UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ATLAS MINING COMPANY
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(Name of small business issuer in its charter)
IDAHO 1044 82-0096527
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(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Number) * Number)
organization)
1221 W. Yellowstone Avenue
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Osburn, Idaho 83849
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(208) 556 - 1181
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(Address and telephone number of principal executive offices)
1221 W. Yellowstone Avenue, Osburn, Idaho 83849
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(Address of principal place of business or intended principal place of
business)
Ben Simpson
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416 River
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Wallace, Idaho 83873
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(208) 752 - 1154
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(Name, address and telephone number of agent for service)
December 2, 1999
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(Approximate date of proposed sale to the public)
If this Form is filed to register additional securities for an offering pursuant
to Rule 463(b) 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(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. [ ]
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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, check
the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Title of Each Dollar Proposed Maximum Proposed Maximum Amount
Class of Securities Amount to be Offering Price per Aggregate Offering of
To Be Registered Registered Unit Price Fee
COMMON STOCK $ 7,500,000 $ 1.00 $ 7,500,000 2,212.50
</TABLE>
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
shall 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 equivalent North American Industry Classification System code is 212222.
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ATLAS MINING COMPANY
7,500,000 SHARES OF COMMON STOCK
Atlas Mining Company, an Idaho corporation, (the "Company" or "Atlas")
maintains its principal offices at 1221 W. Yellowstone Avenue, Osburn, Idaho,
83849, and can be reached by calling (208) 556-1181. The Company is offering
7,500,000 shares of full voting rights Common Stock (the "Stock"). The initial
public offering price is $1.00 per share.
This prospectus (the "Prospectus") will terminate in 30 days at 5:00 p.m.
Pacific Standard Time after the offering date, or December 2, 1999. The Company
may, at the Company's discretion, extend this date for one or two additional
thirty (30) day periods (the "Expiration Date"). The Company may elect to
extend the Expiration Date for no more than two thirty (30) day periods. In no
event will this Offering remain open longer than ninety (90) days. Pending
Closing of the offering, all proceeds will be deposited in a non-interest
bearing escrow account at Idaho Independent Bank. The escrow agreement with
Idaho Independent Bank is attached to this prospectus as Exhibit "3.6." All
subscriptions for Shares are irrevocable.
This Prospectus places no minimum number of shares to be sold by the
Company. The Company makes no representations that all or any shares of stock
will be sold. The Company has taken no actions to insure that any shares of
stock will be sold as a result of this Offering. If all shares offered in this
filing are not sold, the Company does not represent that any future offering
will be made to sell the remaining stock.
The Company is not utilizing the services of an underwriter or
broker-dealer. The Company has not engaged, nor does it intend to engage, any
outside promoter in the sale of the stock. The Company has not sold to, has no
agreement to sell, nor does it know of any, market maker promoting, selling or
planning to sell the Company stock. There are no sources buying or selling
stock to support the price of the stock in the market.
Subscriptions received and accepted by the Company with full payment by the
Expiration Date will remain effective. This Prospectus will terminate with
respect to the unsubscribed Shares. There will be no revocation, cancellation
and/or cash buyback for any shares bought in the open market.
Management of the Company intends to use the funds from the sale of stock
to further the Company's goals described in "Use of Proceeds." If all offered
shares are not sold, the Company may not have the requisite funding to carry out
the objectives set forth in this Prospectus without financing. The investor may
realize a decrease in the value of the stock if the Company cannot obtain
financing and cannot accomplish its objectives. The investor may realize an
increase in the stock if the goals are accomplished with the aid of financing,
increasing value in the Company without increasing the number of shares
outstanding to the full number offered.
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Even though there is no minimum offering requirement, the Company will
offer and sell the Shares on a "best efforts" basis to investors directly
through its officers and directors. At this time, the officers and directors of
the Company intend to generate investor interest through general promotion.
General promotion includes, but is not limited to, informing various
broker-dealers about this offering and providing them with a Prospectus. At
this time, the Company has no plan to employ an Underwriter in the sale of this
stock.
Although the Company has not hired any promoters to help generate investor
interest, it is not precluded from doing so. The Company may engage
underwriters, general promoters or registered broker-dealers to advertise and/or
sell the stock. No selling agent will have any obligation to purchase or accept
any Shares, unless otherwise stated by individual contract. See "Plan of
Distribution."
No security holder is selling the Company's stock pursuant to this Offering. No
director, officer or beneficial owner of more than 5% of the Company's shares
will participate in this Offering.
Prior to the Offering, there has been no public market for the securities,
and there can be no assurance that any such market will develop, or if
developed, any such market will be sustained.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" ON PAGE 10 AND
"DILUTION" ON PAGE 19.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO PUBLIC DISCOUNTS PROCEEDS TO COMPANY
AND COMMISSIONS (1)
<S> <C> <C> <C>
- ------------- ---------------- ------------------- ---------------------
PER SHARE $ 1.00 - 0 - $ 1.00
- ------------- ---------------- ------------------- ---------------------
TOTAL $ 7,500,000 - 0 - $ 7,500,000
- ------------- ---------------- ------------------- ---------------------
TOTAL MINIMUM - 0 - - 0 - - 0 -
- ------------- ---------------- ------------------- ---------------------
TOTAL MAXIMUM $ 7,500,000 - 0 - $ 7,500,000 (2)
- ------------- ---------------- ------------------- ---------------------
</TABLE>
(1) The indication that no underwriting discounts and commissions will be paid
is based on the assumption that the shares are subscribed without the
participation of an underwriter. Should selling agents and broker-dealers be
engaged to solicit securities, they should be paid a commission for doing so,
the commission is estimated to be 3% to 9% of the proceeds resulting from the
shares solicited by each.
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(2) Before deducting the expenses of this offering, estimated at the following:
Registration fees: $2,212
State taxes and fees: $13,500
Trustees' and transfer agents' fees: $22,394
Costs of printing and engraving: $3,500
Legal fees: $25,000
Accounting fees: $15,000
Mailing costs: $1,000
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME OF THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL BE ANY SALE OF THESE SECURITIES IN ANY
STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
The date of this Preliminary Prospectus is November 12, 1999.
THIS OFFERING IS INTENDED TO BE OFFERED ONLY IN CALIFORNIA, TEXAS, NEW JERSEY,
FLORIDA, NEW YORK, IDAHO, WASHINGTON AND COLORADO. ANY SOLICITATION MADE IN ANY
OTHER JURISDICTION IS NOT AUTHORIZED BY THE COMPANY. SUBSCRIPTION AGREEMENTS
ENTERED INTO IN ANY OTHER JURISDICTION WILL NOT BE ACCEPTED WITHOUT AN OPINION
OF COUNSEL AS TO COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAWS.
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<TABLE>
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TABLE OF CONTENTS
<S> <C>
Summary Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Determination of Offering Price. . . . . . . . . . . . . . . . . . . . . . 18
Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Selling Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . 21
Plan of Distribution.. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Directors, Executive Officers, Promoters and Control Persons . . . . . . . 22
Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Description of Securities. . . . . . . . . . . . . . . . . . . . . . . . . 25
Interest of Named Expert and Counsel . . . . . . . . . . . . . . . . . . . 27
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities. . . . . . . . . . . . . . . . . . . . . . 27
Description of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 28
Management's Discussion and Analysis or Plan of Operation. . . . . . . . . 40
Description of Property. . . . . . . . . . . . . . . . . . . . . . . . . . 44
Market for Common Equity and Related Stockholder Matters . . . . . . . . . 53
Executive Compensation.. . . . . . . . . . . . . . . . . . . . . . . . . . 54
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Changes with and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . 55
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Dealer Prospectus Delivery Obligation
Until February 9, 2000, all dealers that affect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscription.
This Registration Statement contains certain forward-looking statements which
involve risks and uncertainties. The actual results of the Company could differ
materially from those anticipated in these forward-looking statements as a
result of factors including those set forth in Risk Factors and elsewhere in
this Registration Statement.
SUMMARY INFORMATION
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The Company, inactive for several years, is a mining and timber resources
company that has revitalized its business activities during the past two years.
It has recently acquired personnel, equipment, and real property to actively
mine its newly acquired San Acacio Mine in Zacatecas, Mexico. These
acquisitions, however, have created the need for additional capital to fund
development. The Company therefore is offering 7,500,000 shares of its common
stock at $1.00 share.
Upon conclusion of the Offering, if completely sold, the Company will have
12,824,981 shares outstanding and 314,852 shares of treasury stock, with
shareholders' equity of approximately $7,990,688, or $0.62 per share, determined
as of June 30, 1999.
THE COMPANY
ATLAS MINING COMPANY (the "Company" or "Atlas") is a natural resource
company engaged in the acquisition, exploration and development of its resource
properties in Mexico. In addition, the Company is currently harvesting
significant timber resources in its Idaho properties. The Company, originally
incorporated on March 4, 1924, in Idaho, is also authorized to operate as a
foreign corporation in the states of Montana and Washington.
A Company's mining services division does business under Atlas Fausett
Contracting ("AFC"). AFC provides contract mining, specialized civil
construction and drilling services. Its main customers are mine operators,
exploration companies, and the construction and natural resource industries.
Atlas plans to develop the San Acacio Mine. Atlas is also exploring the
possibility of revitalizing several mines previously mined by the Company.
Management hopes in the near future to research other areas and expand the
Company's operations and make further acquisitions.
Silver is the most predominant mineral on the Company's Mexican properties.
Silver appears to have the greatest potential for increased value in the future,
based on projected demand. According to the Silver Institute, since 1990, the
average shortfall between supply and demand for silver has been 120 million
ounces per year. Management believes that the demand for silver should keep
rising. This rising demand and lack of available supply may raise silver prices
during the foreseeable future. Since Atlas estimates currently that it has 14.4
million ounces of silver ore resource available for mining, Management intends
to position Atlas to benefit from this trend.
AFC also figures prominently in the plans of Management. On September 1,
1997, Atlas purchased underground mining equipment valued at $1.4 million from
Fausett Mine Services ("Fausett"). Fausett was a privately held mining
contracting firm with over 30 years experience in the mining services business.
Atlas formed AFC to own the mining equipment, perform Atlas' mining needs and to
provide contract mining services to third parties.
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AFC performs site evaluation, feasibility studies, trouble-shooting and
consultation prior to the undertaking of exploration, core-sampling and mine
development. Services are contracted either individually or as joint ventures.
AFC tailors its services to meet the requirements of a particular project or the
specific needs of an individual client. AFC also works with government agencies
and other mining companies to alleviate potential hazards resulting from
abandoned mines.
AFC concentrates on underground mining activities. As a result, very little
surface disturbance occurs. Surface disturbance creates the main environmental
problems faced by mining companies. Atlas' policy of engaging in underground
mining activities therefore shelters it from exposure to some of the
environmental risk experienced by mining companies in general.
In 1997, the Company adopted a policy that limited the Company to exploring
only those properties that are both economically and environmentally sound. It
is an objective of Management to use environmentally sound mining techniques. In
the past, the mining industry has not acted to protect the environment,
especially during times of war, when mining was needed to support the war
effort. Since then, governmental regulation in the United States has dictated
that mining companies minimize environmental tampering when extracting minerals.
AFC's projects are mainly concentrated among the ten percent (10%) of
projects that the bigger companies in the industry do not take on. The major
mining competitors take on larger projects, requiring larger up front expenses,
and resulting in greater revenues, realized over a longer term. For purposes of
this Prospectus, a "major project" is one that involves revenues of $5,000,000
or more. The major competitors can bid on the major projects because of their
relatively greater financial strength. The profit margin on smaller projects is
generally higher, however.
Atlas can utilize AFC's services to develop its own mines. This eliminates
the waiting period that companies experience in outsourcing development of their
properties and enables Management to ascertain when and if a property should be
developed. Finally, bidding on projects worth $5,000,000 or less introduces AFC
to other bidders who may be potential joint venturers, creating the opportunity
for long term projects.
In 1998, the Company purchased Sierra Silver Lead Mining Company ("Sierra
Silver") for $276,157 in an all stock transaction. The Company prior to this
acquisition already controlled 600 acres in Shoshone County, Idaho by way of
direct ownership and claim rights. Through the purchase of Sierra Silver, the
Company acquired an additional 329.18 acres of mineral rights and approximately
250 acres of surface and timber. See "Description of Property." Management
valued the 500,000 board feet of timber acquired from Sierra Silver at
approximately $75,000. The Sierra Silver mines once produced zinc, but have had
no mining activity for over forty years.
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In the first quarter of 1999, Atlas acquired patented mining claims from
Trail Gulch Mining Company, known as the Aulbach Claims, in an all stock
transaction. The acquisition added an additional 100 acres of mineral rights
and timber property to Atlas' assets. The purchase was paid for with 90,000
shares of Atlas Common Stock valued at $27,082. Management estimates that the
property contains over 500,000 board feet of timber, which Management values at
approximately $100,000.
In the second quarter of 1999, Atlas acquired all the outstanding capital
stock of Olympic Silver Resources, Inc. ("Olympic"). Through the acquisition,
Atlas acquired control of the option to mine held by Minera Argentum, S.A. de
C.V. ("Minera"), a Mexican subsidiary of Olympic. These assets include the right
to mine the San Acacio Mine in Zacatecas, Mexico. This acquisition has
positioned Atlas to take advantage of the opportunities to mine silver in
Mexico.
Mining has been the main industry of Zacatecas for over 200 years. The San
Acacio Mine has a history of economic production and is located on one of the
most prominent vein structures in the area. Currently, the Company is conducting
metallurgical testing and will contract with an outside ore reserve specialist.
The specialist will investigate the presence of the amounts of the proven or
probable reserves. The Company plans to actively develop and mine the San Acacio
property.
FINANCIAL INFORMATION
The Company's fiscal year begins January 1 and ends December 31. As of June
30, 1999, the Company has total current assets of $404,921 and total assets,
including investments, property and equipment of $1,952,847. Current
liabilities at June 30, 1999 are $482,700 and shareholders' equity is $590,668.
Net income, however, for June 30, 1999, is $(466,349) and June 30, 1998, is
$(59,999). The losses are attributable to lack of revenue during that period and
to the Company's recent acquisitions. A potential investor is encouraged to
review the financial statements attached to this Prospectus. The financial
information contained herein is qualified by the more detailed information
contained in the financial statements attached to this Prospectus.
As indicated by year-end financial statements, in 1997 the Company earned
net income of $162,461 on operating revenue of $787,887. This profit resulted in
$0.05 earnings per share, on a fully diluted basis. In 1998, the Company
sustained a net loss of $135,963 on operating revenue of $1,651,898. This loss
resulted in a loss of $0.036 per share, fully diluted. The losses sustained are
due to an increase in depreciation and interest expenses on equipment acquired.
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The Company's net loss of $466,349 on operating revenue of $61,965 in the
first two quarters of 1999 translates to a loss of $0.08 per share, on a fully
diluted basis. In the first two quarters of 1998, the Company's net loss was
$59,999 on operating revenue of $935,348. This loss translated to a loss of
$0.02 per share, fully diluted.
Atlas has invested its cash flow and retained earnings since 1997. The
Company has used these funds for the acquisition of properties, equipment and
personnel. These acquisitions are intended to position the Company to actively
mine its properties. Once mining production begins, Management believes that the
mine will generate revenues sufficient to create retained earnings and fill the
current deficits. There is no assurance, however, that Management is correct in
this belief. See "Management's Discussion and Analysis or Plan of Operation."
DESCRIPTION OF SECURITIES
Pursuant to this Prospectus, the Company is offering 7,500,000 shares of
Common Stock. These shares will be fully registered and priced at $1.00 per
share. The shares have no par value. The shares offered hereby have full voting
rights. Dividends are payable on the shares of Common Stock when and if such
dividends are declared by the Board of Directors.
Atlas currently has 5,324,981 outstanding shares of common stock. While the
Company has authorized preferred stock with a par value of $1.00, no preferred
shares have been issued or are outstanding.
The Offering is self-underwritten. The Company is not required to sell any
minimum amount of shares. The Company is offering these shares on a "best
efforts" basis.
RISK FACTORS
1. Dependence on Key Personnel - Successful management of the Company will
depend upon the efforts and abilities of the Board of Directors and the
officers of the Company, particularly William T. Jacobson, the President
and Chief Executive Officer. Mr. Jacobson has eleven years experience in
the mining industry and fifteen years experience in the banking industry.
However, there can be no assurance that Mr. Jacobson will be a part of the
management team in the future. The inability of the Company to retain Mr.
Jacobson would have a material adverse effect on the Company's business.
The Company would most likely experience difficulty in hiring additional
management because of the degree of skill, knowledge and experience that
operating a mining company requires.
2. Centralization of Management - The future of the Company depends wholly on
the decisions made by Management. Management is centralized within the
officers and Board of Directors of the Company. The only paid executive
employee at this time is William Jacobson. Due to the centralization of
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management, the Company's goals and direction may not remain the same.
However, the Board believes that this centralization of management allows
the Company to be flexible to change and adapt in a constantly evolving
marketplace.
3. Lack of Profitability - The Company has shown only sporadic profitability
in recent years. There can be no assurance that the Company will develop
any kind of consistent profitability in the future.
4. Substantial Dilution - An investor purchasing shares through this Offering
will purchase shares which, if the Offering is fully subscribed, would
result in a book value of $0.62 per share. A slightly higher book value per
share will result if less than the total number of shares offered is
subscribed. The book value may represent less than the consideration paid
for the shares. Management intends to maximize shareholder value, however,
there is no guarantee Management will be able to do so.
5. Profitability of Mining Ventures Depends Upon Factors Beyond the Control of
the Company - The profitability of mineral properties is dependent upon
many factors beyond the Company's control. For instance, world prices of
and markets for non-precious and precious metals and minerals are
unpredictable and highly volatile. World prices are also subject to
governmental fixing, pegging and/or controls and respond to changes in
domestic, international, political, social and economic factors.
Availability and cost of funds for production and other costs have become
increasingly difficult, if not impossible, to project, due to worldwide
economic uncertainty. These changes and events may materially affect the
financial performance of the Company.
6. Competitiveness of Mining Industry - The mining industry is intensely
competitive. The Company competes with numerous companies, including many
major mining companies with substantially greater technical, financial, and
operational resources and staffs. Accordingly, there is a high degree of
competition for desirable mining leases, suitable prospects for drilling
operations and necessary mining equipment, as well as for access to funds.
There can be no assurance that the Company can compete in this environment.
7. Fluctuating Price and Demand - The marketability of natural resources which
may be acquired or discovered by the Company will be affected by numerous
factors beyond the control of the Company. These factors include, but are
not limited to: (1) market fluctuations in pricing and demand, (2) the
proximity and capacity of natural resource markets and processing
equipment, (3) governmental regulations, (4) land tenure, (5) land use, (6)
regulations concerning the importing and exporting of minerals, and (7)
environmental protection regulations. The exact effect of these factors
cannot be accurately predicted, but the combination of these factors may
result in the Company not receiving an adequate return on invested capital.
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8. Comprehensive Regulation of Mining Industry - Mining operations are subject
to federal, provincial and local laws relating to the protection of the
environment. These include laws regulating removal of natural resources
from the ground and the discharge of materials into the environment. Mining
operations are also subject to federal, provincial, and local laws and
regulations which seek to maintain health and safety standards by
regulating the design and use of mining methods and equipment. Various
permits from government bodies are required for mining operations to be
conducted; the Company cannot guarantee that it will receive these permits.
Environmental standards imposed by federal, provincial, or local
authorities may change. These changes could have material adverse effects
on the Company's 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 the Company. Additionally,
the Company may be subject to liability for pollution or other
environmental damages. The Company may elect not to insure against these
risks due to prohibitive premium costs and other reasons.
9. Financial Considerations - The Company's decision as to whether to develop
its properties will require substantial funds and will depend upon several
factors, including but not limited to: (1) the results of exploration
programs, (2) feasibility studies and (3) the recommendations of duly
qualified engineers and/or geologists. If the Company decides to develop
its properties, the Company will also consider and evaluate other factors
during the development process. These factors include, but are not limited
to: (1) costs of bringing a property into production, including exploration
and development work, preparation of production feasibility studies, and
construction of production facilities; (2) availability and costs of
financing; (3) ongoing costs of production; (4) market prices for the
minerals to be produced; (5) environmental compliance regulations and
restraints; and (6) political climate and/or governmental regulation and
control.
10. Risks Associated with Mining - Mining operations generally involve a high
degree of risk. Hazards such as unusual or unexpected geological
formations, power outages, labor disruptions, flooding, explosions,
rock-bursts, cave-ins, landslides, inability to obtain suitable or adequate
machinery, equipment or labor, and other risks are involved. The Company
may become subject to liability for pollution, cave-ins, or hazards against
which it cannot adequately insure or which it may elect not to insure.
Incurring any such liability may have a material adverse effect on the
Company's financial position and operations.
The costs of developing a mine include expenses that are of no value once
the minerals have been completely removed. Such costs include, but are not
limited to, removing overburden, sinking shafts and extending tunnels. The
expenditures result in no additional value to the Company above the market
price of the ore produced.
11. Foreign Countries and Regulatory Requirements - The Company has properties
located in Mexico where mineral exploration activities may be affected by
varying degrees of political instability. Haphazard changes in
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government regulations may affect applicable tax laws, business laws, and
mining laws. Any changes in regulations or shifts in political conditions
are beyond the control of the Company and may adversely affect its
business. Operations may be affected in varying degrees by government
regulations with respect to restrictions on production, price controls,
export controls, income taxes, expropriation of property, environmental
legislation, and mine safety. The Company may not elect not to insure
against these risks due to prohibitive costs and other reasons.
12. Risks Associated with Timber - There is no insurance on any of the timber
Atlas owns. Destruction by fire, pestilence, or tree disease would lessen
the asset base of the Company and diminish the value of the stock. In
addition, the lumber industry is affected by lumber price movements and
adjustments, downturns in the housing industry, and interest rate
movements. These factors may considerably lessen the price of lumber on the
open market. A significant decrease in the price of lumber may lower
anticipated income and lessen the value of the Company's stock.
13. Currency Fluctuations - The Company maintains its accounts in U.S. dollars
and in Mexican pesos. The Company's operations in Mexico and the United
States make it subject to foreign currency fluctuations. These fluctuations
may materially affect the Company's financial position and results. The
Company does not engage in currency hedging activities.
14. Absence of Public Market - The Company's Common Stock has not been
registered under the Securities Act of 1933 before this Offering and the
Company is responsible for filing with any states in which the common stock
is sold to qualify for the exemptions under state laws. Any sale of the
stock is unlawful prior to the registration or qualification under the laws
of any such state and will be subject to significant restrictions on
resale. The stock will constitute a new issue of stock with no established
trading market. Accordingly, no assurance can be given that an active
market will develop for any of the stock or as to the liquidity of the
trading market for any of the stock. If a trading market does not develop
or is not maintained, holders of the stock may experience difficulty in
reselling such stock or may be unable to sell it at all. If a market for
the stock develops, any such market may be discontinued at any time. If a
trading market develops for the stock, future trading prices of such stock
will depend on many factors, including, among other things, prevailing
interest rates, the Company's results of operations and the market for
similar stock. The stock may trade at a discount from its principal amount
or liquidation preference depending on prevailing interest rates, the
market for similar stock, and other factors, including the financial
condition of the Company.
15. Lack of Liquidity of Low Price Stocks; Penny Stock Regulations - The
Company's Common Stock is not quoted on the Over-The-Counter Bulletin
Board. The Stock is subject to the penny stock rules under the Exchange
Act. The Act imposes additional sales practice requirements on
broker-dealers that sell such
13
<PAGE>
securities. Such additional sales requirements may deter broker-dealers
from suggesting the stock the to their clients. It is hoped that, as of the
date of this Prospectus, the Common Stock will be outside the definitional
scope of a penny stock.
16 Additional Risks - In addition to the above risks, businesses are often
subject to risks not foreseen or fully appreciated by management. In
reviewing this Prospectus, potential investors should keep in mind other
possible risks that may be important.
USE OF PROCEEDS
The gross proceeds to be received by the Company from the sale of the Common
Stock offered in this Prospectus will be a maximum of $7,500,000. The Company
intends to use the proceeds as follows:
<TABLE>
<CAPTION>
<S> <C>
Expenses from this Offering E$100,000(1)
Completion of San Acacio Feasibility Study $ 350,000
San Acacio Mill Capital Costs $ 1,500,000
San Acacio Level I Development (Refugio) $ 3,000,000
San Acacio Level II Development (Purisima) $ 1,000,000
Debt Retirement $ 800,000
General Working Capital $ 750,000
-------------
TOTALS: $ 7,500,000
<FN>
(1) Expenses are estimates only. The expenses for the offering are calculated
on the assumption that the entire offering is sold without the use of
underwriters. Management is aware of approximately $82,600 in expenses for this
Offering at this time, however for the purposes herein have estimated a total of
$100,000 in expenses incurred regardless of the number of shares sold. Should
broker-dealers be used to sell the securities, any commissions charged by
broker-dealers will be paid out of the "General Working Capital" category.
</TABLE>
The primary purpose of this Offering is to raise funds to develop the San
Acacio Mine. Once expenses of the Offering are paid, Management intends to use
the remaining amount of the proceeds, if practical, to pursue such development.
In describing the Use of Proceeds, Management has described the various steps of
development in practical, chronological order. As such, Management has placed
the objectives in a prioritized order.
The Company is not required to sell any minimum amount of shares in this
Offering. If only a portion of the offered shares are sold, the Company may
still pursue the development of the San Acacio Mines. Management has received an
14
<PAGE>
indication from a third party lender in the industry that debt financing may be
possible, for example. The Company may be able to pursue lender financing,
although no terms or commitment has been discussed at the present time. If the
Company can obtain favorable terms, Management may pursue development of the San
Acacio Mines using a combination of equity and debt financing.
Management estimates that raising $3,000,000 or more from the Offering
would place the Company in a position to obtain favorable credit terms. The
Company may be then be able to obtain third party lender financing to not only
complete the objectives listed above, but also to pursue acquisitions of
additional equipment and properties.
The mining industry is close knit and limited to certain geographical
areas. As a result, it is common for members of the industry to be aware of the
assets and properties that might be available for acquisition. Management has no
firm plans to acquire any certain assets or properties. Nevertheless, Management
may use proceeds from this Offering to further acquire additional assets, if the
Company received sufficient funding from this Offering to obtain lender
financing and complete the objectives described in Use of Proceeds and more. The
Company would be especially interested in acquiring additional properties in
Mexico.
According to the aforementioned prioritized list, Management plans to pay
all expenses from the Offering before expending any money on the goals of the
Company. If adequate funds remain after paying the Offering expenses, then the
Company will complete the San Acacio Feasibility Study and then pursue the
development of the mine properties. This is Management's objective. If however,
this proves impossible or impractical, the Company may use the proceeds
otherwise. For example, a natural disaster in the area of the mines might make
further development impractical.
An option payment on the San Acacio Mine of $100,000 became due and payable
during the past six months. The past six months have resulted in little cash
flow for the Company. As a result, the Company paid $75,000 to the option holder
and secured a verbal agreement that the remaining $25,000 could be paid at a
later date. See, "Description of Properties." Management intends to pay this
amount as soon as possible. To the extent that the payment is not made by the
closing of the Offering, however, this payment may be paid from proceeds before
the expenses of the feasibility study are funded.
Although Management has set forth the anticipated goals of the Company, it
reserves the right to change these goals to adapt to the ever-changing
marketplace as well. Management cannot foresee future conditions. Unforeseen
circumstances may dictate that Management change its order of priorities, or add
new priorities to its list, in order to obtain the maximum shareholder value.
For instance, Management may later believe that growth by acquisition, rather
than growth by development of existing facilities, may be the most appropriate
and profitable course for the Company. Therefore, this Use of Proceeds section
is a guide to the intentions of Management at this time, but is subject to
change to adapt to unforeseen circumstances.
15
<PAGE>
EXPENSES FROM THIS OFFERING
The expenses from this Offering will be paid out of the Offering proceeds
to the extent received. These expenses are estimated at $100,000 in total for
fixed costs. All other uses of proceeds detailed below are after the expenses
from this Offering have been paid. The Company will be responsible for payment
of expenses to the extent that sufficient proceeds are not realized.
COMPLETION OF SAN ACACIO FEASIBILITY STUDY
Management estimates the cost of the feasibility study to approximate
$271,000 plus a contingency of 30%, for a total of $352,300. Similar budget
estimates have been determined for each stage of development of the San Acacio
Mine. Rounded numbers are used throughout the following section to facilitate
understanding of the expenses overall. The study will consist of metallurgical
testing, density determinations, baseline studies and engineering studies. The
feasibility study will help the Company in its development plan for the mine.
SAN ACACIO MILL CAPITAL COSTS
The initial phase of mining will be from the surface. Management plans to
hire independent contractors to perform this work. By hiring a contractor, the
Company will avoid the expense of purchasing heavy equipment required to perform
surface mining.
The Company plans to allocate $1,500,000 from this Offering to construct a
new recovery plant to service the San Acacio Mine. The recovery process will
include a heap leach pad and a Merrill Crowe system to extract silver from a
cyanide solution. In this process, crushed ore is stacked onto an impermeable
pad in a contained area, and is exposed to a cyanide solution. As the solution
drains through the ore it dissolves the silver and is caught in a drain field
where it is pumped into a Merrill Crowe system. The Merrill Crowe system
precipitates the silver from the solution and the solution is recycled back to
the ore pad for additional recovery. The precipitated silver is then dried and
melted into an ore that can be sold directly to a refiner. This process
eliminates the need for a smelter.
The Company may have the need for a different milling process in the
future. An existing mill adjacent to the San Acacio property is available for
this purpose, however, the Company has not made any commitments to purchase any
additional milling capacities at this time.
The Company also expects to install a crushing plant. The Company will
upgrade roads between the mine and the processing plant as well as build an
on-site office.
SAN ACACIO LEVEL I DEVELOPMENT (REFUGIO)
16
<PAGE>
The Company plans to allocate $3,000,000 from this Offering to develop
Level I of the San Acacio Mine, known as Refugio. This amount will cover
equipment purchases as well as labor. Previous owners partially developed the
mine, but did not continue operations. Management believes the allotted amount
is necessary to perform some preproduction construction. The allocated amount
may be sufficient to fund actual production of this level as well. See,
"Description of Property."
Level I is the adit level approximately 300 feet below the surface.
SAN ACACIO LEVEL II DEVELOPMENT (PURISIMA)
The Company plans to allocate $1,000,000 of the Offering proceeds for the
development of Level II of the San Acacio Mine, known as Purisima. This amount
will cover mine preparation, labor and equipment costs.
Level II is approximately 600 feet below the surface. The vein structure is
known to be continuous from the surface to Level II. Management believes that
the vein continues below Level II, and intends to develop and access this level
with the intent to expand the Mine to deeper levels.
DEBT RETIREMENT
The Company plans to pay down or retire approximately $800,000 of long-term
debt from the Offering proceeds. The Company has $811,750 of long-term debt.
The long-term debt of the Company includes a note of $782,741 payable to Fausett
International Inc. The note is paid in monthly payments of $15,000, with an
interest rate of 8.75%. The note is collateralized by the equipment and mining
supplies of the Company. The debt was acquired in 1997 for the purpose of
acquiring equipment and matures in 2001.
Not being retired is a short-term note in the amount of $201,000, which
matures on January 1, 2000, and has an 8% interest rate. The Company intends to
repay this note from logging proceeds. Other notes not being retired include a
note for the purchase of a vehicle with a balance of $23,353.00. This note is
payable in monthly installments of $578, and has an interest rate of 11.9%, and
matures in 2001. Also a vehicle purchase note exists with a balance of
$1,695.76 and is payable at $431 per month at the rate of 7.9%. This note
matures in February, 2000.
GENERAL WORKING CAPITAL
The Company will use any proceeds remaining for general working capital.
Atlas has no plans for this capital except to fund ongoing operations. These
funds will be used to pay broker-dealer commissions if necessary.
17
<PAGE>
The allocation of the proceeds set forth above represents the Company's
best estimate based upon its present plans and certain assumptions regarding
general economic and industry conditions and the Company's future revenues and
expenditures. The Company reserves the right to reallocate the proceeds within
the above described categories or to other purposes in response to, among other
things, changes in its plans, industry conditions, and the Company's future
revenues and expenditures.
The primary purpose of this Offering is to further the Company's plans for
expansion of its Mexican subsidiaries. Based on the Company's operating plan,
the Company believes that even partial funding of the Offering would be
sufficient to meet the Company's anticipated cash needs. As discussed, the
proceeds from a fully subscribed Offering would be sufficient to meet the
Company's anticipated cash needs and may enable the Company to fund additional
projects. These funds, plus the Company's cash flow from operations, should also
be sufficient to finance its plans for expansion for at least 12 months from the
date of this Offering. No assurance can be given that the Company will be
successful in obtaining such financing from this Offering, or to obtain lender
financing on favorable terms, or at all. If the Offering is not successful, or
successful only in part, and the Company is unable to obtain additional
financing, its ability to meet its plans for expansion could be adversely
affected. (See "Risk Factors," "Management Discussion and Analysis.")
The Company reserves the right to change the application of proceeds
depending on unforeseen circumstances at the time of this Prospectus. The
intent is to implement the Company's business plan to the extent possible with
funds raised in this Offering. Unforeseen events, timing, the general state of
the economy and the Company's ability or inability to generate revenue could
greatly alter the application of proceeds from that shown above.
DETERMINATION OF OFFERING PRICE
There currently is no established public market for the Company's stock.
There can be no assurance that a public market in the Company's stock will be
established, or if established, that such market will sustain. The Company's
stock is registered on the Over-the-Counter Bulletin Board System ("OTC BB")
under the stock symbol "ALSM."
The Company determined the Offering price based on several factors: (1)
Potential investor interest, (2) The Company's current capital needs, and (3)
The Company's ability to pay future dividends, although no dividends are
contemplated at this time. The Company believes that its use of the capital
raised by this Offering should increase its revenues, thus increasing
shareholders' equity and the ability to pay dividends. This belief, and
consultation with advisers knowledgeable about the stock market, has led to the
determination of the purchase price.
The Company's stock has historically traded on the Over-the Counter
Bulletin Board Market ("OTC BB"). The stock has not traded with the advent of
recent Securities and Exchange Commission ("SEC") rules, and similar National
18
<PAGE>
Association of Securities Dealers ("NASD") rules, requiring that companies enter
the SEC disclosure system and become fully reporting in order to trade OTC BB.
As a result, there is no way to determine at what price the Company's stock
would trade immediately preceding the Offering.
However, the Company anticipates investor interest in Atlas stock because
of the rising demand for silver in the marketplace. According to the "CPM
Group's Silver Survey for 1999," the world silver supply, in 1998, was estimated
at 630 million ounces. The world demand for this same period was 822 million
ounces, or a 192 million ounce shortfall. (For further discussion, see
"Description of Business.")
The Company has determined that $7,500,000 received from this Offering
would meet the expenses of the Offering and provide at least $7,400,000 in
proceeds for the purposes described above. This amount of proceeds added to the
shareholders' equity of $590,668 at June 30, 1999 raises shareholders' equity to
$7,990,688. The resultant number of outstanding shares pro forma at June 30,
1999 would be 12,824,981 shares, making per share equity $0.62.
DILUTION
As previously discussed, Atlas is not a reporting company immediately
preceding this Offering.
The stock offered hereby is offered at a price significantly more than the
price paid by officers, directors, promoters and affiliated persons during the
past five years. This is because these individuals purchased at the then-current
market price. Over the past five years, the Company's stock has traded in a
range of $0.18 to $0.81 per share.
As discussed, an investor purchasing shares through this Offering will
purchase shares which, if the Offering is fully subscribed, would result in a
book value of $0.62 per share. Partial subscription of the Offering should
result in a slightly higher book value. The book value, however, should not
reach the amount of the purchase price immediately after the closing of the
Offering because of dilution by the current outstanding shares. While this is an
immediate dilution of the stock, Management believes that the added value to the
Company that this Offering represents will result in a future higher market
value and book value for the stock. There is no assurance that the beliefs of
Management are correct in this regard, however.
During the last five years, the following purchases have been made by
officers, directors, promoters and affiliated persons at prices less than the
offering price:
19
<PAGE>
<TABLE>
<CAPTION>
Investor Relationship to Date Amount Purchase Price Total
Company Purchased Purchased per share Purchase
Price
- -------------------- ----------------- --------- ------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
William and William Jacobson, 12/16/97 25,000 shares $ .20 $ 5,000
Mary Ann President
Jacobson
- -------------------- ----------------- --------- ------------- --------------- ---------
Tom Groce Director 12/16/97 25,000 shares $ .20 $ 5,000
- -------------------- ----------------- --------- ------------- --------------- ---------
William and Mary Ann William Jacobson, 1/13/98 25,000 shares $ .20 $ 5,000
Jacobson President
- -------------------- ----------------- --------- ------------- --------------- ---------
Tom Groce Director 3/4/98 75,000 shares $ .20 $ 15,000
- -------------------- ----------------- --------- ------------- --------------- ---------
Jack Harvey Jack Harvey, Vice 3/4/98 50,000 shares $ .20 $ 10,000
Trust President and
Director
- -------------------- ----------------- --------- ------------- --------------- ---------
William and William Jacobson, 3/6/98 50,000 shares $ .20 $ 10,000
Mary Ann President
Jacobson
- -------------------- ----------------- --------- ------------- --------------- ---------
Optimum Promoter 4/6/99 125,000 $ .20 $ 25,000
Source
Stock
Brokers
Society
- -------------------- ----------------- --------- ------------- --------------- ---------
</TABLE>
Not included in the foregoing table are the shares of stock the Company
transferred to Fausett International, Inc., in 1997, for the purchase of
operating equipment and mining supplies. The Company transferred 875,000 share
of common stock valued at $350,000. Subsequent to this transaction, William
Jacobson, Chief Executive Officer of the Company, received 265,000 shares of
Atlas stock from Fausett International, Inc., for payment of past services
performed by Mr. Jacobson for Fausett. The 265,000 shares that Mr. Jacobson
received are valued at approximately $106,000. See, "Certain Relationship and
Related Transactions."
On April 16, 1999, the Board of Directors authorized the issue of Options
on 500,000 shares of common stock to employees and directors for the fair market
value of the stock on the date of grant. Of these 500,000 shares, the Board
designated options for 375,000 shares to directors and 125,000 to employees.
The employees have not received the options at this time. When issued, the
options will carry a mandatory holding period of two years before exercisable.
While the Company has experienced some losses during the past three years,
the Company has not experienced losses in each of the past three years. A
potential investor is strongly urged to review the Company's financial
statements.
20
<PAGE>
SELLING SECURITY HOLDERS
No security holder is selling the Company's stock pursuant to this
Offering. No director, officer or beneficial owner of more than 5% of the
Company's shares will participate in this Offering.
PLAN OF DISTRIBUTION
This Offering involves the offer and sale of 7,500,000 shares of Common
Stock at $1 per share.
This Offering will terminate on December 31, 1999, or on such later date
that (i) the Company, in its discretion, shall determine either 60 days or 90
days after the effective date of the registration or (ii) all Common Stock is
sold.
During the Offering, prospective investor's funds will be deposited into an
escrow account at Idaho Independent Bank, Haydon Lake, Idaho 83835. Once the
Offering closes, all funds tendered by prospective investors will be transferred
to the accounts of the Company and shall be subject to use by the Company in
connection with its business and operations as generally described in this
Offering. The escrow account will not accrue interest. No subscriber is
entitled to interest on funds deposited in escrow. (See "Use of Proceeds.")
If the Company accepts an investor's subscription, the Company will deposit
the escrowed funds into its operating account and send the investor the Common
Stock purchased. The Company will send the securities to investors as their
funds are released from the Escrow Account. Within five (5) business days after
the release of the investor's funds, the Company will issue the stock in the
principal amount equivalent to the number of shares purchased.
The Company reserves the right to accept or reject any subscription
agreement, in whole or in part, for any reason, in the sole discretion of its
Management.
This Offering is self-underwritten and the Company has not secured the
services of an underwriter. The Company intends to offer and sell Common Stock
directly to investors without the assistance of a registered broker-dealer.
Management intends to use a small number of preliminary prospectuses to inform
certain dealers about the stock. The Offering is blue sky registered in states
which the Company believes each potential purchasers may reside. Therefore, the
entire Offering may be purchased by a limited number of investors. In such
instances, the entire principal amount of the Common Stock purchased shall
constitute proceeds to the Company, without deduction for selling commissions.
21
<PAGE>
However, the Company does reserve the right to sell securities described by
this Prospectus through registered broker-dealers. If this occurs, the Company
may have to pay a commission to the broker-dealers. Such commissions may range
from 3% to 9% of the proceeds raised by the broker-dealer.
The Company will send to each investor a written statement of final
capitalization promptly following the termination of the Offering.
Also, under the terms of the Plan of Distribution, the Company may deliver
Prospectuses to broker-dealers until the termination of the Offering.
LEGAL PROCEEDINGS
There are no material pending legal proceedings, and the Company is not
aware of any threatened legal proceedings to which the Company may be a party.
Likewise, there are no material legal proceedings to which any director, officer
or affiliate of the Company is a party. No security holder is a known adverse
party to the Company nor has a material interest adverse to the Company.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The names, ages and positions of the Company's Directors and executive
officers as of September 30, 1999 are listed below:
<TABLE>
<CAPTION>
Name Age Position with the Company First Elected
- ------------------- --- ---------------------------------- -------------
<S> <C> <C> <C>
William T. Jacobson 53 President, C.E.O, Director 1993
Jack Harvey 77 Vice President, Director 1970
Kurt Hoffman 33 Secretary, Treasurer, and Director 1997
Thomas E. Groce 78 Director 1970
Lovon Fausett 62 Director 1974
</TABLE>
WHILE SOME OF THE INDIVIDUALS ABOVE SERVE ON OTHER BOARDS OF DIRECTORS, NO
PERSON LISTED SERVES ON THE BOARD OF A LISTED OR PUBLICLY HELD COMPANY OTHER
THAN ATLAS, OR ITS SUBSIDIARIES.
WILLIAM T. JACOBSON has been President of Atlas Mining Company since August
1997. From 1994 to 1997, he served as Secretary of Atlas and Treasurer of
Fausett International, Inc. Mr. Jacobson also serves on the Board of Directors
of Trend Mining Company. He has an eleven-year career in the mining industry
and spent fifteen years in the banking industry. He holds a business degree
from the University of Idaho.
22
<PAGE>
JOHN "JACK" HARVEY has been Vice President of Atlas for 15 years. He received
his mining engineering degree from Montana Tech, and is retired after a 41 year
career with Anaconda and Arco.
THOMAS E. GROCE received a metallurgical engineering degree from Montana Tech
and is retired after a 30- year career at Kaiser Aluminum. Mr. Groce held the
position of Secretary and Treasurer for 16 years.
LOVON FAUSETT has served as a past President of Atlas and is the one hundred
percent (100%) owner of Fausett International, Inc. Mr. Fausett also is a
Director of Hagby USA, a diamond drill manufacturer.
KURT HOFFMAN is the Secretary and Treasurer of Atlas Mining Company. Mr. Hoffman
has been the Company's Secretary and Treasurer, since 1997. Mr. Hoffman
currently is the president of Trend Mining Company. Mr. Hoffman owns and has
operated Hoffman Mining and Land Services for the past five years. Trend Mining
Company and Hoffman Mining and Land Services are not competitors of Atlas.
None of the above listed individuals has been party to any material legal
proceeding during the past five years.
BOARD OF DIRECTORS, COMMITTEES, AND COMPENSATION
The Board of Directors has the responsibility for establishing broad
corporate policies and for overseeing the overall performance of the Company.
However, in accordance with corporate legal principles, the Board is not
involved in day-to-day operating details. Members of the Board are kept
informed of the Company's business through discussions with the Chairman and
other officers, by reviewing analyses and reports sent to them, and by
participating in Board and committee meetings.
Board members are not presently compensated, but are reimbursed for their
expenses associated with attending Board meetings. The Company has one
standing committee at this time, the Stock Option Committee.
SECURITY OWNERSHIPS OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial
ownership as of September 30, 1999 of the Company's shares by (i) each current
Director and each nominee for Director (ii) each officer of the Company, (iii)
all persons known by the Company to beneficially own more than 5% of the
outstanding shares of the Company's shares, and (iv) all officers and Directors
of the Company as a group.
23
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES BENEFICIALLY OWNED
-------------------
BENEFICIAL OWNER(1) PERCENT OF TOTAL(2)
- ------------------------------ ------------------ -------------------
<S> <C> <C>
Cede & Co.(3) 1,005,688 18.9%
Fausett International, Inc.(4) 500,000 9.3%
William T. Jacobson(5) 383,688 7.2%
John F. Harvey(6) 60,767 1.1%
Thomas E. Groce(7) 126,340 2.4%
Lovon Fausett(8) 39,610 .74%
All officers and directors 610,405(9) 11.5%
as a group
<FN>
* less than one percent
- ---------------------------
(1) Unless otherwise noted, the Company believes 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.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the purchase date upon the
exercise of warrants or options. Each beneficial owner's percentage
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 Prospectus, no options, warrants or rights to
acquire shares have been granted.
(3) The address for Cede & Co. is P.O. Box 20, Bowling Green Station, New
York, New York 10274.
(4) The address for Fausett International, Inc. is Attn: Robert Seitz, P.O.
Box 968, Osburn, Idaho 83849-0968. Fausett International, Inc. is one
hundred percent (100%) owned by Lovon Fausett.
(5) Mr. Jacobson's address is Box 631, Mullan, Idaho 83846. Mr. Jacobson
holds 303,660 shares individually, 50,000 shares with Mary Ann Jacobson,
and 50,000 shares with Mary Ann Jacobson as joint tenants.
(6) Mr. Harvey's address is Bayview Rt, Box 31, 895 Bayview Dr., Poulson,
Montana 59860. Mr. Harvey holds 9,767 shares individually, 1,000
shares with Ruth C. Harvey as joint tenants with right of survivorship,
and 50,000 shares as trustee of the John F. Harvey Trust.
(7) Mr. Groce's address is E. 10413 Desmet, Spokane, Washington 99206. Mr.
Groce holds 14,120 shares individually and 112,220 shares with Maryrose
Groce.
(8) Mr. Fausett's address is P.O. Box 968, Osburn, Idaho 83849-0968. Mr.
Fausett holds 17,003 individually and 22,607 with Nona Fausett as joint
tenants. Mr. Fausett owns one hundred percent (100%) of Fausett
International, Inc.
(9) This number does not include the 500,000 shares held by Fausett
International, Inc., owned 100% by Lovon Fausett, a director of
Atlas.
</TABLE>
24
<PAGE>
Management is unaware of any voting trust or agreement among any of the
shareholders.
DESCRIPTION OF SECURITIES
In this Offering, the Company will offer 7,500,000 shares of Common Stock
for sale to the public. These shares have no par value. Dividend and voting
rights are detailed below.
The authorized capital stock of the Company at the closing of this Offering
consists of 60,000,000 shares of Common Stock, no par value per share. At the
Effective Date, a total of 5,324,981 shares of Common Stock are issued and
outstanding and held by 1,735 shareholders. Of the 5,324,981 shares outstanding,
314,852 are treasury stock. None are being registered by principal shareholders
for sale under this Prospectus.
A stock option plan and an incentive plan were ratified by the shareholders
of the Company in November 1998. Both plans authorize the Board of Directors to
form a Stock Option Committee. The Committee has full authority to administer
the provisions of each plan.
The plans dictate that the combined total maximum option shares for the
existing and all future option plans of the Company shall not exceed 10% of the
then issued and outstanding shares of the Company's stock. The plans provide
that the aggregate number of option shares assignable to one person shall not
exceed 5% of the then issued and outstanding shares of the Company's stock. The
shares of Common Stock to be issued upon the exercise of the plans may be: (1)
authorized but unissued shares, (2) shares issued and reacquired by the Company
or (3) shares bought on the market for the purposes of the plan. In the event
any option plan shall terminate, expire or be surrendered without having been
exercised in full, the shares subject to such plan but not purchased thereunder
shall again be available for future options.
On April 16, 1999, the Stock Option Committee authorized the issue of
options to directors and employees on 500,000 shares of common stock. Of these
500,000 shares, the Committee designated 375,000 shares to directors and 125,000
to employees.
Each director will receive 75,000 shares of stock options. Presently,
there are no grants of any of the authorized stock options. The Committee will
set the price of the stock option shares at the time of the grant. The length
of the options to be granted is three years. The option stock will carry a
mandatory holding period of two years before exercisable.
25
<PAGE>
Dividends are payable on shares of Common Stock when and if such dividends
are declared by the Board of Directors. Shareholders are entitled to one vote
for each share on all matters submitted to a shareholder vote. Most shareholder
votes, except for the election of Directors and other routine matters, require
the affirmative vote of 51% of the shares present in person or by proxy at a
meeting of the shareholders. Shareholders have no rights to a cumulative voting
for the election of Directors. Each share participates equally in assets
available for distribution upon liquidation or dissolution. The holders of
Common Stock have no preemptive or preference rights. Shares of Common Stock are
not subject to any redemption provisions or convertible rights into any other
securities of the Company. All of the outstanding shares are fully paid and
non-assessable. The shares to be offered in this Offering will also be fully
paid and non-assessable when they are issued and paid for.
The foregoing description concerning the Common Stock of the Company does
not purport to be complete. Reference is made to the Company's Articles of
Incorporation and By-Laws as well as to the applicable statutes of the State of
Idaho for a more complete description concerning the rights and liabilities of
shareholders.
The Company intends to furnish shareholders annual reports containing
audited financial statements of the Company. The Company also intends to
distribute quarterly reports containing unaudited financial information.
After the Offering, there will be 12,824,981 shares of Common Stock
outstanding. The Company retains the right to later issue 47,175,019 shares of
Common Stock.
In the event of the liquidation, dissolution or winding-up of the Company,
the holders of the Common Stock would be entitled to share ratably in all assets
remaining after payment of senior note holders and other liabilities.
In addition to the rights specifically mentioned above, Common Stock
holders of the Company are afforded other rights and privileges pursuant to
applicable law and the Articles of Incorporation and By-Laws of the Company,
which are hereby incorporated by reference. Copies of the Company's Articles of
Incorporation and By-Laws have been filed with the Securities and Exchange
Commission.
Subsequent to the completion of the Offering, current stockholders of the
Company will own approximately 41% of the outstanding Common Stock.
The Company can make no prediction as to the effect, if any, that sales of
the Company's securities, or the availability of such for future sale, will have
on the market price of the Company's securities. Sales of substantial amounts
of securities in the public market, or the perception that such sales could
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occur, could depress prevailing market price. Such sales may also make it more
difficult for the Company to sell equity securities or equity-related securities
in the future at a time and price it deems appropriate.
STOCK TRANSFER AGENT
The Transfer Agent and Registrar for the shares of Common Stock is Idaho
Stock Transfer Company, 421 Couer d'Alene Ave., Couer d' Alene, Idaho 83814.
INTEREST OF NAMED EXPERT AND COUNSEL
No expert or counsel will be receiving compensation in excess of $50,000 in
connection with this offering. For estimates of fees to be paid in connection
with this Offering, please see the front page of the Prospectus.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
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.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
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 small business issuer will, unless in the opinion of its counsel
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 Securities Act and will be governed by
the final adjudication of such issue.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Fausett International, Inc., sold operating equipment and mining supplies
to the Company, in 1997, for a purchase price totaling $1,416,094. The purchase
price was paid in cash, capital stock (875,000 shares of common stock valued at
$350,000), and a note payable for the remainder. Subsequent to this transaction,
William Jacobson, Chief Executive Officer of the Company, received 265,000
shares of Atlas stock from Fausett International, Inc., for payment of past
services.
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Atlas has entered into a contract for consulting service with Lovon
Fausett. Mr. Fausett will provide consulting services for three (3) years and
will receive a consulting fee of $1,500 per month. Consulting fees recognized
under this agreement during 1998 and 1997 were $18,000 and $4,500, respectively.
Mr. Fausett will also receive $18,000 under this agreement in 1999. The
agreement terminates in October 2000.
The Company leases office space on a month-to-month basis from Fausett
International, Inc. Rental payments under this lease are $1,100 per month.
Total rental expense recognized under this lease during 1998 and 1997 was
$13,200 and $3,200, respectively.
DESCRIPTION OF BUSINESS
The following Glossary, is provided to assist the investor in understanding
technical mining terms used throughout the Prospectus.
GLOSSARY:
ADIT: The entrance to a level of the mine.
BALL MILL: A machine used to grind ore to the consistency of powder.
BLAST HOLE DRILLING: Drilling holes in the ore to be filled with explosives for
blasting.
CLAIM, PATENTED: Claims that have been vested to the Company by the United
States government giving both surface and mineral rights to the holder.
CLAIM, UNPATENTED: Claims rented from the United States government on a yearly
basis giving the Company the right to the minerals of that claim.
CONCENTRATION: The process by which ore is separated into metal concentrates and
reject material through processes such as crushing, grinding and flotation.
Concentrates are shipped to a smelter.
CONVERTER: A principal phase of the smelting process, which involves the blowing
of oxygen-enriched air through molten metal, causing oxidation and the removal
of sulfur and other impurities from the metal.
DIAMOND CORE DRILLING: A process for sampling a mineral deposit by using a
hollow diamond-tipped drill bit to cut out a rock core. This core sample is
used for geological study and assay.
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DORE: A bar of intermixed gold and silver metals containing some impurities.
Dore is separated at a refinery into pure gold and silver bullion.
DRAW POINT LEVEL: The mine level in which ore is retrieved from the areas mined
and hauled to the surface.
FLOTATION: The process by which minerals attach themselves to the bubbles of an
oily froth and rise to the top where they are skimmed off. This process is used
primarily for the concentration of sulfide ores.
FLUX: A substance that promotes the fusing of minerals or metals or prevents the
formation of oxides.
GROUTING: A method of cementing the fractures or holes in the rock to stabilize
the area and to contain water flows.
HEAD GRADE: An estimate of the total mineral content of the ore being fed into
the process plant.
HEAP LEACH: The process by which a mineral can be economically recovered by
stacking crushed ores on an impervious liner and dissolving the mineral with a
cyanide solution.
IN-SITU: In its natural position or place. In geology, when the deposit is
found in the position it was in when it was originally formed or deposited.
LONG HOLE SAMPLING: Recovered drill clippings from a long hole drill hole for
the purpose of exploration or to define the boundaries or a deposit.
MERRILL-CROWE RECOVERY SYSTEM: A process that mixes zinc dust with solutions of
dissolved gold and silver to precipitate the precious metals.
MILLING: A treatment process involving fine grinding of the ore followed by
extraction of the mineral.
MINE: The source of mineral-bearing material found near the surface or deep in
the ground. Most copper and gold mines are open pits, where ore is removed from
the surface rather than from underground workings.
MINE CLOSURES: Closing of a mine for environmental or safety purposes. The
process normally includes backfilling underground voids, sealing water sources
and capping the adits or shafts.
MINERALIZATION: A deposit of rock containing one or more minerals for which the
economics of recovery have not yet been established.
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ORE: A mineral or aggregate of minerals from which metal can be mined or
extracted.
OVERBURDEN STRIPPING: The portion of waste material removal required prior to
ore mining.
PRECIPITATE: A mixture of minerals filtered from solutions.
RAISE CONSTRUCTION: Driving upward to access underground areas for mining or
exploration.
RAMP CONSTRUCTION: Driving a tunnel in an incline or decline with rubber tire
equipment.
RECOVERY RATE: Percent of total contained mineral values that are extracted into
a salable product.
REHABILITATION: Repairing of existing mine workings to make access possible for
exploration or production.
RESERVES (ORE): That part of a mineral deposit that can be economically and
legally extracted at the time of the reserve determination. A resource that has
been economic, metallurgical and mine planning completed.
RESOURCE: A resource is an ore body with indicated mineralizations, but has not
had economic, metallurgical and mine planning completed.
ROCK BOLTING: A method used to stabilize the ground by drilling holes into the
rock and securing a bolt into the hole.
SETTLER: A tank in which a separation of particles can be effected by gravity.
SHOTCRETE: The spraying of cement onto walls to help stabilize the ground.
SLAG: The waste substance formed in any one of several ways by chemical action
and fusing at furnace operating temperatures.
SLICE PRODUCTION BLASTING: A method of blasting where the ground is blasted in
sections.
SLIMES: A mixture of metals and insoluble compounds that form on the anode in
electrolysis; usually a material of fine particle size.
SMELTING: A metallurgical operation in which metal is further separated from
impurities. A typical smelting operation involves furnacing and converting
concentrates into blister and anode copper, which are sent to a refinery for
further processing. Fire-refined copper, also produced by smelting, is shipped
directly to fabricators.
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STRIPPING RATIO: Ratio of waste material to ore-grade material that is removed
to reach the ore.
VCR (VERTICAL CRATER RETREAT) METHOD: A method of mining between levels by
drilling a series of holes from level to level then blasting in 8 foot to 10
foot sections starting from the bottom layer up towards the surface.
This Registration Statement contains certain forward-looking statements
which involve risks and uncertainties. The actual results of the Company could
differ materially from those anticipated in these forward-looking statements as
a result of factors including those set forth in "Risk Factors" and elsewhere in
this Registration Statement.
THE COMPANY
Atlas was originally incorporated on March 4, 1924, in Idaho, and is also
authorized to operate as a foreign corporation in the states of Montana and
Washington. Since 1924, Atlas has mined the various mineral resources present
in the Idaho mountains, Montana and Washington. The Company has mined silver,
copper, lead, zinc and gold. Over the years, it has developed as a natural
resource company engaged in the acquisition, exploration, and, if warranted,
development of its resource properties in the state of Idaho and, recently,
Mexico.
From 1980 to 1997, the mining activities of the Company ceased, largely due
to a downturn in the market price and the high costs of development and
production. The Company continued to hold its mining properties and wait for a
better market economy. In 1997, Bill Jacobson, then a member of the Board,
became CEO. He initiated the purchase of equipment from Fausett International
and organized AFC. AFC provides contract mining, specialized civil construction
and drilling services. Its main customers are mine operators, exploration
companies, and the construction and natural resource industrie
The Company's properties also possess significant timber resources.
Atlas contracts independent logging companies to harvest its timber. After
harvesting, the timber is sold for Atlas' account. The Company intends to
further explore expansion into the timber industry and better cultivate the
timber properties it currently owns. Unlike the mining industry, timber is a
renewable resource. Long after the metals have been extracted, a managed
property can still produce timber. It is Management's intent to acquire a
sufficient number of properties in north Idaho suitable for continuous
production of marketable timber. This should produce a continuous source of
revenue for the Company.
In the past two fiscal years, Atlas has spent approximately $50,000 on
timber acquisition and development activities. The Company has financed these
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activities itself. In addition, the Company has paid and will pay in the future
reclamation bonds on road access and stumpage fees which are withheld until the
slash is piled and burned.
Management is contemplating the revitalization of several mineral mines
previously developed and to develop the resources of newly acquired silver
mines. Management hopes in the future to acquire additional mining properties.
Management also intends to expand its contract mining services, which are
offered through AFC. Management hopes to increase the profit derived from these
services and to further develop the Company's expertise in this area.
In 1998, Atlas acquired the Sierra Silver Lead Mining Company, an Idaho
corporation. This merger added approximately 329 acres of mineral rights which
includes approximately 250 acres of surface timber to Atlas' current holdings.
In February 1999, Atlas also acquired Olympic Silver Resources, Inc., a Nevada
corporation, in an all-stock transaction. The acquisition of Olympic gave Atlas
control of the Olympic subsidiary mine in Zacatecas, Mexico, the "San Acacio
Mine." In March 1999, the Company acquired the Aulbach mining claims from Trail
Gulch Gold Mining Company. The property has approximately 500,000 board feet of
timber which Management values at approximately $100,000.
The Company intends to raise additional funds through this offering, joint
ventures and/or debt financing. The Company will use these funds to further
explore its property, develop its mineral and timber resources and to expand its
contract mining services. See, "Use of Proceeds". No assurance can be given
that the Company will be able to raise the needed capital to develop such
properties however, failure to raise such financing could be detrimental to the
success of the Company. See "Management's Discussion and Analysis or Plan of
Operation."
The Company's executive office is located at 1221 W. Yellowstone Avenue,
Osburn, Idaho 83849. Its telephone number is (208) 556-1181. The Company's Web
site is http://www.atlasmining.com.
SILVER
Based upon reports made by the Silver Institute, Management believes that
silver has the most potential for increased value in the future. Economists
expect that over the next decade, the greatest demand, and possibly the greatest
price increase, will be for base metals like those mined by Atlas. Silver
brokers are expected to purchase more silver as third world countries modernize
and the demand for plumbing and electricity becomes more widespread. It is
expected that silver, for the reasons stated below, will be the first to see an
increase in price.
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The report by the Silver Institute indicates that in 1997, (the last year
for which figures are available), the total demand for silver was 863.4 million
ounces, up 6.1% from the previous year. Mine production and recycling accounted
for 665.4 million ounces, creating a shortfall between supply and demand of 198
million ounces. As of 1997, conventional supply had not kept up with demand for
nine consecutive years. Since 1990, the average shortfall between supply and
demand for silver has been 120 million ounces per year.
As expected, during 1998, silver inventories were drawn down to levels, in
terms of weeks of demand, that have not been seen since inventory records were
first kept. In July of 1998, the COMEX inventory for silver hit an all time low
of less than 80 million ounces. This figure equates to about 1.1 months
consumption at 1997 rates.
According to a report of "CPM Group's Silver Survey for 1999," the world
silver supply in 1998 was estimated at 630 million ounces. The world demand for
this same period was 822 million ounces, or a 192 million ounce shortfall.
Their projections for 1999 show another shortfall of 177 million ounces. This
indicates the continued trend in demand over supply. Silver prices may
therefore see some increases over the next couple of years.
From 1982 to 1997, the U.S. Government reduced the quantity of silver held
in its stockpile from nearly 4,300 tons (138.2 million ounces) to approximately
1,200 tons (38.5 million ounces). Banks and foreign countries have also reduced
their stockpiles over this same period.
The U.S. Geological Survey states that as of January 1998, two-thirds of
the world's silver resources are associated with gold, copper, lead and zinc
deposits. The remaining one-third is in vein deposits in which silver is the
most valuable component. Significant future reserves and resources are expected
to come from base metal discoveries that contain silver as a byproduct.
Silver is produced in the United States by 76 mines in 16 states. Major
production comes from Nevada (39%), Idaho (15%), and Arizona (12%). Atlas silver
mines are located in Idaho and Mexico.
All of these factors portend higher silver prices in the future. This is
good news for primary silver producers and silver exploration companies like
Atlas. Management hopes that it can take advantage of this potential for silver
through its mines in Idaho and the mines it has options on in Mexico as
described below.
SAN ACACIO MINE
In the second quarter of 1999, Atlas acquired all of the outstanding
capital stock of Olympic Silver Resources, Inc., a Nevada corporation. Through
the acquisition, Atlas acquired control of the mining assets held by Minera
Argentum, S.A. de C.V., a Mexican subsidiary. The subsidiary in turn optioned
the San Acacio mine property ("San Acacio Mine").
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The property is held under an exploration agreement with an option to
purchase. An option payment was due in July of $100,000. The Company timely
paid $75,000 and has a verbal agreement with the optionholder to pay the rest at
a later date. After the $25,000 payment, one additional option payment will
remain in the amount of $100,000. This payment will be due July 2000. In July
2001, Atlas must decide whether or not to purchase the property for $3,200,000,
of which $500,000 may be paid in shares of common stock.
The San Acacio Mine is located approximately five kilometers north of the
city of Zacatecas, in central Mexico. According to the prefeasibility study
developed by the Company, it is a historic mining area with good infrastructure
and a trained labor pool. A pre feasibility study compiled by previous owners
and lessees, indicates that the mine has a drill-indicated resource of 14.4
million ounces of silver. By extending the drill, Management has been able to
identify another five million metric tons of inferred resource. These are not
possible or proven reserves and at the present time, do not even meet the
definition of "resources" required by the SEC Industry Guide 7 which relates to
disclosure of mining activities. It is this indication, however that motivates
Management to pursue the complete feasibility study and further development of
the mine. The resource area covers approximately 7% of the potentially
mineralized strike length and down dip extension of the vein system. Recovery
of 70% of the silver by heap leaching appears possible. See, "Description of
Property."
The Company currently plans to complete feasibility studies on the San
Acacio Mine. If the studies are favorable, as Management expects, then the
Company will begin developing and actively mining the San Acacio Mine.
If the feasibility study is not favorable, Management may explore other
opportunities. See, "Use of Proceeds."
ATLAS FAUSETT CONTRACTING
Because of exploration and other budget constraints, mining on the
Company's properties remained idle since the 1980s. However, on August 10,
1997, the Company's Board met and approved a plan to revitalize the Company for
the purpose of increasing shareholder value and, in the long term, of making
Atlas an operating company with producing silver mines.
The first step in this process was to form a contract mining service. To
accomplish this, on September 1, 1997 the Company purchased $1.4 million in
underground mining equipment from Fausett International, Inc., ("Fausett"), a
privately held mining contracting firm with over 30 years experience in the
mining services business. The Company also hired Lovon Fausett as a consultant.
Lovon Fausett, already on the Board of Atlas, has extensive knowledge and
expertise in all aspects of underground mining. See, "Certain Relationships and
Related Transactions."
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The Company operates its contract mining services under the trade name of
Atlas Fausett Contracting ("AFC").
AFC began contracting work on August 15, 1997. AFC performs site
evaluation, feasibility studies, trouble-shooting and consultation prior to the
undertaking of exploration, core-sampling and mine development. AFC also
performs other pre-development services. AFC's projects include the following:
all types of underground mine development, rehabilitation and specialized
civil construction.
construction of shafts,
blast hole drilling,
construction of tunnels (track and trackless),
specialized blasting,
ramp construction,
controlled and slice production blasting,
raise construction (conventional and alimak),
long hole sampling,
rehabilitation of mine closures, and
mine restoration and development.
Services are contracted for either individually or as joint ventures. AFC
tailors its services to the requirements of a particular project or the specific
needs of an individual client. AFC is also capable of handling a small amount
of work under contract from government agencies but has none at the present
time.
AFC personnel, through Atlas Fausett Contracting or Fausett Mine Services,
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 most of the western United States. AFC operates under a permit from the
Mine Safety and Health Administration and also possesses a permit from the
Bureau of Alcohol, Tobacco and Firearms to handle explosives.
AFC personnel have been responsible for the completion of several
underground mining projects since 1997. They have completed the Caladay Project
near Wallace, Idaho, consisting of a 5100-foot, three compartment shaft,
stations, skip pockets, drifting and extensive core drilling. Another completed
project is the Ropes Project near Ishpeming, Michigan. This project involved
completing a 9000-foot, 12% spiral decline, 7,200 feet of level development on
vein including draw point level, production by sub-level blasting using the VCR
method and extensive core drilling. AFC is also the main contractor at the
Mayflower Mine, a Brimstone Gold Corp. project, outside of Whitehall, Montana.
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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 also works with government agencies
and other mining companies 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 problem faced
by mining companies whose activities are centered on surface mining. Atlas'
policy of engaging in underground mining activities therefore shelters it from
exposure to some of the environmental risk experienced by mining companies in
general.
BUSINESS STRATEGY
AFC is a source of operating revenue for Atlas. Management intends to
demonstrate to the financial community that it has the knowledge and ability to
carry out profitable mining operations. Most companies of Atlas' size often
appear years away from being able to generate cash flow and begin production. In
addition, most of these companies lack the operational mining expertise of AFC.
As a result, positioning the Company both financially and in technical
expertise, Management intends to increase the revenues available from
contracting services, and command a larger portion of the market.
Overall, the Company's business plan is to accomplish a number of
objectives to enhance shareholder value. The are to:
* Become a fully reporting company by registering this Offering.
* Increase market capitalization and asset base to meet NASDAQ (or other
exchange) small cap listing requirements. Management will attempt to
accomplish this through acquisition of other mining companies and
properties with good economic value which are environmentally clean.
* Reach gross annual contracting sales of $2.5 million, and annual timber
sales of $100,000.
* Establish a minimum 40 million ounce reserve potential through exploration
and acquisition of additional properties.
Management hopes to revitalize each of the Idaho mining properties at some
time in the future. The Company, however, does not intend to actively mine its
own properties in Idaho until doing so is financially feasible. Expansion of
current mining of the Idaho properties is therefore not anticipated in the near
future.
COSTS AND SOURCES OF FUNDING
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To date, the Company's activities have been financed primarily through the
sale of equity securities and the issuance of equity for the acquisition of
mining operations and property. No assurance can be given that the Company will
be able to raise the needed capital to develop its properties. See,
"Management's Discussion and Analysis or Plan of Operation."
GOVERNMENTAL APPROVAL
The Company has not applied for the necessary governmental approvals for
development of its properties in Mexico. However, Management intends to apply
for all necessary government approvals as funds are supplied through this
Offering. If additional approvals are necessary for future developments, the
Company intends to provide all the necessary information to regulatory
authorities. The Company may have to adjust its development plans in order to
obtain any requisite approvals. In the event the Company is not able to obtain
the necessary approvals, the Company's development plans and operations could be
negatively impacted.
GOVERNMENTAL REGULATION
The mining industry is regulated on both the federal and state levels in
the United States and in Mexico. Management currently believes its operations
are in compliance with all governmental regulations, and it intends to comply
with all governmental regulations as it continues to explore, develop, and
exploit its properties.
In the U.S., mining activity is affected by two primary categories of laws
and regulations: safety and environmental.
The Federal Metal and Nonmetallic Mine Safety Act prescribes minimum safety
provisions for mines within the United States. Workers within regulated mines
may bring grievances before the U.S. Department of the Interior for violations
of the Act. The Department of Interior investigates these claims and may assess
fines for violations.
Safety is regulated by the Mine Safety and Health Administration ("MSHA"),
created by the Federal Mine Safety and Health Act. MSHA is an arm of the U.S.
Department of Labor. All mining companies must have an MSHA number in order to
legally operate. The Act requires MSHA to inspect the Company's mines for safety
risks at least twice a year. The mining enterprise must also report all injuries
and accidents immediately. If the company is at fault, then corrective measures
are required and fines are assessed.
The enterprise must report all man-hours worked. Man-hours reported are
compared to accident figures reported. The frequency of examination and
inspections is determined by the comparison. All mines and mining activities are
subject to inspection by MSHA inspectors. The inspectors examine the enterprise
for hazards and activities that are unsafe, require corrective measures, and
assess fines based on the severity of the infraction.
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The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), enacted in 1980 and reauthorized by the Superfund Amendments and
Reauthorization Act ("SARA") in 1986, imposes strict liability on landowners,
users and operators whose land is found to be polluted. If pollution is found,
the Environmental Protection Agency ("EPA") may order a company to clean up the
polluted site. In the alternative, the EPA may clean the pollution itself. If
the EPA cleans the pollution from the site, all landowners, users and operators
are jointly and severally liable for the cost of the cleanup.
Nevertheless, environmental soundness is regulated primarily by the various
state agencies. In Idaho, the Department of Lands and the Environmental Quality
Division of the Health & Welfare Department regulate all mining activities where
there may be land disturbance and where water quality may be affected. Each
mining enterprise within the jurisdiction is required to submit a plan of
operation and an environmental impact statement to the agency indicating what,
if any, disturbances would occur. The agency may require a public comment
period before approving the plan.
For safety purposes, Atlas has a policy of storing explosives only when the
Company is conducting blasting activities. To the extent that explosives are
used, the activity is regulated by the ATF.
In Mexico, an environmental permit is issued by the government after first
completing a base line study of the existing property to find out the existing
metal content of the property to be mined. Once a base line is established, the
permit is issued and the Company must furnish an operating plan and impact
statement disclosing the future effects of the property to be disturbed.
EMPLOYEES
As of March 31, 1999, Atlas has two employees and AFC has five employees.
In addition, the Company utilizes the services of various individuals on a
consulting basis. Atlas has also contracted an independent logging contractor
who employs approximately ten people. None of the Company's employees are
covered by a collective bargaining agreement, the Company has never experienced
a work stoppage, and the Company considers its labor relations to be excellent.
COMPETITION
The main silver mining companies in North America include Pan American,
Sunshine Mining Company, Hecla Mining Company and Apex Silver. Each of these
corporations is much larger than Atlas and, in most cases, have significantly
greater resources. However, Management of Atlas believes that the Company is in
a unique position due to its machinery, manpower and know-how. Most companies
of Atlas' size do not enjoy the large amount of silver resources Management
believes it has available to mine.
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AFC must also compete with other smaller companies that provide contract
services related to underground mining. However, AFC has had experience in a
number of different mining techniques. Such related use of this expertise has
been in such things as rock bolting, shotcrete, and grouting for ground support.
AFC has provided tunnel construction expertise for hydroelectric work. AFC has
also acquired and completed mine closure projects under the jurisdiction of the
Forest Service and State and Federal Environmental Agencies.
A review of Dun and Bradstreet industry reports indicates the main
competitors of AFC in the contract mining business as American Mine Services,
Inc., Dynatec Mining Corporation, J.S. Redpath and Small Mine Development.
Except for Small Mine Development, each of these companies is larger than Atlas.
These larger companies have the depth to take on larger projects that require
large capital investments.
Of the underground contracts let on a yearly basis in the western United
States, it is estimated that the total dollar amount averages between $100 and
$125 million. The dollar size of these projects range from smaller, less than
$5 million, to larger, up to $60 million. The larger contractors normally get
the larger projects due to their financial ability to fund major projects. In a
normal year, the larger projects account for approximately 80% to 90% of the
total dollars contracted. This leaves the remaining projects for Small Mine
Development, AFC and a few others.
AFC has the ability to compete on larger projects because of its expertise.
However, to do so, Atlas must be willing to devote the necessary capital,
bonding, and other resources to the larger projects. These resources might be
better used in the development of Atlas' own properties. The goal of Atlas
Management at this time is to show continued growth and profitability in AFC.
This is necessary to support the total corporate organization of Atlas.
Management also intends to use the talents and resources of AFC for Atlas' own
mining projects when AFC is not committed to an outside contract.
AFC has worked for companies such as ASARCO, Echo Bay Minerals, Hecla
Mining Company and Sunshine Mining Company, among others.
Atlas will become a reporting company by registering this Offering.
Historically, however, the Company has not delivered annual reports to security
holders.
The public may read and copy any materials the Company files with the
Securities and Exchange Commission ("SEC") at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.
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The Company also maintains a Web site at http://www.atlasmining.com.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company has not had significant revenues from its mining operations
since the 1980s. Only since 1997 has the Company seen revenues from the
operations of AFC. Consequently, much of the following information centers upon
the Company's plan of operation.
Given a fully subscribed Offering, the Company should be able to satisfy
its cash requirements for the next twelve months and pursue its plans for
expansion. However, the Company may occasionally borrow money in order to
finance a specific project or to fund ongoing operations. Further, the Company
may determine that the objectives described in "Use of Proceeds" should be met
using third party financing regardless of the amount raised in the Offering. In
this event, the Company may set aside a portion of the funds raised in the
Offering to create a "war chest." This might make the Company more attractive to
one of the lenders who specializes in financing mining activities.
If the Company should obtain third party financing it may be able to pursue
the objectives described in this Prospectus without raising the full amount, or
issuing the entire number of shares offered. The Company has identified
$3,000,000 to $4,000,000 as a significant range. If funds raised by this
Offering reach this range, Management believes that financing all or part of the
remaining amounts needed may be advantageous to the Company. The Company's
financial advisers have suggested that using financing at this stage may
accomplish the Company's goals without issuing the full number of shares
offered. This may create greater value per share than would be realized by
issuing the entire number of shares offered.
If funds greater than those identified in the "range" are raised, the
Company may choose to set aside a portion of the proceeds and use lender
financing to complete the objectives described in "Use of Proceeds." The amount
in excess of the range may be used to achieve not only the objectives described
in this Prospectus, but may position the Company to acquire other properties,
primarily in Mexico. In addition, the Company may pursue feasibility studies,
recently acquired properties in Idaho. See, "Description of Business."
Three or four major lenders in the United States and Canada specialize in
financing the mining industry. The Company has received an indication from one
such lender that the lender would like to discuss financing the Company.
Management intends to pursue this positive indication.
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No further stock offerings are planned within the next twelve months. The
Company may consider another offering, however, if the full number of shares is
not issued as a result of this Offering. If the Company is successful in
combining debt and equity financing, the Company's stock may become more robust
in the market. Should this occur, Management may decide to pursue raising
sufficient funds to pursue further acquisitions beyond the objectives described
in this Prospectus.
PROPERTY EXPLORATION AND DEVELOPMENT
Management intends to continue with exploration and development of its
properties. The Company's focus in the near future will be to begin development
of its newly acquired Mexican property. Beyond that, additional exploration and
development will continue on all the Company's properties.
The Company has not mined at the Atlas mine, located in Mullan, Idaho, for
over 20 years. The Sierra mine has not been mined for over 40 years and the
Aulbach claims have not been mined for over 60 years. More exploration is
needed by the Company in the Atlas mine, the Sierra mine and the Aulbach mine.
At this time, Management would prefer to develop and begin mining the San Acacio
mine and possibly use those revenues to fund development of its Idaho
properties.
EQUIPMENT PURCHASES
The Company may need additional equipment to begin development of its newly
acquired properties and possibly to revitalize its previously owned properties.
Management is aware of the requirement to replace aging equipment, or
duplicating existing equipment as more than one mine is developed
simultaneously. Previously, such acquisitions have been accomplished using cash
flow and operating capital. The Fausett transaction involved the partial payment
of stock in consideration for the purchase of equipment. Management may seek a
similar transaction should the necessary equipment become available.
It is likely that additional equipment will be needed for the production of
the Idaho mines. Additional equipment will also be needed as the Company expands
the contract mining services segment of the business. The contract mining
services business has been relatively slow during the first two quarters of
1999, as a result of a downturn of activity in the United States mining
industry. Management believes, that the situation has changed. The companies
that employ the contract mining services have also indicated a belief that the
remainder of the year will be stronger. Should the contract mining services
business become stronger, Management will seek to expand the Company's business.
As the Company develops and expands the San Acacio Mine, it intends to
acquire the following equipment: 1) Six 2yd Loaders at approximately $450,000;
2) Six 16 ton Trucks for approximately $480,000; 3) Compressors with an estimate
value of $75,000; 4) Production Drills with an estimated value of $660,000; 5)
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Miscellaneous equipment budgeted at approximately $300,000 and 6) Track
equipment in the approximate amount of $160,000. These figures are estimates and
may vary once the feasibility study is completed and production begins. The
Company may purchase new equipment, or may acquire used equipment where suitable
and available. As a result, Management believes this is an accurate estimate of
the amount needed, but the investor should consider it solely as a guide. The
cost of the equipment described is included in "Use of Proceeds B San Acacio
Level I Development (Refugio)" and "Use of Proceeds B San Acacio Level II
Development (Purisma)." Management may review and change its opinion as to the
additional equipment and personnel necessary once the feasibility study is
completed and production begins.
Most equipment available today is diesel operated and utilizes a hydraulic
system for most of its operations. All equipment currently held by the Company
is manufactured specifically for underground use and has the proper exhaust
scrubbers and safety factors. Major manufacturers are Wagner, Eimco, and
Svedla.
In removing the minerals from the San Acacio mine, the intent is to put the
proper equipment into the mine to provide the greatest and most efficient
production. The size of the equipment is based on the vein size and hauling
capacity of the adits. This equipment used will be mostly underground, although
the equipment will be used to complete some surface mining at first. This will
be utilized with air track drills, loaders and trucks. When mining operations
begin, the Company anticipates using some of the existing equipment held by AFC,
in addition to "new" equipment purchased specifically for the mining operation,
possibly purchased in Mexico.
PERSONNEL REQUIREMENTS
If the Company is successful in its attempt to raise capital to start
developing its newly acquired Mexican property, it will need to hire additional
personnel. In the alternative, Management intends to subcontract the production
work to a separate entity, or enter into a joint venture with another entity
which is able to perform the production work. The method the Company uses to
move its properties into the production stage will depend upon the ability of
the Company to finance operations. The Company intends to consider the need for
hiring additional personnel in its determination of how it can best move its
properties into production.
The mining industry in the United States, and in Mexico, is limited to a
fairly small group of professionals. As a result, these professionals interact
with each other frequently. The Company may not employ many people at the
present time, but it has access to substantial talent available in the industry.
This talent should be available when the Company begins production in both the
Idaho, and Mexican, mines. Management will determine whether or not to hire
personnel, to contract for their services or to enter into a joint venture with
other companies.
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In addition, it is not customary to hire mining professionals in Mexico by
long term contract. Management expects to utilize local professionals
substantially in Mexico, especially in the first stages of production. Thus,
personnel may be hired short term. To the extent that Mexican personnel are
unavailable, Management will consider sending U.S. professionals to Mexico to
the San Acacio mine, to the extent permitted by NAFTA and other regulations.
This would probably be more expensive. Management expects to hire approximately
132 people to mine the San Acacio property. See, "Description of Business -
Governmental Regulation." Although Management has estimated it labor costs,
Management does not know at this time what those costs will be. This would be
part of the feasibility study envisioned by this Prospectus.
RESULTS OF OPERATIONS
The Company's financial performance is dependent on many external factors.
World prices and markets for metals and minerals are cyclical, difficult to
predict, volatile, subject to government fixing, pegging and/or controls, and
respond to changes in domestic and international political, social and economic
environments. Additionally, the availability and costs of funds for production
and other costs are increasingly difficult to project. All of these factors can
materially affect the financial performance of the Company.
Management cautions a potential investor to review the attached financial
statements carefully. The Company remained relatively stagnant before 1997.
During 1997 and 1999, the Company made relatively large acquisitions which
resulted in a decreased amount of cash and cash equivalents on hand, but a
stable amount of total assets as the assets of the acquisitions were entered on
the books of the Company. Slowly, as the Company's acquired assets become
income producing, revenues should increase.
Management's discussion and analysis must include a review of 1996 figures,
although unaudited, to clarify the changes that the Company has experienced in
operations. In current assets, for example, the Company increased to $592,025
at December 31, 1998, and $592,719 at December 31, 1997, from $181,825 as of
December 31, 1996. Although Cash positions changed from $136,182 in 1996 to
$32,235 in 1997, investments in other current assets increased by $248,673. The
results of these changes were the direct result of the acquisition of Fausett
Mine Services inventory and the beginning of operations as AFC.
In 1998, current assets change little from $592,719 as of December 31,
1997, to $592,025 as of December 31, 1998. In 1998, the Company acquired Sierra
Silver Lead Mining Company ("Sierra Silver") for an allocated value of $276,157.
In the first quarter of 1999, the Company purchased approximately 100 acres of
timber on 5 patented mining claims. The transaction was for 90,000 shares of
Atlas stock, with a value of $27,082. Also in 1999, the Company acquired the
stock of Olympic Silver, a Nevada corporation, for Atlas Common Stock. This
transactions involved the issuance of 741,816 shares of Atlas Common Stock. With
these transactions the Company incurred additional acquisition and
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organizational expenses that reduced cash and cash equivalents of $47,618 as of
December 31, 1998, to $40,549 on June 30, 1999. Management anticipates continued
growth for the Company. The various methods of growth are discussed throughout
this Prospectus. Slowly, as the Company's acquired assets become income
producing, revenues should increase. Total assets at December 31, 1997, are
$1,828,375; December 31, 1998, $1,951,386, and June 30,1999, $1,952,847.
Management anticipates continued growth in assets.
Liabilities have remained fairly constant, with current liabilities at
December 31, 1997, at $236,118 and December 31, 1998, at $221,147. At June 30,
1999, current liabilities are $482,700 and at June 30, 1998, $261,268. The
greater amount indicated at June 30, 1999, reflects a $201,000 working capital
line of credit discussed elsewhere in this Prospectus. Management intends this
obligation to be paid from proceeds of timber sales, and for the amount of
current liabilities to return to the mid $200,000 range.
Revenues are expected to increase, but current losses include the expenses
of the acquisitions made and the lack of revenues from mining contracting. Net
income at December 31, 1997, is $162,461 and at December 31, 1998, is
$(135,963). At June 30, 1999, however, net income is $(466,349) and at June 30,
1998, $(59,999). The June 30 figures are unaudited.
Shareholders' equity has increased due to the acquisitions and
revitalization of the Company. Shareholders' equity is $307,352 at December 31,
1996 (unaudited); increased to $841,200 at December 31, 1997, then to $846,924
at December 31, 1998. Shareholders' equity is $590,668 at June 30, 1999, as
compared to $826,201 at June 30, 1998. The decrease in shareholders' equity as
of June 30, 1999, is the result of losses incurred in the first half of 1999.
Once the Company is operating with a steady revenue base from mining, logging
and contracting, Management believes that this trend will be reversed.
The Company has certain external sources of liquidity to compensate for
recent operating losses. They are sales of investment securities, timber and
properties. Although Management has no desire to liquidate all of these assets,
they are available if liquidation becomes necessary.
DESCRIPTION OF PROPERTY
The Company has assets of real property, mining equipment and mineral
leases and options. These assets are approximately valued at $1,255,734, in the
1998 year-end audited financial statements. The following section describes the
Company's right, title, or claim to its properties and each property's location.
This section also states the Company's present plans for exploration and
development of the properties, a description of the reserves data and an
inventory of equipment and natural resources located on each property.
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SHOSHONE COUNTY, IDAHO
MINING
The Company owns approximately 800 acres of fee simple property and
patented mining claims and 260 acres of mineral rights and unpatented claims.
These are located in the Coeur d' Alene mining district in Shoshone County,
Idaho, commonly referred to as the Silver Valley of North Idaho. The Silver
Valley is the largest silver producing area of the United States. Atlas was
originally incorporated to pursue mining activities on the Atlas mine property
near Mullan, Idaho. This property has some past production of silver, lead,
zinc and copper. However, the ore reserves of this property cannot be determined
without extensive exploration.
The Company may fund the exploration and development of the Coeur d' Alene
mines if the Company has surplus money from this Offering after the stated
Company objectives are achieved. If all the shares of stock are sold, the
Company plans to develop the San Acacio mine in Zacatecas, Mexico, as described
in "Use of Proceeds." Upon the completion of that project, if the Company
produces revenue from the San Acacio Mine, it may use the revenues to further
develop the Shoshone County mines. Alternatively, if the Company produces
revenue from the San Acacio Mine, it may use those revenues to acquire new
properties wholly unrelated to its Coeur d' Alene mines. See, "Use of Proceeds."
The Coeur d' Alene mining district is divided into five separate tracts.
These sections are named for the mines located in that specific section. The
section location and estimated square miles are as follows:
<TABLE>
<CAPTION>
SECTION OF THE COEUR D' ALENE MINING DISTRICT ESTIMATED ACRES
- --------------------------------------------- --------------------------------------
<S> <C>
Atlas 540 acres fee simple and patented, 180
Unpatented
- --------------------------------------------- --------------------------------------
Sierra Trapper Creek 80 acres patented
- --------------------------------------------- --------------------------------------
Aulbach, Section 6 & 7 100 acres patented
- --------------------------------------------- --------------------------------------
Sierra Silver, Woodland Park and 9 Mile 60 acres patented, 80 acres mineral
Rights
- --------------------------------------------- --------------------------------------
Sierra Hardscrabble 20 acres patented
- --------------------------------------------- --------------------------------------
</TABLE>
The largest section is the Atlas Mine. The underground Atlas Mine, idle
since the early 1980's due to exploration budget restraints, is located directly
adjacent and south of the Lucky Friday Mine, owned and operated by Hecla. The
Lucky Friday Mine currently produces over five million ounces of silver
annually. 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.
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TIMBER
Management estimates that the aforementioned properties contain
approximately 2.5 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 $150 per thousand board feet. The Company implements
reforestation techniques to replenish its timber supply.
The Company acquired its Sierra section property through the purchase of
Sierra Silver Lead Mining Company. Through this purchase the Company acquired
approximately 329 acres of mineral rights which includes 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.
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 management values at approximately $75,000,
which is included in the total timber value estimate in the paragraph above.
The Company acquired its Aulbach claims in March 1999 from Trail Gulch Gold
Mining Company. Through this purchase the Company acquired approximately 100
acres of mineral rights which includes approximately surface rights and timber.
Management estimates that 500,000 board feet of timber are on the property with
an approximate value at $75,000.
PRINCIPAL OFFICE
Atlas Mining Company rents property and office space from Fausett
International, Inc., in Osburn, Shoshone County, Idaho. The address of the
property is 1221 W. Yellowstone Avenue, Osburn, Idaho 83849. The property
includes approximately 3.5 acres of ground for equipment storage, two shops and
two storage buildings and an office building. The office building is 1600
square foot. The rent is $1,100 per month paid to Fausett, with no cancellation
penalty. Fausett is wholly owned by Lovon Fausett, a director and shareholder
of the Company.
SAN ACACIO MINE, ZACATECAS, MEXICO
Management intends to use the majority of the funds of this Offering to
fund the development of the San Acacio Mine, near Zacatecas, Mexico. The Company
controls mining assets held under its Mexican subsidiary Minera Argentum, S.A.
de C.V. ("Minera"). Minera controls silver properties in the Zacatecas District
of Mexico.
LOCATION
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The state of Zacatecas is located approximately 600 miles north of Mexico
City. The San Acacio Mine is approximately 5 miles north of the city of
Zacatecas, the capital city of Zacatecas. The mine is located in the Veta
Grande sub-district of the famous Zacatecas silver camp. Zacatecas has a
population of about 150,000 people and is served by railroad, an international
airport and paved highways.
The city lies within the Mesa Central province, a high plateau interrupted
by clusters of hills and mountain ranges lying between the two Sierra Madre
mountain belts in Mexico. Atlas' Zacatecas property is 1179.13 hectares,
approximately 2900 acres. The highest ridge is approximately 2900 meters above
sea level, while the area of the project is between the 2500 and 2600 meter
elevations. The deepest access to the mine, the Purisima adit, is approximately
2380 meters above sea level. The property is accessible by paved road and has
secondary roads into the property.
OWNERSHIP OF THE PROPERTY
The San Acacio Mine and the Zacatecas district have a production history
dating back to the early Spanish Colonial era. The San Acacio property is under
an exploration agreement with an option to purchase to Minera Argentum, S.A. de
C.V., a subsidiary of Atlas Mining Company. The grantor of the option is Minera
San Acacio, S.A. and the principal owner of Minera San Acacio, Amado Mesta
Howard. The Company has paid $175,000 in option payments to date. The last
option payment of $100,000 was due July, 1999. $75,000 was timely paid; the
Company reached a verbal agreement with the optionholder to pay the rest of the
option at a later date. One $100,000 option payment remains, due July 2000. In
July 2001, the Company must decide whether to purchase the property for
$3,200,000, of which $500,000 may be paid in shares of common stock. There are
no other conditions precedent on the purchase of the property. The above amounts
do not include the 15% I.V.A. (valued added) tax. This tax is returned after tax
returns are filed.
FEASIBILITY STUDIES CONDUCTED ON THE LAND
The manager of Atlas' New Business Development Team, Richard J. Tschauder,
conducted a pre-feasibility study on the San Acacio Mine in April 1999. The
Company is analyzing data from 30 to 50 rock density samples. A number of
estimates on the in-situ mineral have been made for the San Acacio Mine, however
none of these estimates are yet at the stage where a proven and probable reserve
can be published. The company is currently in the process of acquiring the
critical information that will be necessary to make a proven or probable reserve
report.
PREVIOUS OPERATIONS:
Previous operations, operators and reports made regarding the San Acacio
Mine:
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1. A 1935 Spanish language report by T. Skewes Saunders of Mexico City
defined a limited reserve of silver in the vicinity of the Refugio level.
The reserve used a density factor of 1.5 for backfill material, and was
based on volumetric considerations and underground sampling.
2. A 1935 English language report by James Berry of Compa ia Minera San
Bartolo, S.A., identified a proven reserve of 117,000 metric tons grading
400 g/t silver and probable ore of 612,500 metric tons averaging 370 g/t
silver and 1.5 g/t gold. This work was based on underground sampling,
following rehabilitation of the Refugio level and sampling of the vein for
120 meters along strike. The samples average 452 g/t silver and 1.5 g/t
gold over three meters. Outcrop sampling above the Refugio level over a
strike length of 800 meters averaged 400 g/t silver and 1.1 g/t gold over
an average width of 6 meters. The maps showing this work are incomplete.
3. A 1986 Spanish language report by IMMSA, a Mexican mining company,
tabulated a proven and probable reserve of 1,669,868 metric tons grading
350 g/t over an average of 2.81 meters in width. This number was based on
underground samples, using 2.5 g/cm3 assumed density for in-place material,
and estimations of the recovery based on previous work. Only limited maps
showing sample locations are available.
4. The Silver Standard reserve estimate was the first accomplished using
a database derived solely from assays of core. Silver Standard calculated a
computer generated polygonal reserve utilizing a 50 meter area of influence
for each drill hole and a two ounce per ton(86g/t) cutoff grade. Assumed
specific gravities were 2.55 for vein material and 1.75 for stope fill. The
combined reserve estimate, as calculated by Silver Standard, is 2.47
million tonnes of vein and backfill material grading 1.82 grams of silver
per metric tonne, containing 449,580 kilograms of silver, or approximately
14.4 million ounces, when converted to Imperial measure. Approximately 9.8
million ounces are in vein material and 4.7 million ounces are in backfill.
This reserve covers only the area drilled by Silver Standard, an area
approximately 600 meters in strike length and to a depth of 70 meters, but
including some outlying holes. This area overlaps with, but includes less
than half of, the areas where previous reserves have been estimated.
Because of the uncertainties associated with the previous resource
estimates, no attempt to combine the Silver Standard reserve with previous
numbers will be attempted.
5. Using the same cutoff, density and area of influence assumptions,
Minera Argentum has checked the Silver Standard reserve by building a
polygon reserve in longitudinal section. The resulting tabulation totaled
2.54 million tonnes grading 185 g/t silver, yielding 470.867 kilograms of
contained silver. This estimate is within 5% of the Silver Standard
estimate.
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<PAGE>
Silver Standard Resources, Inc., the predecessor operators to the Company,
acquired an option on the property, in 1994. Their initial evaluation included
surface rock and soil sampling, a geophysical survey and trenching. Concurrent
with that work, partial access to the underground through the Purisima and
Refugio level was obtained and some rehabilitation work was completed. This
allowed limited access and sampling, but most of the underground samples taken
were of the foot wall of the vein, rather than from the vein itself.
Nevertheless, some high grade values were obtained from the Purisima level. A
percussion drill program was initiated, drilling directly down the vein.
However, this method failed to achieve recovery in backfill material, and the
program was abandoned after the ninth hole was completed. The holes average 16
meters in depth, with the deepest being only 33 meters.
In late August 1995, a diamond drill program was initiated to test the
potential for a near-surface open pit deposit and to test the down drip and
lateral extensions of the vein system. By late November, a total of thirty-two
diamond drill holes were completed and 4060.87 meters of BQ, NQ, and HQ diameter
cores were logged, split and sampled. The work identified four separate
subparallel vein: Veta Blanca, Veta Chica, Veta Grande and Veta Grande
Intermedio. The bulk of the intercepts are on the Veta Grande structure. The
Company has copies of all drill logs and assay certificates. The core has been
examined, and it has been determined that core sampling procedures were of good
quality. Recovery was a problem in some fault gouge in the hangingwall, and in
some of the backfilled material. These problems will be accounted for in the
future reserve estimates.
As Silver Standard had hoped to define an large open pit target, interest
in the target waned, and no work was completed in 1996 and 1997. In 1997, faced
with a large final payment, Silver Standard attempted to negotiate an extension
of the option period. However, since the company had performed no work in two
years, the owner refused, and Silver Standard lost the project. The owner
immediately contacted the Company. The Company entered into a three-year option
to buy the property, with no underlying royalties.
WORK ACCOMPLISHED TO DATE: The Company is currently collecting 30 to 50 rock
density samples. Also, the maps the Company uses for the topography of land are
enlargements of government maps made for the area. The Company believes that
detailed topographical maps were made by the previous operators of the mine,
Silver Standard, and is attempting to locate those maps. The Company is
currently checking the locations of previous underground workings as marked by
blueprints of the location.
In March 1999, Atlas developed a metallurgical testing program to design a
process to recover silver from the San Acacio ores. Early exploitation will
concentrate on highly oxidized material; initial work will be focused on the
upper levels of the vein system. Company geologists collected four samples;
these were shipped to American Assay Labs in Sparks, Nevada, for preliminary
analysis. Each sample weighed approximately 400 pounds (189 kilograms). All of
the samples assayed approximately the same silver content, though there is
enough variation to construct a preliminary grade-recovery curve. The sample
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<PAGE>
average recovery is 73.9%, 75.8% for the oxide ore, 68.3% for the sulfide ore.
Though there is some scatter, there is a tendency for better recoveries at
higher grades. A higher grade sample will be analyzed in order to confirm this
theory.
Based upon the existing drill results and extending the area of influence
to the Purisima level, Management has estimated that high inferred levels of
silver are located in the San Acacio Mine. The total strike width of the vein
on the property is seven kilometers (4.2 miles). Approximately, 5.4 kilometers
(3.2 miles) of vein remain to be explored, in an area unpenetrated by drilling
or mine entry, where the ore zone is expected to lie at reasonable depths below
the existing surface. Management believes the potential here is enormous, but
cannot be proven without more drilling.
ROCK FORMATIONS AND MINERALIZATION
The Veta Grande, is a vein structure that is approximately 7 kilometers in
length and two to thirty meters wide. It is underlain by early Cretaceous
Chulitos Formation, a series of submarine andesite flows and intercalated
sedimentary rocks. The andesite flows are altered adjacent to the major vein
structures encountered. The contact zones of the vein systems are clay gouge
zones in places, while in other places the walls are silicified. The veins are
silica-carbonate fissure fillings containing pyrite, anglesite, cerussite,
native silver, argentite, freibergite, proustite, galena, sphalerite,
cerargyrite and rare chalcopyrite in a gangue of chalcedony, quartz, amethyst
and calcite. The Veta Grande pinches and swells, splays into sigmoid loops and
is accessible from the surface to a depth of at least 380 meters.
SUBSURFACE IMPROVEMENTS AND EQUIPMENT
The mine has over 10,000 feet of tunnels accessible via two separate adits
and a small rail system. There are also three shafts on the property, but these
are not easily accessible at this time. The property is close to electrical and
other supplies and there appears to be a suitable source of water in the area.
MINING PLANS
The area targeted for initial work includes the drill-indicated resource
and the areas of pre-existing mine workings, where backfilled stopes can be
accessed for ore grade fill. This consists of a block 1.3 kilometers (4200
feet) long, and approximately 220 meters (680) feet) deep, where the main vein
appears to average 10 meters (32 feet) in width. Atlas estimates that up to six
million metric tonnes of ore grade material may be within this block. The block
contains the drill-indicated resource, plus the reserves calculated by other
companies on the basis of underground sampling.
Management plans to exploit a typical epithermal vein system at the San
Acacio Mine. The vein in the upper levels of epithermal systems tend to branch
and splay, with multiple hangingwall and footwall structures, while the deeper
levels are more likely to exploit a single discreet vein. Thus, in the upper
levels, the mine plan by necessity must have a large degree of flexibility. The
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deeper levels can likely be exploited by a more rigid and more efficient mining
method. Wall rocks in the upper levels are more likely to be altered, and
ground conditions poorer, therefore requiring additional labor for good support.
Atlas intends to begin mining the San Acacio property from the surface and
pulling backfill material from the stopes in order to attain initial positive
cash flow. A mining contractor will be used to mine, crush, transport and stack
mineral from the surface operation. Atlas will utilize the services of AFC
personnel and local labor to extract ore from underground and for the processing
plant. It is estimated that AFC will employ approximately 132 workers and 12
key employees when in full production.
Existing accessible drifts in the footwall of the vein will be extended.
This is necessary to recover back fill material and to develop stopes in the
areas between existing mine workings. Development work will benefit from the
use of the Purisima adit, which gives the Company access to deeper levels of the
mine, and the Refugio adit, which gives access to intermediate levels. A second
adit is also planned for the Refugio level. The company believes it can extract
2000 metric tonnes per day from the Refugio level. Another 2000 tonnes per day
can be extracted from the Purisima level once the open pit is exhausted and the
Purisima haulage modified.
In the open pit, Management estimates it can establish six working faces on
the Veta Grande between the west end of the property and the Intermediate shaft.
From these six faces, Management believes it can mine 2000 metric tonnes per
day.
The underground mining plan calls for developing haulage drifts on three
levels: the Purisima, the Rodadillo, and the Refugio. The existing filled
stopes, which may contain as much as 30% of the total resource, will be
exploited from these three levels. During this time, the Company will have the
opportunity to optimize extraction from multiple entry points, identify ore
blocks on hangingwall and footwall structures, and note areas which are amenable
to more efficient mining methods.
Initial development for backfill material will take place on the Refugio
level. The 400 meter Refugio adit will be enlarged for 16 ton trucks and a
drift will be driven westerly in the immediate footwall of the vein system. A
second Refugio adit will be driven 1000 meters west of the existing adit to
provide a second access to the footwall. Drifts will be driven to the east and
west from this adit in the footwall of the vein. Crosscuts will be driven into
known workings for ore extraction, while small portable diamond drills such as a
Hagby-Bruk 100 or a Diamec 250 will be used to probe the area between known
stopes, and to test for hangingwall and footwall veins.
On the Purisima level, the Company intends initially to extract broken rock
from two large stopes, the Hundido de Guadalupe and the Rodadillo stope. The
Purisima drift will be extended 260 meters to access the Hundido de Guadalupe
while ore is being extracted from the Rodadillo stope. This effort will use the
existing haulage, without substantial modification. Once cash flow can support
the effort, the Purisima level will be enlarged to accommodate a conveyance
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system and a conveyor and underground crusher will be installed. An access
drift will be driven in the footwall of the vein to the west from the end of the
Purisima, and ramps will be extended to the Rodadillo level, where a second
drift will be driven westerly. Crosscuts will be extended from the Purisima
level into known stopes for backfill extraction, and a small diamond drill will
be used to test the walls.
During the initial phase of mining (backfill extraction), the Company will
develop plans to extract the material. The Company will evaluate extraction
methods for the remaining mining blocks on a block-by-block basis. However, the
mine will easily lend itself to end slicing, a method used by AFC personnel to
exploit the Ropes gold deposit in Michigan. This method simply calls for
slicing the vein from the edges of the existing stopes. Some smaller pillars
will be ring drilled and shot, while other areas may require shrink stoping or
cut and fill methods. This extraction method may call for intermediate levels,
which can be developed from ramps or adits.
PLANT SITE LOCATION
The Company is currently considering and researching various potential
plant sites. All have advantages and disadvantages. The Company has narrowed
the site location to three possible sites. All sites are currently available
and are comparable in price.
Site 1 is a hillside directly opposite the Purisima adit. This is a small
site, capable of handling material pulled from the adit. The site has the
advantage of being close to the adit, and is only slightly uphill from the
portal. Water is available and power is in close proximity. The disadvantage
is that this site is on Ejido land, and can only be leased.
Site 2 is a valley leach site, east of the Refugio adit. It is the most
far site from power and water, would be a downhill haul from the pits and
Refugio levels, but an uphill haul from the Purisima level. In addition to the
potential problems of a valley leach area where flash flooding is a danger, the
site is also on Ejido land.
Site 3 is a flat area known as "La Plata." It is approximately two
kilometers by road from the open pit area, and four kilometers by road form the
Purisima adit. The land is private, has been used as a plant site in the past,
and is for sale. Water and power are close by. The disadvantage is that it is
the furthest from the mine, and requires an uphill haul over a vertical span of
about 100 meters from the open pit ore, and approximately 300 meters from the
Purisima ore. However, it is preferred because of the flat area and because of
historic use as a processing site. The government agencies charged with issuing
the necessary permits also favor this site over other, undisturbed locations. A
road connects this site with the mine, but improvements will be necessary.
ENVIRONMENTAL
52
<PAGE>
No environmental obstacles have been noted for the mining of the San Acacio
mines. The project is in a 451 year old mining camp, and most areas have been
contaminated to some degree with mine dumps, tailings piles and other mining
pollutants and equipment. Meetings with Manuel de Jesus Macias Patino of the
SEMARNAP office in Zacatecas, and meetings with CONAGUA officials have been very
productive. The Company has been assured that it will only be required to
produce a baseline study. Within one month of providing the baseline study,
according to SEMARNAP officials in Zacatecas, the Company should receive its
construction and operating permits. The present Governor or the State, Ricardo
Monreal, has also pledged his personal support in helping to get the project on
line as quickly as possible.
The Company has made no comprehensive evaluation of San Acacio's existing
permits to determine if the existing operation is in full compliance. The
biggest obstacle will be obtaining an explosives permit. Jose Casta eda, the
regional director of Explosivos de Norteamerica in Zacatecas, a federal agency,
has offered his support in obtaining an explosives permit, if necessary.
The Company anticipates budgeting three months for the baseline study, plus
two months for permitting.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors, and persons who own more than 10% of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC") and
any stock exchange on which the Company's securities are listed. These
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. The Company believes that it has had no
filing obligation to the time of this filing and, therefore, the filing
requirements applicable to its officers, directors, and greater than 10%
beneficial owners were complied with.
MARKET INFORMATION
The Company's stock has historically traded on the Over-the Counter
Bulletin Board Market
("OTC BB"). The stock has not traded with the advent of recent Securities and
Exchange Commission ("SEC") rules, and similar National Association of
Securities Dealers ("NASD") rules, requiring that companies enter the SEC
disclosure system and become fully reporting in order to trade OTC BB. As a
result, there is no way to determine at what price the Company's stock would
trade immediately preceding the Offering.
53
<PAGE>
The following table lists the high and low bid information for the
Company's stock for the past two fiscal years plus the interim period for which
financial statements are required and furnished. The bid information is listed
by quarter and is provided by Pennaluna & Company. These quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
Quarter High Low
------- ---- ---
2Q 1999 .25 .18
1Q 1999 .25 .18
4Q 1998 .35 .25
3Q 1998 .50 .25
2Q 1998 .50 .44
1Q 1998 .81 .50
4Q 1997 .69 .53
3Q 1997 .60 .35
2Q 1997 .35 .13
1Q 1997 .13 .13
As of June 30, 1999, the approximate number of record holders of the
Company's Common Stock was approximately 1,735.
The Company has not paid any cash dividends on its Common Stock since its
incorporation and anticipates that for the foreseeable future, earnings, if any,
will continue to be retained for use in its business.
EXECUTIVE COMPENSATION
The Company currently has one executive officer, William T. Jacobson, the
Company's President and Chief Executive Officer. The Company is currently
compensating Mr. Jacobson at the rate of $72,000 per year. In addition, the
Company pays medical insurance premiums for Mr. Jacobson in the amount of
$3230.40 per year. Mr. Jacobson is also covered under a life insurance policy in
the amount of $100,000; the Company pays the premiums on this policy.
Mr. Jacobson is entitled to use one of the Company's vehicles. The Company
leases the vehicle for $7,937 annually.
The following table summarizes the compensation paid to the Company's
executive officers. Information is provided only for 1998 since the Company is
not a reporting company under the Securities Exchange Act of 1934.
54
<PAGE>
SUMMARY COMPENSATION TABLE
Name and principal position Year Salary ($)
- --------------------------------------- ---- -----------
William Jacobson, President and CEO 1998 72,000
- --------------------------------------- ---- -----------
The Board of Directors has authorized the issuance of certain stock options
to Directors and Officers. See "Description of Securities."
FINANCIAL STATEMENTS
The financial statements included with this Prospectus have been audited by
the Company's independent accountant, Moss Adams, LLP, Spokane, Washington, for
the periods and to the extent set forth herein.
A potential investor is strongly encouraged to review the Company's
financial statements.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
The Company has experienced no recent change in or disagreement with its
accountant. The Company's present auditor, Moss Adams, LLP, Spokane,
Washington, has been the Company's auditor since 1997. Management of the
Company intends to keep Moss Adams, LLP, as its auditor for the foreseeable
future.
55
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Idaho Revised Statutes and certain provisions of the Company's Articles
of Incorporation and Bylaws under certain circumstances provide for
indemnification of the Company's 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 the Company's
Articles and Bylaws and to the statutory provisions.
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 the Company's 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 the 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 the Company's
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 the
Company to purchase and maintain insurance which protects its Officers and
Directors against any liabilities incurred in connection with their service in
such a position, and such a policy may be obtained by the Company.
Article VII of the Company's Restated 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."
56
<PAGE>
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of this Offering are as follows. Estimates are marked "e".
Registration fees: $2,212.50
State taxes and fees: $13,500
Trustees' and transfer agents' fees: $22,393.75e
Costs of printing and engraving: $22,393.75e
Legal fees: $25,000e
Accounting fees: $15,000e
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.
In 1997, Atlas issued 842,964 shares of common stock (valued at $276,157)
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.
In November 1998, the Company changed its capitalization from 6 million to
60 million shares of no par common stock and authorized the issuance of 10
million shares of one-dollar par value noncumulative nonvoting convertible
preferred stock.
In February 1999, the Company issued 741,816 shares 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.
In March 1999, the Company issued 90,000 shares of Common Stock valued at
$27,082 to Trail Gulch Gold Mining Company for 100 acres of land, including five
patented mining claims.
All of these transactions were private placements exempted under Section
4(2) of the Securities Act of 1933.
EXHIBITS
INDEX TO EXHIBITS
(a) The following documents are filed as part of this Registration Statement
on Form SB-2:
1. Unaudited financial reports dated June 30, 1999
2. Financial Statements dated December 31, 1998 and December 31, 1997.
57
<PAGE>
Independent Auditors' Report
Balance Sheet
Statements of Income
Statements of Changes in Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
3. Exhibits
3.1 Articles of Incorporation, as amended
3.2 Bylaws
3.3 Opinion of counsel regarding the legality of the securities to be issued
3.4 Letter on unaudited financial information
3.5 Employment Agreement with William T. Jacobson
3.6 Escrow Agreement
3.7 Corporate Resolution authorizing the offer and issue of shares
UNDERTAKINGS
The undersigned small business issuer hereby undertakes:
(a) 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;
(b) 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.
59
<PAGE>
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
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 small business issuer will, unless in the opinion of its counsel
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 Securities Act and will be governed by
the final adjudication of such issue.
(c) That:
(i) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the small business issuer
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the
time it was declared effective;
(ii) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus 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.
59
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Osburn, State of Idaho, on , 1999.
ATLAS MINING COMPANY
By: /s/ William T. Jacobson
-------------------------------------
William T. Jacobson,
Chief Executive Officer, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
/s/ William T. Jacobson November 12, 1999
- ----------------------------- ----------------------------
William T. Jacobson Date
Principal Executive Officer
/s/ Kurt Hoffman November 12, 1999
- ----------------------------- ----------------------------
Kurt Hoffman Date
Principal Executive Officer
BOARD OF DIRECTORS:
/s/ William T. Jacobson November 12, 1999
- ----------------------------- ----------------------------
William T. Jacobson Date
Director
/s/ Kurt Hoffman November 12, 1999
- ----------------------------- ----------------------------
Kurt Hoffman Date
/s/ C. Lovon Fausett November 12, 1999
- ----------------------------- ----------------------------
C. Lovon Fausett Date
Director
60
<PAGE>
/s/ Jack Harvey November 12, 1999
- ----------------------------- ----------------------------
Jack Harvey Date
Director
/s/ Thomas E. Groce November 12, 1999
- ----------------------------- ----------------------------
Thomas E. Groce Date
Director
61
<PAGE>
<TABLE>
<CAPTION>
Assets
----------- -----------
ATLAS MINING COMPANY AS OF JUNE 30, 1999 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash . . . . . . . . . . . . . . . . . . $ 40,549 $ 49,423
Investment securities available for sale 30,099 27,107
Investment in silver and gold bullion. . 2,014 2,014
Trade accounts receivables . . . . . . . 43,117 314,720
Note receivable, current . . . . . . . . 55,871 -
Other current receivables. . . . . . . . 131 8,300
Mining supplies. . . . . . . . . . . . . 213,289 213,289
Deposits and prepaids. . . . . . . . . . 19,851 7,066
----------- -----------
TOTAL CURRENT ASSETS . . . . . . . . . . 404,921 621,919
----------- -----------
PROPERTY AND EQUIPMENT
Land and tunnels . . . . . . . . . . . . 326,259 126,710
Buildings and equipment. . . . . . . . . 77,680 77,680
Mining equipment . . . . . . . . . . . . 1,080,750 1,081,750
Office equipment . . . . . . . . . . . . 10,000 10,000
Vehicles . . . . . . . . . . . . . . . . 83,972 63,274
----------- -----------
1,578,661 1,359,414
Accumulated depreciation . . . . . . . . (384,614) (208,460)
----------- -----------
. . . . . . . . . . . . . . . . . . . . . 1,194,047 1,150,954
----------- -----------
DEFERRED TAXES . . . . . . . . . . . . . . 16,953 -
----------- -----------
INVESTMENTS AND OTHER ASSETS
Notes receivable, noncurrent . . . . . . 31,351 -
Other investments. . . . . . . . . . . . 305,575 -
----------- -----------
. . . . . . . . . . . . . . . . . . . . . 336,926 -
----------- -----------
. . . . . . . . . . . . . . . . . . . . . $1,952,847 $1,772,873
=========== ===========
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
Liabilities
------------ -----------
ATLAS MINING COMPANY AS OF JUNE 30, 1999 1998
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accruied expenses. . . . . . . . . . . . . . . . . . . $ 102,666 $ 96,819
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 2,431
Line of credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,508 -
Current maturities of long-term debt. . . . . . . . . . . . . . . . . . . . 332,446 162,018
------------ -----------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 482,700 261,268
------------ -----------
LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 684,096 684,976
------------ -----------
ESTIMATED STOCK REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . 195,383 -
------------ -----------
DEFERRED TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 428
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, 1999 no par value; 1998 $0.10 par
value 1999 60,000,000 shares authorized; 1998 6,000,000
shares authorized, 1999 5,213,965; 1998 3,859,836 issued and outstanding. 2,081,711 405,297
Preferred stock, $1.00 par value 10,000,000 shares
authorized, noncumulative nonvoting, nonconvertibles,
none issued or outstanding. . . . . . . . . . . . . . . . . . . . . . . . - -
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . - 1,151,345
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . . (1,264,731) (722,418)
Accumulated comprehensive income (loss), net of
deferred (benefit) taxes 1999 $(16,953); 1998 $428. . . . . . . . . . . . . (67,811) 1,285
------------ -----------
749,169 835,509
Less cost of 1999 314,852; 1998 15,000 shares of treasury stock . . . . . . (158,501) (9,308)
------------ -----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590,668 826,201
------------ -----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,952,847 $1,772,873
============ ===========
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
Income
---------- ---------
ATLAS MINING COMPANY YEAR TO DATE, JUNE 30, 1999 1998
---------- ---------
<S> <C> <C>
Operating revenue:
Contracting revenue. . . . . . . . . . . . $ 42,565 $931,055
Timber sales . . . . . . . . . . . . . . . 19,400 3,988
Equipment rental income. . . . . . . . . . - 305
---------- ---------
. . . . . . . . . . . . . . . . . . . . . . 61,965 935,348
---------- ---------
Operating expenses:
Contract costs . . . . . . . . . . . . . . 117,315 737,292
Timber costs . . . . . . . . . . . . . . . 948 4,468
General and administrative . . . . . . . . 352,856 220,404
---------- ---------
. . . . . . . . . . . . . . . . . . . . . . 471,119 962,164
---------- ---------
OPERATING INCOME (LOSS). . . . . . . . . . . (409,154) (26,816)
---------- ---------
Financial income (expense):
Interest expense . . . . . . . . . . . . . (58,452) (31,632)
Investment income. . . . . . . . . . . . . 1,337 299
---------- ---------
. . . . . . . . . . . . . . . . . . . . . . (57,115) (31,333)
---------- ---------
INCOME (LOSS) BEFORE INCOME TAXES. . . . . (466,269) (58,149)
Provision (benefit) for income taxes . . . . 80 1,850
---------- ---------
NET INCOME (LOSS). . . . . . . . . . . . . . $(466,349) $(59,999)
========== =========
Basic earnings (loss) per share. . . . . . . $ (0.036) $ 0.056
========== =========
Diluted earnings (loss) per share. . . . . . $ (0.036) $ 0.053
========== =========
</TABLE>
Page 3
<PAGE>
<TABLE>
<CAPTION>
Cash flows
---------- ---------
ATLAS MINING COMPANY YEAR TO DATE, JUNE 30, 1999 1998
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(466,349) $(59,999)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,769 87,202
Gain on sale of property and equipment
Gain on available for sale investments. . . . . . . . . . . . . . . . . . . . . . . . . - (568)
Appreciation in gold and silver bullion . . . . . . . . . . . . . . . . . . . . . . . . - (938)
(Increase) decrease in:
Trade accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,639 (59,929)
Mining supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 563
Deposits and prepaids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,860 27,755
Other current receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (8,300)
Increase (decrease) in:
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 41,305 15,150
Income taxes payable
---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . (276,776) 936
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available for sale investments . . . . . . . . . . . . . . . . . . . . . . . - (17,844)
Sale of available for sale investments. . . . . . . . . . . . . . . . . . . . . . . . . . - 47,249
Purchases of other investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,181)
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . - (2,500)
Payments on notes receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,649 -
Certificates of deposits, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,050 -
---------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES. . . . . . . . . . . . . . . . . . . . 26,518 26,905
---------- ---------
</TABLE>
Page 4
<PAGE>
<TABLE>
<CAPTION>
Cash flows 2
--------- ---------
ATLAS MINING COMPANY JUNE 30, 1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of capital stock $ 26,777 $ 45,000
Payments on long-term debt. . . . . . . (3,836) (55,653)
Short-term borrowings . . . . . . . . . 220,248 -
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES . . 243,189 (10,653)
--------- ---------
NET INCREASE (DECREASE) IN CASH . . . . (7,069) 17,188
Cash, beginning of year . . . . . . . . . 47,618 32,235
--------- ---------
Cash, end of year . . . . . . . . . . . . $ 40,549 $ 49,423
========= =========
SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid during the year for:
Interest
========= =========
Income taxes
========= =========
</TABLE>
Page 5
<PAGE>
<TABLE>
<CAPTION>
-------- -----
ATLAS MINING COMPANY JUNE 30, 1999 1998
-------- -----
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCIAL ACTIVITIES
Change in net unrealized loss on investment securities
available for sale, net of deferred taxes . . . . . . . . $ 31,297 $ -
======== =====
Issuance of common stock in connection with
acquisition of Olympic Silver, Inc. . . . . . . . . . . . $214,613 -
======== =====
Transfer of investment in connection with
acquisition of trail Gulch Gold Mining Co., Inc. property $ 27,082 -
======== =====
</TABLE>
Page 6
<PAGE>
ATLAS MINING COMPANY
NOTES TO THE FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999, AND 1998
In the second quarter of 1999, Atlas Mining Company ("Atlas") acquired all the
outstanding capital stock of Olympic Silver Resources, Inc. ("Olympic"), a
Nevada corporation. Through the acquisition, Atlas acquired control of
Olympic's Mexican subsidiary, Minera Argentum, S.A. de C.V. ("Minera"). Minera
has an option on the San Acacio Mine in the state of Zacatecas, Mexico. Atlas
issued 692,300 shares of common stock and will issue an additional 49,516 shares
for a total of 731,816 shares for 100% of the outstanding Olympic stock. The
Olympic acquisition was accounted for under the purchase method of accounting,
with substantially all the purchase price of $230,383 has been allocated to
investments in mining property and land.
Page 7
<PAGE>
ATLAS MINING COMPANY
1998 FINANCIAL STATEMENTS
<PAGE>
ATLAS MINING COMPANY
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS . 1
FINANCIAL STATEMENTS
BALANCE SHEETS . . . . . . . . . . . . . . . . . . . 2-3
STATEMENTS OF INCOME . . . . . . . . . . . . . . . . 4
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY. . . . 5
STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . 6-8
NOTES TO FINANCIAL STATEMENTS. . . . . . . . . . . . 9-20
</TABLE>
<PAGE>
Independent Auditor's Report
----------------------------
To the Board of Directors
Atlas Mining Company
Osburn, Idaho
We have audited the accompanying balance sheets of Atlas Mining Company as of
December 31, 1998 and 1997, and the related statements of income, changes in
stockholders' equity, and cash flows. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Atlas Mining Company as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Subsequent to year end, the Company purchased a controlling interest in Olympic
Silver Resources, Inc. as described in Note 13.
/s/ Moss Adams, LLP
Spokane, Washington
January 22, 1999, except for Note 13
which is dated February 5, 1999
1
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 47,618 $ 32,235
Certificate of deposit 41,050 -
Investment securities available for sale (Note 4) 69,221 55,944
Investment in silver and gold bullion 2,014 1,076
Trade accounts receivable 84,887 254,791
Note receivable, current (Note 5) 60,871 -
Other current receivables 35,364 -
Mining supplies (Notes 6 and 8) 213,289 213,852
Deposits and prepaids (Note 10) 37,711 34,821
----------- -----------
TOTAL CURRENT ASSETS 592,025 592,719
----------- -----------
PROPERTY AND EQUIPMENT (Notes 3, 6, and 8)
Land and tunnels 299,177 126,710
Buildings and equipment 77,680 77,680
Mining equipment 1,080,750 1,079,250
Office equipment 10,000 10,000
Vehicles 83,972 63,274
----------- -----------
1,551,579 1,356,914
Accumulated depreciation (295,845) (121,258)
----------- -----------
1,255,734 1,235,656
----------- -----------
DEFERRED TAXES (Note 7) 9,128 -
----------- -----------
INVESTMENTS AND OTHER ASSETS
Notes receivable, noncurrent (Note 5) 33,000 -
Other investments (Note 10) 61,499 -
----------- -----------
94,499 -
----------- -----------
$1,951,386 $1,828,375
----------- -----------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1998 AND 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
1998 1997
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 61,361 $ 81,669
Income taxes payable 80 2,431
Line of credit (Note 12) 34,100 -
Current maturities of long-term debt (Note 6) 125,606 152,018
----------- -----------
TOTAL CURRENT LIABILITIES 221,147 236,118
----------- -----------
LONG-TERM DEBT (Note 6) 687,406 750,629
----------- -----------
ESTIMATED STOCK REDEMPTION (Note 3) 195,909 -
----------- -----------
DEFERRED TAXES (Note 7) - 428
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 8 and 10)
STOCKHOLDERSEQUITY (Note 3)
Common stock, 1998 no par value; 1997 $0.10 par value
1998 60,000,000 shares authorized; 1997 6,000,000
shares authorized, 1998 4,390,069; 1997 3,602,968
issued and outstanding 1,840,321 360,297
Preferred stock, $1.00 par value 10,000,000 shares
authorized, noncumulative nonvoting, nonconvertible,
none issued or outstanding - -
Additional paid-in capital - 1,151,345
Retained earnings (deficit) (798,382) (662,419)
Accumulated comprehensive income (loss), net of deferred
(benefit) taxes of 1998 $(9,128); 1997 $428 (36,514) 1,285
----------- -----------
1,005,425 850,508
Less cost of 1998 314,852; 1997 15,000 shares of
treasury stock (158,501) (9,308)
----------- -----------
846,924 841,200
----------- -----------
$1,951,386 $1,828,375
----------- -----------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
----------- ---------
<S> <C> <C>
Operating revenue:
Contracting revenue $1,624,859 $586,011
Timber sales 27,039 196,051
Equipment rental income - 5,825
----------- ---------
1,651,898 787,887
----------- ---------
Other operating revenue:
Loss on sale of available for sale investments (1,698) (11,720)
Gain on sale of property and equipment 100,849 22,480
Other, net (2,678) (4,795)
----------- ---------
96,473 5,965
----------- ---------
Operating expenses:
Contract costs 1,396,138 437,558
Timber costs 6,346 17,827
General and administrative 412,087 156,080
----------- ---------
1,814,571 611,465
----------- ---------
OPERATING INCOME (LOSS) (66,200) 182,387
----------- ---------
Financial income (expense):
Interest expense (71,251) (20,408)
Investment income 987 2,923
----------- ---------
(70,264) (17,485)
----------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (136,464) 164,902
Provision (benefit) for income taxes (Note 7) (501) 2,441
----------- ---------
NET INCOME (LOSS) $ (135,963) $162,461
----------- ---------
Basic earnings (loss) per share (Note 11) $ (0.036) $ 0.056
----------- ---------
Diluted earnings (loss) per share (Note 11) $ (0.036) $ 0.053
----------- ---------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
Accumulated
Total Accumulated Compre- Compreh-
Stock- Additional Retained hensive ensive
holders' Common Paid-In Earnings Treasury Income Income
Equity Stock Capital (Deficit) Stock (Loss) (Loss)
---------- ---------- ------------ ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 307,352 $ 267,792 $ 883,845 $ (824,880) $ - $ (19,405)
Net income 162,461 - - 162,461 - - $ 162,461
Net change in unrealized gains
(losses) on available for sale
securities, net of taxes 20,690 - - - - 20,690 20,690
Issuance of 50 shares of
common stock 5 5 - - - -
Issuance of 875,000 shares of
stock for the purchase of
equipment 350,000 87,500 262,500 - - -
Issuance of 50,000 shares of
common stock upon the
exercise of stock options 10,000 5,000 5,000 - - -
Purchase of 15,000 shares
of stock for the treasury (9,308) - - - (9,308) -
----------
Comprehensive income $ 183,151
---------- ---------- ------------ ------------- ---------- ------------- ----------
Balance, December 31, 1997 841,200 360,297 1,151,345 (662,419) (9,308) 1,285
Net loss (135,963) - - (135,963) - - $(135,963)
Net change in unrealized
gains (losses) on available for
sale securities, net of taxes (37,799) - - - - (37,799) (37,799)
Issuance of 16,180 shares of
common stock 8,708 1,618 7,090 - - -
Issuance of 48,500 shares of
stock in connection with
acquisition of equity securities 21,340 4,850 16,490 - - -
Issuance of 451,850 shares of
stock in connection with
acquisition of equity securities 226,331 45,184 181,147 - - -
Issuance of 70,571 shares of
stock in connection with
acquisition of equity securities 31,050 7,056 23,994 - - -
Issuance of 200,000 shares of
common stock upon the
exercise of stock options 40,000 20,000 20,000 - - -
Purchase of 5,400 shares of
stock for the treasury (3,066) - - - (3,066) -
Treasury shares acquired in
connection with acquisition
of Sierra Silver Lead Mines (153,201) - - - (153,201) -
Sales of 11,400 share from
the treasury 8,324 - 1,250 - 7,074 -
Change in capitalization of
common stock - 1,401,316 (1,401,316) - - -
----------
Comprehensive income $(173,762)
---------- ---------- ------------ ------------- ---------- ------------- ----------
Balance, December 31, 1998 $ 846,924 $1,840,321 $ - $ (798,382) $(158,501) $ (36,514)
---------- ---------- ------------ ------------- ---------- -------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(135,963) $ 162,461
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 176,001 43,661
Gain on sale of property and equipment (100,849) (22,480)
Loss on available for sale investments 1,698 11,720
Appreciation in gold and silver bullion (938) -
(Increase) decrease in:
Trade accounts receivable 169,904 (254,791)
Mining supplies 563 29,908
Deposits and prepaids (2,890) (34,821)
Other current receivables (35,364) -
Increase (decrease) in:
Accounts payable and accrued expenses (20,308) 80,402
Income taxes payable (2,351) 2,431
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 49,503 18,491
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available for sale investments (20,174) (53,031)
Sale of available for sale investments 42,586 40,707
Sale of gold and silver bullion - 10,346
Purchases of other investments (9,108) -
Purchases of property and equipment (8,618) (60,000)
Proceeds from sale of property and equipment 2,000 79,980
Issuance of notes receivable (49,603) -
Certificates of deposits, net 12 -
Cash acquired through acquisitions 32,467 -
---------- ----------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES (10,438) 18,002
---------- ----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of capital stock $ 8,708 $ 5
Proceeds from exercise of stock options 40,000 10,000
Proceeds from sales of treasury stock 8,324 -
Purchase of treasury stock (3,066) (9,308)
Payments on long-term debt (111,748) (141,137)
Short-term borrowings 34,100 -
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (23,682) (140,440)
---------- ----------
NET INCREASE (DECREASE) IN CASH 15,383 (103,947)
Cash, beginning of year 32,235 136,182
---------- ----------
Cash, end of year $ 47,618 $ 32,235
---------- ----------
SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid during the year for:
Interest $ 71,251 $ 20,408
---------- ----------
Income taxes $ 1,850 $ 10
---------- ----------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
-------- -----------
<S> <C> <C>
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Change in net unrealized loss on investment
securities available for sale, net of deferred taxes $ 37,799 $ (20,690)
-------- -----------
Mining supplies and property and equipment
acquired with issuance of long-term debt $ - $1,043,164
-------- -----------
Mining supplies and property and equipment
acquired with issuance of capital stock $ - $ 350,000
-------- -----------
Investments in equity securities acquired with issuance
of capital stock $ 52,390 $ -
-------- -----------
Refinance of long-term debt $ 3,874 $ -
-------- -----------
Issuance of common stock in connection with acquisition
of Sierra Lead Mines, Inc. $226,331 $ -
-------- -----------
Assets and liabilities recognized upon acquisition
of Sierra Lead Mines, Inc. through issuance of stock:
Certificate of deposit $ 41,062 $ -
-------- -----------
Property $195,510 $ -
-------- -----------
Estimated stock redemption $195,909 $ -
-------- -----------
Treasury stock $153,201 $ -
-------- -----------
Property acquired through issuance of long-term debt $ 25,987 $ -
-------- -----------
Book value of property traded-in $ 3,874 $ -
-------- -----------
Stock issued for other investments $ 52,391 $ -
-------- -----------
Note received on sale of investments $ 6,268 $ -
-------- -----------
Investments acquired on sale of property $ 91,010 $ -
-------- -----------
Note received on sale of property $ 38,000 $ -
-------- -----------
</TABLE>
8
<PAGE>
ATLAS MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF ORGANIZATION
The Company was incorporated under the laws for the state of Idaho on March 4,
1924, and was an exploratory stage mining company engaged in the business of
exploring for nonferrous and precious metals, principally silver, lead, gold,
and zinc. The properties of the Company are located in Mullan, Shoshone County,
Idaho. The Company commenced contracting operations through a trade name, Atlas
Fausett Contracting, and became an operating company during the year ended
December 31, 1997.
Atlas Mining Company pursues property acquisitions that will increase the
natural resource potential for the Company.
Through Atlas Fausett Contracting, the Company provides shaft sinking,
underground mine development, and contracting to a customer base consisting
primarily of companies in the mining and civil industries. The contract mining
industry in which Atlas operates is highly competitive and subject to business
downturns.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the provision for accumulated depreciation, valuation of
deferred taxes, and the valuation of the mining properties.
AVAILABLE FOR SALE SECURITIES:
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.
9
<PAGE>
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOLD AND SILVER INVESTMENTS:
The cost of silver and gold bullion is determined by specific identification.
Unrealized losses on gold and silver bullion are charged to operations.
MINING SUPPLIES:
Mining supplies, consisting primarily of bits, steel, and other mining related
equipment, are stated at the lower of cost (first-in, first-out) or market. In
addition, equipment repair parts and maintenance items are also included at
cost.
PROPERTY AND EQUIPMENT:
Property and equipment are carried at cost. Depreciation and amortization is
computed principally on the straight-line method over the estimated useful lives
of the assets as follows:
<TABLE>
<CAPTION>
Estimated
Useful Life
-----------
<S> <C>
Building. . . . . . . . . . . . . . . . 39 years
Mining equipment. . . . . . . . . . . . 2-8 years
Office and shop furniture and equipment 5-8 years
Vehicles. . . . . . . . . . . . . . . . 5 years
</TABLE>
The Company has a recorded cost of $278,492 in its exploratory stage mining
properties at December 31, 1998. The ultimate realization of the Company's
carrying cost in these assets is dependent upon the discovery and the ability of
the Company to finance successful exploration and development of commercial ore
deposits, if any, in the mining properties in sufficient quantity for the
Company to recover its recorded cost or to sell such assets for more than their
recorded values. The ultimate realization of the carrying cost in the mineral
properties at December 31, 1998, cannot presently be determined. No provisions
for any possible revaluation of these assets has been made in the financial
statements.
VALUATION OF LONG-LIVED ASSETS:
In accordance with Financial Accounting Standards Board Statement No. 121, the
Company records impairment of long-lived assets to be held and used or to be
disposed of when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the carrying
amount. At December 31, 1998 and 1997, no impairments were recognized.
REVENUE AND COST RECOGNITION:
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.
10
<PAGE>
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE AND COST RECOGNITION (CONTINUED):
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance, such as indirect labor, supplies, tools,
repairs, and depreciation costs. Costs associated with the start-up of
contracts are capitalized as deferred contract costs and amortized to expense
over the life of the contract. General and administrative costs are charged to
expense as incurred. Provisions for estimated losses on uncompleted contracts
are made in the period in which such losses are determined. Changes in job
performance, job conditions, and estimated profitability, including those
arising from contract penalty provisions, and final contract settlements may
result in revisions to costs and income and are recognized in the period in
which revisions are determined.
Contract claims are included in revenue when realization is probable and can be
reliably estimated.
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.
INCOME TAXES:
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss, tax
credit carryforwards, 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.
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, 1998 and 1997. The
Company has no investments in derivative financial instruments.
11
<PAGE>
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE:
Earnings per share were computed by dividing net income by the total weighted
average common shares outstanding and the additional dilutive effect of stock
warrants and stock options during the respective periods. The dilutive effect
of stock warrants and stock options are considered using the treasury stock
method.
ACCOUNTING CHANGE:
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 130,
Reporting Comprehensive Income, for the year ended December 31, 1998. This
statement establishes standards for reporting and display of comprehensive
income and its components in the financial statements. The December 31, 1997,
financial statements have been reclassified to reflect the application of the
provisions of this statement for comparative purposes. The adoption of SFAS No.
130 has no impact on the Company's statements of financial condition, income, or
cash flows. Management has elected to display its components of comprehensive
income in the statements of stockholders' equity.
NOTE 3. BASIS OF PRESENTATION
FAUSETT MINING COMPANY:
During 1997, Atlas Mining Company purchased substantially all the operating
equipment and mining supplies of Fausett International, Inc., a related party.
The purchase price was $1,416,094 which consisted of $50,000 cash, 875,000
shares of capital stock valued at $350,000, and a note payable totaling
$1,016,094 (Note 5).
SIERRA SILVER LEAD MINES, INC.:
During 1998, the Company entered into an agreement and plan of merger with
Sierra Silver Lead Mines, Inc., an Idaho corporation.
The acquisition was accounted for as a purchase. The purchase price was
allocated to the assets acquired and liabilities assumed based on their
estimated fair values. All assets of Sierra were subsequently transferred to
Atlas and Sierra ceased operations.
12
<PAGE>
NOTE 3. BASIS OF PRESENTATION (CONTINUED)
SIERRA SILVER LEAD MINES, INC. (CONTINUED):
In the merger, all outstanding shares of common stock of Sierra were to be
converted into 842,964 shares of Atlas common stock. At December 31, 1998,
391,114 shares of Atlas stock had not been issued as the owners of the
corresponding Sierra stock could not be located. Under the plan of merger, any
dissenters to the acquisition have the right to exchange their shares for cash
in lieu of common stock. As a result, $195,909 is included in long-term debt
due to this contingent liability. Under Idaho State law, these shares will be
converted and held with the state of Idaho in the Unclaimed Property Division
for an indefinite period of time.
The purchase price was allocated as follows.
Cash. . . . . . . . . . $ 32,467
Certificates of deposit 41,062
Property. . . . . . . . 202,628
--------
$276,157
--------
CHANGE IN CAPITALIZATION:
On November 19, 1998, the Company amended their Articles of Incorporation.
Under the amended Articles, the Company changed the authorized capital stock
from $0.10 par to no par. Also the number of shares authorized increased from
6,000,000 to 60,000,000. Further amendments included the authorization of
10,000,000 shares of $1.00 par value noncumulative, nonvoting, nonconvertible
preferred stock.
NOTE 4. INVESTMENT SECURITIES AVAILABLE FOR SALE
Following is a summary of available for sale equity securities which are
concentrated in companies in the mining industry:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
-------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1998 $114,863 $ - $ (45,642) $ 69,221
-------- ----------- ------------ -----------
December 31, 1997 $ 54,229 $ 3,434 $ (1,719) $ 55,944
-------- ----------- ------------ -----------
</TABLE>
13
<PAGE>
NOTE 5. NOTES RECEIVABLE
<TABLE>
<CAPTION>
1998 1997
------- -----
<S> <C> <C>
Note receivable from Lookout Recreation, Inc.,
noninterest bearing and unsecured.. . . . . . . . . . . . . . . . . $49,603 $ -
Note receivable bearing interest of 10% per annum. Due in annual
installments of $5,000 plus accrued interest. Secured by property. 38,000 -
Note receivable, noninterest bearing, secured by stocks.. . . . . . . 6,268 -
------- -----
93,871 -
Less current portion. . . . . . . . . . . . . . . . . . . . . . . . . 60,871 -
------- -----
$33,000 $ -
------- -----
</TABLE>
NOTE 6. LONG-TERM DEBT
Long-term debt is comprised as follows at December 31:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Note payable to a Fausett International Inc., due in monthly payments
of $15,000, including interest at 8.75% and is collateralized by all
equipment and mining supplies. This note matures August 22, 2001.. . $782,741 $880,730
Two notes payable to a lending facility. The notes are due in total
combined monthly payments of $813, including interest at 7.90% and
10.90%. The notes are due in June 1999 and September 1999. These
notes are collateralized by vehicles. . . . . . . . . . . . . . . . . 5,343 21,917
Note payable to a lending facility. The note is due in monthly
installments of $578, including interest at 11.99% per annum. This
note is due September 2003 and is secured by a vehicle. . . . . . . . 24,928 -
-------- --------
813,012 902,647
Less current portion. . . . . . . . . . . . . . . . . . . . . . . . . 125,606 152,018
-------- --------
$687,406 $750,629
-------- --------
</TABLE>
14
<PAGE>
NOTE 6. LONG-TERM DEBT (CONTINUED)
Future maturities of long-term debt at December 31, 1998, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Period ending December 31:
1999 . . . . . . . . . . . $125,606
2000 . . . . . . . . . . . 131,367
2001 . . . . . . . . . . . 545,275
2002 . . . . . . . . . . . 5,966
2003 . . . . . . . . . . . 4,798
--------
$813,012
--------
</TABLE>
NOTE 7. INCOME TAXES
Temporary differences in the recognition of taxable income for financial
reporting and income tax purposes relate primarily to the use of accelerated
depreciation methods for tax purposes and the carryforward of net operating
losses for tax purposes.
The components of the net deferred tax asset (liability) recorded in the
accompanying consolidated balance sheets are:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards. . . . . . . . . . . . $ 66,960 $ 32,168
Contribution carryforwards. . . . . . . . . . . . . . . 340 105
Unrealized loss on available for sale securities. . . . . 9,128 -
--------- ---------
TOTAL DEFERRED TAX ASSETS . . . . . . . . . . . . . . 76,428 32,273
Valuation allowance for deferred tax assets . . . . . . . (55,822) (21,463)
--------- ---------
20,606 10,810
--------- ---------
Deferred tax liabilities:
Tax over book depreciation. . . . . . . . . . . . . . . 11,478 10,810
Unrealized gain on available for sale equity securities - 428
--------- ---------
TOTAL DEFERRED TAX LIABILITIES. . . . . . . . . . . . 11,478 11,238
--------- ---------
$ 9,128 $ (428)
--------- ---------
</TABLE>
15
<PAGE>
NOTE 7. INCOME TAXES (CONTINUED)
At December 31, 1998 and 1997, Atlas has established a valuation allowance for
deferred tax assets related to net operating loss and contribution carryforwards
which may not be realized. Net operating loss carryforwards total $267,841 at
December 31, 1998, and expire from 2001 through 2018 if not utilized sooner.
The income tax provision (benefit) differs from the amount of income tax
determined by applying the federal income tax rate to pretax income from
continuing operations due to the following for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Computed expected tax expense (benefit). . . . . . . $(34,579) $ 43,773
Increase (decrease) in income taxes resulting from:
Nondeductible expenses . . . . . . . . . . . . . . 704 139
State taxes. . . . . . . . . . . . . . . . . . . . 80 -
Overaccrual of prior year taxes. . . . . . . . . . (1,065) -
Change in valuation allowance. . . . . . . . . . . 34,359 (41,471)
--------- ---------
$ (501) $ 2,441
--------- ---------
</TABLE>
NOTE 8. RELATED PARTY TRANSACTIONS
The following transactions occurred in 1998 and 1997 with Fausett International
Inc., a minority stockholder of Atlas Mining Company. Mr. Fausett is also on
the Board of Directors of Atlas Mining Company.
ASSET PURCHASES:
As explained in Note 3 of Notes to Financial Statements, Fausett International,
Inc. sold operating equipment and mining supplies to the Company in 1997 for a
purchase price totaling $1,416,094. The purchase price was paid in cash,
capital stock, and a note payable.
NOTE PAYABLE:
Included in long-term debt is a note payable in the amount of $782,741 and
$880,730 for the years ended December 31, 1998 and 1997, respectively. Interest
paid in 1998 and 1997 on this note was $67,087 and $20,371, respectively.
OFFICE RENTAL:
The Company has a month-to-month lease for office space. Rental payments under
this lease are $1,100 per month. Total rental expense recognized under this
lease during 1998 and 1997 was $13,200 and $3,200, respectively.
16
<PAGE>
NOTE 8. RELATED PARTY TRANSACTIONS (CONTINUED)
CONSULTING FEES:
As part of the purchase of Fausett International Inc.'s assets, a three-year
agreement was signed with Lovon Fausett, the majority stockholder of Fausett
International, Inc., to provide consulting services for a three-year period
payable at $1,500 per month. Consulting fees recognized under this agreement
during 1998 and 1997 were $18,000 and $4,500, respectively.
NOTE 9. STOCK OPTIONS
The Company has a qualified stock option plan authorizing the granting to
officers and directors, of options to purchase 100,000 shares of common stock
each at exercise prices equal to the fair market value on the common stock at
the date of grant. Options became exercisable immediately and expire two years
after the date of the grant. As permitted under generally accepted accounting
principles, grants under the plan are accounted for under the provisions of APB
No. 25 and its related interpretations. Accordingly, no compensation cost has
been recognized for grants made to date.
A summary of the status of the Company's stock option plans and changes during
the years ending on those dates is presented below:
<TABLE>
<CAPTION>
1998 1997
----------------- ------------------
WEIGHTED Weighted-
-AVERAGE Average
SHARES EXERCISE Shares Exercise
ACTUAL PRICE Actual Price
------- -------- ------- ---------
<S> <C> <C> <C> <C>
Outstanding options at beginning of year 350,000 .20 400,000 .20
Granted. . . . . . . . . . . . . . . . - - - -
Exercised. . . . . . . . . . . . . . . 200,000 .20 50,000 .20
Terminated . . . . . . . . . . . . . . 150,000 .20 - -
------- -------
Outstanding at end of year . . . . . . . - - 350,000 .20
------- -------
Options exercisable at yearend . . . . . - 350,000
------- -------
</TABLE>
The pro forma effect on net income as reported, if the fair value of accounting
for stock options had been adopted by the Company, is not significantly
different than net income as reported on the statement of income. The fair
value assumptions are based on a risk-free interest rate over the expected lives
for the options granted in 1996 and assumes no annual cash dividends.
17
<PAGE>
NOTE 9. STOCK OPTIONS (CONTINUED)
STOCK OPTION PLAN 1998:
In 1998, the Company adopted a nonqualified 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. The period for which an
option is exercisable is at the discretion of the Administrative Committee. As
permitted under generally accepted accounting principles, grants under the Plan
are accounted for under the provisions of APB No. 25 and its related
interpretations.
At December 31, 1998, no options had been granted under this plan.
INCENTIVE STOCK OPTION PLAN 1998:
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. Options granted under this plan and any other stock
option plan adopted by the Company shall not exceed 10% of the then issued and
outstanding shares of the Company's common stock. Options are granted by the
Administrative Committee, which is elected by the Board of Directors. 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. Once granted, options may
be fully vested or may vest over a period of time. The price of shares
purchased must be equal to or greater than fair market value of the common stock
at the date the option is granted, and payment terms are determined by the
Incentive Stock Option Committee. As permitted under generally accepted
accounting principles, grants under the plan are accounted for under the
provisions of APB No. 25 and its related interpretations.
At December 31, 1998, no options had been granted under this plan.
NOTE 10. COMMITMENTS AND CONTINGENCIES
PARK COPPER AND GOLD MINING, LTD.:
The Company has tendered an offer to the shareholders of Park Copper and Gold
Mining, Ltd. to exchange all the outstanding stock for 221,415 shares of common
stock. At December 31, 1998, the Company had exchanged 70,571 shares of Atlas
stock. This acquisition will be accounted for as a purchase.
18
<PAGE>
NOTE 10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
YEAR 2000:
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue and is
implementing a plan to resolve any issues. The Company presently believes that,
with modifications to existing software and converting to new software, the Year
2000 problem will not pose significant operational problems for the Company's
computer systems as so modified and converted. However, if such modifications
and conversions are not completed timely, the Year 2000 may have a material
impact on the operations of the Company.
NOTE 11. EARNINGS PER SHARE
The calculation of earnings per share and earnings per share assuming full
dilution is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------
PER
INCOME SHARES SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ---------
<S> <C> <C> <C>
BASIC EPS
Loss available to common stockholders $ (135,963) 3,812,925 $(0.036)
------------ ------------- ---------
EFFECT OF DILUTIVE SECURITIES
Stock options -
-------------
DILUTED EPS
Loss available to common stockholders
plus assumed conversions. . . . . . $ (135,963) 3,812,925 $(0.036)
------------ ------------- --------
</TABLE>
19
<PAGE>
NOTE 11. EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
Year Ended December 31, 1997
------------------------------------
Per
Income Shares Share
(Numerator) (Denominator) Amount
------------ ------------- -------
<S> <C> <C> <C>
BASIC EPS
Income available to common stockholders $ 162,461 2,910,160 $ 0.056
------------ -------
EFFECT OF DILUTIVE SECURITIES
Stock options 179,268
-------------
DILUTED EPS
Income available to common stockholders
plus assumed conversions. . . . . . . $ 162,461 3,089,428 $ 0.053
------------ ------------- -------
</TABLE>
NOTE 12. LINE OF CREDIT
The Company obtained an unsecured line of credit with Suntrust Credit for
$50,000 in 1998. Interest accrues at the lender's prime lending rate plus 6%.
At December 31, 1998, borrowings under this agreement were $34,100.
NOTE 13. SUBSEQUENT EVENT
Subsequent to the end of fieldwork, the Company purchased the majority of the
outstanding shares of Olympic Silver Resources, Inc., a Nevada corporation.
Under the agreement reached, Atlas has committed 750,000 shares of stock to the
stockholders of Olympic in exchange for 4,000,000 shares.
20
<PAGE>
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 transportation 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.
<PAGE>
ARTICLES OF INCORPORATION
-------------------------
OF
ATLAS MINING COMPANY.
---------------------
KNOW ALL MEN BY THESE PRESENTS: That we, Donald A. Callahan and Helen A.
McAllister, residents of the County of Shoshone and State of Idaho, and W. Earl
Greenough, a resident of the County of Spokan, State of Washington, do hereby
associate ourselves together for the purpose of forming a corporation under the
laws of the State of Idaho, 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 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 transportation 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 connection with such business and that may be
necessary, profitable or convenient in furthering the interests of said
<PAGE>
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 stock 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 Wallace,
Shoshone County, Idaho.
IV.
The corporation shall exist for Fifty Years.
V.
The number of directors shall be five.
VI.
The amount of its capital stock shall be Two Million Dollars divided into
Two Million shares of the par value of One Dollar each.
VII.
The amount of the capital stock which has been actually subscribed is
Thirty Dollars and the following are the names of the persons who have
subscribed for said stock and the amount and number of shares subscribed for by
each of the said subscribers, to wit:
Name Number of Shares Amount.
Donald A. Callahan 10 $10.00
Helen A. McAllister 10 10.00
W. Earl Greenough 10 10.00
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands and seals this 1st day
of March, A. D. 1924.
/s/ Donald A. Callahan (SEAL)
-------------------------
/s/ Helen A. McAllister (SEAL)
--------------------------
/s/ W. Earl Greenough (SEAL)
--------------------------
STATE OF IDAHO )
) ss.
COUNTY OF SHOSHONE )
On this 1st day of March, A. D., 1924, before me, ________________________,
a Notary Public in and for the County of Shoshone, State of Idaho, personally
appeared DONALD A. CALLAHAN, HELEN A. McALLISTER, and W. EARL GREENOUGH, known
to me to be the persons whose names are subscribed to the within instrument and
so acknowledged to me that they executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate written.
/s/
--------------------------
Notary Public.
STATE OF IDAHO )
) ss.
COUNTY OF SHOSHONE )
DONALD A. CALLAHAN and HELEN A. McALLISTER, the persons whose names are
signed to the foregoing ARTICLES OF INCORPORATION, each disposes and says that
he is and for more than one year last past has been a bona fide resident of the
County of Shoshone, State of Idaho.
/s/
-------------------------
/s/
-------------------------
Subscribed and sworn to before me
This last day of March, A. D. 1924.
/s/
- ------------------------------------------
Notary Public for the State of Idaho,
Residing at Wallace, Idaho.
<PAGE>
Atlas Mining Company
--------------------
BY-LAWS.
--------
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 t???e several stockholders and the respective addresses to
which the same were mailed, shall be evidence of the manner g????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.
<PAGE>
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.
<PAGE>
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.
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.
<PAGE>
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
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:
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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)
-----------------------
<PAGE>
November 11, 1999
Atlas Mining Company
1121 W. Yellowstone Avenue
Osburn, Idaho 83849
Gentlemen:
You have requested our opinion in connection with the issuance and
registration of 7,500,000 shares of common stock of Atlas Mining Company (the
"Company"), with respect to whether the securities in question, when sold, will
be validly issued, fully paid and non-assessable.
The Company is incorporated in the State of Idaho. We have undertaken the
rendering of this opinion solely in satisfaction of the Securities and Exchange
Commission ("SEC") requirements for the filing of a registration statement in
accordance with the Securities Act of 1933.
For purposes of this opinion, we have not made any independent
investigation of the information you have provided us. We have consequently
relied on your representation that the information presented to us, in such
documents or otherwise furnished to us by you, accurately and completely
describes all material facts relevant to our opinion.
This opinion, as well as the preparation of the registration, is based upon
many representations by the officers of the Company, particularly Bill Jacobson,
the President, Chief Executive Officer and Director of the Company. These
representations include, but are not limited to:
1. The Corporation is in good standing under the laws of the State of
Idaho.
2. All companies represented by the officers of the Company as subsidiary
corporations are duly incorporated, validly existing and in good
standing under the laws in which each was incorporated.
3. The Company has the corporate power and authority to execute, deliver
and perform the goals and objectives stated in the registration on
it's own behalf and on the behalf of its subsidiaries. Any documents
that are necessary to create such power or authority have been duly
executed and delivered to the Company.
4. The execution of the plans stated in the registration do not (i)
breach or result in default under any existing obligation of the
Company pursuant to any contract or obligation that the Company may
have to any party, or (ii) breach of otherwise violate any existing
obligation of the Company under a Court Order.
5. Execution of the purposes and objectives of the Company set forth by
the registration statement do not violate applicable provisions of
statutory law or regulation.
6. No consent, approval, waiver, license or authorization or other action
by or filing with any governmental authority is required under state
or federal statutes or regulations in connection with the execution of
the purposes and objectives of the Company set forth by the
registration statement, except for those already obtained or completed
or those which the Company intends to obtain or complete at the
appropriate time, as disclosed by the registration statement.
7. There are no other legal actions or proceedings against the Company,
pending or overtly threatened in writing before any court,
governmental agency or arbitrator other than those specifically
disclosed in the registration statement.
8. All outstanding shares are validly issued and non-assessable. All
previously issued assessable shares have been redeemed.
The opinion set forth below is based, among other things, on examination of
the following:
1. Copy of the Company's Restated Articles of Incorporation, certified by
the Idaho Secretary of State.
2. Copies of the Company's By-Laws, certified by the Idaho Secretary of
State, and all amendments thereto.
3. Corporate resolution authorizing the issuance of the Company's common
stock and recognition that the consideration to be received is fair
and adequate.
Section 30-1-603, Idaho Code states that "a corporation may issue the number of
shares of each class or series authorized by the articles of incorporation."
Article VI of the Company's Restated Articles of Incorporation state that, "the
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." In the public
offering that the Company is planning to undertake, a total of 7,500,000 shares
of common stock are offered. This is in addition to the 5,213,965 shares of
common stock already outstanding.
On August 20, 1999, the Company's Board of Directors passed a Resolution
authorizing the issuance and registration of 7,500,000 shares of the Company's
common stock (the "Resolution") at $1.00 per share, no par value. A copy of the
Resolution has been provided by you for our review, accompanied by a certificate
from the board's secretary attesting to its validity.
Therefore, it is our opinion that the shares are duly authorized.
We express no opinion as to the already outstanding shares of the Company,
nor any shares to be issued subsequent to this offering.
Section 30-1-621, Idaho Code, allows the board of directors of an Idaho
corporation to issue shares for consideration. Paragraph (3) of Section 30-1-621
states that "before the corporation issues shares, the board of directors must
determine that the consideration received or to be received for shares to be
issued is adequate. That determination by the board of directors is conclusive
insofar as the adequacy of consideration for the issuance of shares relates to
whether the shares are validly issued, fully paid and nonassessable." Paragraph
(4) of section 30-1-621 states that "when the corporation receives the
consideration for which the board of directors authorized the issuance of
shares, the shares issued therefor are fully paid and nonassessable."
The board, in the Resolution, deemed $1.00 per share to be adequate and
fair consideration.
Therefore, based on Section 30-1-621, Idaho Code, and the Resolution, it is
our opinion that when the corporation receives the consideration authorized by
the board for the sale of these securities, the shares will be fully paid and
nonassessable under Idaho law.
Section 30-1-622, Idaho Code addresses the liability of a corporation's
shareholders. Paragraph (1) of Section 30-1-622 states that a shareholder "is
not liable to the corporation or its creditors with respect to the shares except
to pay the consideration for which the shares were authorized to be issued "
To the best of our knowledge and belief, the Company currently complies
with Section 30-1-622, Idaho Code, in that the corporation's responsibilities
are its own and no shareholder is liable for the Company's obligations.
To the best of our knowledge and belief, the shares to be issued in the
instant registration statement will be fully paid and nonassessable when issued,
purchased, and the offering price received by the Company.
There can be no assurance that any of the laws discussed above will not
change, with or without retroactive effect, nor can there be any assurance that
any such changes will not have an adverse effect on the opinion.
Other than as expressly stated above, this opinion does not, and should not
be viewed, as addressing compliance with other laws, state or federal. Further,
we express no opinion on any other issue relating to the proxy or other
solicitation used in connection with a change in the authorized capital of the
Company.
This opinion is for your use only and cannot be relied upon by any other
party.
We undertake no responsibility or obligation to update this opinion at any
time during the future, regardless of any changes in circumstances of fact or
law which may occur.
Very truly yours,
SCHROEDER WALTHALL NEVILLE L.L.P.
<PAGE>
MOSS-ADAMS LLP
- --------------------------------------------------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS Seafirst Financial Center
601 West Riverside, Suite 1800
Spukane,WA 99201-0663
Phone 509.747.2600
Toll Free 1.800.888.4065
FAX 509.624.5129
Offices in Prncipal Cities of
Washingon, Oregon and California
Securities and Exchange Commission
450 Fifth Street NW
Washington, DC 20549
Gentlemen:
Our Firm has provided the audited financial statements and unaudited financial
information for
Atlas Mining Company (the Company).
We are aware of the Company's use of the unaudited interim financial information
in connection
with the registration of 7,500,000 shares of common stock. We hereby consent to
such use in the
Sfl-2 registration statement.
The Company requested that our Firm acknowledge use of the tinmidited financial
information in
accordance with the Securities Act of 1933, and therefore, we have written this
letter at the
Company's request.
Thank You.
/s/ Moss Adams LLP
Spokane, Washington
November11, 1999
A member of
Moores
Rowland
International
An association of independent
accounting firms throughout the world.
<PAGE>
EMPLOYMENT AGREEMENT
Atlas Mining Company has herein agreed to hire William T. Jacobson, as president
and chief executive officer of Atlas Mining Company for a yearly compensation of
$72,000.00.
Signed this 19th day of January, 1999.
/s/ Kurt J. Hoffman
- --------------------------
For Atlas Mining Company
Accepted:
/s/ William T. Jacobson
- --------------------------
William T. Jacobson
<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is entered into as to the day of
1999, by and between Atlas Mining Company ("Issuer"), 1221 West Yellowstone
Avenue, Osburn, Idaho 83849 and Idaho Independent Bank ("Escrow Agent"), 8882
North Government Way, Hayden, Idaho 83835.
RECITALS:
A. Issuer proposes to offer for sale to subscribers 7,500,000 shares
("Shares") of the common capital stock of Atlas Mining Company. Each
share is offered at a price of One Dollar ($1.00) per Share, payable
at the time of subscription, and such payments, will be paid into the
escrow created by this Agreement.
B. The Offering is registered with the United States Securities and
Exchange Commission ("SEC") in accordance with the Securities Act of
1933 and the rules and regulations promulgated thereunder. Each
subscriber will be provided a prospectus ("Prospectus") and a
subscription agreement, which will be completed and submitted with
payment by cashiers check or wire transfer to the Escrow Agent.
C. Issuer desires to establish an escrow account in which funds received
from subscribers will be deposited pending completion of the Escrow
Period (as defined below). Idaho Independent Bank agrees to serve as
Escrow Agent in accordance with the terms and conditions set forth
herein.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
1. Issuer hereby appoints Idaho Independent Bank as Escrow Agent and
Escrow Agent shall establish an escrow account (the "Escrow Account")
on its books styled "Atlas Mining Company Escrow Account." Commencing
upon the execution of this Agreement, Escrow Agent shall act as Escrow
Agent and hereby agrees to receive and disburse the proceeds from the
Offering of the Shares in accordance with the terms herewith. Issuer
agrees to notify the Escrow Agent promptly of the closing of the
Offering ("Closing") and sale of the Shares.
Wiring instructions for wire transfers into the escrow account are:
Idaho Independent Bank, Hayden, Idaho
ABA 123103732
Account Number 0200025575
Checks must be payable to "Atlas Mining Company Escrow Account."
2. Upon receipt of a wire transfer or check from a subscriber, Escrow
Agent will provide notice to Issuer of such. Escrow Agent will provide
the subscription agreement and the confirmed amount of consideration
for the Shares subscribed. Prior to Closing, the Issuer is aware and
understands that it is not entitled to any proceeds from subscriptions
deposited into the Escrow Account and no amounts deposited in the
Escrow Account during the Escrow Period (as defined below) shall
become the property of the Issuer or any other entity, or be subject
to the debts of the Issuer or any other entity.
<PAGE>
3. The Escrow Period shall commence on the date hereof and shall
terminate upon the earlier to occur of the following dates:
(a) Ten (10) business days following the "Closing," which for the
purposes of this Agreement shall be 30 days after the effective
date of Issuer's registration statement with the SEC unless (i)
Issuer elects to continue to offer the Shares for sale until some
later date, as permitted by the Prospectus, and (ii) Issuer
notifies Escrow Agent in writing no later than ten (10) days of
such extension specifying the extended Closing Date;
(b) Ten (10) business days following the date upon which a
determination is made by the Issuer to terminate the Offering, as
communicated to Escrow Agent in writing; or
(c) Ten (10) business days after all shares offered are sold.
Not withstanding anything to the contrary contained herein, the
Closing date is intended to signify the date of the cessation of the
Offering as provided in the Prospectus, and not the termination of the
Escrow Period of this Agreement, and upon the occurrence of any of the
events described above, the Escrow Period shall continue for such ten
(10) business day period solely for the limited purposes of collecting
subscribers' checks which have been deposited prior to such event and
disbursing funds from the Escrow Account as provided herein. Escrow
Agent will not accept deposits of subscribers' checks after notice
that any of the events described above has occurred.
In no event will the Escrow Period last longer than 100 days. However,
failure to comply with this provision shall not entitle either party
to damages, compensatory or punitive, nor injunctive relief.
4. The Escrow Agent will deposit the subscribers' checks for collection
and credit the proceeds to the Escrow Account to be held by it under
the terms of this Agreement. Notwithstanding anything to the contrary
contained herein, Escrow Agent is under no duty or responsibility to
enforce collection of any checks delivered to Escrow Agent hereunder.
The Escrow Agent hereby is authorized to forward each check for
collection and deposit the proceeds in the Escrow Account. As an
alternative, the Escrow Agent may telephone the bank on which the
check is drawn to confirm that the check has been paid. Any item
returned to the Escrow Agent on its first presentation for payment
shall be returned to Issuer and need not be again presented by the
Escrow Agent for collection. For purposes of this Agreement, the term
"collected funds" or the term "collected" when referring to the
proceeds of subscribers' checks shall mean all funds received by
Escrow Agent that have cleared normal banking channels and are in the
form of cash.
5. If Issuer notifies the Escrow Agent in writing that Issuer elects to
terminate the Offering as provided in paragraph 3 (b) above, the
Escrow Agent shall then issue and mail its bank checks to the
subscribers in the amount of the subscribers' respective checks,
without deduction, penalty or expense to the subscriber, and shall,
for this purpose, be authorized to rely upon the names and addresses
of the subscribers furnished to it as contemplated above. The purchase
money returned to each subscriber shall be free and clear of any and
all claims of the Issuer and any of its creditors. For each
subscription for which the Escrow Agent has not collected funds but
has submitted the subscriber's check for collection, the Escrow Agent
shall promptly issue a check to such subscriber in the amount of the
collected funds from such subscriber's check after the Escrow Agent
has collected such funds. If Escrow Agent has not yet submitted such
subscriber's check for collection, the Escrow Agent shall promptly
remit the subscriber's check directly to such subscriber.
<PAGE>
At such time as Escrow Agent shall have made the payments and
remittances provided in the Agreement, the Escrow Agent shall be
completely discharged and released of any and all further liabilities
and responsibilities hereunder.
6. As consideration for its agreement to act as Escrow Agent as herein
described, Issuer agrees to pay the Escrow Agent an administration fee
of $7,500.00 upon execution of this Agreement, plus the fees described
on the attached fee schedule. Further, Issuer agrees to pay all
disbursements and advances incurred or made by the Escrow Agent in
performance of its duties hereunder, including reasonable fees,
expenses and disbursements of its counsel, all in accordance with the
attached fee schedule or the other provisions of this Agreement.
If the Issuer rejects any subscription for which Escrow Agent has
already collected funds, the Escrow Agent shall promptly issue a
refund check to the rejected subscriber in the amount of the
subscriber's check. If the Issuer rejects any subscription for which
the Escrow Agent has not yet collected funds but has submitted the
subscriber's check for collection, the Escrow Agent shall promptly
issue a check in the amount of the collected funds from the
subscriber's check to the rejected subscriber after the Escrow Agent
has cleared such funds. If Escrow Agent has not yet submitted a
rejected subscriber's check for collection, the Escrow Agent shall
promptly remit the subscriber's check directly to the subscriber.
7. This Agreement shall automatically terminate upon the earlier of (i)
twenty (20) days after the Closing or (ii) twenty (20) days after the
date upon which the Escrow Agent has delivered the final portion of
Escrow Account funds pursuant to the terms of this Agreement.
8. Escrow Agent reserves the right to resign hereunder, upon ten (30)
days prior written notice to Issuer, except that Escrow Agent will not
resign while the Offering is open. In the event of said resignation,
and prior to the effective date thereof, Issuer, by written notice to
Escrow Agent shall designate a successor escrow agent to assume the
responsibilities of Escrow Agent under this Agreement, and Escrow
Agent immediately shall deliver any undisbursed Escrow Account funds
to such successor escrow agent. If Issuer shall fail to designate such
a successor escrow agent within such time period, the Escrow Agent may
deliver any undisbursed funds into the registry of any court having
jurisdiction.
9. The Escrow Agent shall have no responsibility except for the
investment, safekeeping and delivery of the amounts deposited in the
Escrow Account in accordance with this Agreement. The Escrow Agent
shall not be liable for any act done or omitted to be done under this
Agreement or in connection with the amounts deposited in the Escrow
Account, except as a result of the Escrow Agent's gross negligence or
willful misconduct. The Escrow Agent is not a party to nor is it bound
by, nor need it give consideration to the terms or provisions of, even
though it may have knowledge of (i) any agreement or undertaking by,
between or among the Issuer and any other party, except this
Agreement, (ii) any agreement or undertaking that may be evidenced by
this Agreement, (iii) any other agreements that may now or in the
future be deposited with the Escrow Agent in connection with this
Agreement. The Escrow Agent is not a party to, is not responsible for,
and makes no representations with respect to the offer, sale or
distribution of the Shares including, but not limited to, matters set
forth in any offering documents prepared and distributed in connection
with the offer, sale and distribution of the Shares.
<PAGE>
10. The Escrow Agent has no duty to determine or inquire into any
happening or occurrence of or of any performance or failure of
performance of the Issuer or of any other party with respect to
agreements or arrangements with any other party. If any question,
dispute or disagreement arises among the parties hereto and/or any
other party with respect to the funds deposited in the Escrow Account
of the proper interpretation of this Agreement, the Escrow Agent shall
not be required to act and shall not be held liable for refusal to act
until the question or dispute is settled, and the Escrow Agent has the
absolute right at its discretion to do either or both of the
following:
(i) withhold and/or stop all further performance under this
Agreement until the Escrow Agent is satisfied, by receipt of
a written document in form and substance satisfactory to the
Escrow Agent and executed and binding upon all interested
parties hereto (who may include the subscribers), that the
question, dispute, or disagreement had been resolved; or
(ii) file a suit in interpleader and obtain by final judgment,
rendered by a court of competent jurisdiction, an order
binding all parties interested in the matter.
The Escrow Agent may consult with counsel of its own choice and shall have full
and complete authorization and protection for and shall not be liable for any
action taken or suffered by it hereunder in good faith and believed by it to be
authorized hereby under this agreement or applicable laws.
11. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth in this Agreement and may rely
and shall be protected in acting or refraining from acting upon any
written notice, instruction or request furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by
the proper party or parties and to take statements made therein as
authorized and correct without any affirmative duty of investigation.
12. The Escrow Agent shall not be liable to any person for anything which
it may do or refrain from doing in connection with this agreement,
including the Escrow Agent's own negligence, but excluding the Escrow
Agent's own gross negligence or willful malfeasance. In no event shall
the Escrow Agent be liable to any third party for special, indirect,
or consequential damages, or loss profits or loss of business, arising
under or in connection with this agreement.
13. The Escrow Agent shall not be bound by any modification, amendment,
termination, cancellation, rescission or supersession of this
Agreement unless the same shall be in writing and signed by all of the
other parties hereto and , if its duties as Escrow Agent hereunder are
affected thereby, unless it shall have given prior written consent
thereto.
The following are miscellaneous provisions applying to all parties:
14. Notices required to be sent hereunder shall be delivered by hand, sent
by an express mail service or sent via United States mail, postage
prepaid, certified, return receipt requested, to the following
addresses:
If to Issuer:
Atlas Mining Company
1221 W. Yellowstone Avenue
Osburn, Idaho 83849
<PAGE>
If to Escrow Agent:
Idaho Independent Bank
8882 North Government Way
Hayden, Idaho 83835
From time to time any party hereto may designate an address other than the
address listed above by giving the other parties hereto not less than five
(5) days advance notice of such change in address in accordance with the
provisions hereof.
15. This Agreement shall be governed by and interpreted in accordance with the
laws of the State of Idaho and the laws of the United States applicable to
transactions in Idaho.
16. No right or remedy in this Agreement is intended to be exclusive of any
right or remedy. Neither this Agreement nor the exercise by either party of
(or the failure to so exercise) any rights, power or remedy conferred
herein or by law shall be construed as relieving any person liable from
full liability.
17. No delay or omission by either party to exercise any right or remedy shall
impair such right or remedy or any other right or remedy or shall be
construed to be a waiver of any default or an acquiescence therein.
18. The invalidity or unenforceability of any of the rights or remedies herein
provided in any jurisdiction shall not in any way affect the right to the
endorsement in such jurisdiction or elsewhere of any of the other rights or
remedies herein provided.
19. This Agreement shall be binding upon and inure to the benefit of the
respective heirs, successors, representatives and authorized assigns of the
parties.
20. This Agreement embodies the entire agreement and understanding between the
parties hereto and supersedes all prior agreements and understandings
relating to the subject matter hereof.
21. The headings in this Agreement are for the purpose of reference only, and
shall not limit or otherwise affect any of the terms hereof.
EXECUTED on the date first written above.
ISSUER:
Atlas Mining Company
By: /s/ William T. Jacobson
----------------------------
William T. Jacobson, President
By: /s/
----------------------------
, Chairman of the Board
ESCROW AGENT:
Idaho Independent Bank
By: /s/ Craig Buckhart
----------------------
Printed Name: Craig Buckhart
---------------
Title: Manager
---------
<PAGE>
CORPORATE RESOLUTION
ATLAS MINING COMPANY
Pursuant to Idaho statutes, Title 30, Corporations, the Board of Directors
of Atlas Mining Company ("Corporation") do hercby adopt and authorize the
following resolutions:
RESOLVED, that the Corporation register with the S.E.C., offer and issue
7,500,000 shares of common stock of the corporation at a purchase price of $1.00
per share, deemed adequate and fair consideration by this Board, and
RESOLVED FURTHER, that the officers and appropriate employees and agents of
the Corporation are hereby authorized and directed to take any actions necessary
to fulfill the objectives stated in these resolutions; further, any action taken
before the date hereof with the intent to bring about the objectives adopted and
approved herein are hereby ratified.
Passed this 20th day of August, 1999
/s/ William Jacobson
- ---------------------------
President
/s/ Kurt Hoffman
- ---------------------------
Secretary
[State Seal]
<PAGE>
