ATLAS MINING COMPANY AND SUBSIDIARIES

Condensed Notes to the Consolidated Financial Statements

March 31, 2008 and 2007

NOTE 4 – STOCK AWARD PAYABLE

Under the requirements of SFAS 123(R), the Company reviews the value of stock award payable and adjusts the carrying value to market based on the closing price of the Company’s common stock on the last day of the quarter.  Any adjustment made to the carrying value of the stock award is recorded as a gain or loss on revaluation of stock awards.  For the period ended March 31, 2008, the Company realized a gain on the revaluation of stock awards totaling $80,500.  At March 31, 2008, the value of Mr. Dumont’s stock award payable was $142,500, and value of Mr. Gaensbauer’s stock award payable was $57,000 for a total of $199,500.

NOTE 5 – NOTES AND LEASES PAYABLE

NOTES

Notes payable are detailed in the following schedules as of March 31, 2008 and December 31, 2007:

 

	March 31,		December 31,
	2008		2007
Note payable to an insurance company due in monthly installments of $2,875 including interest at 5.75%.  The note matures in April 2008	$ - 0 -		$ 8,474
Note payable to a company due in monthly installments of $1,605, including interest at 17.10%.  The note matures in April 2009 and is collateralized by equipment.	- 0 -		27,691
Note payable to an insurance company due in monthly installments including interest at 8.60%.  The note matures in May 2009 and 2008.	28,712		84,887
Total Notes Payable	28,712		121,052
Less:  Current Portion	(28,712)		(111,571)
Total Long-Term Liabilities	$ - 0 -		$ 9,481

Future minimum principal payments on notes payable are as follows:

2008		$	28,712
		$	28,712

 

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ATLAS MINING COMPANY AND SUBSIDIARIES

Condensed Notes to the Consolidated Financial Statements

March 31, 2008 and 2007

NOTE 5 – NOTES AND LEASES PAYABLE (CONTINUED)

CAPITAL LEASES

The Company is a lessee of certain equipment under capital leases that expire on various dates through March 2012. Terms of the leases call for monthly payments ranging from $688 to $15,573 at implicit interest rate of 9.34% per annum (the incremental borrowing rate).  The assets and liabilities under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets.  The assets are depreciated over their estimated useful lives.

The following is a schedule by years of the future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of March 31, 2008:

		March 31,
		2008
	2008	$ 136,835
	2009	174,406
	2010	133,248
	2011	77,376
	2012	11,932
	Total Minimum Lease Payments	533,797
	Less:  Amount Representing Interest	(90,263)
	Present Value of Net Minimum Lease Payments	443,564
	Current Net Minimum Lease Payments	(134,927)
	Long-Term Net Minimum Lease Payments	$ 308,607

OPERATING LEASES

At the end of December 2007, the Company entered into a rental lease agreement for its office space with an unrelated third party.  The lease was a one-year, non-terminable lease through the end of 2008 with an option to purchase the property.  The monthly rent during the first year was $2,250 per month.  For the quarter ended March 31, 2008, the Company recognized rent expense of $6,750 with regards to this lease agreement.

NOTE 6 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 10,000,000 shares of noncumulative, non-voting, nonconvertible preferred stock, $1.00 par value per share.  At March 31, 2008 and December 31, 2007, no shares of preferred stock were outstanding.

Common Stock

The Company is authorized to issue 60,000,000 shares of common stock, no par value per share.  At the periods ended March 31, 2008 and December 31, 2007, 54,233,779 and 54,173,594 shares were issued and outstanding, respectively.

At December 31, 2008, the Company did not have sufficient authorized unissued common stock available for conversion of all common stock equivalents.

During the quarter ended March 31, 2008, the Company issued 60,185 of restricted stock at a price ranging between $0.59 and $0.71 per share for director and special investigation committee fees for a fair value of $40,000.

 

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ATLAS MINING COMPANY AND SUBSIDIARIES

Condensed Notes to the Consolidated Financial Statements

March 31, 2008 and 2007

NOTE 7 – OPTIONS TO PURCHASE COMMON STOCK

A summary of the status and changes of the options granted under the Company’s 1998 Non-qualified Stock Option Plan and other agreements for the periods ended March 31, 2008 and December 31, 2007 are as follows:

		March 31, 2008			December 31, 2007
			Weighted			Weighted
			Average			Average
		Shares	Exercise Price		Shares	Exercise Price
Outstanding at beginning of period		2,688,577	$ 0.66		3,773,333	$ 0.52
Granted		- 0 -	- 0 -		4,000,000	2.61
Exercised		- 0 -	- 0 -		(1,084,756)	0.18
Forfeited		- 0 -	- 0 -		(4,000,000)	2.61
Expired		- 0 -	- 0 -		- 0 -	- 0 -
Outstanding at end of period		2,688,577	$ 0.66		2,688,577	$ 0.66
Exercisable at end of period		1,938,577	$ 0.95		1,438,577	$ 1.01

A summary of the status of the options outstanding at March 30, 2008 is presented below:

	Options Outstanding				Options Exercisable
		Weighted
		Average	Weighted			Weighted
		Remaining	Average			Average
Range of	Number	Contractual	Exercise		Number	Exercise
Exercise Price	Outstanding	Life	Price		Exercisable	Price
$ 0.18	1,688,577	1.50 years	$ 0.18		1,188,577	$ 0.18
$0.54 - $2.32	1,000,000	1.25 years	$ 1.47		750,000	$ 1.78
	2,688,577				1,938,577

At March 31, 2008, the total compensation cost of $88,151 for unvested shares is expected to be recognized over the next 1.5 years on a weighted average basis.

 

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ATLAS MINING COMPANY AND SUBSIDIARIES

Condensed Notes to the Consolidated Financial Statements

March 31, 2008 and 2007

NOTE 8 – EARNINGS (LOSS) PER SHARE INFORMATION

The Company has adopted SFAS No. 128, “Earnings Per Share,” which provides for calculation of “basic” and “diluted” earnings per share. The computation of earnings (loss) per share of common stock is based on the weighted average number of shares outstanding at the date of the financial statements.  The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year plus the common stock equivalents that would arise from the exercise of stock options and warrants outstanding under the treasury method and the average market price per share during the year. Common stock equivalents at March 31, 2008 and 2007 consisted of 2,688,577 and 3,773,333, respectively, in options.  Common stock equivalents at March 31, 2008 and 2007 were considered but were not included in the computation of loss per share at March 31, 2008 and 2007 because they would have been anti-dilutive.

		Net Loss		Shares		Per-Share
		(Numerator)		(Denominator)		Amount
For the period ended March 31, 2008:
Basic EPS
Net loss to common shareholders		$ (980,645)		54,212,094		$ (0.02)
For the period ended March 31, 2007:
Basic EPS
Net loss to common shareholders		$ (296,302)		52,747,230		$ (0.01)

NOTE 9 – COMMITMENTS AND CONTINGENCIES

LITIGATION

Various lawsuits, claims, proceedings and investigations are pending involving us as described below in this section.  In accordance with SFAS No. 5, “Accounting for Contingencies,” when applicable, the Company records accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.  In addition to the matters described herein, the Company is involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business, which in management’s opinion will not have a material adverse effect on the financial condition, cash flows or results of operations.

 

 

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ATLAS MINING COMPANY AND SUBSIDIARIES

Condensed Notes to the Consolidated Financial Statements

March 31, 2008 and 2007

NOTE 10 – SUBSEQUENT EVENTS

Sale of Securities

On May 27, 2008, the Company sold 833,333 shares of common stock at $0.60 per share to three purchasers in transactions that were exempt from registration under Section 4(2) of the Securities Act of 1933.  A total of 583,333 shares were sold to two funds managed by Mr. David Taft, a current director of the Company.

On June 27, 2008, the Company sold 2,000,000 shares of common stock for $0.50 per share to two funds managed by Mr. David Taft, a current director of the Company.  The transactions were exempt from registration under Section 4(2) of the Securities Act of 1933.

On September 23, 2008, the Company sold 1,700,000 shares of common stock at $0.50 per share to two funds managed by Mr. David Taft, a current director of the Company, in transactions that were exempt from registration under Section 4(2) of the Securities Act of 1933.

Convertible Notes December 2008

On December 30, 2008, the Company sold to accredited investors $1,000,000 principal amount of Series 10% PIK-Election Convertible Notes due 2018 (the “Notes”) at a conversion price of $0.35 per share (the “Conversion Price”) and entered into a Registration Rights Agreement in connection with the shares of common stock to be issued upon conversion of the Notes.  The principal under the Notes is due December 15, 2018 subject to earlier acceleration or conversion of the Notes as described below.  The Notes bear interest at the rate of 10% per annum payable (including by issuance of additional in kind notes) semi-annually in arrears on June 15th and December 15th of each year, commencing June 15, 2009.

The Notes per above may be converted at the option of the Noteholder at any time there is sufficient authorized unissued common stock of the Company available for conversion.  The Notes will be mandatorily converted when (i) sufficient common stock is available for conversion all notes in the Series, (ii) the average closing bid price or market price of the Company’s common stock for the preceding five (5) trading days is above the Conversion Price and (iii) a registration statement is effective and available for resale of all of the converted shares or the Noteholders may sell such shares under Rule 144 under the Securities Act.

Convertible Notes April 2009

Between April 7, and April 9, 2009, the Company sold to accredited investors $1,500,000 principal amount of Series 10% PIK-Election Convertible Notes due 2018 (the “Notes”) at a conversion price of $0.35 per share (the “Conversion Price”) and entered into a Registration Rights Agreement in connection with the shares of common stock to be issued upon conversion of the Notes.  The principal under the Notes is due December 15, 2018 subject to earlier acceleration or conversion of the Notes as described below.  The Notes bear interest at the rate of 10% per annum payable (including by issuance of additional in kind notes) semi-annually in arrears on June 15th and December 15th of each year commencing June 15, 2009.

Convertible Notes May 2009

On May 1, 2009, the Company entered into agreements to sell to accredited investors $1,350,000 principal amount of Series 10% PIK-Election Convertible Notes due 2018 (the “Notes”) at a conversion price of $0.50 per share (the “Conversion Price”) and entered into a Registration Rights Agreement in connection with the shares of common stock to be issued upon conversion of the Notes.  The principal under the Notes is due December 15, 2018 subject to earlier acceleration or conversion of the Notes as described below.  The Notes bear interest at the rate of 10% per annum payable (including by issuance of additional in kind notes) semi-annually in arrears on June 15th and December 15th of each year commencing June 15, 2009.

 

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ATLAS MINING COMPANY AND SUBSIDIARIES

Condensed Notes to the Consolidated Financial Statements

March 31, 2008 and 2007

NOTE 10 – SUBSEQUENT EVENTS (CONTINUED)

The Notes (April and May 2009) may be converted at the option of the Noteholder at any time there is sufficient authorized unissued common stock of the Company available for conversion.  The Notes will be mandatorily converted when (i) sufficient common stock is available for conversion all notes in the Series, (ii) the average closing bid price or market price of the Company’s common stock for the preceding five (5) trading days is above the Conversion Price and (iii) a registration statement is effective and available for resale of all of the converted shares or the Noteholders may sell such shares under Rule 144 under the Securities Act.

Sale of Non-Core Assets

Between April 1 and April 10, 2009, the Company sold certain equipment from its discontinued contract mining business.  On April 15, 2009, the Company entered into an agreement for appointment of agent for the sale of assets with AAMCOR LLC (“the Agreement”).  Under the Agreement, the Company agreed to (i) sell certain of the equipment of its discontinued contract mining business to AAMCOR for $300,000 in cash plus a potential share in proceeds of resale of such items, and (ii) appointed AAMCOR exclusive agent to sell certain other non-core equipment deemed unnecessary for development of the Company’s Dragon Mine property.

Settlement Agreement

On July 2, 2009, the Company entered into a Settlement Agreement (“Class Action Settlement Agreement”) with the lead plaintiffs in the class action In Re Atlas Mining Company Securities Litigation pending in the United States District Court for the District of Idaho, Civil Action No. 07-428-N-EJL(D. Idaho).

Under the terms of the settlement agreement, the Company will pay plaintiffs $1,250,000 (which includes fees to plaintiff’s counsel), to be funded by the proceeds of an insurance policy, in exchange for release of all claims against the Company, NanoClay & Technologies Inc., and the individual defendants William T. Jacobson, Robert Dumont, Ronald Price and Barbara Suveg.  The Company will also fund up to $75,000 to fund expenses in connection with notification to class members.  The settlement agreement is the agreement contemplated by the memorandum of understanding entered into by the Company and the lead plaintiffs dated May 1, 2009 described in the 8-K filed by the Company on May 4, 2009 (“the MOU”) and the terms of it are consistent with such MOU.

Related to the Class Action Settlement, effective July 8, 2009, Atlas entered into a Settlement Agreement and Release with Navigators, RSUI Indemnity Company and RSUI Group, Alexander, Morford & Woo, Inc., and the individual defendants listed above in settlement of the insurance litigation Atlas Mining Co. v. Navigators Insurance Co. et al., No. 1:08-cv-00359-EJL (D. Idaho) and Navigators Insurance Co. v. Atlas Mining Co., et. al., Case No. 2:08-cv-00216-EJL (D.Idaho).  Pursuant to this agreement (i) Navigators will deliver $1,250,000 into a court registry, which will then be used upon final court approval of the Class Action Settlement to fund the $1,250,000 payment to class action plaintiffs, (ii) Navigators will deliver $750,000 to the Company for defense and investigative costs in connection with the Class Action and related matters, which Atlas will use in part to pay the individual defendants their costs in the class action and (iii) all claims under the insurance litigation will be released upon final court approval of the Class Action Settlement.

Also, related to the class action settlement, the Company has entered into a settlement agreement with Robert Dumont, a former President, CEO and director of the Company, mutually releasing all claims related to Dumont’s employment by the Company in consideration of the Company’s payment to Dumont of up to $258,000 for Dumont’s attorneys’ fees and expenses related to the class action (to be funded from the insurance proceeds described above), insurance litigation, and other matters which the Company will fund with monies it receives from Navigators in connection with the insurance litigation settlement.

 

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NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-QSB contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry. Words such as "believe," "anticipate," "expect," "intend," "plan," "will," "may," and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We operate a Contract Mining business and are engaged in the development of our resource property, the Dragon Mine, located in the state of Utah.

Historically our primary source of revenue has been generated by our Contract Mining operations.  On December 31, 2008 we discontinued our Contract Mining business due to adverse economic conditions and the desire to concentrate our efforts on the commercialization of the halloysite clay deposit at the Dragon Mine.

Property Exploration

We intend to continue our exploration activities the Dragon Mine.  We do not intend to seek out and acquire other properties.

In August 2001 we acquired the Dragon Mine in Juab, Utah and began our clay exploration activities.  Our exploration and development expenses for the quarters ending March 31, 2008 and 2007 were $64,287 and $481,868, respectively, on the halloysite clay property.

The activities at our Dragon Mine property, located in Juab County, Utah, were suspended in October 2007 when previous management determined that both a resource survey and an appropriate processing facility were needed before the property could be successfully commercialized.  In 2008, a geological consulting firm was hired by us to both carry out a detailed geological review of the property and develop an appropriate method by which to process the mineral resource.  This work is ongoing as of the date of this report.  Beginning in 2009, we began processing material from the mine and distributing samples to potential customers as part of a preliminary marketing program. The geological consulting firm referred to above has sub-contracted with a firm with expertise in the development of mineral processing to identify an appropriate processing system for the Company.  Any subsequent reference to a geological consulting firm may be assumed to include the firm currently being contracted to identify the processing system.

Management believes that the clay resource found at the Dragon Mine property possesses, among other things, certain structural and mineralogical characteristics that may possibly add functionality to applications such as, but not limited to, the controlled release of biological and chemical agents, polymer-related strengtheners and fire retardants, oil field drilling minerals, catalyst carriers, filtration technologies, hydrogen storage for fuel cells and cosmetics.  For certain of the aforementioned applications, management believes the Dragon Mine resource has the potential to serve as a more effective alternative to the materials upon which these current technologies are established. Other above-mentioned applications are being developed to specifically utilize the structural characteristics of the clay resource.

 

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The Dragon Mine property contains halloysite, kaolinite, alunite and other minerals located underground and in waste piles that are the result of previous mining operations.   The geological resource survey being conducted on the Dragon Mine has involved the assessment of approximately 10,000 feet of borehole drill cores and the analysis of samples taken from the five waste piles located at the mine site.  The survey has included X-ray diffraction analysis to determine the levels of halloysite, kaolinite and other minerals found in the resource.  Initial studies have indicated that conventional processing may be used to separate the halloysite and kaolinite fractions from alunite and other minerals found in the Dragon Mine resource.  The geology of the deposit shows alterations of feldspar identified along side the presence of monzanite, halloysite and kaolinite.  Purer halloysite found at the mine has been identified along side the presence of iron ore.  The morphology of the halloysite identified at the Dragon Mine, as determined by Scanning Electron Microscopy (“SEM”) analysis, demonstrates the existence of both lath-like and tubular formations.  The kaolinite present at the Dragon Mine has been determined to possess a highly crystalline structure.

NaturalNano, Inc. (OTC: NNAN), in conjunction with Cascade Engineering and it’s subsidiary, Noble Polymers, has developed Pleximer ™, a halloysite nanotube concentrate used to create stronger, lighter, environmentally friendlier and lower-cost polymer-based nanocomposites.  According to NaturalNano’s 2008 annual report, Pleximer ™ is being marketed to the global nanocomposites market that, in the estimation of BCC Research, is expected to grow from $273 million in 2005 to $4.0 billion by 2015.  According to BCC Research, clay-based nanocomposites are expected to represent 47% of the nanocomposites market by 2010.  The U.S. Department of the Navy, represented by the Naval Research Lab (NRL”), has patented a technology that provides for the controlled release of active agents using inorganic tubules such as halloysite clay.  The U.S. Navy’s technology has been licensed by at least two companies that are developing controlled-release applications for the fields of electromagnetic shielding/strength enhancement, cosmetics, fragrances, agriculture, ink and paper, electronics, fabrics and textiles, local drug delivery and mold-resistant building products.  The U.S. Navy has also patented a technology that permits a controlled release of an active agent as an anti-scaling treatment for environments such as oil wells.

As of the date of this report, a study is being conducted to identify the applications for which the Dragon Mine resource may provide functionality. Processed clay samples have been distributed to potential customers who have requested halloysite and/or halloysite-kaolinite mixtures.  A number of advanced applications to which the Company plans to market its resource are currently using plate-like structured clays that must undergo expensive exfoliation process to achieve proper functionality.  The tubular morphology of the Dragon Mine resource does not require such an exfoliation process to achieve similar or, in many instances, greater functionality.  Management, therefore, believes that it may be able to deliver its processed mineral to market at price points lower than those of competing clays, without sacrificing performance.

In addition to certain advanced applications previously mentioned, we believe the Dragon Mine resource may also be marketed to certain established, low-tech applications such as, but not limited to, fine porcelain, bone china, high-performance advanced technical ceramics, paint fillers, suspension agents, animal feed, cement hardeners, and food and pharmaceutical additives.  Markets, such as fine porcelain and bone china, would likely require the Dragon Mine clay resource be processed for increased brightness and reduced presence of titanium whereas applications, such as a cement hardener, would require a relatively unprocessed version of the Dragon Mine resource.  Management, as part of its overall business strategy, will continually assess the economic feasibility of pursuing potential markets.

Management believes that both existing and potential applications that utilize the Dragon Mine resource will require varying grades of clay to satisfy the unique technical requirements of each application.  Some applications may require pure halloysite, composed of tubular and/or lath-shaped particles while other applications may require a grade of clay consisting of a specific halloysite-kaolinite ratio.  The determination of the appropriate grade of clay will likely require significant technical cooperation between the Company and the developer of the related application.  As previously mentioned, the Company has hired a consulting firm to identify a processing system capable of producing the grades of clay required by potential applications.  The identification of such a system is ongoing.

In 2009, the Company entered into a development agreement with Yuri M. Lvov, Ph.D., a professor of chemistry at Louisiana Tech University and the T.C. Pipes Eminent Endowed Chair on Micro and Nanosystems at the Institute for Micromanufacturing (LaTech).  The scope of the agreement includes, among other things, the development of halloysite in an anti-corrosion paint application in addition to the development of other emerging applications.

 

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RESULTS OF OPERATIONS

Revenues for the three-month period ending March 31, 2008 were $1,555,999 and $2,002,270 for the same period ending March 31, 2007, a decrease of 22%.  The difference was caused by the decrease in contracting revenues of $446,271 for this period compared to the previous year.

Gross profit for the three-month period ending March 31, 2008 was $534,503 compared to $931,556 for the same period ending March 31, 2007, a decrease of 43%.  This was due to decreased contracting revenues for the three-month period ending March 31, 2008 over the same period ended March 31, 2007.

Total operating expenses for the three-month period ending March 31, 2008 was $1,339,157 compared to $1,123,179 for the same period ending March 31, 2007 an increase of 19%.  The Company recognized more general and administrative costs, and production costs in the period ended March 31, 2008 compared to the same period ended March 31, 2007.

Our net loss for the three month period ending March 31, 20008 was $(980,645) compared to $(296,302) for the same period ending March 31, 2007, an increase of approximately 231%.  As previously mentioned, the Company experienced decreases in contracting revenues during the first quarter ended March 31, 2008 as compared to the same period ending March 31, 2007, and also increases in operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

To date our activities have been financed primarily through the sale of equity securities, borrowings, and revenues from Contract Mining. For the three month periods ended March 31, 2008 and March 31, 2007 Contract Mining accounted for 100% of the revenue. Our current asset and debt structure is explained below.

Our total assets as of March 31, 2008 were $5,520,368 compared to $6,271,643 as of December 31, 2007, or a decrease of $751,275.  For the three-month period ended March 31, 2008 the Company has decreased its current assets by $692,015, and its fixed assets by $59,260 through the acquisition of additional equipment for mining and milling operations.

Total liabilities were $1,512,303 as of March 31, 2008, compared to $1,702,224 as of December 31, 2007.  The following debts are still outstanding;

·	A lease payable for equipment due in annual installments of $15,573, including interest of 8.59%, with a balance of $50,911.

·	A lease payable for a vehicle due in monthly installments of $688, including interest of 7.49% with a balance of $15,299.

·	A lease payable for equipment due in monthly installments of $3,518, including interest of 18.05% with a balance of $108,975.

·	A lease payable for equipment due in monthly installments of $1,075, including interest of 0%, with a balance of $25,808.

·	A lease payable for equipment due in monthly installments of $1,632, including interest of 3%, with a balance of $75,182.

·	A note payable to an insurance company for insurance premiums with a balance of $28,712, including interest at 8.60%.

·	A capital lease payable for equipment due in monthly installments of $2,144, including interest of 19.00%, with a balance of $2,177.

·	A capital lease payable for equipment due in monthly installments of $6,323, including interest of 8.5% with a balance of $165,240.

Current liabilities including accounts payable and accrued expenses due as of March 31, 2008 were $1,004,196 and are the result of daily operations and accrued taxes.  We also carry a liability of $52,415 to the minority interest in a subsidiary, and stock awards payable of $199,500.

 

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Our principal sources of cash flow during the first quarter 2008 was from contracting activities which provided an average of $518,666 per month for the three month period ended March 31, 2008, and averaged $667,423 per month for the same period in 2007.  In addition, we rely on our credit facilities and any public or private sales of equity for additional cash flow.

Cash flow provided (used) by financing activities for the three-month period ended March 31, 2008 was $(146,226) compared to $1,936,282for the same period in 2007, a difference of $2,082,508.  The major factor for the difference was that no private sales of equity occurred during the first three months of 2008 compared to the same period in 2007.

The Company used $49,764 from investing activities for the three month period ended March 31, 2008, compared to using $307,705 in the same period in 2007, a difference of $257,941.  This decrease occurred as less equipment was acquired during the first three months of 2008 compared to the same period in 2007.

Cash flow used by operating activities for the three-month period ended March 31, 2008, was ($506,190) compared to ($46,740) for the same period in 2007, a difference of $459,450.  In the three-month period in 2008 net losses were markedly higher than during the same period in 2007.

OFF-BALANCE SHEET ARRANGEMENTS

There are no off-balance sheet arrangements between the Company and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

ITEM 3.                     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have no exposure to fluctuations in interest rates, foreign currencies, or other market factors.

 

ITEM 4.                     CONTROLS AND PROCEDURES

(a)           Evaluation of Disclosure Controls and Procedures

 

We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures,  (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.  Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of March 31, 2008 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and was accumulated and communicated to our management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

(b)           Changes in Internal Controls.

 

We believe that the condensed consolidated financial statements in this quarterly report on Form 10-Q fairly present, in all material respects, our financial condition as of March 31, 2008 and December 31, 2007, and results of its operations and cash flows for the quarters ended March 31, 2008 and 2007, in conformity with United States generally accepted accounting principles (GAAP).

 

 

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PART II.  OTHER INFORMATION

ITEM 1.                     LEGAL PROCEEDINGS

 

Various lawsuits, claims, proceedings and investigations are pending involving us as described below in this section. In accordance with SFAS No. 5, Accounting for Contingencies, when applicable, we record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. In addition to the matters described herein, we are involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business, which in our opinion will not have a material adverse effect on our financial condition, cash flows or results of operations.

 

ITEM 2.                     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the first quarter of 2007, we sold stock in several transactions not registered under the Securities Act as listed below.  Management at the time deemed such sales to be exempt under Section 4(2) of the Securities Act and indicated that all sales were made to accredited investors.  With the exception of the sales of 1,481,482 made on January 9, 2007, current management has not verified that the purchasers were accredited investors or whether the conditions of the 4(2) exemption were satisfied.

On January 3, 2007, we issued 40,000 shares of common stock to two accredited investors for $20,000 for the redemption of outstanding warrants.

On January 9, 2007, we 1,481,482 shares of common stock to an accredited investor for $2,000,001 for exercise of a subscription agreement.

Also on January 9, 2007, we issued 230,000 shares of common stock to two accredited investors for $115,000 for the redemption of outstanding warrants.

On January 12, 2007, we issued 3,430 shares of common stock to an accredited investor for $858 for the redemption of an outstanding warrant.

On January 29, 2007, we issued 30,570 shares of common stock to an accredited investor for $15,000 for the redemption of an outstanding warrant.  An additional 19,430 shares were issued for cash at $.50.

ITEM 3.                     DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.                     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.                     OTHER INFORMATION

None.

 

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ITEM 6.                     EXHIBITS

(a)

Exhibits.

The following exhibits are included in this report:

Exhibit Number		Description of Exhibits
31.1		Certification pursuant to Rule 13a-14 of the Securities Exchange Act, as adopted pursuant to the Section 302 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer
31.2		Certification pursuant to Rule 13a-14 of the Securities Exchange Act, as adopted pursuant to the Section 302 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer
32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer

 

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		ATLAS MINING COMPANY
Dated:  July 27, 2009		/s/  ANDRE ZEITOUN
		By:  Andre Zeitoun
		Chief Executive Officer
Dated:  July 27, 2009		/s/  CHRISTOPHER T. CARNEY
		By:  Christopher T. Carney
		Interim Chief Financial Officer

 

 

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