets and liabilities were transferred to the Company. At the time of the acquisition, Olympic held the rights to the San Acacio Mine in Zacatecas, Mexico. The rights to the mine have since been terminated in 2001. 45 ATLAS MINING COMPANY Notes to the Financial Statements December 31, 2001 and 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In 1998 and 1999, the Company exchanged 71,238 shares of its common stock for 53% of the outstanding shares of Park Copper and Gold Mining, Ltd. (Park Copper), and Idaho corporation. The purchase price was $72,825. The acquisition has been recorded as a purchase. b. Revenue and Cost Recognition The Company recognizes income and expenses on the accrual basis of accounting. Revenues from unit price contracts are recognized on the units produced method which management considers to be the best available measure of progress on contracts. Contract costs include al direct material and labor costs and those indirect costs related to contract performance, such a indirect labor, supplies, tools, repairs, and depreciation costs. Costs associated with the start-up of contracts are capitalized as deferred contract costs and amortized to expense over the life of the contract. General and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability, including those arising from contract penalty provisions, and final contract settlements may result in revisions to costs and income and are recognized in the period in which revisions are determined. Contract claims are included in revenue when realization is probable and can be reliably estimated. c. Bad Debts Bad debts on receivables are charged to expense in the year the receivable is determined uncollectible, therefore, no allowance for doubtful accounts is included in the financial statements. Amounts determined as uncollectible are not significant to the overall presentation of the financial statements. d. Basis of Consolidation The consolidated financial statements include the accounts of Park Copper & Gold Mining Ltd. Al significant inter-company accounts and transactions have been eliminated in the consolidation. 46 ATLAS MINING COMPANY Notes to The Financial Statements December 31, 2001 and 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) e. Earnings (Loss) Per Share The computation of earnings per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements.
Income (loss) Shares Per-Share (Numerator) (Denominator) Amount ------------------ ------------- -------------------- For the year ended December 31, 2001: Basic EPS Income (loss) to common Stockholders $ (578,283) 6,057,758 $ (0.09) ================== ================== ================== For the year ended December 31, 2000: Basic EPS Income (loss) to common Shareholders $ (347,243) 5,846,472 $ (0.05) ================== ================== ==================
f. Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. g. Income Taxes Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss, tax credit carry-forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 47 ATLAS MINING COMPANY Notes to The Financial Statements December 31, 2001 and 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
December 31, -------------------------------------- 2001 2000 ------------------ ------------------ Deferred tax assets: Net operation loss carry-forwards $ 466,915 $ 321,651 Contribution carry-forwards 148 148 Unrealized loss on available for sale securities 7,630 7,550 ------------------ ------------------ Total Deferred Tax Assets 474,693 329,299 Valuation allowance for deferred tax assets (464,567) (316,332) ------------------ ------------------ 10,126 12,967 ------------------ ------------------ Deferred tax liabilities: Tax over book depreciation 10,126 12,967 ------------------ ------------------ Total Deferred Tax Liabilities 10,126 12,967 ------------------ ------------------ $ - $ - ================== ==================
At December 31, 2001, the Company has net operating losses of $1,604,355 which expire from 2002 through 2020. h. Available for Sale Investments Management determines the appropriate classification of marketable equity security investments at the time of purchase and reevaluates such designation as of each balance sheet date. Unrestricted marketable equity securities have been classified as available for sale. Available for sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported as a net amount in accumulated comprehensive income. Realized gains and losses and declines in value judged to be other-than-temporary on available for sale securities are included in investment income. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available for sale are included in investment income. 48 ATLAS MINING COMPANY Notes to The Financial Statements December 31, 2001 and 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) h. Available for Sale Investments (Continued) Following is a summary of available for sale equity securities which are concentrated in companies in the mining industry:
Gross Gross Unrealized Unrealized Estimated Cost Gains Losses Fair Value ---------------- --------------- --------------- ---------------- December 31, 2001 $ 42,033 $ - $ (30,569) $ 11,464 December 31, 2000 $ 33,325 $ - $ (30,051) $ 3,274
i. Contracting Supplies Contracting supplies, consisting primarily of bits, steel, and other mining related equipment, are stated at the lower of cost (first-in, first-out) or market. In addition, equipment repair parts and maintenance items are also included at cost. j. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. In these financial statements assets and liabilities involve extensive reliance on management's estimates. Actual results could differ from those estimates. k. Property and Equipment Property and equipment are carried at cost. Depreciation and amortization is computed on the straight-line method over the estimated useful lives of the assets as follows: Estimated Useful Life ----------- Building 39 years Contracting equipment 2-8 years Office and shop furniture and equipment 5-8 years Vehicles 5 years 49 ATLAS MINING COMPANY Notes to The Financial Statements December 31, 2001 and 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) k. Property and Equipment (Continued) In accordance with Financial Accounting Standards Board Statement No. 121, the Company records impairment of ling-lived assets to be held and used or to be disposed of when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount. At December 31, 2001 and 2000, no impairments were recognized. l. Financial Instruments The recorded amounts of financial instruments, including cash equivalents, receivables, investments, accounts payable and accrued expenses, and long-term debt approximate their market values as of December 31, 2001 and 2000, The Company has no investments in derivative financial instruments. m. Mining Exploration Costs The company has elected to expense all mining exploration costs due to the inactivity of their mining operations. At such a time as mining continues in any of the Company's properties, the Company will capitalize costs of developing the properties, when future benefit of the costs can be identified. NOTE 2 - GOING CONCERN The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company is dependent upon raising capital to continue operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. It is management's plan to raise additional funds to continue its operations. In 2001 and 2000 the Company pursued an SB-2 filing with the Securities and Exchange Commission (SEC). It is managements intent to continue the filing process, which when completed will fully register Atlas Mining Company as required by the SEC, and authorize the Company to offer 6 million shares of common stock for sale. 50 ATLAS MINING COMPANY Notes to The Financial Statements December 31, 2001 and 2000 NOTE 3 - NOTES RECEIVABLE Notes receivable at December 31, 2001 and 2000 consist of the following:
2001 2000 ------------- ------------- Note receivable bearing interest at 10% per annum, Due in annual installments of $5,000 plus accrued interest, secured by property - 30,046 ------------- ------------- Total - 30,046 Less current portion - 5,000 ------------- ------------- Notes receivable - long term $ - $ 25,046 ============= =============
NOTE 4 - LONG-TERM LIABILITIES Long- term liabilities are detailed in the following schedules as of December 31, 2001 and 2000:
2001 2000 -------------- -------------- Note payable to a company, due in monthly payments of $1,000 with a balloon payment due at maturity, including interest at 9%. The note matured August 16, 2001, now in default. $ 53,250 $ 53,250 Note payable to a lending company, due in monthly installments of $578, including interest at 11.99%. The note is due in August 2003 and collateralized by a vehicle. 16,393 17,450 Note payable to a mortgage company, due in monthly installments of $1,614, including interest at 16%. The note is due in August 2005, secured by the proceeds of a logging agreement and collateralized by land and a building. 119,606 119,981 Note payable to a bank, principal due at maturity with interest at 11%. The note matured February 1, 2001. - 13,164 -------------- -------------- Total Notes Payable 189,249 203,845 -------------- --------------
51 ATLAS MINING COMPANY Notes to The Financial Statements December 31, 2001 and 2000 NOTE 4 - LONG-TERM LIABILITIES (Continued)
2001 2000 ------------- ------------- Notes payable - related party: Note payable to Fausett International Inc. due in monthly payments of $15,000, including interest at 8.75% and is collateralized by all equipment and contracting supplies. The note matured August 22, 2001, now in default. 782,741 782,741 Note payable to an officer, payable on demand and bears no interest. 114,648 114,501 Note payable to a board of director, payable on demand and bears no interest. 15,000 15,000 ------------- ------------- Total Notes Payable - Related Party $ 912,389 $ 912,242 ------------- ------------- Total Long-term Liabilities $ 1,101,638 $ 1,116,087 Less Current Portion (81,370) (96,429) Less Current Portion-related party (912,389) (912,242) ------------- ------------- Total Current Portion (993,759) (1,008,671) ------------- ------------- Total Long-Term Liabilities $ 107,879 $ 107,416 ============ =============
Future minimum principal payments on notes payable are as follows: 2002 $ 993,759 2003 56,963 2004 28,929 2005 21,987 --------------- Total $ 1,101,638 =============== NOTE 5 - LINE OF CREDIT In 2001 and 2000, the Company has an unsecured line of credit for $50,000 at an interest rate of prime plus 6%. The balance of the line of credit at December 31, 2001 and 2000 is $32,517 and $39,503, respectively. 52 ATLAS MINING COMPANY Notes to The Financial Statements December 31, 2001 and 2000 Note 5 - LINE OF CREDIT (Continued) In 2000, the Company entered into an agreement whereby advances are received by pledging accounts receivable as collateral. At December 31, 2001 and 2000, the balance of the advances is $0 and $38,715, respectively. Interest is payable after 90 days at .17% daily. NOTE 6 - RELATED PARTY TRANSACTIONS In 1997, the Company purchased the operating equipment and contracting supplies from Fausett International, Inc. The owner of Fausett is also a Board of Director of the Company. The balance of the notes payable in connection with the purchase as of December 31, 2001 and 2000 is $782,741. No principal payments were made during 2001 and 2000. The interest paid during 2001 and 2000 was $52,500 and $60,000, respectively. During 2000, a Board of Director loaned the Company $15,000. The note is payable upon demand and bears no interest. The balance of the note at December 31, 2001 and 2000 is $15,000. The Company leases office space from a Board of Director for $1,100 per month, on a month to month basis. In 2001 and 2000, the Company paid $15,400 and $2,200, respectively. The Company entered into a consulting agreement in connection with the asset purchase of Fausett International, Inc. The owner was to be paid $1,500 per month for 36 months beginning October 1, 1997. There were no payments made during 2001 and 2000. During 2001 and 2000, an officer loaned the Company $31,300 and $36,000, respectively. In 2001 and 2000, the Company paid $31,153 and $-0- on the loan. The loan balance at December 31, 2001 and 2000 is $114,648 and $114,501, respectively. NOTE 7 - STOCK OPTIONS In 1998, the Company adopted a non-qualified stock option plan authorizing the granting to officers, directors, or employees options to purchase common stock. Options are granted by the Administrative Committee, which is elected by the Board of Directors. The number of options granted under this plan and any other plans active may not exceed 10% of the currently issued and outstanding shares of the Company's common stock. The term of each option granted is determined by the Committee, but cannot be for more than five years from the date the option is granted. The option priced per share with each option granted will be fixed by the Administrative Committee on the date of grant. At December 31, 2001, no options had been granted under this plan. 53 ATLAS MINING COMPANY Notes to The Financial Statements December 31, 2001 and 2000 NOTE 7 - STOCK OPTIONS (Continued) The Company adopted an incentive stock option plan in 1998. The stock option plan permits the Company to grant to key employees options to purchase shares of stock in the Company at the direction of the Committee. The price of shares purchased must be equal to or greater than fair market value of the common stock at the date. At December 31, 2001, no options have been granted under the plan. NOTE 8 - COMMITMENTS AND CONTINGENCIES On July 10, 2001, the Company entered into an agreement to lease and possibly purchase a mine in Juab County, UT. The Company has the sole option to renew the lease on an annual basis. The Company paid the first year of the lease through the issuance of 400,000 shares of its common stock valued at $100,000. This amount has been recorded as a prepaid expense in the equity section of the balance sheet and is being amortized over a one year period. For subsequent years, the agreement requires that the lease payments be made through the issuance of 100,000 shares of the Company's common stock. If during any one year period the Company sells $1,000,000 of product from the mine, the Company has the option to purchase the mine for $500,000. In addition to the $500,000 payment, the Company will pay a 3% royalty on the gross sales from the mine. NOTE 9 - SUBSEQUENT EVENTS On February 5, 2002, the company signed an agreement to settle its outstanding debt, accrued interest and accounts payable due to a related party. The total balance payable to the related party at December 31, 2001 was approximately $890,000. The Company has agreed to return to the related party assets which have a net book value of approximately $679,000 at December 31, 2001. In exchange, the related party has forgiven the debt of $890,000 and has accepted a new note in the amount of $53,500. 54 - --------------------------------------- ------------------------------------ No person is authorized to give any information or to make any representation other than those contained in this prospectus, and if made such information or representation must not be relied ATLAS MINING COMPANY upon as having been given or authorized. This prospectus does 6,740,000 Shares of Common Stock not constitute an offer to sell or a solicitation of an offer to buy any securities other than the Securities offered by this prospectus or an offer to sell or a solicitation of an offer to buy the Securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. The delivery of this prospectus shall not, under any circumstances, create any implication that there has been no changes in the affairs of the Company since the date of this prospectus. However, in the event of a material change, this prospectus will be amended or supplemented accordingly. TABLE OF CONTENTS Page PROSPECTUS SUMMARY..............................3 RISK FACTORS....................................6 USE OF PROCEEDS................................10 Selling Securityholders........................11 DETERMINATION OF OFFERING PRICE................12 ----------------------- PLAN OF DISTRIBUTION...........................13 PROSPECTUS MANAGEMENT'S DISCUSSION AND ANALYSIS OF ----------------------- PLAN OF OPERATION..............................16 DESCRIPTION OF BUSINESS........................19 DESCRIPTION OF PROPERTY........................24 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS................................28 EXECUTIVE COMPENSATION.........................29 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.31 MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS............................31 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..........................32 April __, 2002 DESCRIPTION OF SECURITIES......................33 LEGAL PROCEEDINGS..............................34 INTEREST OF NAMED EXPERTS AND COUNSEL..........34 INDEMNIFICATION................................34 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.........35 INDEX TO FINANCIAL STATEMENTS..................36 - --------------------------------------- ------------------------------------ PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 24: INDEMNIFICATION OF DIRECTORS AND OFFICERS The only statute, charter provision, bylaw, contract, or other arrangement under which any controlling person, director or officers of the Registrant is insured or indemnified in any manner against any liability which he may incur in his capacity as such, is as follows: a. Title 30, Chapter 1 of the Idaho Revised Statutes provides for the indemnification of a corporation's officers and directors under certain circumstances. b. Article VII of Registrant's Amended Articles of Incorporation provides, in part: "A director shall not be held liable to the company or its shareholders for monetary damages for any action taken or any failure to take any action as a director except to the minimum degree required under Idaho law as it now exists or hereafter may be amended. Further, the company is authorized to indemnify, agree to indemnify, or obligate itself or advance or reimburse expenses incurred by its directors, officers, employees, or agents to the full extent of the laws of the state of Idaho as may now or hereafter exist; excepting incidents involving intentional violation of criminal law." Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The estimated expenses of the offering, all of which are to be borne by the Company, are as follows: SEC Filing Fee* $3,000 Printing Expenses* 5,000 Accounting Fees and Expenses* 20,000 Legal Fees and Expenses* 67,000 Blue Sky Fees and Expenses* 2,000 Registrar and Transfer Agent Fee* 1,000 Miscellaneous* 2,000 --------------------------------------------------------- Total* $100,000 *Estimated Item 26: RECENT SALES OF UNREGISTERED SECURITIES In September 1997, the Company issued 875,000 shares of common stock (valued at $350,000) to Fausett International, Inc. for the purchase of mining equipment and tools. The shares issued were exempt from registration pursuant to Section 4(2) of the Securities Act because the issuance was not a public offering. In 1997, Atlas issued 842, 964 shares of common stock (valued at $276,157) to Sierra Silver Lead Mining Company in order to acquire Sierra Silver Lead Mining Company, an Idaho corporation. Atlas issued 1 share of the company's common stock for every 3.76 shares of Sierra Silver. The shares issued were exempt from registration pursuant to Section 4(2) of the Securities Act because the issuance was not a public offering. In February 1999, the Company issued approximately 750,000 share of common stock (valued at $232,500) to the shareholders of Olympic Silver Resources, Inc., a Nevada corporation, in order to purchase the majority outstanding shares of Olympic. The shares issued were exempt from registration pursuant to Section 4(2) of the Securities Act because the issuance was not a public offering. In 1999 the Company issued 96,903 shares of common stock to Park Copper and Gold Mining Company acquire 53% interest in Park Copper and Gold Mining Company. The shares issued were exempt from registration pursuant to Section 4(2) of the Securities Act because this issuance was not a public offering. In July, 2001, the Company issued 271,430 shares of common stock to Summa Metals Corporation for $95,000 cash payment from Summa Metals Corporation. The shares issued were exempt from registration pursuant to Section 4(2) of the Securities Act because this issuance was not a public offering. In July, 2001, the Company issued 400,000 shares of common stock to Conjecture Silver Mines to acquire the interest in the Dragon Mine in Juab County, Utah. The shares issued were exempt from registration pursuant to Section 4(2) of the Securities Act because this issuance was not a public offering. In, 2001, the Company issued 300,000 shares of common stock to William T. Jacobson for $21,000. The shares issued were exempt from registration pursuant to Section 4(2) and Rule 506 of Regulation D of the Securities Act because this issuance was not a public offering. In March 2002, the Company issued 440,000 shares of common stock to 4 consultants of the Company in exchange for marketing and legal advisory services. The shares issued were exempt from registration pursuant to Section 4(2) of the Securities Act. Item 27. EXHIBITS. a. The following Exhibits are filed as part of this Registration Statement pursuant to Item 601 of Regulation S-B: Number Description - ------ ----------- 3.1 Articles of Incorporation, as amended 3.2 Bylaws, as amended 5.0 Legal Opinion of Pollet & Richardson 10.1 Subscription Agreement 10.2 Dragon Mine Lease Purchase Agreement 10.3 Article of Merger of Sierra Silver-Lead Mining Company and Atlas Mining Company 10.4 Equipment Purchase Agreement 10.5 Stock Option Plan of Atlas Mining Company 10.6 Incentive Stock Option Plan of Atlas Mining Company 10.7 Investment Marketing Agreement by and between Atlas Mining Company and Breakout Investment Marketing, Inc. 10.8 Note payable to Moss Adams, LLP 10.9 Note payable to CLS Mortgage Company 10.10 Settlement Agreement with Fausett International 21.0 Subsidiaries of the Registrant 23.1 Independent Auditors Consent 23.2 Consent of Pollet & Richardson (included in Exhibit 5.0) Item 17. UNDERTAKINGS. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel that the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes: 1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. 2. That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 4. To provide, upon effectiveness, certificates in such denominations and registered in such names as are required to permit prompt delivery to each purchaser. SIGNATURES Pursuant to the requirements of the 1933 Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and has duly caused this Registration Statement on Form SB-2 to be signed on its behalf by the undersigned thereunto duly authorized. In the City of Osburn, State of Idaho on the 5th November, 2001. ATLAS MINING COMPANY, a Idaho corporation /s/ William T. Jacobson, President ---------------------------------- Pursuant to the requirements of the 1933 Securities Act, this Form SB-2 Registration Statement has been signed by the following persons in the capacities with Atlas Mining Company and on the dates indicated. Dated: April 18, 2002 /s/ William T. Jacobson ------------------------------------------ William T. Jacobson, Chief Executive Officer and President Dated: April 18, 2002 /s/ Jack Harvey ------------------------------------------- Jack Harvey, Vice President and Director Dated: April 18, 2002 /s/ Kurt Hoffman ------------------------------------------- Kurt Hoffman, Treasurer, Director and Principal Financial Officer Dated: April 18, 2002 /s/ Thomas E. Groce ------------------------------------------- Thomas E. Groce, Director Dated: April 18, 2002 /s/ Marqueta Martinez ------------------------------------------- Marqueta Martinez, Secretary, Chief Accounting Officer and Controller EX-3.1 3 atlas_ex3-1.txt EXHIBIT 3.1 RESTATED -------- ARTICLES OF INCORPORATION ------------------------- OF ATLAS MINING COMPANY -------------------- KNOW ALL MEN BY THESE PRESENTS: That we, the board of directors of Atlas Mining Company, as authorized by an affirmative vote by the majority of the shareholders at a shareholders meeting held on November 19, 1998, do hereby present the following for the purposes of restating the articles of incorporation of Atlas Mining Company, an Idaho corporation, originally filed under file number C14572 on March 4, 1924, and we hereby certify: I. The name of this corporation is: ATLAS MINING COMPANY II. The purposes for which said corporation is formed are to locate, acquire, buy, hold, sell, lease, bond and otherwise deal in and dispose of mines and mining claims: also to hold, work, develop and mine such mines and mining claims, including the mining, extracting, milling, concentrating and reducing all ores and minerals so extracted and mined, and the selling and disposing of the same; also to locate, buy, acquire, hold, sell, lease, bond and otherwise dispose of millsites, and erect mills, concentrating plants and reduction works and buy and sell the same, and buy and sell real estate and otherwise deal in real estate, including the leasing and mortgaging the same; also to locate, buy, acquire, appropriate, water and lay out water rights, ditches, canals, flumes, and other conduits for carrying water; also to locate, build, hold, sell, lease and otherwise acquire, hold and sell roads, railroads, tramways and other means of and for travel and the transportatin of people and property, and the said corporation shall have full power to do a general mining and milling business and everything usually done in the connection with such business and that may be necessary, profitable or convenient in furthering the interest of said corporation in carrying out the purpose for which it is formed or organized; also power and authority to maintain stores, deal in, buy and sell merchandise and do a general merchandise business in connection with its said mining business and deal in ores, mines and minerals and real estate, and in short do a general mining, real estate and merchandise business. Said corporation shall also have the right and power to buy stocks and bonds in other mining corporations and deal in stocks, bonds and other securities, and to mortgage any property which it may acquire or hold, and take mortgages and bonds upon all kinds of property, both real and personal, as security for money which it may loan to other corporations or persons or for any indebtedness or obligation of any other corporation or person to it. III. The place where its principal business is to be transacted is Shoshone County, Idaho. IV. The corporation existence of this corporation shall be perpetual. V. The number of directors shall be five. VI. The total authorized capital stock of this corporation shall be sixty million (60,000,000) no par, common shares, and ten million (10,000,000) of one dollar ($1.00) par value noncumulative nonvoting nonconvertible preferred shares. VII. A DIRECTOR SHALL NOT BE HELD LIABLE TO THE COMPANY OR ITS SHAREHOLDERS FOR MONETARY DAMAGES FOR ANY ACTION TAKEN OR ANY FAILURE TO TAKE ANY ACTION AS A DIRECTOR EXCEPT TO THE MINIMUM DEGREE REQUIRED UNDER IDAHO LAW AS IT NOW EXISTS OR HEREAFTER MAY BE AMENDED. FURTHER, THE COMPANY IS AUTHORIZED TO INDEMNIFY, AGREE TO INDEMNIFY, OR OBLIGATE ITSELF TO ADVANCE OR REIMBURSE EXPENSES INCURRED BY ITS DIRECTORS, OFFICERS, EMPLOYEES, OR AGENTS TO THE FULL EXTENT OF THE LAWS OF THE STATE OF IDAHO AS MAY NOW OR HEREAFTER EXIST; EXCEPTING INCIDENTS INVOLVING INTENTIONAL VIOLATION OF CRIMINAL LAW. /s/ William T. Jacobson - ----------------------- /s/ John Harvey - --------------- /s/ Kurt Hoffman - ---------------- /s/ Thomas Groce - ---------------- /s/ Lovon Fausett - ----------------- EX-3.2 4 atlas_ex3-2.txt EXHIBIT 3.2 ATLAS MINING COMPANY BYLAWS Article I. ---------- Stockholders and Their Meetings. -------------------------------- Section 1. The annual meeting of the stockholders of this company shall be held at its principal office in the city of Wallace, County of Shoshone, State of Idaho, at ten o'clock in the forenoon on the third Saturday in February of each year, or at such other place in the United State as may from time to time be designated by the Board of Directors, in accordance with and if permitted by the laws of the state of Idaho, for the purpose of electing directors and the transacting of such other business as may be brought before the meeting. At least ten days' written or printed notice, specifying the time and place of the annual meeting shall be mailed to each of the stockholders of record at his or her or its address as it appears on the books of the company. Section 2. Special meetings of the stockholders may be held at the principal office of the Corporation in the City of Wallace, County of Shoshone, in the State of Idaho, or elsewhere in said State (or at any other place in the United States as may from time to time be designated by the Board of Directors in accordance with and if permitted by the laws of the state of Idaho), whenever and wherever called in writing or a vote of a majority of the Board of Directors, or by the President, or by the holders of at least one-fourth in amount of the issued shares of the capital stock of the Corporation. In either case, at least ten days' written or printed notice of such meeting, specifying the day and hour and place and purposes of the meeting shall be mailed to each of the stockholders of record at his or her or its address as it appears on the books of the corporation. The lawful holders of a majority in amount of the stock of the Corporation may call a meeting of the stockholders any time, irrespective of any other provisions in these By-Laws, at the principal office of the Corporation in said City of Wallace, upon giving the notice thereof to record shareholders hereinbefore specified for special meeting and giving thirty days' notice by publication in a newspaper printed and published in said City of Wallace. If all the stockholders shall waive notice of a special meeting, no notice of such meeting shall be required; and whenever all of the stockholders shall meet in person or by proxy, such meetings shall be valid for all purposes without prior notice, and at such meeting any corporate action may be taken. The written certificates of the officer or officers calling any special meeting, setting forth the substance of the notice and time and place of the mailing of the same several stockholders and the respective addresses to which the same were mailed, shall be evidence of the manner act of the calling and giving of a notice. Section 3. All business ever lawful to be transacted by the stockholders may be done, at any annual meeting or any adjournment thereof. Only such business shall be acted upon at the special meetings of the stockholders as shall have been referred to in the notice of such meetings, but any stockholders' meeting at which all the outstanding stock of the Corporation is represented shall be a valid meeting for all purposes. 1 Section 4. At all stockholders' meetings, a majority of the outstanding capital stock of the Corporation shall constitute a quorum for all purposes of any meeting. If the holders of the amount of stock necessary to constitute a quorum shall fail to attend in person or by proxy at the time and place fixed by these By-Laws for an annual meeting, or fixed by notice as above provided for a special meeting, a majority in interest of the stockholders present in person or by proxy may adjourn, from time to time, without notice other than by announcement at the meeting, until holders of the amount of stock requisite to constitute a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. Section 5. At each meeting of the stockholders every stockholder shall be entitled to vote in person or by proxy (granted not more than thirty days before the meeting named therein and delivered to the inspectors at the meeting.) He shall have one vote for each share of the stock standing registered in his name on the books of the Corporation (for) thirty days next preceding the date of such meeting, and, in voting for directors, but no otherwise he may cumulate his votes in the manner and to the extent as provided by the laws of the State of Idaho. The vote for directors, and, upon demand by any stockholders, the votes upon any question before the meeting shall be by ballot. At each meeting of the stockholders a full, true and complete list, in alphabetical order, of all the stockholders entitled to vote at such meeting and indicating the number of shares held by each, certified by the Secretary or Transfer Agent, shall be furnished, which list shall be open to the inspection of the stockholders. Prior to any meeting, any proxy-holder may submit his powers of attorney or proxies to the Secretary for examination. The certificate of the Secretary as to the regularity of such powers of attorney or proxies and as to the number of shared held by the person severally and respectively executed such powers of attorney or proxies shall be received as prima facie evidence of the number of shares held by the holders of such powers of attorney or proxies for the purpose of establishing the presence of a quorum at such meeting and for organizing the same, and for all other purposes. Section 6. At each meeting of the stockholders the polls shall be opened and closed, the proxies and ballots shall be received and counted and be taken in charge for the purposes of the meeting, and all questions touching the qualifications of voters, the validity of proxies, the right to vote and the acceptance or rejection of votes shall be adjudged and decided by three inspectors. Such inspectors shall be appointed by the Board of Directors before or at the meeting, or if no such appointment shall have been made, then by the presiding officer of the meeting. If, for any reason, any of the inspectors previously appointed shall fail to attend or refuse or be unable to serve, an inspector in place of the one so failing to attend or refusing or unable to serve shall be appointed in like manner. Section 7. At stockholders' meeting the regular order of business shall be as follows: 1. Reading and approval of the minutes of the previous meeting or meetings; 2. Report of the Board of Directors, the President, the Treasurer and the Secretary of the Corporation, in the order named; 3. Reports of committees; 4. The election of Directors. 5. Unfinished business; 6. New business; 7. Adjournment. 2 ARTICLE II ---------- Directors and Their Meetings. ---------------------------- Section 1. The Board of Directors of the Corporation shall consist of five persons, who shall be chosen by the stockholders from their own number at annual meetings or adjournments thereof, and who shall hold office for a term of one year, or until their successors are elected and qualified. Section 2. When any vacancy occurs among the Directors by death; resignation, or otherwise, the Board of Directors may elect a successor to hold office for the unexpired portion of the term of the Director whose place shall be vacant, and until the election and qualification of his successor. Section 3. Meetings of the Directors may be held at the principal office of the Corporation in the City of Wallace, Shoshone County, Idaho, or elsewhere, at such place or places in the United State of America as the Board of Directors from time to time, may determine. Section 4. Without notice or call, the Board of Directors shall hold its annual meeting immediately after the adjournment or each annual stockholders' meeting at the place where such stockholders' meeting shall have been held. Special Directors' meetings may be held on the call of the President or Secretary on at least two days' notice by mail to the Directors resident in the State of Idaho, and on at least ten days' notice by mail to Directors not resident in said Idaho. No notice of any adjourned meeting shall be necessary. Any meeting of the Board, no matter where held, at which all of the members shall be present, even though without notice, or of which notice shall be waived at any time by all absentees, provided a quorum shall be present, shall be valid for all purposes. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. Section 5. A majority of the Board of Directors shall constitute a quorum for the transaction of business but if at any meeting of the Board there be less than a quorum present a majority of those present may adjourn from time to time. The Board of Directors may prescribe rules not in conflict with these By-Laws for the conduct of its business. Section 6. All of the Directors must be stockholders of the Corporation, each of whom must own, in his own right, at least one share of the capital stock of the Corporation. Section 7. The Board of Directors shall make a report to the stockholders at annual meetings of the condition of the Corporation and shall, on request, furnish each stockholder with a true copy thereof. The Board of Directors in its discretion, may submit any contract or act for approval or ratification at any annual stockholders' meeting, or at any meeting of the stockholders called for the purpose of considering any such contract or act; and any contract or act which shall be approved or be ratified by the vote of the holders of a majority of the capital stock of the Corporation 3 which is represented in person or by proxy at such meeting, provided that a lawful quorum of stockholders be there represented in person or by proxy, shall be as valid and binding upon the Corporation and upon all its stockholders as if it had been approved or ratified by every stockholder of the Corporation, whether or not the contract or act would otherwise be open to legal attack because of directors' interest, or for any other reason. Section 8. The Board of Directors shall determine to what extend and at what times and places and under what conditions and regulations the books and records of Corporation, or any of them, shall be opened to the inspection of the stockholders, and no stockholder shall have any right to inspect any books or records of the Corporation except as conferred by the laws of Idaho or authorized by the Board of Directors or by resolution of the stockholders. Section 9. The Board of Directors is invested with complete and unrestricted authority in the management of all the affairs of the Corporation, and is authorized to exercise for such purpose all such powers of the Corporation as are not by law or by these By-Laws required to be otherwise exercised, including, without restricting the generality of the foregoing, the power to fix, from time to time, the compensation of all officers, agents, and employees of the Corporation, including the compensation or allowances to be paid to officers, agents, employees, Directors, or members of committees for attendance at meetings of the Board of Directors or of committees. Section 10. The Board of Directors shall have full power, from time to time, to fix and determine and to vary the amount of working capital of the Corporation to determine whether any, and if any, what part of any surplus or accumulated profits shall be declared in dividends and paid to the stockholders; to determine the time or times for the declaration and payment of dividends; and to direct and to determine the use and disposition of any surplus or net profits over and above the capital stock paid in. Section 11. Subject always to the By-Laws made by the stockholders, the Board of Directors may make by-laws and , from time to time, may alter, amend or repeal any by-law or by-laws; but any by-laws made by the Board of Directors may be altered, amended or repealed by the stockholders at any annual meeting of the Corporation, or at any special meeting of the Corporation, provided notice of such proposed alteration, amendment or repeal at any special meeting be included in the notice of such meeting. Section 12. The regular order of business at meetings of the Board of Directors shall be as follows: 1. Reading and approval of the minutes of any previous meeting or meetings; 2. Reports of officers and committees; 3. Election of officers; 4. Unfinished business; 5. New Business; 6. Adjournment. 4 ARTICLE III. ------------ Officers and Their Duties ------------------------- Section 1. The Board of Directors, at its first meeting after the annual stockholders' meeting, or any adjournment thereof, shall elect from its own number, a President, may elect from its own members, a Vice-President, and shall also elect a Treasurer and a Secretary, who need not be members of the Board, and may elect an Assistant Treasurer and an Assistant Secretary, who also need not be members of the Board, to hold office for one year next ensuing and until their successors are elected and qualified. The offices of President and Treasurer, or of Vice-President and Treasurer, or of Secretary and Treasurer, or of Assistant Secretary and Assistant Treasurer, may be held by the same person. Any vacancy in any of the said offices may be filled by the Board of Directors. The Board of Directors may from time to time, by resolution, appoint a General Manager and an Auditor and such additional Vice-presidents, such additional Assistant Secretaries, and such additional Vice-Presidents, such additional Assistant Secretaries, and such additional Assistant Treasurers of the Corporation as it may deem advisable, and prescribe their duties, unless and except as the same are herinafter specified and fix their compensation, and all such appointed officers shall be subject to removal at any time by the Board of Directors. All other officers agents and factors of the Corporation shall be chosen and appointed in such manner and shall hold their office for such terms and upon such conditions as the Board of Directors may, from time to time, by resolution, prescribe. Section 2. The President shall be the chief executive officer of the Corporation and shall have the supervision and, subject to the control of the Board of Directors, the direction of the Corporation's affairs, with full power to execute all resolutions and orders of the Board of Directors not especially entrusted to some other officer of the Corporation. He shall preside at all meetings of the Board of Directors and at all meetings of the stockholders, and shall sign all certificates of stock issued by the Corporation, and shall perform such other duties as shall be prescribed by the Board of Directors. Section 3. The Vice-President shall be vested with all the powers and perform all of the duties of the President in his absence or inability to act, and he shall also perform such other duties as shall be prescribed by the Board of Directors. Section 4. The Treasurer shall have the custody of all funds and securities of the Corporation. When necessary or proper, he shall endorse on behalf of the Corporation for collection, checks, notes and other obligations; he shall deposit all moneys to the credit of the Corporation in such bank or banks or depository as the Board of Directors may designate; he shall also sign all receipts and vouchers for payment made by the Corporation; except as herein provided he shall jointly, with such other officer as shall be designated by these By-Laws, sign all checks made by the Corporation, and shall issue and dispose of the same under the direction of the Board of Directors; he shall also have the care and custody of all the stocks, bonds, certificates, vouchers, evidence of debt, securities, and such other property belonging to the Corporation as the Board of Directors shall designate; either he or the Secretary or an Assistant Secretary or an Assistant Treasurer shall sign all certificates of stock issued by the Corporation; he shall sign all papers required by law or by these By-Laws, or by the Board of Directors to be signed by the Treasurer; whenever required by the Board of Directors, he shall render a statement of his cash account; he shall enter regularly in the books of the Corporation to be kept by him for the purpose, full and accurate account of all moneys received and paid by him on account of the Corporation; he shall at all reasonable times exhibit the books and accounts to any Director of the Corporation upon application at the office of the Corporation during business hours; and he shall perform all act incident to the position of Treasurer, subject to the control of the Board of Directors. 5 The Board of Directors may require the Treasurer to give a bond to the Corporation in such sum and with such surety as shall be approved by the Board of Directors, and conditioned for the faithful performance of all his duties as Treasurer. Section 5. All Assistant Treasurers, and all officers, agents and factors of the Corporation, if required by the Board of Directors, shall give bonds payable to the Corporation in such penalties and with such conditions and sureties as the board of Directors may approve. Section 6. The Secretary shall keep the minutes of all meetings of the Board of Directors and the minutes of all meetings of the stockholders, in books provided for that purpose; he shall attend to the giving and serving of notices of meetings of the Stockholders, Board of Directors of the Corporation, and all notices of the Corporation; he shall sign with the President all bills of exchange and all promissory notes of the Corporation; me may sign with the President or Vice-President in the name of the Corporation all contracts authorized by the Board of Directors; he shall affix the corporate seal of the Corporation thereto; he shall have the custody of the corporate seal of the corporation either he or an Assistant Secretary or the Treasurer or an Assistant Treasurer shall sign all certificates of stock issued by the Corporation; he shall affix the corporate seal to all certificates of stock duly issued by the Corporation; he shall have charge of such books and papers as the Board of Directors may from time to time direct all of which shall, at all reasonable times, be open to the examination of any Director upon application to the office of the Corporation during business hours; and he shall in general perform all the duties incident to the office of Secretary, subject to the control of the Board of Directors. Section 7. If and whenever an Auditor shall be appointed , he shall have supervision over all the accounts and account books of the Corporation and shall see that the system of keeping the same is enforced and maintained. He shall direct as to forms and blanks relating to books and account in all departments and no change shall be made without his consent, or the consent of the President or of the Board of Directors. He shall see that there is kept in the bookkeeping department a set of books containing a complete record of all earnings, expenses, expenditures and all business transactions of the Corporation pertaining to accounts. He shall see that the records are kept of all recommendations made by officers or committees, of all plans adopted, all bids received and all contracts entered into for construction work and the state of the same from time to time. He shall verify the assets reported by the Treasurer or Assistant Treasurer, and cause all books and accounts of officers and agents of the Corporation charged with the receipt and disbursement of money to be examined from time to time and as often as practicable, he shall, when requested furnish the President and the Board of Directors, a statement covering all or any part of the matters in his charge. The Auditor shall have such additional powers and perform such further and other duties, as may from time to time be conferred upon or be prescribed for him by the President or by the Board of Directors. Section 8. Unless otherwise ordered by the Board of Directors, the President or Vice-President shall have full power and authority in behalf of the Corporation to attend to act and to vote at any meeting of stockholders of any corporation in which the Corporation may hold stock, and at any such meetings shall possess and may exercise any and all rights and powers incident to the ownership of such stock, and which, as the owner thereof, the Corporation might have possessed and exercised if present. The Board of Directors by resolution from time to time, may confer like powers upon any person or person or appoint another person or person in place of the Presidents or Vice-President to represent the Corporation for the purposes in this Section mentioned. 6 ARTICLE IV. ----------- Capital stock. -------------- Section 1. Ownership of stock in the Corporation shall be evidenced by certificates of stock in such form as shall be prescribed by the Board of Directors and shall be under the seal of the Corporation, and signed by the president or Vice-president and either the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. All certificates shall be consecutively numbered. The name of the person owning the shares thereby represented with the number of shares and the date of issue, shall be entered on the Corporation's books. No certificate shall be valid unless it be signed by President or Vice-President and either the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. All certificates surrendered to the Corporation shall be cancelled and no new certificate shall be issued until the former certificate for the same number of shares shall have been surrendered and cancelled. Section 2. No transfer of stock shall be valid as against the Corporation except on surrender and cancellation of the certificate therefor, accompanied by an assignment or transfer by the owner thereof made either in person or under power of attorney, and upon such surrender, cancellation or assignment, a new certificate shall be issued therefor. The Corporation shall not be bound to take notice of or recognize any trust, charge or equity affecting any of the shares of its capital stock, or recognize any person as having any interest therein except the person or persons whose name or names appear or appears on the books of the Corporation as the legal owner or owners thereof. Whenever any transfer shall be expressed as made for collateral security and not absolutely, the same shall be so expressed in the entry of said transfer on the books of the corporation. Section 3. The Board of Directors shall have power and authority to make all such rules and regulations, not inconsistent herewith, as it may deem expedient, concerning the issue, transfer and registration of certificates for shares of the capital stock of the corporation. Section 4. The Board of Directors may appoint a transfer agent or agents and a registrar or registrars of transfers within or without the State of Idaho, and may require all stock certificates to bear the signature of a transfer agent and of a registrar. Each Transfer Agent shall keep a stock ledger and transfer book for the transfer of the shares of the capital stock. A list of stockholders with the number of shares of stock held by each set opposite the respective names of the stockholders, certified by the President or Vice-President and the Treasurer or an Assistant Treasurer, shall be sufficient authority to any Transfer Agent to credit upon the stock ledger to each stockholder the number of shares of stock and the number of the certificates of stock representing the same to which each stockholder is entitled, and, if certificates of stock have not been issued therefor, to issue the same. Except in the case of an original issue of stock no new certificates of stock shall be issued by the Transfer Agent except upon the transfer, surrender and cancellation of old certificates for an equal number of shares of said stock. 7 Upon such transfer, surrender and cancellation, the former stockholder shall be debited on the stock ledger with stock transferred and surrendered by him and cancelled and the new stockholder credited upon the stock ledger with the amount of stock transferred to him. Each Registrar of the capital stock shall keep a register book of the stock in which shall be registered by it the names of the stockholders and the number of shares held by each, and the number of the certificates representing such shares. A list of stockholders with the shares of stock held by each set opposite his name and the number of the certificate representing such shares, certified by the President or Vice-President and the Treasurer or an Assistant Treasurer, shall be sufficient authority to each such Registrar to register the same upon its said register book. After such original registration by any Registrar, no new certificates for shares of stock shall be registered by any Registrar except upon cancellation of certificates for an amount of shares of said stock at the time of such new registration equal to those then registered. Section 5. The stock transfer books may be closed for any meeting of the stockholders, and may be closed for the payment of dividends, during such periods as from time to time may be fixed by the Board of Directors, and during such periods no stock shall be transferable. Section 6. Any person or persons applying for a certificate of stock in lieu of one alleged to have been lost or destroyed, shall make affidavit or affirmation of the fact, shall advertise the same with a description of the certificate in a newspaper published in the City of Wallace, State of Idaho, once a week for four consecutive weeks and shall deposit with the Corporation said affidavit and evidence of said advertisement and shall give a bond of indemnity to the Corporation, with surety, to be approved by the Board of Directors, in double the current value of the stock, against any damages, loss or inconvenience to the Corporation which may or can arise in consequence of a new or duplicate certificate being issued in lieu of the one lost or missing; whereupon, at the end of thirty days after the deposit of said affidavit, advertisement and bonds, the Board of Directors may cause to be issued to such person or persons, a new certificate or a duplicate of the certificate so lost or destroyed. ARTICLE V. ---------- Miscellaneous. -------------- Section 1. No agreement, contract or obligation (other than checks in payment of indebtedness or incurred by authority of the Board of Directors) involving the payment of moneys or the credit of the Corporation for more than Ten Thousand Dollars shall be made without the order of the Board of Directors. Section 2. Unless otherwise prescribed by law or ordered by the Board of Directors, all agreements and contracts shall be signed by the President and the Secretary in the name and on behalf of the Corporation and shall have the corporate seal thereto attached. Section 3. All moneys of the Corporation shall be deposited when and as received by the Treasurer in such bank or banks or depository as may from time to time be designated by th4e Board of Directors and such deposits shall be made in the name of the Corporation. 8 Section 4. No note, draft, acceptance, endorsements or other evidence of indebtedness shall be valid as against the Corporation unless the same shall be signed by the Secretary or an Assistant Secretary and countersigned by the President or Vice-President, or by such other person as may be authorized by resolution of the Board of Directors, except that the Secretary or Assistant Secretary or General Manager may, without countersignature, sign pay-roll checks and checks for all authorized disbursements, represented by properly approved vouchers, and make endorsements for deposit to the credit of the Corporation in its duly authorized depository or depositories. No check or order for money shall be signed in blank by more than one officer of the Corporation. Section 5. No loan or advance in money shall be made by the Corporation to any stockholder or officer therein. Section 6. No Director or Executive Officer of the Corporation shall be entitled to any salary or compensation for any services performed for the Corporation unless such salary or compensation shall be fixed by resolution of the Board of Directors or by the Stockholders. Section 7. The corporate seal of the Corporation shall be a metallic stamp, circular in form, with the name of the Corporation engraved thereon around the word "Seal" and the impression of such seal upon any instrument requiring its use shall be sufficient authentication of the same as an instrument under seal. A duplicate of the corporate seal may be kept and used by the Treasurer or by any Assistant Secretary or any Assistant Treasurer. ARTICLE VI. ----------- Amendment. ---------- Section 1. These By-Laws from time to time, may be altered, amended or repealed, in whole or in part, and new ones adopted and substituted therefor, by a vote of a majority of the full Board of Directors; but the stockholders may alter or amend or repeal those or any existing By-Laws of the Corporation, in whole or in part, and adopt and substitute new ones therefor, at any annual meeting of the Corporation, or at any special meeting of the Corporation, provided notice of such proposed alteration, amendment or repeal at any special meeting be included in the notice of such special meeting. The foregoing By-Laws were adopted as the code of By-Laws of ATLAS MINING COMPANY by the holders of more than two-thirds of the subscribed capital stock of said corporation on, to-wit: the 5th day of March, A. D. 1924. STATE OF IDAHO ) ) ss. COUNTY OF SHOSHONE ) We, Donald A. Callahan, Helen A. McAllister and W. Earl Greenough, Directors of ATLAS MINING COMPANY, do certify the above and foregoing to be a true and correct copy of the By-Laws of said Corporation, adopted by the holders of more than two-thirds of the capital stock of the said Corporation on, to-wit: the 5th day of March, A. D. 1924. WITNESS our hands and seals this 5th day of March, A. D. 1924. /s/ Donald A. Callahan (SEAL) ----------------------- /s/ Helen A. McAllister (SEAL) ----------------------- /s/ W. Earl Greenough (SEAL) ----------------------- 9 EX-5.0 5 atlas_ex5-0.txt EXHIBIT 5.0 POLLET & RICHARDSON a Law Corporation 10900 Wilshire Blvd. Suite 500 Los Angeles, California 90024 Tel (310) 208-1183 Fax (310) 208-1154 November 5, 2001 Atlas Mining Company 630 East Mullan Avenue Osburn, Idaho 83849 Re: REGISTRATION STATEMENT FORM SB-2 --- -------------------------------- Ladies and Gentlemen: We have acted as counsel for Atlas Mining Company, a Idaho corporation ("Atlas Mining"), in connection with the preparation of a Registration Statement on Form SB-2 filed by Atlas Mining with the Securities and Exchange Commission (the "Commission") pursuant to the Securities Act of 1933, as amended ("Act"), relating to the public sale of 6,000,000 shares of common stock offered by Atlas Mining and the public resale by certain selling securityholders of 740,0000 shares of common stock. This opinion is being furnished pursuant to Item 601(b)(5) of Regulation S-B under the Act. In connection with rendering the opinion as set forth below, we have reviewed (a) the Registration Statement and the exhibits thereto; (b) Atlas Mining's Articles of Incorporation, as amended, (c) Atlas Mining's Bylaws; (d) certain records of Atlas Mining's corporate proceedings as reflected in its minute books, and (e) such statutes, records and other documents as we have deemed relevant. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and conformity with the originals of all documents submitted to us as copies thereof. In addition, we have made such other examinations of law and fact as we have deemed relevant in order to form a basis for the opinion hereinafter expressed. Based upon the foregoing, we are of the opinion that (i) the shares issuable by Atlas Mining pursuant to this Registration Statement will be validly issued, fully paid and nonassessable; and (ii) that the outstanding shares of common stock to be sold by the selling securityholders will be validly issued, fully paid and non-assessable. We hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the references to this firm under the caption "Legal Matters" in the Registration Statement. In giving this consent, we do not thereby admit that we are acting within the category of persons whose consent is required under Section 7 of the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder. /s/ Pollet & Richardson EX-10.1 6 atlas_ex10-1.txt EXHIBIT 10.1 ATLAS MINING COMPANY COMMON STOCK SUBSCRIPTION AGREEMENT This Atlas Mining Company Common Stock Subscription Agreement (the "Agreement") is hereby submitted by ____________________________________________ (the "Purchaser") for acceptance by Atlas Mining Company, a Idaho corporation (the "Company") as of , 2002. 1. ISSUANCE AND SALE OF COMMON STOCK. Subject to the terms hereof, at the closing as provided for hereunder, the Company will issue and sell to the Purchaser and the Purchaser will buy from the Company the number of shares of the Company's Common Stock indicated on the signature page below (the "Shares"), at a purchase price of $.25 per share. 2. CLOSING; DELIVERY. 2.1 CLOSING. The closing (the "Closing") of the purchase and sale of the Shares to the Purchaser hereunder shall be held at the offices of the Company, located at 1221 West Yellowstone Avenue, Osburn, Idaho, 83849, at the time and date upon which the Company accepts and signs this Agreement. The Company may issue and sell additional shares of its Common Stock at additional closings related to the Offering registered on Form SB-2 (SEC File No: 333-72830) at a purchase price of not less than $.25 per share, up to the aggregate maximum of 6,000,000 shares. Notwithstanding anything to the contrary in this Section 2.1, unless otherwise extended by the Company, no such Closing or closings for the sale and issuance by the Company of shares of its Common Stock shall occur on the ninetieth (90) day following the effectiveness of the Company's Registration Statement SB-2. 2.2 DELIVERY. At the Closing of the sale of the Shares to the Purchaser, the Purchaser shall deliver to the Company cash, a check or wire transfer payable to the Company, or any other consideration acceptable to the Company, at the Company's sole discretion, for the appropriate aggregate purchase price of the Shares. Upon receipt of the Purchaser's payment and the acceptance by the Company of this Agreement from the Purchaser, the Company will prepare a stock certificate representing the Shares purchased by the Purchaser and promptly transmit such stock certificate to the Purchaser at the address specified below. 3. THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the Purchaser as follows: 3.1 ORGANIZATION AND STANDING. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Idaho and has all requisite corporate power and authority to carry on its businesses as now conducted and as proposed to be conducted. The Company is qualified or licensed to do business as a foreign corporation in all jurisdictions where such qualification or licensing is required, except where the failure to so qualify would not have a material adverse effect upon the Company. 3.2 CORPORATE POWER. The Company has now, or will have at the date of each of the respective Closings, all requisite corporate power necessary for the authorization, execution and delivery of this Agreement and to sell and issue the Shares, and to carry out and perform all of its obligations hereunder. 3.3 AUTHORIZATION. This Agreement, including the obligation to issue the Shares to be issued hereunder, when executed and delivered by the Company, will constitute a valid and legally binding obligation of the Company, enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law 1 governing specific performance, injunctive relief or other equitable remedies. The Company has duly authorized the execution, delivery and performance of this Agreement, including the issuance of the Shares by the Company. 3.4 NO CONSENT. No consent, approval or authorization of or designation, declaration or filing with any governmental authority or other outside third party on the part of the Company is required in connection with the valid execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. 3.5 CAPITALIZATION. As of the date of the Closing, the authorized capital stock of the Company will consist of 60,000,000 shares of Common Stock, of which 7,006,727 shares are issued and outstanding. The maximum aggregate number of shares of Common Stock to be issued and sold by the Company will not exceed the number of shares currently authorized in the Articles of Incorporation. All such issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable, and have been issued in compliance with all applicable state and federal laws concerning the issuance of securities. 3.6 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The Company is not in violation of any term of its Certificate of Incorporation or Bylaws, as amended, or any mortgage, indenture, contract, agreement, instrument, judgment, decree or order by which the Company is bound or to which its properties are subject or, to its knowledge any statute, rule or regulation applicable to the Company which would materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of the Company. The execution, delivery and performance of and compliance with this Agreement and the transactions contemplated hereby will not result in any such violation and will not be in conflict with or constitute a default under any of the foregoing and will not result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company pursuant to any of the foregoing. 3.7 VALID ISSUANCE. The Shares, when issued in compliance with the provisions of this Agreement, will be validly issued, fully paid and nonassessable and will be free of any liens or encumbrances created by or imposed upon the holders thereof through action of the Company except as set forth in this Agreement. Subject to the accuracy of each Purchaser's representations in Section 4 hereof, the Shares will be issued in compliance with all applicable federal and state securities laws. 3.8 FREELY TRADABLE. All shares issued pursuant to this Subscription Agreement have been registered pursuant to the Securities Act of 1933, as amended, on Form SB-2 (SEC File No: 333-72380)(the "Registration Statement"). This Registration Statement will be or has become effective as of the date of the execution of this Agreement and no stop order shall have been issued regarding the shares issued. Accordingly, the shares subscribed to and issued pursuant to this Agreement are freely tradable and unrestricted. 4. REPRESENTATIONS, WARRANTIES OF THE PURCHASER. The Purchaser represents and warrants to the Company with respect to this purchase as follows: 4.1 PROSPECTUS. The Purchaser has received a copy of this Prospectus registered on Form SB-2 (SEC File No: 333-72380). 4.2 EFFECTIVENESS. The Purchaser has not received any soliciting materials regarding the shares subscribed to herein aside from the Prospectus discussed in Section 4.1 of this Agreement. The Purchaser has not tendered this Agreement prior to effectiveness of the Registration Statement and understands that no shares will be issued prior to the date of effectiveness. 2 4.3 HIGH RISK. The Purchaser realizes that an investment in the Shares involves a high degree of risk, and has reviewed the risk factors in the Prospectus beginning on page 6 of the Prospectus. 5. MISCELLANEOUS. 5.1 GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of California without regard to the conflict of laws provisions. The parties hereto agree to submit to the exclusive jurisdiction of the federal and state courts of the State of California with respect to the interpretation of this Agreement or for the purposes of any action arising out of or relating to this Agreement. 5.2 SURVIVAL. The representations, warranties, covenants and agreements made herein shall survive the Closing of the transactions contemplated hereby. All statements as to factual matters contained in any certificate or other instrument delivered by or on behalf of the Company pursuant hereto or in connection with any of the transactions contemplated hereby shall be deemed to be representations and warranties of the Company hereunder solely as of the date of such certificate or instrument. 5.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including any agreements contemplated hereunder, constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought. 5.4 NOTICES, ETC. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed (a) if to a Purchaser, at such respective address as set forth in the Schedule of Purchasers attached hereto as Attachment A or at other such address as Purchaser shall have properly furnished in writing to the Company attention of the President or (b) if to the Company, at Atlas Mining Company, Inc. 630 East Mullan Avenue, Osburn, Idaho, 83849, Attn: Mr. Bill Jacobson or at other such address as the Company shall have properly furnished to the Purchasers in writing. Such notices shall be deemed effective upon (i) personal delivery to the party to be notified; (ii) upon the next business day if sent by confirmed telex or facsimile; (iii) one business day after deposit with a nationally recognized overnight carrier, specifying next day delivery; or (iv) five business days after having been sent by registered or certified mail, return receipt requested, postage prepaid. 5.5 EXPENSES. The Company and each Purchaser shall bear its own expenses incurred on its behalf with respect to this Agreement and the transactions contemplated hereby. 5.6 RULES OF CONSTRUCTION. The parties hereto agree that they have been adequately represented by counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 5.7 SEVERABILITY. In the event that any provision of this Agreement or the application thereof becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as to reasonably affect the intent of the parties hereto. To the extent possible, the parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve the economic, business and other purposes of such void or unenforceable provision as closely as possible. 3 5.8 BROKER'S FEES. Each party hereto represents and warrants that no agent, broker, investment banker, person or firm acting on behalf of or under the authority of such party hereto is or will be entitled to any broker's or finder's fee or any other commission directly or indirectly in connection with the transactions contemplated herein. Each party hereto further agrees to indemnify each other party for any claims, losses or expenses incurred by such other party as a result of the representation of this section being untrue. 5.9 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument. 4 ATLAS MINING COMPANY COMMON STOCK SUBSCRIPTION AGREEMENT SIGNATURE PAGE The undersigned hereby subscribes for the following number of Shares of the Company's Common Stock pursuant to the terms and conditions contained in this Stock Subscription Agreement at a purchase price of $.25 per share: PURCHASER: Number of Shares of Common Stock: --------------- Purchase Price per Share: $.25 Total Purchase Price: $ --------------- IF FOR AN INDIVIDUAL: IF FOR AN ENTITY: Entity Name: -------------------- By: By: -------------------------------------- ----------------------------- Print Name: Print Name: ------------------------------ --------------------- Title: -------------------------- COMPANY: AGREED AND ACCEPTED AS TO _______________ SHARES EFFECTIVE AS OF ----------- - ------------------------------. Atlas Mining Company a Idaho Corporation By: --------------------------------------- Bill Jacobson, President ATTACHMENT A ------------ Names and Addresses of Purchasers EX-10.2 7 atlas_ex10-2.txt EXHIBIT 10.2 DRAGON MINE LEASE PURCHASE AGREEMENT This Lease Purchase Agreement (hereinafter "Agreement") is made this 10th day of July, 2001, by and between Conjecture Silver Mines, Inc., an Idaho corporation, (hereinafter "CSM") with an address of 905 North Pines Road, Suite A, Spokane, WA 99208, and Atlas Mining Company, an Idaho corporation, (hereinafter "Atlas") with an address of P. O. Box 968, 1221 W. Yellowstone Ave., Osburn, ID 83849. WHEREAS, CSM owns the Dragon Mine in Juab County, Utah, which consists of real property listed in Exhibit "A" attached hereto and any improvements located thereon; and WHEREAS, Atlas desires to lease and to operate and possibly purchase said mine; and WHEREAS, CSM is willing to lease and sell said mine to Atlas. WHEREFORE, in consideration for the mutual convenants, terms and conditions set forth below, the parties agree as follows: 1. GRANT: CSM does hereby lease, let and demise to Atlas and its successors and assigns, for the consideration stated below the property listed in Exhibit "A" attached hereto. 1.1 The purposes for which Atlas may use the premises under this Agreement are for surveying, sampling, investigating, exploring for, prospecting for drilling for, developing, mining by any method (whether or not now known and including, but not limited to, open pit, strip, underground and solution methods), producing, saving, milling, treating, storing, stockpiling, handling and marketing all minerals or any valuable products of any nature whatsoever in, on or under the property including, but not limited to, ore, minerals, concentrates, refined materials and any other product of any process whether or not now known and regardless of the stage of milling, refining, upgrading or other processing title passes to Buyer, together with all Lessor's rights, privileges, water rights, and easements useful for the Lessee's operations hereunder on the Dragon Mine, including, but not limited to, the rights to look for, test, work, mine, excavate, raise, clean, stockpile, store, leased substances, to excavate pits, sink shafts, make, use and occupy openings, adits, tunnels, raises, rooms, stopes, slopes, winzes, and underground passages now existing or hereafter opened, strip seams, lodes, veins and beds, and erect, use and maintain on the property, such buildings, tipples, headframes, machinery, devises, wall, wells, presently appurtenant (if any) or newly established water rights, roadways, housing, railroad tracks, shops, ditches, dams ponds, reservoirs, pipes, power and communication lines, and without limitation, all other necessary structures and facilities, and from time to time to relocate on the Dragon Mine all or any part of said improvements as lessee may deem desirable or necessary in its operations. 2. TITLE: It is acknowledged that the recorded deeds of the Dragon Mine are set forth in Exhibit "B" attached to this Agreement. CSM guarantees the title as CSM may now hold or hereafter acquire and will protect Atlas from any conflicts that may result in the title as disclosed herein. Atlas retains the right to acquire a title insurance policy or to perform a search of the records as recorded in the county of Juab, Utah, at Atlas' expense. 3. PAYMENTS AND ROYALTY: In consideration for CSM's grant above and in consideration of the other terms and conditions of this Agreement, Atlas agrees to make the payment and to pay the following consideration: 3.1 At the execution of this Agreement Atlas will issue 400,000 shares of Atlas Mining Company common stock in favor of CSM. Said stock will be restricted in nature, and subject to the rules of section 144 of the Securities Exchange Commission. 3.2 If the Agreement remains in effect, on or before the yearly anniversary of the date herein, and on every anniversary thereafter, Atlas will issue 100,000 shares of Atlas Mining Company common stock to the favor of CSM for a one year extension of the Agreement. 3.3 If Atlas sells any product from the Dragon Mine during the period of the Agreement, then Atlas will pay to CSM a 3% royalty of the gross sales. All sales royalties are payable in cash and will be paid within thirty (30) days after receipt of payment to Atlas. Any royalties not timely paid, shall bear interest at the Bank of America prime rate then in effect plus 2%. 1 3.4 If Atlas sales of any product from the Dragon Mine should reach One Million Dollars ($1,000,000.00) during any one year period of this Agreement, then Atlas may purchase the Dragon Mine from CSM for Five hundred Thousand Dollars ($500,000.00). 4. TERM: The term of this Agreement is one year from the date first above written subject to Atlas' right to terminate earlier. Atlas shall have the sole option to renew this Agreement for additional one (1) year periods by giving CSM written notice at least twenty (20) days prior to the anniversary date of this Agreement, and satisfaction of paragraph 3.2 above. 5. POSSESSION: Atlas shall during the term of this Agreement have the right to possession and control of the Dragon Mine for the purposes stated herein. 6. MANNER OF WORK AND CONFORMITY WITH THE LAWS: Atlas agrees in all of its possession, control, and operations under this Agreement, that it shall conduct the same in a miner-like fashion and shall comply with all local, state, and federal laws and regulations. 7. LIENS: Atlas shall suffer no liens to attach to the property. Should such liens attach, Atlas shall immediately provide CSM with notice of the same and shall undertake and diligently pursue the release of said liens. Atlas shall within thirty (30) days after the filling of such liens against the property obtain the release of same or post a bond or other means as provided by the law. In no case shall Atlas fail to pay a lien and jeopardize loss of CSM's title. However, if Atlas should at any time have fully performed its duties under section 3. above, then with the prior written consent of CSM, which consent shall not be unreasonably withheld, Atlas may be allowed liens attach to the property, but only for the purposes of securing financing. 8. REMEDIATION: All disturbance caused by Atlas will be reclaimed in the manner specified in any permits required for the operation or any pertinent laws currently in force or put into force in the future. 9. INSURANCE: Atlas shall continuously maintain in effect a comprehensive general liability insurance policy in an amount no less than one million dollars ($1,000,000.00). Said policy shall provide converges acceptable to the general risks related to or expected under the control and operation of the Dragon Mine. A copy of the policy shall be issued for the benefit of CSM within 14 days of the date herein. 10. TAXES: All real-estate taxes that may be assessed on the property shall become the responsibility of Atlas during the term of the Agreement. Taxes due for the year 2001 will be split between Atlas and CSM on a pro-rata basis. Any other taxes that may be assessed due to the operations of and or maintenance of the property will be born by Atlas. This shall not be construed to require Atlas to pay CSM's proportionate share of any net profits tax on the productions royalty, or CSM's income tax obligations. 11. INSPECTION: CSM shall have the right to enter and to inspect the property at all reasonable times, so long as such inspection does not unreasonably interfere with Atlas's operations. 12. INDEMNIFICATION: Atlas agrees to indemnify and hold CSM harmless from any and all liability and claims, including reasonable attorney fees, which may arise out of Atlas's possession, operations and activities under this Agreement. 13. FORCE MAJEURE: If Atlas shall be prevented from performing any of the Agreement hereunder, by any act or neglect of CSM or by strikes, lockouts, fire, unusual delay in transportation, orders of the Government, or any duly constituted instrumentality thereof, unavoidable causalities, or any causes beyond the control of Atlas , such delay shall not be deemed a breach of this Agreement or a default on the part of Atlas constituting a cause for termination. Depressed prices shall constitute a force majeure when the minerals produced are salable only at abnormally low prices. 2 It is expressly stipulated and agreed that Atlas shall promptly notify CSM in writing of the commencement of or termination of any claimed force majeure, and the term of this Agreement shall be extended for a term equal to the period thereof. 14. DEFAULT: Either party shall have the duty to provide the other with written notice specifying any claimed default. Upon receipt of notice of default the recipient of a notice of default shall have thirty (30) days to undertake and diligently prosecute the cure of any such default. If the recipient disagrees as to the existence of any default, it shall immediately provide the other party with written notice of each and every reason it claims it is not in default. In the case the parties are unable to amicably resolve any dispute with respect to a default, either party may seek a judicial determination of the respective rights of the parties, including termination. Attorney fees of each party are the each party's responsibility. 15. TERMINATION AND SURRENDER OF THE PROPERTY: Upon termination of this Agreement, Atlas shall have one hundred twenty (120) days to remove any equipment and fixtures it placed on the property. Fixtures may be removed only if their removal can be accomplished without damage to the premises. Any equipment and fixtures not removed shall be deemed to be the property of CSM. 16. NOTICE: Any notice required to be given under this Agreement shall be sufficiently given upon deposit of said notice, postage paid, return receipt requested, to the address of the parties listed below or such other address as they may provide to the other party: Conjecture Mines, Inc. Atlas Mining Company 905 Pines Road, Suite A P. O. Box 968 Spokane, WA 99206 Osburn, ID 83849 17. INUREMENT: This Agreement shall inure to the benefit of and be binding upon the successors and assignees of the parties. Atlas shall not assign its rights hereunder without the prior written consent of CSM. Such consent shall not be unreasonably withheld. 18. GOVERNING LAW: The Agreement shall be governed by the laws of the state of Idaho. 19. TITLES OF ARTICLES: The titles to the Articles hereof have been inserted for convenience only. Such titles are not to be considered as limiting or expanding or modifying in any other fashion the language of the Article following the same. 20. NO WAIVER: No waiver by either party of any right herein shall be construed a waiver of any such right in the future or any other right in this Agreement. 21. MEMORANDUM: Lessee and Lessor shall execute a Memorandum of this Agreement in a recordable form under the laws of the State of Utah to give notice to third parties of the rights granted hereunder. Either party may record such Memorandum. Neither of the parties hereto shall or may record this Agreement. 22. OBLIGATIONS OF GOOD FAITH: All obligations and convenants set forth in this Agreement shall be subject to an obligation of good faith in the performance or enforcement hereof. "Good Faith" means honesty in fact in the conduct or transaction concerned. 23. SOLE AGREEMENT: This Agreement constitutes the sole understanding of the parties with respect to the subject matter hereof and all prior written or oral agreements or understandings between the parties hereto, are incorporated in and superseded by this Agreement. No modifications or alterations of the terms of this Agreement shall be binding unless in writing and executed subsequent to the date hereof by both parties. In the case of any modifications hereunder an Amended Memorandum of this Agreement may be executed on a form sufficient under the laws of the state of Utah and recorded in Juab county. Time is of the essence of this Agreement. 3 In witness whereof, the parties hereto have duly executed the Agreement as of the day and Year first above written. Conjecture Silver Mines, Inc. Atlas Mining Company By: ______________________ By:_______________________ President President 4 EX-10.3 8 atlas_ex10-3.txt EXHIBIT 10.3 ARTICLE OF MERGER OF SIERRA SILVER-LEAD MINING COMPANY AND ATLAS MINING COMPANY Pursuant to the provisions of the Idaho Business Corporation Act, Part 30-1-1105, the undersigned corporations hereby submit the following Articles of Merger for filing for the purpose of merging Sierra Silver-Lead Mining Company, an Idaho corporation ("Sierra"), into Atlas Mining Company, an Idaho corporation ("Atlas"). ARTICLE I The Plan of Merger of Sierra into Atlas is attached as Exhibit A. ARTICLE II The merger was duly approved by the shareholders of Sierra. There is only one class of Sierra stock outstanding. Designation Outstanding Shares Shares Voted for Merger Percent - ----------------------- ------------------ ----------------------- ------- Common Stock 2,594,540 1,304,962 50.45% ARTICLE III Approval of the Atlas shareholders was not required to approve the merger. Dated the 14th day of October, 1998. ATLAS MINING COMPANY ATLAS MINING COMPANY By: /S/ William T. Jacobson By: /S/ Kurt Hoffman ------------------------ -------------------- William T. Jacobson, President Kurt Hoffman, Secretary SIERRA SILVER-LEAD MINING COMPANY SIERRA SILVER-LEAD MINING COMPANY By: /S/ Donald C. Springer By: /S/ R. M. MacPhee -------------------------- --------------------- Donald C. Springer, President R. M. MacPhee, Secretary PLAN OF MERGER This Plan of Merger is made and entered into this 20th day of August, 1998, by and between Sierra Silver-Lead Mining Company (Sierra), and Atlas Mining Company (Atlas), both Idaho corporations. Sierra Silver-Lead Mining Company is a corporation organized and existing under the laws of the State of Idaho and has authorized capital stock consisting of 6,000,000 shares of fully paid, nonassessable stock with .10 par value, of which 2,594,540 shares are issued and outstanding, and held by 157 shareholders. Atlas Mining Company is a corporation organized and existing under the laws of the State of Idaho and has authorized capital stock consisting of 6,000,000 shares of fully outstanding, and held by 157 shareholders. The Board of Directors of Sierra and Atlas, respectively, deem it advisable for Sierra to merge into and with Atlas. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, Sierra and Atlas hereby agree to the following Plan of Merger. 1. NAMES OF CONSTITUENT CORPORATIONS. Sierra will merge with and into Atlas. Atlas Mining Company will be the Surviving Corporation. 2. TERMS AND CONDITIONS OF MERGER. The effective date of merger shall be the date upon which the Articles of Merger are filed with the Secretary of State. Upon the effective date of the merger: the separate corporate existence of Sierra shall cease; title to all real estate and other property owned by Sierra shall be vested in Atlas without reversion or impairment; and the Surviving Corporation (Atlas) shall have all liabilities of Sierra. Any proceedings pending by or against Sierra or Atlas may be continued as if such merger did not occur, or the surviving Corporation may be substituted in the proceeding for Sierra. 3. GOVERNING LAW. The laws of the State of Idaho shall govern the Surviving Corporation. 4. NAME. The name of the Surviving Corporation shall be Atlas Mining Company. 5. REGISTERED OFFICE. The address of the Registered office of the Surviving Corporation shall be 416 River Street, Wallace, Idaho 83873. 2 6. ACCOUNTING. The assets and liabilities of Sierra as of the effective date of the merger shall be taken up on the books of the Surviving Corporation at the amounts at which they are carried at that time Or at the valuation as determined by the directors of each corporation. 7. ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation and Bylaws including any amendments of Atlas will remain the same except that an Article of Merger will be filed upon acceptance of the shareholders of Sierra. 8. DIRECTORS. The directors of Atlas as of the effective date of the merger shall be the directors of the surviving Corporation until their respective successors are duly elected and qualified. 9. MANNER AND BASIS OF CONVERTING SHARES. As of the effective date of the Merger: Each 3.76 shares of Sierra common stock, with a par value of .10 per share, Issued and outstanding shall continue to be one share of Atlas common stock with a par value of .10 per share. The Surviving Corporation shall convert or exchange each 3.76 shares of Sierra common stock for one share of the common stock of the Surviving Corporation; PROVIDED, however, that no fractional shares of the Surviving Corporation stock shall be issued. In the case of fractional shares, all fractions of one-half (.50) or more will be issued one share. Any shares of stock of Sierra in the Treasury of Sierra on the effective date of the merger shall be surrendered to the surviving Corporation for cancellation, and no shares of the Surviving Corporation shall be issued in respect thereof. On the effective date of the merger, holders of certificates of common stock in Sierra shall surrender them to the Surviving Corporation, or its Appointed agent, in such manner as legally required. Upon receipt of such certificate, the Surviving Corporation shall issue in exchange therefor a certificate of shares of common stock in the Surviving Corporation representing the number of shares of stock to which such holder shall be entitled as set forth above. 3 In addition, such shareholder shall be entitled to receive any dividends on such shares of common stock of the surviving Corporation which may have been declared and paid between the effective date of the merger and the issuance to such shareholder of the certificate of such common stock. 10. SHAREHOLDER APPROVAL. This Plan of Merger shall be submitted to the shareholders of Sierra for their approval in the manner provided under Idaho Code 30-1-1103, on or before September 30, 1998, or at such time as the Board of Directors of Sierra shall agree. After approval by a vote of the holders of the majority of the shares entitled to vote thereon, the Articles of Merger shall be filed as required by the laws of the State of Idaho. 11. RIGHTS OF DISSENTING SHAREHOLDERS. Any shareholder of Sierra who has the right to dissent from this merger as provided in Idaho Code 30-1-1302, and who so dissents in accordance with the requirements of such part, shall be entitled, upon surrender of the certificate or certificates representing certificated shares or upon imposition of restrictions of transfer of uncertificated shares, to receive payment of the fair value of such shares as provided therein. 12. COUNTERPARTS. This Plan of Merger may be executed in any number of counterparts, and all such counterparts and copies shall be and constitute an original instrument. IN WITNESS WHEREOF, this Plan of Merger has been adopted by the undersigned as of this 20th day of August, 1998. SIERRA SILVER-LEAD MINING COMPANY By: /S/ Donald C. Springer By: /S/ R. M. MacPhee -------------------------- --------------------- Donald C. Springer, its President R. M. MacPhee, Secretary ATLAS MINING COMPANY By: /S/ William T. Jacobson By: /S/ Kurt Hoffman ------------------------ -------------------- William T. Jacobson, its President Kurt Hoffman, its Secretary 4 EX-10.4 9 atlas_ex10-4.txt EXHIBIT 10.4 EQUIPMENT PURCHASE AGREEMENT THIS AGREEMENT, made and entered into this 22nd day of August, 1997, by and between FAUSETT INTERNATIONAL, INC., an Idaho corporation, ("FII") and ATLAS MINING COMPANY, an Idaho corporation ("Buyer"); WHEREAS, FII owns equipment used in providing underground mining and related civil construction contract services in the state of Idaho and throughout the western United States; and WHEREAS, Seller desires to sell and Buyer desires to purchase from Seller all of the mining equipment, drills, loaders, trucks, tools, vehicles and supplies upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for the other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties do hereby mutually agree as follows: Agreement to Sell and to Buy. Seller, for itself and its respective successors, legal representatives and assigns, hereby agrees to sell to Buyer and Buyer, for itself and its successors, legal representatives and assigns, hereby agrees to purchase from Seller, for the consideration set forth in Section 2 hereof, all of Seller's rights, title and interests in and to the property listed in Exhibit B, attached hereto. Seller warrants that the specified assets are free from all liabilities and encumbrances, except for the secured interests of Washington Trust Bank and Orix Credit Alliance as described in Exhibit A, attached hereto. Buyer is not assuming any underlying debts in a timely and orderly manner. Purchase Price and Method of Payment. Subject to the adjustments Hereinafter specified, the total purchase price is One Million Four Hundred Sixteen Thousand Ninety-Four Dollars ($1,416,094.00) and is payable by the Buyer as follows: Twenty-five Thousand Dollars ($25,000) upon signing of this agreement, the receipt of which is hereby acknowleged as earnest money in partial payment of the purchase price for said assets; and The additional sum of Twenty-five Thousand Dollars ($25,000), plus Three Hundred Fifty Thousand Dollars ($350,000) of Atlas Mining Company Stock issued at the bid price as of the date of this agreement to FII, on or before the closing date of this agreement; and 1 The balance of the purchase price shall be evidenced by a promissory Note payable to Seller which provides for payment principal in the amount of One Million Sixteen Thousand Ninety-Four Dollars ($1,016,094) payable according to the following schedule. During the first 12 months of the term of the note, payments will be $15,000, payable monthly beginning thirty days after Closing Date. Interest will accrue at the rate of eight and three quarters percent (8.75%) per annum. Should Buyer sell or refinance equipment on Exhibit A (now financed by Washington Trust or Orix Credit), then Buyer will pay the additional principal payment of the sale or refinance proceeds directly to the Creditor herein and Seller will reduce balance of the promissory note in the amount equal to that paid by the Buyer directly to the creditor. At the end of One Year after Closing Date the Buyer shall: Pay the outstanding principal and accrued interest in one lump payment; or Refinance the outstanding balance of principal and accrued interest with another lender; or If after pursuing both SBA and commercial financing for the purpose of refinancing the outstanding balance of principal and accrued interest the Buyer is unable to obtain financing the Buyer shall have the option of refinancing with the Seller the outstanding balance for additional periods of 30 month or 42 month periods, and for periods of one year thereafter. The terms of the notes shall be of a maximum 7 year amortization and annual percentage rate no more than the Washington Trust Bank prime rate + .75%. The Buyer has the right to prepay the note without penalty. The Buyer agrees that all of the equipment listed on Exhibit B shall be subject to uniform commercial code security interests and/or motor vehicle title liens in favor of the Seller to secure payment of the amount due under the promissory note. All security interests shall be released by the Seller when the note is satisfied. Buyer agrees the duty of Seller to consummate this sale is expressly contingent upon the approval of the terms hereof by Washington Trust Bank and Orix Credit Alliance on or prior to the Closing Date. Liabilities Not Assumed. This agreement is intended by the parties to be for the sale of equipment only. It is expressly understood and agreed that Buyer shall not assume any liability or obligations of any nature, financial or otherwise, pertaining to the conduct of the business by Seller prior to the date of closing or the ownership by Seller of the assets sold to Buyer hereunder. 2 Closing. It is hereby agreed that this matter shall be closed at the office of HULL, BRANSTETTER & SIMPSON, Wallace, Idaho. All funds and instruments necessary to complete the sale and create the contemplated security interests will be deposited with them. The Closing Date shall be ______________, 1997, unless an earlier date is mutually agreed upon. Documents to be Delivered by Seller at Closing. At Closing, Seller Shall deliver to Buyer, in form and substance satisfactory to Buyer in each case: Certified copies of resolutions duly adopted by the Board of Directors and ratification of shareholders of FII approving the transactions referred to herein and authorizing and directing the execution of this Agreement and the performance of all obligations hereunder; Fully executed Bills of Sale and Assignment with full warranties of title (except as otherwise shown on Exhibit A hereto) transferring to Buyer all of Seller's interests of every kind and nature in and to all equipment and supplies as listed in Exhibit B; All other documents or instruments which Buyer may reasonably require to assure full and effective transfer to Buyer of all of Seller's property transferred to Buyer pursuant to the terms of this agreement. Seller agrees to give the Board of Directors of Atlas Mining Company voting rights to the stock issued by Atlas as partial payment herein, said proxy to be nonrevocable for the term of this agreement or extensions thereof. Documents to be Delivered by Buyer at Closing. At Closing, Buyer shall deliver to Seller, in form and substance satisfactory to Seller in each case; Payment in full of that portion of the consideration payable on the Date of Closing as specified in Section 2; Duly executed promissory note purchase money security agreement and uniform commercial code filing instrument covering assets purchased in the amount and payable in the manner specified in Section 2; 3 Certified copies of resolutions duly adopted by Buyer's Board of Directors approving the transactions referred to herein and authorizing and directing the execution of this Agreement and the performance of all obligations hereunder; Such other documents as may be reasonably requested by Seller in order to complete the transaction contemplated hereby. Possession. Seller shall deliver to Buyer, and Buyer shall take delivery of, property to Seller being purchased and sold hereunder on the Date of Closing. Seller's Covenant, Representations, and Warranties. As an inducement to Buyer to enter into this Agreement, Seller for itself and its respective representatives, successors and assigns, jointly and severally covenant, represent and warrant to Buyer as follows: The Seller is now, and on the Date of Closing will be, a corporation duly organized and in good standing under the laws of the State of Idaho, with the power to own, sell and transfer its assets, inventory and properties pursuant to this Agreement; The execution, delivery and performance by the Seller of this Agreement, and each other instrument or agreement contemplated by this agreement, are within the corporate powers of the Seller, have been duly authorized by all necessary corporate action on the part of the Seller (including shareholder approval of transactions or documents contemplated by this Agreement with respect to which shareholder approval is required by law or each of the Seller's governing instruments), and will not violate or constitute a default under any provision of law or of the Articles of Incorporation, By-Laws, or other contractual obligation of the Seller. This Agreement, together with all other instruments or agreements contemplated hereunder, when duly executed and delivered, will be the legal, valid and binding obligation of the Seller and its heirs or assigns, and is enforceable against the Seller in accordance with their respective terms; Except as specified in Exhibit A, Seller has good and marketable title to their respective assets sold hereunder. On the Date of Closing all tangible personal property purchased hereunder shall be in as good order and condition as on the date of this Agreement, ordinary wear and tear excepted; 4 The Seller is not a party to or by any agreement or instrument or subject to any charter or corporate resolution or any order, injunction or decree of any court or governmental agency affecting the properties being purchased by Buyer hereunder; Except to the extent otherwise specifically agreed upon under the terms of this Agreement, the risk of loss of the properties purchased by the Buyer Hereunder shall remain with Seller until the Closing, at which time such risk shall become that of the Buyer. Buyer's Covenants, Representations and Warranties. As an inducement to Seller to enter into this Agreement, Buyer covenants, represents and warrants to Seller that: Buyer is now, and on the Date of Closing will be, a corporation duly organized, Validly existing and in good standing under the laws of the State of Idaho, with power to own, purchase and acquire Seller's assets pursuant to this Agreement; The execution, delivery and performance by Buyer of this Agreement, and each other instrument or agreement contemplated by the Agreement, are within the corporate powers of Buyer, have been duly authorized by all necessary corporate action on the part of Buyer and will not violate or constitute default under any provision of the Articles of Incorporation, Bylaws or any other contractual obligation of Buyer. This Agreement, together with all other instruments or agreements contemplated hereunder, when duly executed and delivered, will be the legal, valid and binding obligation of Buyer, and will be enforceable against Buyer in accordance with their respective terms. From and after the time of closing Buyer agrees to continually insure the equipment subject to this agreement in the amount equal to the amount owed FII from time to time. Buyer further agrees to name FII as an additional Insured on such theft and casualty policy and with indemnification paying all proceeds of claims directly to FII or its assigns. 10. Conditions to Obligation of Buyer. The obligations of Buyer under this Agreement are expressly conditioned upon satisfaction of the following conditions as of the Date of Closing: All the terms, covenants and conditions of this Agreement to be compiled with and performed by the Seller on or before the Date of Closing shall have been fully complied with and performed in all material respects; Seller shall have afforded to the officers and authorized representatives of Buyer free and full access to the equipment and supplies of Seller prior to the Date of Closing in order that Buyer shall have full opportunity to make such inspections of the assets being purchased hereunder and such other investigations as it shall desire, including the right of Buyer to have an independent outside appraisal of the assets in Exhibit B, and Seller shall have furnished Buyer with such additional financial and operating data and other information as to the maintenance operation of Seller's assets which Buyer shall from time to time have reasonably requested prior to the Date of Closing. 5 11. Brokerage. Seller and Buyer warrant and represent to each other that there is no brokerage or finder's fee payable to any party in connection with the sale o the assets, inventory, and properties provided for in this Agreement. 12. Assignment. Prior to the Date of Closing, Buyer may at its option assign its interests under this Agreement to a third party without the prior consent of Seller. Seller may at its option assign its interests under this agreement to a third party without the prior written consent of Buyer. 13. Miscellaneous. All covenants, agreements, representations and warranties contained herein Shall survive the execution of this Agreement and the Date of Closing hereunder; The parties shall execute and deliver such other and further documents as may be necessary to implement and consummate this Agreement; This Agreement shall be binding upon and inure to the benefit and be enforceable against the parties hereto and their respective successors and assigns, and shall in all respects be governed, enforced and interpreted in accordance with the laws of the State of Idaho; Attorney for the Seller is Ben Simpson, Hull Branstetter & Simpson, 416 River Street, Wallace, Idaho 83873. Each party acknowledges the right of the other to have any and all documents reviewed by their respective representative. All notices, demands and requests required or permitted to be given hereunder shall be deemed duly given if and when mailed by certified or registered mail, postage prepaid, and, pending the designation in writing of another address, addressed to Seller as follows: Fausett International, Inc. 1221 W. Yellowstone Avenue Osburn, Idaho 83849 and addressed as follows: Atlas Mining Company P.O. Box 631 Mullan, ID 83846 (f) This Agreement and the Exhibits attached hereto contain the entire agreement between the parties, superseding in all respects any and all prior oral or written agreements or understandings, between the parties hereto pertaining to the sale of Seller's equipment purchased and sold hereunder, and shall be amended or modified only by written instrument signed by both parties hereto. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one agreement. 6 IN WITNESS WHEREOF, each of the parties hereto executed this Agreement on the day and year first above written. SELLER: Fausett International, Inc. By: _________________________ Its: ________________________ Date: _______________________ BUYER: Atlas Mining Company By: _________________________ Its: ________________________ Date: _______________________ EXHIBIT "A" EQUIPMENT: All equipment of Debtor now owned or hereafter acquired including, but not limited to mining equipment and machinery, together with all parts, fittings, and accessions at anytime acquired, wherever located. INVENTORY: All inventory of debtor now owned or hereafter acquired, including, but not limited to, raw materials, work in process, finished goods and materials and supplies used or consumed in debtor's business including, but not limited to drill bits, drill shafts and other consumable mining inventory whether in the possession of the debtor, warehouseman, bailee, or any other person or wherever located, and all proceeds and products of debtor's inventory in any form. CASH AND DEPOSIT ACCOUNTS: All cash and deposit accounts in any form excluding payroll and tax reserve accounts. DATED this 11th day of October, 1989. Fausett International, Inc. By:________________________________ President By:________________________________ Treasurer Washington Trust Bank By:_________________________________ Vice President 7 FAUSETT INTERNATIONAL, INC. FAUSETT MINE SERVICES, INC. Exhibit A ACCOUNTS: All accounts, chattel paper, contracts and contract receivables, instruments, documents or other writing evidencing a monetary obligation, all other rights to payments, including, but not limited to, all general intangibles evidencing or comprising a right to receive payment, including all city, county, state and federal tax refunds or other receivables due from such sources now or at anytime hereafter existing whether or not earned by performance arising out of the conduct of the Debtor's business together with all rights, titles, security and guaranties of each account including any right to stop in transit and all security interest, claims and pledges whether voluntary or involuntary which are pertinent to or affect such accounts and all returned or repossessed goods sold in inventory. All accounts, chattel paper, instruments general intangibles, and rights to payment of every kind, now or hereafter owing to Debtor including but not limited to that certain contract between Debtor and Pegasus Gold Corporation dated 24th day of June, 1994. CASH AND DEPOSIT ACCOUNTS: All cash deposit accounts in any form excluding payroll and tax reserve accounts. GENERAL INTANGIBLES: All general intangibles (as defined in Article 9 of the Uniform Commercial Code) now owned or hereafter acquired, together with all renewals, replacements and/or substitutions therefore or additions thereto, all rights accruing therefrom and all proceeds thereof. FAUSETT INTERNATIONAL, INC. By:_______________________________ By:_______________________________ FAUSETT MINE SERVICES, INC. By:_______________________________ By:_______________________________ 8 EXHIBIT "A" EQUIPMENT: All equipment of Debtor now owned or hereafter acquired including, but not limited to mining equipment and machinery, together with all parts, fittings, and accessions at anytime acquired, wherever located. INVENTORY: All inventory of debtor now owned or hereafter acquired, including, but not limited to, raw materials, work in process, finished goods and materials and supplies used or consumed in debtor's business including, but not limited to drill bits, drill shafts and other consumable mining inventory whether in the possession of the debtor, warehouseman, bailee, or any other person or wherever located, and all proceeds and products of debtor's inventory in any form. CASH AND DEPOSIT ACCOUNTS: All cash and deposit accounts in any form excluding payroll and tax reserve accounts. DATED this 11th day of October, 1989. Fausett International, Inc. By:________________________________ President By:________________________________ Treasurer Washington Trust Bank By:_________________________________ Vice President FAUSETT INTERNATIONAL, INC. FAUSETT MINE SERVICES, INC. Exhibit A ACCOUNTS: All accounts, chattel paper, contracts and contract receivables, instruments, documents or other writing evidencing a monetary obligation, all other rights to payments, including, but not limited to, all general intangibles evidencing or comprising a right to receive payment, including all city, county, state and federal tax refunds or other receivables due from such sources now or at anytime hereafter existing whether or not earned by performance arising out of the conduct of the Debtor's business together with all rights, titles, security and guaranties of each account including any right to stop in transit and all security interest, claims and pledges whether voluntary or involuntary which are pertinent to or affect such accounts and all returned or repossessed goods sold in inventory. All accounts, chattel paper, instruments general intangibles, and rights to payment of every kind, now or hereafter owing to Debtor including but not limited to that certain contract between Debtor and Pegasus Gold Corporation dated 24th day of June, 1994. CASH AND DEPOSIT ACCOUNTS: All cash deposit accounts in any form excluding payroll and tax reserve accounts. GENERAL INTANGIBLES: All general intangibles (as defined in Article 9 of the Uniform Commercial Code) now owned or hereafter acquired, together with all renewals, replacements and/or substitutions therefore or additions thereto, all rights accruing therefrom and all proceeds thereof. FAUSETT INTERNATIONAL, INC. By:_______________________________ By:_______________________________ FAUSETT MINE SERVICES, INC. By:_______________________________ By:_______________________________ 9 ADDENDUM TO PURCHASE AGREEMENT DATED AUGUST 22, 1997 This is to modify the maturity date of the Equipment Purchase Agreement of August 22, 1998, between Fausett International, Inc. and Atlas Mining Company. It is mutually agreed that the date of maturity of this agreement be extended to August 22, 2002. It is mutually agreed that the maturity of the Promissory Note dated September 30, 1997, negotiated in conjunction with the Equipment Purchase Agreement also be extended to August 22, 2002. Signed this ___ day of December, 1998. - --------------------------------- For Fausett International, Inc. 10 EX-10.5 10 atlas_ex10-5.txt EXHIBIT 10.5 STOCK OPTION PLAN OF ATLAS MINING COMPANY I. PURPOSE OF PLAN The Atlas Mining Company. Stock Option Plan (the "Plan") is intended to advance the interests of Atlas Mining Company. (the "Company"), its shareholders, and its subsidiaries by encouraging and enabling selected officers, directors, and other key employees upon whose judgment, initiative and effort the Company is largely dependent for the successful conduct of its business, to acquire and retain a proprietary interest in the Company by ownership of its stock. Options granted under the Plan are intended to be options which do not meet the requirements of Section 422 of the Internal Revenue Code of 1986 (the "Code"). II. DEFINITIONS 2.1 "Administrative Committee" means the Board of Directors or a committee appointed by the Board of Directors, pursuant to Article III below, administering the Plan. 2.2 "Affiliate" means a "parent corporation" of the Company, as described in Section 424(e) of the Code, or a "subsidiary corporation" of the Company, as described in Section 424(f) of the Code. 2.3 "Board" means the Board of Directors of the Company. 2.4 "Code" means the Internal Revenue Code of 1986. 2.5 "Common Stock" means the Company's no par value Common Stock. 2.6 "Company" means Atlas Mining Company. 2.7 "Date of Grant" means the date on which an Option is granted under the Plan. 2.8 "Disinterested Person" has the meaning defined in Article 3.1(c) of this Plan. 2.9 "Option" means an option granted under the Plan. 2.10 "Optionee" means a person to whom an Option, which has not expired, has been granted under the Plan. 2.11 "Plan" means this Stock Option Plan. 2.12 "Qualified Successor" means a person or persons entitled under Optionee's will or applicable laws of descent and distribution to receive Incentive Stock Options held by Optionee at the time of Optionee's death. 2.13 "Reorganization" and "Reorganization Agreement" have the meanings defined in Article VII of this Plan. 2.13 "Subsidiary" or "Subsidiaries" means a subsidiary corporation or corporations of the Company as defined in Section 424 of the Code. 2.14 "Successor" means the legal representative of the estate of a deceased Optionee or the person or persons who acquire the right to exercise an Option by bequest or inheritance or by reason of the death of any Optionee. 1 III. ADMINISTRATION OF PLAN 3.1 This Plan shall be administered by the Board of Directors of the Company (the "Board") unless a committee of the Board is appointed in accordance with Article 3.2 or 3.4(b) below. The Board, or such committee if appointed, will be referred to in this Plan as the "Administrative Committee." 3.2 The Board may at any time appoint a committee, consisting of not less than two of its members, to administer this Plan on behalf of the Board in accordance with such terms and conditions not inconsistent with this Plan as the Board may prescribe. After it is appointed, the committee shall continue to serve until otherwise directed by the Board. The Board may appoint additional members to the committee; remove members (with or without cause); fill vacancies however caused; and/or remove all members of the committee and thereafter directly administer this Plan. 3.3 A majority of the members of the Administrative Committee shall constitute a quorum; and subject to the limitations of this Article III, all actions of the Administrative Committee shall require the affirmative vote of members who constitute a majority of a quorum. Members of the Administrative Committee who are not Disinterested Persons (as defined in Article 3.4(c)) may vote on any matters affecting the administration or the grant of Stock Options under the Plan; provided, however, that no member shall vote on the granting of a Stock Option to himself or herself (but a member may be counted in determining the existence of a quorum at a meeting of the Administrative Committee during which action is taken with respect to the granting of such Stock Option). 3.4 Notwithstanding the foregoing provisions of this Article III, to the extent necessary to be exempt from the operation of Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Plan shall from the effective date of registration until six months after the termination thereof, be administered as follows: a. The Board shall administer the Plan directly (regardless of whether a committee of the Board has been appointed under Article 3.2) as long as each member of the Board is a Disinterested Person, and all actions of the Board as the Administrative Committee shall require the affirmative vote of directors who constitute a majority of a quorum. b. If at any time a member of the Board is not a Disinterested Person, the Board shall appoint a committee consisting of two or more of its members, each of whom is a Disinterested Person, to administer this Plan on behalf of the Board. Such committee shall act in accordance with terms and conditions prescribed by the Board to the extent such terms and conditions are not inconsistent with this Plan. Once appointed, the committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may appoint additional members to the committee; remove members (with or without cause); fill vacancies however caused; and/or at any time when all members of the Board are Disinterested Persons, remove all members of the committee and thereafter directly administer this Plan. At no time shall a person who is not a Disinterested Person serve on the committee appointed under this Article 3.4(b), nor shall such committee at any time have fewer than two members. c. The term "Disinterested Person" shall mean a director who, during the one year prior to service as a member of the Administrative Committee or during such service, is not granted or awarded equity securities pursuant to this Plan or any other plan of the Company or any of its Affiliates (as defined in Article 2.2) other than grants or awards that pursuant to Rule 166-3(c)(2)(i) under the Exchange Act will not cause the director to cease to be a "Disinterested Person," as defined in such rule. 3.5 The following provisions shall apply to the Administrative Committee: a. The Administrative Committee shall have the authority to (i) administer this Plan in accordance with its express terms; (ii) determine all questions arising in connection with the administration, interpretation, and application of this Plan, including all questions relating to the value of the Common 2 Stock; (iii) correct any defect, supply any information and reconcile any inconsistency in such manner and to such extent as shall be deemed necessary or advisable to carry out the purpose of this Plan; (iv) prescribe, amend, and rescind rules and regulations relating to the administration of this Plan; (v) determine the duration and purposes of leaves of absence which my be granted to participants without constituting a termination of employment for purposes of this Plan; and (vi) make all other determinations necessary or advisable for administration of this Plan. b. The authority of the Administrative Committee to administer the Plan shall be exercised consistently with the intent that (i) the Stock Options issued under this Plan qualify under Section 422 of the Code (including any amendments thereof or successor provision similar thereto); and (ii) the Plan be administered in a manner that satisfies the conditions of Rule 16b-3(c)(2)(i) under the Exchange Act (including any amendments thereof and any successor provision similar thereto) so that the grant of Stock Options under this Plan, and all other actions taken with respect to the Plan, to the options granted thereunder and to the Common Stock acquired upon exercise of Stock Options, shall to the extent possible be exempt from the operation of Section 16(b) of the Exchange Act. c. All determinations made by the Administrative Committee in good faith on matters referred to in this Article 3.5 shall be final, conclusive, and binding upon all persons. The Administrative Committee shall have all powers necessary or appropriate to accomplish its duties under this Plan. ARTICLE IV. COMMON STOCK SUBJECT TO OPTIONS The aggregate number of shares of the Company's Common Stock which may be issued upon the exercise of Options granted under this Plan and any other stock option plan adopted by the Company shall not exceed ten percent (10%) of the then currently issued and outstanding shares of the Company's Common Stock, subject to adjustment under the provisions of Article VII. The aggregate number of shares of the Company's Common Stock which may be issued to any one person shall not exceed five percent (5%) of the then currently issued and outstanding shares of the Company's Common Stock. The shares of Common Stock to be issued upon the exercise of Options may be authorized but unissued shares, shares issued and reacquired by the Company or shares bought on the market for the purposes of the Plan. In the event any Option shall, for any reason, terminate or expire or be surrendered without having been exercised in full, the shares subject to such Option but not purchased thereunder shall again be available for Options to be granted under the Plan. ARTICLE V. PARTICIPANTS Options may be granted under the Plan to any person who is or who agrees to become an officer, director, or employee (including officers and employees who are also directors) of the Company or any of its subsidiaries. ARTICLE VI. TERMS AND CONDITIONS OF OPTIONS Any Option granted under the Plan shall be evidenced by an agreement executed by the Company and the applicable officer or employee and shall contain such terms and be in such form as the Administrative Committee may from time to time approve, subject to the following limitations and conditions: 6.1 OPTION PRICE. The Option price per share with respect to each Option may be the lowest price allowable under applicable laws and regulations. 6.2 PERIOD OF OPTION. The expiration date of each Option shall be fixed by the Administrative Committee; but notwithstanding any provision of the Plan to the contrary, such expiration date shall not be more than five (5) years from the Date of Grant. 6.3 VESTING OF SHAREHOLDER RIGHTS. Neither an Optionee nor his successor shall have any of the rights of a shareholder of the Company until the Option has been exercised and the certificates evidencing the shares purchased are properly delivered to such Optionee or his successor. 3 6.4 EXERCISE OF OPTION. Each Option shall be exercisable from time to time over a period commencing on the Date of Grant and ending upon the expiration or termination of the Option; provided, however, the Administrative Committee may by the provisions of any Option agreement limit the number of shares purchasable thereunder in any period or periods of time during which the Option is exercisable. An Option shall not be exercisable in whole or in part prior to the date of shareholder approval of the Plan. 6.5 NON-TRANSFERABILITY OF OPTION. No Option shall be transferable or assignable by an Optionee, otherwise than by will or the laws of descent and distribution and each Option shall be exercisable, during the Optionee's lifetime, only by him. No Option shall be pledged or hypothecated in any way and no Option shall be subject to execution, attachment, or similar process except with the express consent of the Administrative Committee. 6.6 TERMINATION OF EMPLOYMENT. Upon termination of an Optionee's employment with the Company or with any of its subsidiaries, his Option privileges shall be limited to the shares which were immediately purchasable by him at the date of such termination and such Option privileges shall expire unless exercised by him within 30 days after the date of such termination. In the event of termination of an Optionee's employment "for cause," his Option privileges shall immediately terminate. The granting of an Option to an eligible person does not alter in any way the Company's or the relevant subsidiary's existing rights to terminate such person's employment at any time for any reason or for no reason, nor does it confer upon such person any rights or privileges except as specifically provided for in the Plan. 6.7 DEATH OF OPTIONEE. If an Optionee dies while a member of the Board or in the employ of the Company or any subsidiary, the Option privileges of the estate shall be limited to the shares which were immediately purchasable by the Optionee at the date of death and such Option privileges shall expire unless exercised by the Optionee's successor within one year after the date of death. ARTICLE VII. ADJUSTMENTS 7.1 In the event that the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation, by reason of a recapitalization, reclassification, stock split-up, combination of shares, or dividend or other distribution payable in capital stock, appropriate adjustment shall be made by the Administrative Committee in the number and kind of shares for the purchase of which Options may be granted under the Plan. In addition, the Administrative Committee shall make appropriate adjustment in the number and kind of shares as to which outstanding Options, or portions thereof then unexercised, shall be exercisable, to the end that the proportionate interest of the holder of the Option shall, to the extend practicable, be maintained as before the occurrence of such event. Such adjustment in outstanding Options shall be made without change in the total price applicable to the unexercised portion of the Option but with a corresponding adjustment in the Option price per share. 7.2 In the event of the dissolution or liquidation of the Company, any Option granted under the Plan shall terminate as of a date to be fixed by the Administrative Committee, provided that not less than 30 days written notice of the date so fixed shall be given to each Optionee and each such Optionee shall have the right during such period to exercise his Option as to all or any part of the shares covered thereby including shares as to which such Option would not otherwise be exercisable by reason of an insufficient lapse of time. 7.3 In the event of a Reorganization (as hereinafter defined) in which the Company is not the surviving or acquiring company, or in which the Company is or becomes a wholly-owned subsidiary of another company after the effective date of the Reorganization, then 4 a. If there is no plan or agreement respecting the Reorganization ("Reorganization Agreement") or if the Reorganization Agreement does not specifically provide for the change, conversion, or exchange of the shares under outstanding and unexercised stock Options for securities of another corporation, then the Administrative Committee shall take such action, and the Options shall terminate, as provided in Article 7.2; or b. If there is a Reorganization Agreement and if the Reorganization Agreement specifically provides for the change, conversion, or exchange of the shares under outstanding and unexercised stock Options for securities of another corporation, then the Administrative Committee shall adjust the shares under such outstanding and unexercised stock Options (and shall adjust the shares remaining under the Plan which are then available to the Optionee under the Plan, if the Reorganization Agreement makes specific provision therefor) in a manner not inconsistent with the provisions of the Reorganization Agreement for the adjustment, change, conversion, or exchange of such stock and such Options. The term "Reorganization" as used in this Article VII shall mean any statutory merger; statutory consolidation; sale of all or substantially all of the assets of the Company; or pursuant to an agreement with the Company, the sale of securities of the Company pursuant to which the Company is or becomes a wholly-owned subsidiary of another company after the effective date of the Reorganization. 7.4 Adjustments and determinations under this Article VII shall be made by the Administrative Committee, whose decisions as to what adjustments or determinations shall be made, and the extent thereof, shall be final, binding, and conclusive. ARTICLE VIII. RESTRICTIONS ON ISSUING SHARES The exercise of each Option shall be subject to the condition that if at any time the Company shall determine in its discretion that the satisfaction of withholding tax or other withholding liabilities, or that the listing, registration, or qualification of any shares otherwise deliverable upon such exercise upon any securities exchange or under any state or federal law, or that the consent or approval of any regulatory body, is necessary or desirable as a condition of, or in connection with, such exercise or the delivery or purchase of shares pursuant thereto, then in any such event, such exercise shall not be effective unless such withholding, listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Company. ARTICLE IX. USE OF PROCEEDS The proceeds received by the Company from the sale of Common Stock pursuant to the exercise of Options granted under the Plan shall be added to the Company's general funds and used for general corporate purposes. ARTICLE X. AMENDMENT, SUSPENSION, OR TERMINATION OF PLAN The Board may at any time suspend or terminate the Plan or may amend it from time to time in such respects as the Board may deem advisable in order that the Options granted thereunder may conform to any changes in the law or in any other respect which the Board may deem to be in the best interest of the Company; provided, however, that without approval by the shareholders of the Company representing a majority of the voting power, no such amendment shall (i) except as specified in Article VII, increase the maximum number of shares for which Options may be granted under the Plan; (ii) change the provisions of Article 6.01 relating to the establishment of the Option price; (iii) change the provisions of Article 6.2 relating to the expiration date of each Option; or (iv) change the provisions of the second sentence of this Article X relating to the term of this Plan. Unless the Plan shall theretofore have been terminated by the Board or as provided in Article XI, the Plan shall terminate ten years after the effective date of the Plan. No Option may be granted during any suspension or after the termination of the Plan. Except as provided in Article XI, no amendment, suspension, or termination of the Plan shall, without an Optionee's consent, alter or impair any of the rights or obligations under any Option theretofore granted to such Optionee under the Plan. 5 ARTICLE XI Option Agreement and Legend Requirement Each Stock Option granted hereunder shall be evidenced by a written agreement executed by the Company and the Optionee. Such agreement shall contain the terms of the Stock Option specified by Article VI, together with other terms, conditions, and provisions that the Administrative Committee deems advisable and that are not inconsistent with the terms and conditions of this Plan. Such agreement shall also provide that, by accepting a Stock Option granted under this Plan, the Optionee, for himself or herself, for his or her Qualified Successor, and for his or her heirs, successors and assigns: (i) Recognizes, agrees and acknowledges that no registration statement under the Securities Act of 1933, as amended (the "1933 Act"), or under any state securities laws, will have been filed as to either the Stock Option or any shares of Common Stock that may be acquired upon exercise of such Stock Option; (ii) Warrants and represents that the Stock Option and any shares of Common Stock of the Company acquired upon exercise of the Stock Option will be acquired and held by the Optionee for the Optionee's own account, for investment purposes only, and not with a view towards the distribution or public offering thereof nor with any present intention of reselling or distributing the same at any particular future time; (iii) Acknowledges and consents to the appearance of a printed legend on the back of each stock certificate representing shares of Common Stock issued upon exercise of the Stock Option, which legend shall read as follows: NOTICE: RESTRICTION ON TRANSFER The securities represented hereby have not been registered under the Securities Act of 1933 or any state securities laws, and may not be offered, sold, transferred, encumbered or otherwise disposed of except upon satisfaction of certain conditions set forth in the Atlas Mining Company Stock Option Plan. Information concerning these restrictions may be obtained from the corporation or its legal counsel. Any offer or disposition of these securities without satisfaction of such conditions will be wrongful and will not entitle the transferee to register ownership of the securities with the corporation. These securities may also be subject to repurchase by the corporation upon certain terms and conditions set forth in said documents. (iv) Agrees not to sell, transfer or otherwise dispose of any shares of Common Stock that may be acquired upon exercise of the Stock Option unless (i) there is an effective registration statement under the 1933 Act covering the proposed disposition and compliance with governing state securities laws, (ii) the Optionee delivers to the Company, at the Optionee's expense, a "no-action" letter or similar interpretative opinion, satisfactory in form and substance to the Company, from the staff of each appropriate securities agency, to the effect that such shares may be disposed of by the Optionee in the manner proposed, or (iii) the Optionee delivers to the Company, at the Optionee's expense, a legal opinion, satisfactory in form and substance to the Company, of legal counsel designated by the Optionee and satisfactory to the Company, to the effect that the proposed disposition is exempt from registration under the 1933 Act and governing state securities laws; and (v) Agrees to indemnify the Company and hold it harmless from and against any loss, claim or liability, including attorney's fees or other legal expenses incurred in the defense thereof, incurred by the Company as a result of any breach by the Optionee of, or any inaccuracy in, any representation, warranty, covenant or other provision contained in such agreement. 6 If a registration statement under the 1933 Act is hereafter filed with respect to Stock Options granted or to be granted hereunder and the shares of Common Stock that may be acquired upon exercise of such Stock Options, then, following the effectiveness of such registration statement, the provisions in agreements representing Stock Options that would otherwise be required by this Article XI may, in the discretion of the Administrative Committee, be modified or eliminated. ARTICLE XII. EFFECTIVE DATE OF PLAN AND SHAREHOLDER APPROVAL The effective date of the Plan is January 13, 1997, the date of its approval by the Board; provided, however, if the Plan is not approved by the shareholders of the Company representing a majority of the voting power at the next shareholders' meeting or if the Plan is not approved by such shareholders before January 12, 1998, the Plan shall terminate and any Options granted thereunder shall be void and have no force or effect. This Plan is adopted this 19th day of November, 1998. ATLAS MINING COMPANY BY: /S/ William T. Jacobson BY: /S/ Marqueta Martinez ------------------------------- ------------------------------------- William T. Jacobson, President Marqueta Martinez, Secretary 7 EX-10.6 11 atlas_ex10-6.txt EXHIBIT 10.6 INCENTIVE STOCK OPTION PLAN OF ATLAS MINING COMPANY ARTICLE I. Purpose of Plan ARTICLE II. Definitions ARTICLE III. Administration of the Plan ARTICLE IV. Eligibility ARTICLE V. Shares Available for Incentive Stock Options ARTICLE VI. Option Terms ARTICLE VII. Limitation on Exercise of Options ARTICLE VIII. Exercise of Option ARTICLE IX. Transferability of Options ARTICLE X. Termination of Options ARTICLE XI. Adjustments to Options ARTICLE XII. Termination and Amendment ARTICLE XIII. Option Agreement and Legend Requirement ARTICLE XIV. Miscellaneous Provisions ARTICLE XV. Effective Date of Plan ATLAS MINING COMPANY, an Idaho corporation (the "Company"), hereby establishes and sets forth the terms of the ATLAS MINING COMPANY INCENTIVE STOCK OPTION PLAN (the "Plan"), dated January 13, 1997. ARTICLE I Purpose of Plan The purpose of this Plan is to provide participating employees an incentive to exert their best efforts on behalf of the Company. The Plan seeks to accomplish this purpose by giving such employees an opportunity to gain a proprietary interest in the Company in the form of stock options. Holders of the options are allowed to acquire stock of the Company on favorable terms. An option granted hereunder shall be referred to herein as an "Incentive Stock Option," and all such options are intended to constitute an "incentive stock option"' as such term is defined in Section 422 of the Internal Revenue Code of 1986, as amended from time to time (the "Code"). ARTICLE II Definitions 2.1 "Administrative Committee" means the Board of Directors or a committee appointed by the Board of Directors, pursuant to Article III below, administering the Plan. 2.2 "Affiliate" means a "parent corporation" of the Company, as described in Section 424(e) of the Code, or a "subsidiary corporation" of the Company, as described in Section 424(f) of the Code. 2.3 "Board" means the Board of Directors of the Company. 2.4 "Code" means the Internal Revenue Code of 1986. 2.5 "Common Stock" means the Company's no par value Common Stock. 2.6 "Company" means XXX 2.7 "Date of Grant" means the date on which an Incentive Stock Option is granted under the Plan. 2.8 "Disinterested Person" has the meaning defined in Article 3.4(c) of this Plan. 1 2.9 "Incentive Stock Option" means an option granted under the Plan. 2.10 "Optionee" means a person to whom an Incentive Stock Option, which has not expired, has been granted under the Plan. 2.11 "Plan" means this Incentive Stock Option Plan. 2.12 "Qualified Successor" shall have the meaning as defined in Article 9.2 of this Plan. 2.13 "Reorganization" and "Reorganization Agreement" have the meanings defined in Article XI of this Plan. 2.14 "Subsidiary" or "Subsidiaries" means a subsidiary corporation or corporations of the Company as defined in Section 424 of the Code. 2.15 "Successor" means the legal representative of the estate of a deceased Optionee or the person or persons who acquire the right to exercise an Incentive Stock Option by bequest or inheritance or by reason of the death of any Optionee. 2.16 "Terminating Event" shall have the meaning as defined in Article 11.2 of this Incentive Stock Option Plan. ARTICLE III Administration of the Plan 3.1 This Plan shall be administered by the Board of Directors of the Company (the "Board") unless a committee of the Board is appointed in accordance with Article 3.2 or 3.4(b) below. The Board, or such committee if appointed, will be referred to in this Plan as the "Administrative Committee." 3.2 The Board may at any time appoint a committee, consisting of not less than two of its members, to administer this Plan on behalf of the Board in accordance with such terms and conditions not inconsistent with this Plan as the Board may prescribe. After it is appointed, the committee shall continue to serve until otherwise directed by the Board. The Board may appoint additional members to the committee; remove members (with or without cause); fill vacancies however caused; and/or remove all members of the committee and thereafter directly administer this Plan. 3.3 A majority of the members of the Administrative Committee shall constitute a quorum; and subject to the limitations of this Article III, all actions of the Administrative Committee shall require the affirmative vote of members who constitute a majority of a quorum. Members of the Administrative Committee who are not Disinterested Persons (as defined in Article 3.4(c)) may vote on any matters affecting the administration or the grant of Incentive Stock Options under the Plan; provided, however, that no member shall vote on the granting of an Incentive Stock Option to himself or herself (but a member may be counted in determining the existence of a quorum at a meeting of the Administrative Committee during which action is taken with respect to the granting of such an Incentive Stock Option). 3.4 Notwithstanding the foregoing provisions of this Article III, to the extent necessary to be exempt from the operation of Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Plan shall from the effective date of registration until six months after the termination thereof, be administered as follows: a. The Board shall administer the Plan directly (regardless of whether a committee of the Board has been appointed under Article 3.2) as long as each member of the Board is a Disinterested Person, and all actions of the Board as the Administrative Committee shall require the affirmative vote of directors who constitute a majority of a quorum. 2 b. If at any time a member of the Board is not a Disinterested Person, the Board shall appoint a committee consisting of two or more of its members, each of whom is a Disinterested Person, to administer this Plan on behalf of the Board. Such committee shall act in accordance with terms and conditions prescribed by the Board to the extent such terms and conditions are not inconsistent with this Plan. Once appointed, the committee shall continue to serve until otherwise directed by the Board. From time to time, the Board may appoint additional members to the committee; remove members (with or without cause); fill vacancies however caused; and/or at any time when all members of the Board are Disinterested Persons, remove all members of the committee and thereafter directly administer this Plan. At no time shall a person who is not a Disinterested Person serve on the committee appointed under this Article 3.4(b), nor shall such committee at any time have fewer than two members. c. The term "Disinterested Person" shall mean a director who, during the one year prior to service as a member of the Administrative Committee or during such service, is not granted or awarded equity securities pursuant to this Plan or any other plan of the Company or any of its Affiliates (as defined in Article 2.2) other than grants or awards that pursuant to Rule 166-3(c)(2)(i) under the Exchange Act will not cause the director to cease to be a "Disinterested Person," as defined in such rule. 3.5 The following provisions shall apply to the Administrative Committee: a. The Administrative Committee shall have the authority to (i) administer this Plan in accordance with its express terms; (ii) determine all questions arising in connection with the administration, interpretation, and application of this Plan, including all questions relating to the value of the Common Stock; (iii) correct any defect, supply any information and reconcile any inconsistency in such manner and to such extent as shall be deemed necessary or advisable to carry out the purpose of this Plan; (iv) prescribe, amend, and rescind rules and regulations relating to the administration of this Plan; (v) determine the duration and purposes of leaves of absence which my be granted to participants without constituting a termination of employment for purposes of this Plan; and (vi) make all other determinations necessary or advisable for administration of this Plan. b. The authority of the Administrative Committee to administer the Plan shall be exercised consistently with the intent that (i) the Incentive Stock Options issued under this Plan qualify under Section 422 of the Code (including any amendments thereof or successor provision similar thereto); and (ii) the Plan be administered in a manner that satisfies the conditions of Rule 16b-3(c)(2)(i) under the Exchange Act (including any amendments thereof and any successor provision similar thereto) so that the grant of Incentive Stock Options under this Plan, and all other actions taken with respect to the Plan, to the options granted thereunder and to the Common Stock acquired upon exercise of Incentive Stock Options, shall to the extent possible be exempt from the operation of Section 16(b) of the Exchange Act. c. All determinations made by the Administrative Committee in good faith on matters referred to in this Article 3.5 shall be final, conclusive, and binding upon all persons. The Administrative Committee shall have all powers necessary or appropriate to accomplish its duties under this Plan. ARTICLE IV Eligibility 4.1 An officer, director or other individual shall be eligible to participate in this Plan provided that such individual (i) is in the employ of the Company or its Affiliate, (ii) is determined by the Administrative Committee to be a key employee of the Company or its Affiliate, and (iii) is selected by the Administrative Committee to receive one or more Incentive Stock Options under this Plan. Each key employee so selected by the Administrative Committee shall hereinafter be referred to as an "Optionee." 3 4.2 As used in this Plan, an "Affiliate" of a corporation shall mean a "parent corporation" of such corporation, as described in Section 424(e) of the Code, or to a "subsidiary corporation" of such corporation, as described in Section 424(f) of the Code. 4.3 No Incentive Stock Option shall be granted hereunder to a key employee who is not a resident of the State of Idaho, unless the Administrative Committee shall have determined, based on the advice of counsel, that the grant of such Incentive Stock Option (and the exercise thereof by the Optionee) will not violate the securities laws of the state where the Optionee resides. ARTICLE V Shares Available for Incentive Stock Options The aggregate number of shares of the Company's Common Stock which may be issued upon the exercise of Incentive Stock Options granted under this Plan and any other stock option plan adopted by the Company shall not exceed ten percent (10%) of the then issued and outstanding shares of the Company's Common Stock, subject to adjustment under the provisions of Article XI. The aggregate number of shares of the Company's Common Stock which may be issued to any one person shall not exceed five percent (5%) of the then issued and outstanding shares of the Company's Common Stock. The shares of Common Stock to be issued upon the exercise of Incentive Stock Options may be authorized but unissued shares, shares issued and reacquired by the Company or shares bought on the market for the purposes of the Plan. In the event any Incentive Stock Option shall, for any reason, terminate or expire or be surrendered without having been exercised in full, the shares subject to such Incentive Stock Option but not purchased thereunder shall again be available for Incentive Stock Options to be granted under the Plan. ARTICLE VI Option Terms 6.1 With respect to each Incentive Stock Option granted to an Optionee selected by the Administrative Committee in accordance with Article III, the Administrative Committee shall specify the following terms of the Incentive Stock Option: a. The number of shares of Common Stock subject to the Incentive Stock Option. b. The date on which the grant of the Incentive Stock Option shall be effective (the "Date of Grant"). c. The period of time during which the Incentive Stock Option shall be exercisable, which shall in no event be more than five (5) years from the Date of Grant of the Incentive Stock Option. d. The price or prices at which the Incentive Stock Option shall be exercisable by the Optionee (the "Option Price"); provided, however, that the Option Price shall in no event be less than the fair market value, on the Date of Grant, of the shares of Common Stock subject thereto; and provided further, that, if such Incentive Stock Option is granted to an Optionee who on the Date of Grant owns, either directly or indirectly within the meaning of Section 424(d) of the Code, more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or an Affiliate of the Company, then the Option Price shall be at least one hundred ten percent (110%) of the fair market value, on the Date of Grant, of the Common Stock subject thereto. e. Any vesting schedule pursuant to which the right of the Optionee to exercise the Incentive Stock Option shall be contingent upon the passage of a specified period of time following its Date of Grant, it being intended that the Administrative Committee shall have complete discretion with respect to the terms of the vesting schedule, including, 4 without limitation, discretion (i) to allow full and immediate vesting upon grant of the Incentive Stock Option, (ii) to permit partial vesting in stated percentage amounts based on the length of the holding period of the Incentive Stock Option, or (iii) to permit full vesting after a stated holding period has passed. No rights to exercise the Incentive Stock Option shall vest after the termination of an Optionee's employment with the Company, unless further vesting is expressly allowed in the written agreement evidencing the Incentive Stock Option. f. Whether shares of Common Stock acquired upon exercise of the Incentive Stock Option will be subject to repurchase in accordance with Article XII. g. Such other terms and conditions as the Administrative Committee deems advisable and as are consistent with the terms and conditions of this Plan, including, without limitation, any repurchase provisions different from those set forth in Article XII. 6.2 Notwithstanding any provision of this Article VI to the contrary, no Incentive Stock Option shall be granted hereunder after the date immediately preceding the tenth (10th) anniversary of the date this Plan is adopted by the Board. Except as expressly provided herein, nothing contained in this Plan shall require that the terms and conditions of Incentive Stock Options granted hereunder be uniform. ARTICLE VII Limitation on Exercise of Options The aggregate fair market value of the Common Stock with respect to which, during any calendar year, one or more Incentive Stock Options under this Plan (and/or one or more options under any other plan maintained by the Company or any of its Affiliates for the granting of options intended to qualify under Section 422 of the Code) are exercisable for the first time by an Optionee shall not exceed $100,000 (said value to be determined as of the respective Dates of Grant of such options). ARTICLE VIII Exercise of Option Subject to Article VII and any terms of an Incentive Stock Option specified pursuant to Article VI, an Optionee (or the Qualified Successor, as defined in Articles 9.2 and 9.3) may exercise an Incentive Stock Option, or any part thereof (unless partial exercise is specifically prohibited by the terms of the Incentive Stock Option), by giving written notice thereof to the Company at its principal place of business. Such notice shall include a written representation that the shares to be acquired will be acquired and held for investment and not for resale or distribution and be accompanied by any documents required by Article VII above. Such notice shall be accompanied by full payment of the Option Price for the shares of Common Stock for which exercise is made. Payment shall be in lawful money of the United States and shall be made in cash or by certified or cashier's check; provided, however, that in the discretion of the Administrative Committee, payment may be made, in whole or in part, in shares of Common Stock or in any other form approved by the Administrative Committee. Following the exercise of an Incentive Stock Option, the Administrative Committee shall cause the information statement required by Section 6039 of the Code to be furnished to the Optionee within the time and in the manner prescribed by law. ARTICLE IX Transferability of Options 9.1 Except as provided in Articles 9.2, 9.3 and 9.4 below, no Incentive Stock Option shall be transferable or exercisable by any person other than the Optionee to whom such Incentive Stock Option was originally granted. 9.2 In the event of the demise of an Optionee while in the employ of the Company, any Incentive Stock Options held by the Optionee shall pass to the person or persons entitled thereto under the will of the Optionee or applicable laws of descent and distribution (such person or persons 5 are sometimes herein referred to collectively as the "Qualified Successor" of the Optionee). Any right under an Incentive Stock Option which the Optionee could have exercised immediately prior to the date of his or her demise shall, subject to Article X below, be exercisable by the Qualified Successor for a period of one (1) year following such demise. 9.3 In the event of an Optionee's demise, after the termination of Optionee's employment on account of a Disability (as defined in Article 11.2 below) but prior to the expiration of the one (1) year period specified in Article 11.2, any right under an Incentive Stock Option which the Optionee could have exercised immediately prior to the date of his or her demise shall, subject to Article X, pass to and be exercisable by the Qualified Successor of the Optionee until the expiration of such period of one (1) year following the date of Optionee's termination. 9.4 In the event of the demise of an Optionee, after the termination of Optionee's employment for any reason other than Disability, but prior to the expiration of the three (3) month period specified in Article 11.3, any right under any Incentive Stock Option which the Optionee could have exercised immediately prior to the date of his or her demise shall, subject to Article X, pass to and be exercisable by the Qualified Successor of the Optionee until the expiration of the three (3) months period following the date of Optionee's employment termination. 9.5 In the event two or more persons constitute the Qualified Successor of an Optionee, all rights of such Qualified Successor shall be exercisable, if at all, by the unanimous agreement of such persons. ARTICLE X Termination of Options To the extent not earlier exercised, an Incentive Stock Option shall terminate at the earliest of the following dates: a. The date specified in such Incentive Stock Option, which date shall not be extended for any reason; b. One (1) year following the date of termination of the Optionee's employment with the Company on account of (a) the Optionee's demise, or (b) the Optionee's disability, as defined in Section 22(e)(3) of the Code (herein referred to as "Disability"); c. Three (3) months following the date of termination of the Optionee's employment with the Company for any reason other than the Optionee's demise or Disability; d. The date of any sale, transfer or hypothecation, or any attempted sale, transfer or hypothecation, of the Incentive Stock Option, by the Optionee or his or her Qualified Successor; e. The date a voluntary or involuntary petition is filed under the bankruptcy laws of the United States, or under the insolvency laws of any state, for the estate of the Optionee or his or her Qualified Successor; and f. The date specified in Article 11.2 for such termination in the event of a Terminating Event. ARTICLE XI Adjustments to Options 11.1 In the event that the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation, by reason of a recapitalization, reclassification, stock split-up, combination of shares, or dividend or other distribution payable in capital stock, appropriate adjustment shall be made by the Administrative Committee in the number and kind of shares for the purchase of which Incentive Stock Options may be granted under the Plan. In addition, the Administrative Committee shall make appropriate adjustment in the number and kind of shares as to which 6 outstanding Incentive Stock Options, or portions thereof then unexercised, shall be exercisable, to the end that the proportionate interest of the holder of the Incentive Stock Option shall, to the extend practicable, be maintained as before the occurrence of such event. Such adjustment in outstanding Incentive Stock Options shall be made without change in the total price applicable to the unexercised portion of the Incentive Stock Option but with a corresponding adjustment in the Incentive Stock Option price per share. 11.2 In the event of the dissolution or liquidation of the Company, any Incentive Stock Option granted under the Plan shall terminate as of a date to be fixed by the Administrative Committee, provided that not less than 30 days written notice of the date so fixed shall be given to each Optionee and each such Optionee shall have the right during such period to exercise his Incentive Stock Option as to all or any part of the shares covered thereby including shares as to which such Incentive Stock Option would not otherwise be exercisable by reason of an insufficient lapse of time. 11.3 In the event of a Reorganization (as hereinafter defined) in which the Company is not the surviving or acquiring company, or in which the Company is or becomes a wholly-owned subsidiary of another company after the effective date of the Reorganization, then a. If there is no plan or agreement respecting the Reorganization ("Reorganization Agreement") or if the Reorganization Agreement does not specifically provide for the change, conversion, or exchange of the shares under outstanding and unexercised incentive stock options for securities of another corporation, then the Administrative Committee shall take such action, and the Incentive Stock Options shall terminate, as provided in Article 11.2; or b. If there is a Reorganization Agreement and if the Reorganization Agreement specifically provides for the change, conversion, or exchange of the shares under outstanding and unexercised incentive stock options for securities of another corporation, then the Administrative Committee shall adjust the shares under such outstanding and unexercised incentive stock options (and shall adjust the shares remaining under the Plan which are then available to the Optionee under the Plan, if the Reorganization Agreement makes specific provision therefor) in a manner not inconsistent with the provisions of the Reorganization Agreement for the adjustment, change, conversion, or exchange of such stock and such Incentive Stock Options. The term "Reorganization" as used in this Article XI shall mean any statutory merger; statutory consolidation; sale of all or substantially all of the assets of the Company; or pursuant to an agreement with the Company, the sale of securities of the Company pursuant to which the Company is or becomes a wholly-owned subsidiary of another company after the effective date of the Reorganization. 11.4 Adjustments and determinations under this Article XI shall be made by the Administrative Committee, whose decisions as to what adjustments or determinations shall be made, and the extent thereof, shall be final, binding, and conclusive. ARTICLE XII Termination and Amendment 12.1 Unless earlier terminated as provided below, this Plan shall terminate on, and no Incentive Stock Option shall be granted under this Plan after, the tenth (10th) anniversary of the date immediately preceding the date this Plan is adopted by the Board. Such termination shall not affect the rights of the Administrative Committee or the Company under the Plan (including, but not limited to, rights under Article XI above) with respect to any Incentive Stock Options theretofore granted or shares of Common Stock issued upon exercise thereof. 12.2 The Board may at any time terminate, suspend or amend the terms of this Plan; provided, however, that, except as provided in Article XI above, the Board may not, without prior approval by holders of shares of Common Stock constituting at least a majority of the shares of Common Stock represented in person or by proxy at the meeting at which such approval is sought: 7 i. Change the aggregate number of shares of Common Stock reserved for issuance upon exercise of Incentive Stock Options granted under this Plan; ii. Increase the period during which Incentive Stock Options may be granted or exercised; iii. Change the class of employees who are eligible to receive Incentive Stock Options under this Plan; or iv. Make any change to the terms of this Plan which would cause the Incentive Stock Options granted hereunder to lose their qualification as incentive stock options under Section 422 of the Code. 12.3 Notwithstanding the above, the Administrative Committee may, subject to the terms and conditions of this Plan, grant additional Incentive Stock Options to an Optionee (if such Optionee is otherwise eligible) or, with the consent of the Optionee, grant a new Incentive Stock Option in lieu of an outstanding Incentive Stock Option, for a number of shares, at an Option Price and for a term which is greater or less than that of the earlier Incentive Stock Option. 12.4 No Incentive Stock Option may be granted during any suspension, or after termination, of this Plan. Amendment, suspension or termination of this Plan shall not, without the consent of the Optionee, alter or impair any rights or obligations with respect to any Incentive Stock Option theretofore granted or shares of Common Stock acquired upon exercise thereof. ARTICLE XIII Option Agreement and Legend Requirement Each Incentive Stock Option granted hereunder shall be evidenced by a written agreement executed by the Company and the Optionee. Such agreement shall contain the terms of the Incentive Stock Option specified by Article VI, together with other terms, conditions, and provisions that the Administrative Committee deems advisable and that are not inconsistent with the terms and conditions of this Plan. Such agreement shall also provide that, by accepting an Incentive Stock Option granted under this Plan, the Optionee, for himself or herself, for his or her Qualified Successor, and for his or her heirs, successors and assigns: i. Recognizes, agrees and acknowledges that no registration statement under the Securities Act of 1933, as amended (the "1933 Act"), or under any state securities laws, will have been filed as to either the Incentive Stock Option or any shares of Common Stock that may be acquired upon exercise of such Incentive Stock Option; ii. Warrants and represents that the Incentive Stock Option and any shares of Common Stock of the Company acquired upon exercise of the Incentive Stock Option will be acquired and held by the Optionee for the Optionee's own account, for investment purposes only, and not with a view towards the distribution or public offering thereof nor with any present intention of reselling or distributing the same at any particular future time; iii. Acknowledges and consents to the appearance of a printed legend on the back of each stock certificate representing shares of Common Stock issued upon exercise of the Incentive Stock Option, which legend shall read as follows: 8 NOTICE: RESTRICTION ON TRANSFER The securities represented hereby have not been registered under the Securities Act of 1933 or any state securities laws, and may not be offered, sold, transferred, encumbered or otherwise disposed of except upon satisfaction of certain conditions set forth in the ATLAS MINING COMPANYIncentive Stock Option Plan. Information concerning these restrictions may be obtained from the corporation or its legal counsel. Any offer or disposition of these securities without satisfaction of such conditions will be wrongful and will not entitle the transferee to register ownership of the securities with the corporation. These securities may also be subject to repurchase by the corporation upon certain terms and conditions set forth in said documents. iv. Agrees not to sell, transfer or otherwise dispose of any shares of Common Stock that may be acquired upon exercise of the Incentive Stock Option unless (i) there is an effective registration statement under the 1933 Act covering the proposed disposition and compliance with governing state securities laws, (ii) the Optionee delivers to the Company, at the Optionee's expense, a "no-action" letter or similar interpretative opinion, satisfactory in form and substance to the Company, from the staff of each appropriate securities agency, to the effect that such shares may be disposed of by the Optionee in the manner proposed, or (iii) the Optionee delivers to the Company, at the Optionee's expense, a legal opinion, satisfactory in form and substance to the Company, of legal counsel designated by the Optionee and satisfactory to the Company, to the effect that the proposed disposition is exempt from registration under the 1933 Act and governing state securities laws; and v. Agrees to indemnify the Company and hold it harmless from and against any loss, claim or liability, including attorney's fees or other legal expenses incurred in the defense thereof, incurred by the Company as a result of any breach by the Optionee of, or any inaccuracy in, any representation, warranty, covenant or other provision contained in such agreement. If a registration statement under the 1933 Act is hereafter filed with respect to Incentive Stock Options granted or to be granted hereunder and the shares of Common Stock that may be acquired upon exercise of such Incentive Stock Options, then, following the effectiveness of such registration statement, the provisions in agreements representing Incentive Stock Options that would otherwise be required by this Article XIII may, in the discretion of the Administrative Committee, be modified or eliminated. ARTICLE XIV Miscellaneous Provisions 14.1 Nothing contained in this Plan shall obligate the Company to employ an Optionee for any period, nor shall this Plan interfere in any way with the right of the Company to reduce such Optionee's compensation. 14.2 The provisions of this Plan, each Incentive Stock Option issued to an Optionee hereunder, and the agreement evidencing such Incentive Stock Option under Article XIV above shall be binding upon the Optionee, and his or her Qualified Successor, heirs, successors and assigns. 14.3 This Plan shall be construed, administered and enforced in accordance with the laws of the United States, to the extent applicable hereto, as well as the laws of the State of Idaho. 9 ARTICLE XV Effective Date of Plan This Plan shall be effective upon adoption of a resolution of the Board approving it; and it shall be subject to approval, within twelve (12) months before or after the date it is adopted by the Board, by holders of shares of Common Stock constituting at least a majority of the shares of Common Stock represented in person or by proxy at a meeting at which such approval is sought. This Plan shall also be subject to any requirements imposed by the Director of the Department of Finance pursuant to the Idaho Securities Act. If the shareholder approval and notification requirements have not been satisfied on or prior to January 12, 1998, this Plan and any Incentive Stock Options granted hereunder prior to such date shall be void. This Plan is adopted this 19th day of November, 1998. ATLAS MINING COMPANY By: /S/ William T. Jacobson -------------------------------------- William T. Jacobson, President By: /S/ Marqueta Martinez -------------------------------------- Marqueta Martinez, Secretary 10 EX-10.7 12 atlas_ex10-7.txt EXHIBIT 10.7 INVESTMENT MARKETING AGREEMENT This Investment Marketing Service Agreement (the "Agreement") is entered this 26th day of October, 2000 by and between BreakOut Investment Marketing ("BOIM") an Arizona Limited Liability Corporation and Atlas Mining (OTCBB: ALMI) ("Client") a Idaho Corporation. RECITALS A. The Client desires to be assured of the association and services of BOIM in order to avail itself of BOIM's experience, skills, knowledge and background to facilitate strategic planning, corporate imaging and to assist the Client in business and/or financial matters and is therefore willing to engage BOIM upon the terms and conditions set forth herein. B. BOIM agrees to be engaged and retained by the Client and upon the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing, of the mutual promises hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. ENGAGEMENT. Client hereby engages BOIM on a non-exclusive basis, and BOIM hereby accepts the engagement to become a consultant to Client and to render such advice, consultation, information and services to the Directors and/or Officers of the Client regarding general business matters including but not limited to: A. Monitoring and increasing exposure on message boards B. Periodic reporting as to developments concerning the general financial markets and public securities markets and industry which may be relevant or of interest or concern to the Client or the Client's business It shall be expressly understood that BOIM shall have no power to bind Client to any contract or obligation or to transact any business in Client's name or on behalf of Client in any manner. 5. TERM. The term ("Term") of this Agreement shall commence on the date hereof and continue for twelve (12) months. The Agreement may extend upon agreement by both parties, unless or until the Agreement is terminated. Either party may cancel this Agreement upon five (5) days written notice in the event either party violates any material provisions of this Agreement and fails to cure such violations within five (5) days of written notification of such violation from the other party. Such cancellation shall not excuse the breach or non-performance by the other party or relieve the breaching party of its obligation incurred prior to the date of cancellation. 3. COMPENSATION AND FEES. As consideration for BOIM entering into this Agreement, Client and BOIM shall agree to the following: 6. The Engagement Fee ("Engagement Fee") may be satisfied by issuing certificates representing an aggregate of 420,000 shares of restricted common stock (the "Shares"). The shares, when issued to BOIM, will be duly authorized, validly issued and outstanding, fully paid and nonassessable and will not be subject to any liens, encumbrances and cannot be cancelled. Shares have piggyback rights on the next registration. 1 4. EXCLUSIVITY; PERFORMANCE; CONFIDENTIALITY. The service of BOIM hereunder shall not be exclusive, and BOIM and its agents may perform similar or different services for other persons or entities whether or not they are competitors of Client. BOIM shall be required to expend only such time as is necessary to service Client in a commercially reasonable manner. BOIM acknowledges and agrees that confidential and valuable information proprietary to Client and obtained during its engagement by the Client, shall not be, directly or indirectly, disclosed without the prior express written consent of the Client, unless such information is otherwise known to the public generally or is otherwise secret and confidential. 7. INDEPENDENT CONTRACTOR. In its performance hereunder, BOIM and its agents shall be an independent contractor. Consultant shall complete the services required hereunder according to his own means and methods of work, shall be in the exclusive charge and control of BOIM and which shall not be subject to the control or supervision of Client, except as to the results of the work. Client acknowledges that nothing in this Agreement shall be construed to require BOIM to provide services to Client at any specific time, or in any specific manner. Payments to BOIM hereunder shall not be subject to withholding taxes or other employment taxes as required with respect to compensation paid to an employee. 8. MISCELLANEOUS. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any provision and no waiver shall constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waver. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by both parties. This Agreement constitutes the entire agreement between the parties and supersedes any prior agreement or negotiations. There are no third party beneficiaries of this Agreement. IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on the date first written above. Client: Atlas Mining Company, Inc. Signature: /s/ William Jacobson --------------------- President Company: BreakOut Investment Marketing 2 EX-10.8 13 atlas_ex10-8.txt EXHIBIT 10.8 MOSS ADAMS, LLP PROMISSORY NOTE December 1 , 2000 $53,250.00 FOR VALUE RECEIVED, ATLAS MINING COMPANY (herein called "Maker") hereby promises to pay to the order of MOSS ADAMS, LLP (herein called "Holders") the principal sum of Fifty three Thousand Two Hundred Fifty Dollars & No/100 ($53,250.00), plus interest from October 1, 2000, at the rate of 9.0% per annum, on the unpaid principal until fully paid. Said principal and accrued interest shall be paid by the maker at 601 W. Riverside, Suite 1800, Spokane, Washington 99201-0663, or at such other location as may be designated by the holder, as follows: the principal and accrued interest shall be payable in equal monthly installments of One Thousand Dollars & No/100 ($1,000.00), including interest, which installments shall commence on December 18, 2000 and continue thereafter on or before the same date of each succeeding calendar month until August 16, 2001 when the principal and interest balances are due and payable in their entirety. This note may be prepaid in part or in full with accrued interest without penalty at any time. From each monthly installment, there shall first be deducted accrued interest and remainder shall be applied to principal. If any installment, whether principal or interest, is not paid as provided above, or an event of default as defined in Agreement shall have occurred, then the entire balance of principal and accrued interest shall become immediately due and payable at the option of the holder hereof, and, thereafter, bear interest at the maximum rate allowed by law. Each and every party to this note binds himself, jointly, and severally hereon, as principal and not as surety, and all parties hereto, including endorsers, sureties, and guarantors, hereby severally waive presentment, demand, protest, notice of nonpayment hereof, any prior party, or any defense other than actual payment in full hereof, and promise to pay, upon the defaults, all costs of collection and reasonable attorneys' fees incurred or paid by the Holder in protecting or enforcing its rights under this note. At the holder's option, the venue of any suit upon this note may be laid in Spokane County, State of Washington. MAKER: ATLAS MINING COMPANY BY: /S/ WM. T. JACOBSON --------------------------- Title: PRESIDENT ------------------------- EX-10.9 14 atlas_ex10-9.txt EXHIBIT 10.9 CLS MORTGAGE COMPANY DATE: AUGUST 10, 2000 1. BORROWER'S PROMISE TO PAY In return for a loan that I have received, I promise to pay $120,000.00 (this amount is called "principal"), plus interest, to the order of the Lender. The lender is CLS MORTGAGE, INC., A WASHINGTON CORPORATION. I understand that the Lender may transfer this Note. The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the "Note Holder". 2. INTEREST Interest will be charged on unpaid principal until the full amount of principal has been paid. I will pay interest at a yearly rate of SIXTEEN PER CENT (16.0%). Interest shall commence AUGUST 11, 2000. 3. PAYMENTS (A) TIME AND PLACE OF PAYMENTS I will pay principal and interest by making payments every month. I will make my payments on the 11th day of each month beginning on September 11, 2000. I will make these payments every month until I have paid all of the principal and interest and any other charges described below that I may owe under this Note. My monthly payments will be applied to interest before principal. If on August 11, 2005, I still owe amounts under this Note I will pay those amounts in full on that date, which is called the "maturity date". I will make my monthly payments to CLS Escrow, Inc., 12904 E. Nora, Spokane, WA 99216, or at a different place if required by the Note Holder. (B) AMOUNT OF MONTHLY PAYMENTS My monthly payment will be in the amount of $1,613.71. 4. BORROWER'S RIGHT TO PREPAY I have the right to make payments of principal at any time before they are due. A payment of principal only is known as a "prepayment". When I make a prepayment, I will tell the Note Holder in writing that I am doing so. I may make a full prepayment or partial prepayments without paying any prepayment charge. The Note Holder will use all of my prepayments to reduce the amount of the principal that I owe under this Note. If I make a partial prepayment, there will be no changes in the due date or tin the amount of my monthly payment unless the Note Holder agrees in writing to those changes. 5 LOAN CHARGES If a law, which applies to this loan and which sets maximum loan charges, is finally interpreted so that the interest or other loan charges collected or to be collected in connection with this loan exceed the permitted limits, then" (i) any such loan charges shall be reduced by the amount necessary to reduce the chart to the permitted limit; and (ii) any sums already collected from me which exceeded permitted limits will be refunded to me. The Note Holder may chose to make this refund by reducing the principal I owe under this Note or by making a direct payment to me. If a refund reduces principal, the reductions will be treated as a partial prepayment. 6. BORROWER'S FAILURE TO PAY AS REQUIRED (A) LATE CHARGE FOR OVERDUE PAYMENTS If the Note Holder has not received the full amount of any monthly payment, including the payment due at maturity, within five (5) calendar days after the date it is due, the Maker agrees to pay the Holder a late charge of Twenty Five Dollars ($25.00) or Ten Percent (10%) of the delinquent payment amount whichever is greater. It is hereby agreed that the Holder of the Late Charge is CLS Escrow, Inc. (B) DEFAULT If I do not pay the full amount of each monthly payment on the date that it due, I will be in default. (C) PAYMENT OF NOTE HOLDER'S COSTS AND EXPENSES If I am in default, the Note holder will have the right to be paid back by me for all its costs and expenses in enforcing this Note to the extent not prohibited by applicable laws. Those expenses include, for example, reasonable attorney's fees. 7. OBLIGATIONS OF PERSON UNDER THIS NOTE If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety or endorser of this Note is also obligated to do these things. Any person who takes over these obligations, including the obligations of a guarantor, surety or endorser of this Note, is also obligated to keep all of the promises made in this Note. The Note Holder may enforce its rights under this Note against each person individually or against all of us together. This means that any one of us may be required to pay all of the amounts owed under this Note. 8. WAIVERS I AND ANY OTHER PERSON WHO HAS OBLIGATIONS UNDER THIS note waive the rights of presentment and notice of dishonor. "Presentment" means the right to require the Note Holder to demand payment of amounts due. "Notice of Dishonor" means the right to require the Note Holder to give notice to other persons that amounts due have not been paid. 9. UNIFORM SECURED NOTE In additions to the protection given to the Note Holder under this Note, a Mortgage or Deed of Trust (the "Security Instrument"), dated the same date as this Note, protects the Note Holder form possible losses which might result if I do not keep the promises which I make in this Note. That Security Instrument describes how and under what conditions I may be required to make immediate payment in full of all amounts I owe under this Note. Some of those conditions are described as follows: Transfer of the Property or a Beneficial Interest in Borrower. If all or any part of the Property or any interest in it is sold or transferred without the Lender's prior written consent, Lender may, at its option, require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised by Lender if exercise is prohibited by federal law as of the date of this Security Instrument. If Lender exercises this option, Lender shall give Borrower notice of acceleration. The Notices shall provide a period of not less than 30 days from the date the notice is delivered or mailed with in which Borrower must pay all sums secured by this Security Instrument . If Borrower fails to pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower. THIS NOTE AND ACCOMPANYING LOAN DOCUMENTS SHALL BE GOVERNED AS TO VALIDITY, INTERPRETATION, CONSTRUCTION, EFFECT AND IN ALL OTHER RESPECTS BY THE LAWS AND DECISIONS OF THE STATE OF IDAHO. The laws of the state of Idaho shall apply to each and every action or proceeding initiated with respect to this Note and loan evidenced herein. If any State or Federal Court shall declare this provision invalid then it is expressly agreed by the parties that the interest rate expressed in the Note shall be the highest rate permitted pursuant to the applicable state law in effect at the inception of this Loan. the parties agree that the venue thereof shall be Shoshone Count, State of Idaho. WITNESS THEN THE HANDS OF THE UNDERSIGNED. ATLAS MINING COMPANY BY: /S/ WILLIAM T. JACOBSON ----------------------------- EX-10.10 15 atlas_ex10-10.txt EXHIBIT 10.10 FAUSETT CANCELLATION AGREEMENT This agreement is between Atlas Mining Company ("Atlas") and Fausett International, Inc. and the estate of Cliford Lovon Fausett (collectively referred to as "Fausett") and is entered into by both parties for the purpose of canceling the Equipment Purchase Agreement between Atlas and Fausett dated August 22, 1997, and subsequent Promissory Note dated September 30, 1997, ("Agreement") RECITALS: Lovon Fausett herein asserts that he is the president of Fausett International, Inc. and is the executor of the estate of Clifford Lovon Fausett, and as such has the authority to sign on behalf of Fausett William Jacobson is the President of Atlas Mining Company and has the authority to sign on behalf of Atlas. Whereas both Fausett and Atlas desire to cancel the Agreement and to return each party to the status that existed prior to August 22, 1997; And Whereas, both Fausett and Atlas understand that the assets listed in the Agreement may or may not be in the same condition today as in 1997 both in terms of quantity and working condition; And Whereas both Fausett and Atlas recognize that the payments made on this equipment are not refundable; WITNESSETH: Now, therefore, in consideration of the mutual covenants and promises herein contained and for the good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties do hereby mutually agree as follows: That the remaining equipment and inventory, the subject of the Agreement dated August 22, 1997, shall be returned to Fausett, a copy of the equipment and inventory is attached hereto as exhibit A. Atlas is hereby forgiven and relieved of any and all obligations under the Agreement, and the same is hereby cancelled and held for naught. Atlas shall execute a promissory note in the amount of $53,500.00 as and for unpaid rents, consulting and other funds loaned to Atlas by Fausett. Said loan will be repaid from the proceeds of the offering currently in application with the Securities and Exchange Commission. This agreement shall be binding upon and inure to the benefit and be enforceable against the parties hereto and their respective successors and assigns, and shall in all respects be governed, enforced and interpreted in accordance with the laws of the State of Idaho. Effective this 5th day of February, 2002. For Atlas Mining Company For Fausett International, Inc. By: /S/ WILLIAM JACOBSON By: /S/ LOVON FAUSETT , its President -------------------- ----------------------- its President For the Estate of Clifford Lovon Fausett By: /S/ LOVON FAUSETT ---------------------- Personal Representative PROMISSORY NOTE FOR Value received the undersigned promise to pay to the order of Fausett Internaitonal, Inc. and its assigns, the sum of ***** Fifty-three thousand Five hundred and no/100 Dollars***** ($53,500.00) ***** with interest from this date at the rate of 7% per annum. The above sum is for the following debts owed to Fausett International, Inc. and or Clifford Lovon Fausett. $18,500 for past rents $15,000 for loan to Atlas Mining Company $20,000 for Consulting fees Interest will be paid monthly and continue each month thereafter until maturity of this note. The principal balance is due ninety days (90) days from today's date. All payments will be applied first to interest and then to principal. Extensions or renewals herein may be allowed with consent of both parties. Should the debtor acquire funding through the Securities and Exchange offering currently in registration then the proceeds then will be used to pay this note. This note can be prepaid at any time during the course of this note, without repayment penalty to the maker. In the event of any default in payments due on this note, or upon the breach of any terms, covenants, representations, warranty or conditions related to this note or other agreements between the parties, then, at the option of the holder hereof, the entire unpaid principal balance of this note, along with accrued interest, shall become immediately due and payable with notice. Should the holder thereafter take action to collect the amounts payable under this note, maker will pay any outstanding balances and reasonable attorney fees incurred in such collection. Signed this 5TH day of February, 2001. Atlas Mining Company P. O. Box 968 1221 W. Yellowstone Ave. Osburn, ID 83849 By /S/ WILLIAM JACOBSON ---------------------------------- its PRESIDENT -------------------------------- EX-21 16 atlas_ex21.txt EXHIBIT 21 ATLAS MINING SUBSIDIARIES Atlas Mining owns 53% of the outstanding shares of common stock of Park Copper & Gold Mining Company, Ltd, an Idaho corporation. EX-23.1 17 atlas_ex23-1.txt EXHIBIT 23.1 Independent Auditors' Consent We hereby consent of the use of our report dated January 23, 2002, with respect to the consolidated financial statements included in the filing of the Registration Statement (Form SB-2) of Atlas Mining, Inc. for the fiscal years ended December 31, 2001 and 2000. /s/ Chisholm & Associates - ------------------------- Chisholm & Associates North Salt Lake, UT April 17, 2002 -----END PRIVACY-ENHANCED MESSAGE-----