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Date
of Report (Date of earliest event reported)
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August
20, 2008
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ATLAS
MINING COMPANY
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(Exact
name of registrant as specified in its charter)
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Idaho
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000-31380
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82-0096527
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification No.)
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1221
Yellowstone, Osburn, Idaho
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83849
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(Address
of principal executive offices)
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(Zip
Code)
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(208)
556-1181
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Issuer's
telephone number, including area code
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N/A
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(Former
name or former address, if changed since last
report.)
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230-425)
|
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240-14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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·
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During
the period beginning in 2002 and ending in early 2006, approximately 30
million shares of Common Stock were issued in violation of the federal
securities laws, including the registration provisions of Section 5 of the
Securities Act of 1933. The violations involved (a) misuse of
SEC Registration Form S-8, a short form registration form for compensatory
issuances to certain officers, directors, employees and consultants
(approximately 16 million shares were issued under Form S-8), (b) transfer
of 9.9 million shares to related parties and affiliates that
were purportedly sold under a Company Registration Statement on
SEC Registration Form SB-2 and subsequent resales without compliance with
the plan of distribution contained in the Company’s SB-2, and (c) grants
of at least 2.8 million shares purportedly made pursuant to the exemption
from registration set forth in Section 4(2) of the Securities
Act. These issuances are discussed in more detail in the
following three paragraphs.
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o
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Between
2002 and 2006, the Company issued approximately 16 million shares of its
common stock that were purportedly issued under the Company’s registration
statements on Form S-8. A review of these issuances revealed
that approximately 14.6 million of these shares, with an aggregate market
value of approximately $3.6 million (based upon the closing sale price per
share on the apparent dates of issuance) were issued to individuals and
entities that were ineligible to receive shares registered on Form S-8
because, among other reasons, these individuals or entities provided Atlas
with capital raising or stock promotion services and/or did not provide
any bona fide consulting services to Atlas. In addition, some
such issuances and other issuances also may have been in excess of the
number of shares the Company had registered on Form S-8 at the time of
issuance. Many of the shares were issued in violation of Atlas’
2002 Consultant Stock Plan. Certain shares were issued to
family members of the Company’s then CEO, Mr. Jacobson, and such
transactions appear to have been, among other things, director conflict of
interest transactions which did not receive proper approval from the Board
of Directors. Moreover, the values given to the S-8 stock for
financial reporting purposes in many cases appear to have been less than
market value of the stock on the apparent dates of
issuance.
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o
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In
2003, the Company registered for sale on SEC Registration Form SB-2 ten
million shares of Common Stock at a fixed price of $.10 per share on a
self-underwritten basis. Purportedly to avoid filing a
post-effective amendment to update the disclosure in the registration
statement, the Company issued 9.9 million shares to related parties and
affiliates. In 2003 and 2004, these shares were provided to
third parties for resale and resales were apparently made at times when
the market price was greater than $.10. Only after such resales
did the Company ultimately receive cash payments in the aggregate of
approximately $805,000 for these shares, which is less than the $990,000
that would be expected.
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o
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In
2003, the Company issued 2.8 million restricted shares for supposed
services purportedly in reliance on the private placement
exemption from registration set forth in Section 4(2) of the Securities
Act. However, the Company did not determine whether the
recipients satisfied a condition of the exemption (that is, that the
recipients took with the intent to resell only pursuant to an effective
registration statement or an exemption form registration). In
some cases, the Company instructed its transfer agent to transfer these
shares prior to the applicable holding period under Rule 144, which is an
exemption from registration. 1.4 million of these shares were
issued to a family member of Mr. Jacobson and this transaction appears to
have been, among other things, a director conflict of interest transaction
which did not receive proper authorization from the Board of Directors.
.
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·
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The
Special Committee also determined that the Company did not properly record
compensation expenses associated with the vesting of certain
stock options granted to officers of the
Company.
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·
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The
Special Committee has determined that Mr. Jacobson was primarily
responsible for the securities law violations set forth
above.
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·
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The
Special Committee also discovered transactions between the
Company and wholly- or partly-owned subsidiaries of the Company or related
entities, including stock issuances to those entities that violated
Section 5 of the Securities Act and inter-company loans with those
entities that appear to have been conflict-of-interest
transactions entered into without proper corporate authorization or
business purpose. The investigation into these transactions is
on-going by current management.
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·
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The
accounting treatment of the $250,000 received from NaturalNano
as revenue in 2004 was incorrect. The treatment of
such funds as proposed in the October 9, 2007 Press Release was also
incorrect. In October, 2007, management determined to account
for the transaction as a deposit of funds, reducing previously recorded
revenues and increasing long-term liabilities. The Special
Committee believes that during the two year term of the contract, the
$250,000 should have been treated as a deposit, but after the expiration
of the contract in 2006, the entire $250,000 should have been recognized
as revenue, and will provide support for its conclusion to
PMB.
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·
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The
Special Committee determined that in 2004, Mr. Jacobson received options
to purchase 3.5 million shares of Atlas common stock in
violation of existing Company stock option plans and that had an exercise
price below market price at the date of the grant. The Company
did not properly account for the compensation expenses related to the
grant.
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·
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The
Special Committee found no evidence of accounting irregularities with
respect to fixed asset ownership and long-term
liabilities.
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·
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The
Company’s internal control over financial reporting and disclosure
controls contained material weaknesses, which led to inadequate and
inaccurate disclosures.
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·
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There
were inaccurate statements in press releases released by the Company
including a press release dated November 28, 2006 that contained
inaccurate statements regarding the production capabilities and activities
at the Dragon Mine.
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·
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In
June 2008, Mr. Jacobson resigned as an officer and director of the Company
and its subsidiaries.
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·
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As
a result of Mr. Jacobson’s resignation, the Company’s Board now consists
of a majority of independent
directors.
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·
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In
July 2008, the Company announced the hiring of Michael Lyon as interim
Chief Executive Officer, who brings more than 35 years of experience in
finance, operations, law and strategic planning in a variety of
businesses.
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·
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The
Company has hired experienced securities and disclosure
counsel.
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ATLAS
MINING COMPANY
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(Registrant)
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Date
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August
26, 2008
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/s/
Michael Lyon
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By: Michael
Lyon
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Chief
Executive Officer and President
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