UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal Year Ended December 31, 2002
COMMISSION FILE NO. 1-2714
ATLAS MINERALS INC.
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(Exact name of Registrant as specified in its charter)
COLORADO 84-1533604
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10920 W. Alameda Ave., Ste 205, Lakewood, CO 80226 303-292-1299
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(Address of principal executive offices) (Zip Code) (Registrant's
telephone number)
(including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name Of Each Exchange
Title Of Each Class On Which Registered
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Common Stock, par value $0.01 per share OTCBB
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year were $22,000
Aggregate market value of 2,352,647 shares of Common Stock held by
non-affiliates of the Registrant as of March 26, 2002 was $470,530.
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [X] No [ ]
As of March 26, 2002 Registrant had outstanding 5,915,103 shares of Common
Stock, $0.01 Par Value, its only class of voting stock.
Documents Incorporated by Reference: Proxy Statement for the 2003 Annual Meeting
Transitional Small Business Disclosure Format Yes [ ] No [X]
INDEX
Page
PART I
Item 1. Description of Business 1
Item 2. Description of Properties 6
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 12
Item 6. Management's Discussion and Analysis 12
Item 7. Financial Statements 21
Item 8. Changes to and Disagreements with Accountants on Accounting
and Financial Disclosure 40
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; 41
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation 41
Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 41
Item 12. Certain Relationships and Related Transactions 41
Item 13. Exhibits and Reports on Form 8-K 42
Item 14. Controls and Procedures 43
FORWARD LOOKING STATEMENTS
This annual report on Form 10-KSB 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. Atlas Minerals Inc. is referred to herein as
"we" or "our". The words or phrases "believe," "would be," "will allow,"
"intends to," "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results could differ materially
from those projected in the forward looking statements as a result of a number
of risks, assumptions and uncertainties, including, without limitation, the
Company's present financial condition and the risks and uncertainties concerning
the availability of additional capital as and when required; the speculative
nature of mineral exploration, commodity prices, and production and reserve
estimates; environmental and governmental regulations; competitive pressures;
general economic conditions and other factors, including the risk factors set
forth below and elsewhere in this report (see Description of Business - Risk
Factors in Part I, Item 1 and Management's Discussion and Analysis of Financial
Condition and Results of Operations in Part I, Item 6). Statements made herein
are as of the date of the filing of this Form 10-KSB with the Securities and
Exchange Commission and should not be relied upon as of any subsequent date.
Unless as may otherwise be required by applicable law, we do not undertake, and
specifically disclaims any obligation, to update any forward-looking statements
contained in this Form 10-KSB to reflect occurrences, developments,
unanticipated events or circumstances after the date of such statement.
i
PART I
ITEM 1. DESCRIPTION OF BUSINESS
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General Description
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Atlas Minerals Inc. (formerly Atlas Corporation) is principally engaged in the
exploration, development and exploitation of mineral properties and is actively
in the process of identifying new acquisition opportunities in the natural
resource sector. Throughout this document, use of the term "Company,"
"Reorganized Company," or "Atlas" refers to Atlas Minerals Inc. and its
subsidiaries from and after December 11, 1999. Use of the term "Predecessor
Entity" refers to Atlas Corporation and its subsidiaries prior to December 11,
1999.
The Company was incorporated under the laws of the State of Colorado on February
3, 2000. The principal office of the Company is located at 10920 W. Alameda
Avenue, Suite 205, Lakewood, Colorado 80226.
On September 22, 1998, the Predecessor Entity filed a petition for relief under
Chapter 11 of the U.S. Bankruptcy Code. The Company's subsidiaries, Atlas
Precious Metals Inc. ("APMI") and Atlas Gold Mining Inc. ("AGMI") also filed
petitions for relief under Chapter 11 on January 26, 1999. On December 11, 1999,
the Bankruptcy Court approved the plans of reorganization of Atlas, APMI and
AGMI (collectively the "Reorganization Plan"). Atlas, APMI and AGMI emerged from
Chapter 11 on January 10, 2000. Final decrees were issued by the Bankruptcy
Court officially closing the APMI and AGMI cases on November 8, 2000 and the
Atlas case effective December 31, 2001.
In May 2002, the Company was successful in its application and moved its listing
to the OTC Bulletin Board from the NQB Pink Sheets.
The Company owns 100% of the voting stock of APMI, incorporated under the laws
of the State of Nevada, which holds the Grassy Mountain property in Malheur
County, Oregon, a property known to host gold mineralization. In March 2003,
AGMI, a subsidiary of the Company, was merged with and into APMI, with APMI
remaining as the surviving entity. As a result of the merger, APMI now owns 100%
of the gold processing mill and related facilities and infrastructure related to
the Gold Bar mine in Eureka County, Nevada, previously held by AGMI. The Company
also owns 100% of an inactive subsidiary, Suramco Metals, Inc.
In June 2002, the Company purchased the White Cliffs Diatomite Mine and
processing facilities located approximately 30 miles north of Tucson, Arizona
("White Cliffs"). The property, which has been dormant for several years,
consists of approximately 3,200 acres of unpatented placer claims, a fully
permitted mine and a processing plant with a nominal annual capacity of at least
50,000 tons of finished product.
The largest current use of diatomaceous earth is in filtering applications. It
is also used as an absorbent, in filler applications and in manufacture of
insulation. One of the fastest growing uses is as a livestock feed supplement
and first production from the property was pre-sold for this purpose. The
majority of U.S. production currently comes from California and Nevada which
accounted for 87% of the production in 2000.
1
It is estimated from previous drilling, face sampling, and testing that there
are approximately 2,500,000 tons of diatomite mineralization on the property.
Currently there are approximately 32,000 tons of diatomite mineralization
permitted for mining. Based on internal and third party analyses, it appears
that the known diatomite material should be able to meet specifications for most
end products. The property is located adjacent to the Copper Basin Railroad
which accesses the Southern Pacific Line and within five miles of Highway 77,
both of which will serve for product distribution.
In July 2002, the Company incorporated a wholly-owned subsidiary in Arizona,
White Cliffs Mining, Inc., in which is held the White Cliffs Diatomite Mine and
related assets in Arizona.
In September 2002, the Company entered into a 120-day exclusive option agreement
(the "Option Agreement') to acquire 100% of the outstanding shares of Western
Gold Resources, Inc., a private Florida company whose primary asset is the
Estrades polymetallic mine located in northwestern Quebec. The Company
subsequently assigned the Option Agreement to APMI. Western Gold's primary asset
is the Estrades polymetallic mine located northwest of Val-d'Or in northwestern
Quebec. The Company is in the process of completing extensive due diligence of
the Estrades mine.
As of March 26, 2003, the Company operates only in the United States. Each of
its current properties is described in Item 2 below.
It is the intention of Management for the Company to remain in the business of
development and exploitation of natural resource properties. Management's
current efforts regarding this are being directed toward the identification of
possible acquisition opportunities, primarily in the sectors of industrial
minerals, base metals, and precious metals.
Risk Factors
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Operations
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OPERATIONS MAY BE ADVERSELY AFFECTED BY RISKS AND HAZARDS ASSOCIATED WITH THE
MINING INDUSTRY.
The Company currently has limited operations and cash flow from one start-up
operation, the White Cliffs mine and mill located in Arizona. This operation and
any possible future operations, if any, will be subject to risks and hazards
inherent in the mining industry, including but not limited to unanticipated
variations in resource grade and other geological problems, water conditions,
surface or underground conditions, metallurgical and other processing problems,
mechanical equipment performance problems, the unavailability of materials and
equipment, accidents, labor force and transportation disruptions, unanticipated
transportation costs and weather conditions, any of which can materially and
adversely affect, among other things, the development of properties, production
quantities and rates, costs and expenditures and production commencement dates.
2
Environmental Issues
--------------------
COMPLIANCE WITH ENVIRONMENTAL LAWS MAY HAVE A MATERIAL ADVERSE AFFECT ON
OPERATIONS.
The Company is required to comply with various federal, state and local
regulations relating to environmental matters at its properties from time to
time. Any other operator of the Company's properties will be required to comply
with these regulations as well. In addition, any potential purchaser of the
Company's properties takes into account the potential cost of compliance with
environmental regulations. The Company and any operator or subsequent owner of
its properties will be required to obtain permits from various governmental
agencies in order to mine and mill metals. Increasing costs of environmental
compliance for its properties may have a material adverse impact on the
Company's operations or competitive position. Also see Item 6. Management's
Discussion and Analysis, Environmental Matters.
Competition
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THE COMPANY FACES STRONG COMPETITION FROM OTHER MINING COMPANIES FOR THE
ACQUISITION OF NEW PROPERTIES.
The Company will compete with substantially larger companies in the acquisition
of properties and the production and sale of minerals and/or metals and may be
considered to be at a competitive disadvantage compared to such companies.
However, the Company may not be disadvantaged in acquiring smaller, possibly
higher grade, properties which might not be of significant interest to larger
companies. The price which the Company may receive for its production will
depend almost entirely upon market conditions over which it will have no
control. The Company believes that it can promptly sell at current market prices
all of the minerals and/or metals that it can produce.
Government Regulations
----------------------
THE COMPANY FACES EXTENSIVE GOVERNMENTAL REGULATION AND ENVIRONMENTAL RISKS.
In connection with mining, milling and exploration activities, the Company is
subject to extensive federal, state and local laws and regulations governing
such exploration, development and operation of mining activities as well as the
protection of the environment, including laws and regulations relating to
obtaining permits to mine, protection of air and water quality, hazardous waste
management, mine reclamation and the protection of endangered or threatened
species.
A number of bills have been introduced in the U.S. Congress over the past years
that would revise in various respects the provisions of the current federal
mining law, the Mining Law of 1872, but none of these proposals currently are
under active consideration. However, if enacted, such legislation could
substantially increase the cost of holding unpatented mining claims and could
impair the ability of companies to develop mineral resources on unpatented
mining claims. Under the terms of these bills, the ability of companies to
obtain a patent on unpatented mining claims would be nullified or substantially
impaired, and most contain provisions for the payment of royalties to the
federal government in respect of production from unpatented mining claims, which
could adversely affect the potential for development of such claims and the
3
economics of operating new or even existing mines on federal unpatented mining
claims. The Company's financial performance could therefore be affected
adversely by passage of such legislation. Pending possible reform of the Mining
Law of 1872, Congress has put in place a moratorium which prohibits acceptance
or processing of most mineral patent applications. It is not possible to predict
whether any change in the Mining Law of 1872 will, in fact, be enacted or, if
enacted, the form the changes may take.
Insurance
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THE COMPANY MAY NOT CARRY ENOUGH INSURANCE.
The mining industry is subject to risks of human injury, environmental liability
and loss of assets. While the Company currently carries, and as operations
expand intends to acquire, insurance coverage consistent with industry practice,
the Company can give no assurance that this level of insurance can cover all
risks of harm to the Company associated with being involved in the mining
business.
Price Volatility
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IT MAY NOT BE ECONOMICALLY FEASIBLE TO CONTINUE DEVELOPMENT OF A PROJECT OR
CONTINUE COMMERCIAL PRODUCTION.
The Company's ability to grow its operations in the future is dependent upon its
exploration efforts, and its ability to develop new orebodies. If prices for
commodities and/or metals decline, it may not be economically feasible for the
Company to continue its development of a project or to continue commercial
production of some of its properties.
Development of New Orebodies
----------------------------
DEVELOPMENT OF NEW OREBODIES MAY COST MORE AND PRODUCE LESS RETURN THAN
ESTIMATED.
The Company's ability to sustain or increase its current level of production of
minerals and/or metals partly depends on its ability to develop new orebodies
and/or expand existing mining operations. Before the Company can begin a
development project, the Company must first determine whether it is economically
feasible to do so. This determination is based on estimates of several factors,
including:
o resources;
o expected recovery rates of minerals and/or metals from the ore;
o facility and equipment costs;
o capital and operating costs of a development project;
o future commodities and/or metals prices;
o comparable facility and equipment costs;
o anticipated climate conditions.
Development projects may have no operating history upon which to base these
estimates, and these estimates are based in large part on our interpretation of
geological data, a limited number of drill holes and other sampling techniques.
As a result, actual cash operating costs and returns from a development project
4
may differ substantially from estimates as a result of which it may not be
economically feasible to continue with a development project.
Exploration
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THE COMPANY'S MINERAL EXPLORATION EFFORTS MAY NOT BE SUCCESSFUL.
The Company's ability to expand depends on the success of its exploration
program. Mineral exploration is highly speculative. It involves many risks and
is often non-productive. Even if the Company can find a valuable mineral or
metals deposit, it may be several years before production is possible. During
that time, it may become economically unfeasible to produce those minerals or
metals. Developing orebodies requires the Company to make substantial capital
expenditures and, in the case of new properties, to construct mining and
processing facilities.
Foreign Operations
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FOREIGN OPERATIONS, INCLUDING POTENTIAL FUTURE OPERATIONS IN CANADA AND MEXICO,
ARE SUBJECT TO ADDITIONAL INHERENT RISKS.
The Company anticipates that it may conduct significant exploration and
operations in Mexico and other international locations in the future, in which
case the Company would be subject to political and economic risks such as:
o the effects of local political and economic developments;
o exchange controls and export or sale restrictions;
o currency fluctuations;
o expropriation; and
o taxation and laws or policies of foreign countries and the United
States affecting trade, investment and taxation.
Consequently, any development and production activities undertaken by the
Company outside of the United States may be substantially affected by factors
beyond its control, any of which could materially adversely affect the Company's
financial position or results of operations.
Title to Properties
-------------------
TITLES TO SOME OF THE COMPANY'S PROPERTIES MAY BE DEFECTIVE.
Unpatented mining claims constitute a significant portion of our undeveloped
property holdings. The validity of these unpatented mining claims is often
uncertain and may be contested. In accordance with mining industry practice, we
do not generally obtain title opinions until we decide to develop a property.
Therefore, while we have attempted to acquire satisfactory title to our
undeveloped properties, some titles may be defective.
Employees
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As of March 26, 2003, the Company employed two full time persons at its
headquarters in Lakewood, Colorado, and four full time persons at its office
located in Tucson, Arizona.
5
ITEM 2. DESCRIPTION OF PROPERTY
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Grassy Mountain Property
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The Grassy Mountain property, located in northern Malheur County, Oregon,
encompasses approximately 6 square miles comprised primarily of 3 patented lode
claims, 135 unpatented lode claims, 46 unpatented lode and placer claims, and
approximately 1,000 acres of fee surface. From prior work, the property is known
to host a gold mineral inventory of 17,217,000 tons at a grade of 0.061 ounces
of gold per ton (using a 0.02 ounce per ton cutoff grade).
The rocks exposed at Grassy Mountain are part of a late to middle-Miocene Grassy
Mountain Formation, a sequence of volcanic and volcaniclastic rocks made up of
primarily olivine-rich basalt and intercalated tuffaceous siltstones,
sandstones, and conglomerates. Mineralization is associated with a low-grade
gold siliceous hot springs system (low sulfidation type) having sporadic high
grade gold values along multi-stage quartz-adularia veins and favorable
lithologies. The mineralized rock is highly silicified and locally brecciated in
the vicinity of the feeder structures.
There was no significant mining or major mineral occurrence known in the area
prior to the Predecessor Entity's acquisition of the Grassy Mountain project in
1986. Since that time, significant exploration work has been completed on the
property consisting of detailed mapping, sampling and the drilling over 400
coreholes totaling over 230,000 feet.
On February 14, 2000, the Company and APMI entered into a purchase option
agreement for the Grassy Mountain property with Seabridge Gold Inc.
("Seabridge") (formerly known as Seabridge Resources Inc.). This option
agreement was subsequently amended in December 2000 and July 2001 (collectively,
the "Original Option Agreement"). Under the terms of the Original Option
Agreement, Seabridge had until December 31, 2002, to exercise its option to
acquire the Grassy Mountain property for a total of $1.7 million. Specifically,
the payment was to consist of $150,000 cash (excluding $100,000 in option
payments made by Seabridge to extend the option period to December 31, 2002),
Seabridge common shares totaling $750,000, and a $700,000, 5% promissory note
payable in three equal installments of $233,333, payable every six months.
During the later part of 2002, Seabridge indicated to the Company that it was
concerned with certain provisions of the Original Option Agreement, particularly
those terms pertaining to the issuance of Seabridge common shares, which,
pursuant to the terms of the Reorganization Plan, would need to be immediately
distributed to the Company's and APMI's creditors and could have a negative
effect on the market for Seabridge securities. As a result, and recognizing the
Company's need for cash, the parties agreed to restructure the terms of the
transaction. Under the restructured agreement (the "Agreement"), the Company
received a $300,000 non-refundable option payment from Seabridge on December 20,
2002 in exchange for which Seabridge obtained the right to acquire the Grassy
Mountain gold property for a cash payment of $600,000 due on or before March 31,
2003. Subsequent to December 31, 2002, the Company assigned all of its rights,
title and interest in, to and under the Agreement to APMI.
While the Company believes that Seabridge will exercise its option, as of the
date of this Report, Seabridge has not done so. Should Seabridge, for any
reason, decide not to exercise its option under the Agreement, the Company would
attempt to find another buyer for the property.
6
Under the terms of the Reorganization Plan, proceeds from the sale of Grassy
Mountain will first be utilized to pay expenses of APMI with the remaining
proceeds to be distributed amongst APMI creditors, Atlas creditors and Atlas,
such that Atlas will receive approximately 35% of the excess proceeds.
Gold Bar and Related Assets
---------------------------
The Gold Bar property is located in and adjacent to the Roberts Mountains in
Eureka County, Nevada. At January 1, 2001, the property encompassed
approximately 17 square miles, comprised of 507 unpatented lode claims, 6
patented lode claims, and 8 patented millsite claims.
Regional reconnaissance exploration led the Predecessor Entity to the Battle
Mountain Trend area in the summer of 1983. Focused reconnaissance along the
southern Roberts Mountains identified widespread hydrothermal alteration with
anomalous gold geochemistry along the western range front. Detailed exploration
and drilling in the area by the Company led to gold being discovered in five
separate deposits on the property.
All of the mineralization on the property occurs as "Carlin-type" deposits
hosted in carbonate-rich sedimentary rocks of the Devonian Nevada Formation.
Mineralization is characterized by micron-size gold and a distinct hydrothermal
alteration suite of the decalcification and silicification.
In 1986 the Company completed construction of a mill with the first gold poured
in January 1987. The mill, originally designed and constructed for throughput of
1,500 tons per day ("tpd"), was expanded in 1989 to a 3,200 tpd rate. Operations
were suspended in February 1994 pending potential identification of additional
economic reserves. From inception through cessation of operations in 1994,
485,200 ounces of gold were recovered from 7,514,600 tons of ore.
Commencing in late 1994, the Predecessor Entity signed numerous agreements with
third parties for further exploration and development of the Gold Bar property,
but by late 1998 all such agreements had been terminated. As the Predecessor
Entity no longer intended to develop, operate or otherwise invest in this
property, in August 1999 it reached an agreement (the "Agreement") with Bonanza
Explorations Inc. (a successor corporation to Vengold Inc., a public Canadian
company) ("Bonanza") giving Bonanza the option to acquire the Company's interest
in certain of its patented and unpatented lode claims with all remaining claims
being dropped.
During 2001, Bonanza notified the Company that it was relinquishing 437 of the
unpatented lode claims. The Company subsequently decided not to retain any of
these lode claims for its own account and let the claims lapse. The Company has,
however, continued to retain ownership in the eight patented millsite claims.
Under the terms of the Agreement, Bonanza was obligated to incur $200,000 in
exploration costs on the property by December 31, 2001, with the Company
retaining a 2% net smelter royalty interest in the property if the option were
to be exercised. In January 2002, Bonanza notified the Company that it had
fulfilled the terms of the Agreement and requested that the Company transfer the
remaining 70 unpatented and 6 patented lode claims. The Company completed all
necessary documentation to effect such transfer in February 2002.
7
On January 11, 2000, Atlas entered into an exclusive agreement with Machinery
and Equipment Company, Inc. ("M&E") to dismantle, salvage and sell the mill and
related equipment at the Gold Bar property. Net receipts from the sale of the
equipment were approximately $29,000 and $90,000 during 2001 and 2000,
respectively. M&E received a 25% commission on all proceeds received under the
agreement. In January 2002, this exclusive agreement was mutually terminated by
the companies.
Under the terms of the Reorganization Plan, any future proceeds from the sale of
the mill and related equipment at Gold Bar will first be utilized to pay certain
priority claims, including administrative expenses of Atlas (approximately
$353,000 at December 31, 2002). Proceeds in excess of these amounts will be
distributed amongst AGMI creditors, APMI creditors, Atlas creditors and Atlas,
such that Atlas will receive approximately 54% of any excess proceeds.
In addition to the Gold Bar mill, the Company has the rights to certain capital
refunds from the power company which supplied electricity to the mine and mill.
Based on information received from the power company, as of December 31, 2002,
these remaining credits, payable in varying amounts over the next thirteen
years, total approximately $570,000. Because this payment is a dividend,
according to the power company, its Board at any time could decide to not issue
a dividend or change either or both the annual amount and the payment schedule.
Inasmuch as no payment for 2002 has as yet been forthcoming, the Company has
established an allowance of $386,000 to reduce the asset to a net amount of
$184,000, which is management's estimate of current fair value.
The Company also owns a 39-space, fully developed trailer park in the town of
Eureka, Nevada, which is included in the assets held for sale under the
Reorganization Plan. Revenue from rental of spaces is currently minimal, and,
under the Reorganization Plan, any income is offset against the holding costs of
the asset held for sale.
White Cliffs Mine
-----------------
Overview
--------
In June 2002, the Company purchased the White Cliffs Diatomite Mine and
processing facilities located approximately 30 miles north of Tucson, Arizona.
In July 2002, the Company incorporated in Arizona a new wholly-owned subsidiary,
White Cliffs Mining, Inc., in which the White Cliffs mine and related assets
will be held.
The property consists of approximately 3,200 acres comprised of twenty 160-acre
Bureau of Land Management ("BLM") unpatented association placer mining claims, a
fully permitted mine and an operational processing plant with a nominal annual
capacity of 50,000 tons of finished product. The processing plant is located
near the Copper Basin Railroad which accesses the Southern Pacific Line and
within five miles of Highway 77.
It is estimated from previous drilling, face sampling, and testing that there
are approximately 2,500,000 tons of in-place diatomite mineralization on the
property. Of this material, there are currently approximately 32,000 tons
permitted for mining. Based on internal and third party analyses and past
production records, it appears that the known diatomite material should be able
to meet specifications for most end products. Because of the size of the
8
property, however, relatively little work has been done to define the deposit's
overall quality, quantity, mining economics and utility for specific
applications.
Diatomaceous earth deposits are the result of the accumulation of diatoms,
microscopic single-cell aquatic plants, in ancient ocean and lake beds. The
diatom skeleton typically ranges only 10 to 200 micrometers across. The
resulting material is chemically inert (environmentally friendly), chalk-like,
very porous and low density, actually able to float on water until it becomes
saturated.
The largest current use of diatomaceous earth is in filtering applications. It
is also used as an absorbent, natural insecticide, in filler applications and in
the manufacture of insulation. One of the fastest growing uses is as a livestock
feed supplement and first production from the property was pre-sold as livestock
feed supplement. The majority of U.S. production currently comes from California
and Nevada which accounted for 87% of the production in 2000.
Description of Operations
-------------------------
The diatomite beds lie almost horizontal and have between the beds certain waste
material consisting primarily of clays, volcanic ash, and other loose
sedimentary type materials. The overburden is similar to the waste but includes
a blanket of alluvial gravels. None of these materials is cemented and, as such,
no blasting is required. Stripping and mining is done by dozer. Once the
diatomite beds are exposed, they are sampled, ripped, and temporarily stockpiled
at the mine site. A front end loader is used to pick up the ripped material,
which is then hauled by truck to a stockpile area at the plant site.
This plant stockpile is fed into a grizzly. The material then moves by conveyor
to an impact mill for its first reduction, to a surge bin, into a heated chamber
where it is initially dried, and then to a hammer mill where it is reduced to a
fine mesh. This material is air conveyed to a set of three cyclones where the
impurities are removed. Product fines go to a baghouse and then to a fines silo.
The primary product is air conveyed to a product silo and, when ready to be
bagged, transferred pneumatically to the bagging hopper. The bagging machines
can load 35 or 50 pound bags, or super sacks weighing up to one ton. The product
bags are palletized, wrapped with stretch film, and strapped on to the pallets
for delivery to the customer.
Arizona Public Service provides the plant with 480-volt electric power and the
dryer is fueled by propane.
Development Work Completed In 2002
----------------------------------
As the processing plant was primarily constructed in the mid-1980s and has been
idle since 2000, upon purchase of the property by the Company some maintenance
of the mill and replacement of certain worn components was required. Also during
2002 the Company purchased all necessary mining and mobile milling equipment,
and hired necessary staff. Additionally, the BLM transferred to the Company the
permit to conduct mining and milling activities on approximately 34 acres of the
property and accepted the Company's reclamation bond ($45,900) that replaced and
updated the bond provided by the previous operator.
In August 2002 the Company commenced commercial mining operations on the White
Cliffs property. Initial production from the property had been pre-sold
primarily as livestock feed supplement. The first shipment of ore, under a
220-ton sales contract, was made in September. In total, approximately 2200 tons
9
of material were mined in 2002, of which 200 tons of product were shipped to
buyers.
A systematic property mapping and sampling program was initiated to support
future marketing and mine planning efforts. Building on past geological work,
the Company's exploration activities in 2002 consisted of measuring detailed
sections of exposed and accessible strata, mapping select areas, and collecting
well-defined samples that were analyzed for chemical and physical properties. A
base map and several detailed cross sections were developed in anticipation of
the mine expansion planning and permitting activities projected for 2003.
In late January 2003, operations were temporarily shut down until such time as
additional improvements can be effected to the plant instrumentation and
equipment. As of this date, the Company has at the mill site approximately 700
tons in stockpile of diatomite material and about 89 tons of bagged product in
inventory to sustain continued sales efforts.
Proposed Program for Exploration and Development
------------------------------------------------
It is anticipated that the currently permitted area on the property will sustain
operations for approximately another twelve months by which time the Company
plans to have permitted and developed new mine areas. To support the proposed
mine expansion, the Company will continue its exploration field work and
sampling efforts which will include a first phase drilling program in the
projected quarry areas. The Company also will develop mine plan designs and
perform supporting environmental studies required for the preparation of its
permit application which the Company anticipates submitting to the applicable
regulatory agencies in 2003.
The Company will continue to evaluate the potential for additional applications
and markets as well as developing new products as it improves its position in
both the established and developing markets.
Geology of the Property
-----------------------
The White Cliffs deposit generally slopes in a westerly direction to the San
Pedro River which serves as the major drainage for the area. The canyons cutting
through the property are generally parallel and discharge into the river.
The deposit, which occurs in the Quiburis Formation, was formed in an elongated
lake in Miocene to Pliocene time. The lake bed sediments are composed of
interbedded gypsite, silts, marls, diatomites and minor clastics. After the
diatomite was deposited, faulting took place along a well defined line that
represents a displacement of as much as a hundred feet in some areas. The lake
subsequently lost its identity and the entire area was covered with water which
left a secondary deposit of gravel terraces and alluvial fill. As the area
became more arid, the present canyons were cut through the secondary deposit
into the strata of diatomite.
Most of the diatoms are typical freshwater types. As relatively little clay is
present in the deposit, it has been deduced that the area has been relatively
dry and arid for most of the deposit's existence. Because most of the strata are
nearly horizontal and there is little folding, it is possible to project the
in-place diatomite tonnage fairly accurately.
10
Ownership History
-----------------
The White Cliffs property has been mined off and on since the early 1900s. The
first use of the diatomite was as an insulator. In the 1940s the Arizite
Products Company operated the mine and had a processing plant outside of
Mammoth, Arizona, located about ten miles from the property. Arizite produced
material for both filter aid and paint filler applications. The Arizona Diatomes
Company operated with a plant on the site during the 1950s producing a filter
aid material. In 1985, White Cliffs Industries erected an air classification
plant on the property which they operated until 1987. In 1991 Arimetco Inc.
purchased the property and plant, revamped the mechanical and electrical aspects
of the plant including an upgrade in the main blower capacity, operating the
facility until 1998 when it was sold to White Cliffs LLC. White Cliffs LLC
operated sporadically until its default on the purchase in 2000. At that time,
Arimetco reassumed ownership of the property but never restarted the operation.
The Company purchased the property from Arimetco in June 2002.
Arisur Inc.
-----------
Until December 2001, the Company owned 100% of Arisur Inc. ("Arisur'), a Grand
Cayman corporation. Arisur owns the Andacaba Mine and Mill and the Don Francisco
and Koyamayu development properties. All three properties are underground lead,
zinc and silver operations located in southern Bolivia.
In May 1999, Arisur defaulted on a payment of $478,000 due under its loan
agreement with Corporacion Andina de Fomento ("CAF"). During the first quarter
of 2001, CAF began foreclosure proceedings against Arisur, and the Company's
participation in Arisur's operations was terminated in March 2001. As further
discussed in the Note 4 to the Consolidated Financial Statements, the investment
in Arisur was deemed to have been effectively abandoned as of January 1, 2001.
During December 2001, the Company took additional steps to ensure that any and
all remaining liabilities associated with termination of Arisur's operations
were extinguished. On December 24, 2001, the Company transferred all of the
common stock of Arisur to a Bolivian group, which signed an agreement releasing
and indemnifying the Company from any and all liabilities that could be
associated with Arisur.
ITEM 3. LEGAL PROCEEDINGS
-----------------
As of December 31, 2002, there were no pending legal proceedings.
See discussion of the Chapter 11 reorganization in Item 1. Description of
Business and Item 6. Management's Discussion and Analysis or Plan of Operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of the security holders of the Company
during the quarter ended December 31, 2002.
11
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
From February 10, 2000, to January 7, 2001, the Company's common stock traded on
the OTC Bulletin Board. From January 8, 2001, to May 4, 2002, the Company's
common stock traded on the NQB Pink Sheets before resumption of trading on the
OTC Bulletin Board on May 5, 2002, under the symbol ATMR. The high and low sales
prices for the common stock for each quarterly period are as follows:
Year Ended December 31, Year Ended December 31,
2002 2001
------------------------- -----------------------
Quarter Ended High Low High Low
--------------- ------------- ----------- ----------- -----------
March 31 $ 0.15 $ 0.10 $ 0.20 $ 0.10
June 30 0.65 0.10 0.18 0.10
September 30 0.40 0.14 0.21 0.07
December 31 0.28 0.16 0.21 0.04
The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions. All prices
have been adjusted to reflect a 1 for 30 reverse split effective on January 10,
2000. Since the change of the Company's trading symbol to ATMR, a result of the
reorganization, there has been a limited market for the Company's stock.
While there currently are no restrictions prohibiting the Company from paying
dividends to its shareholders, subject first to satisfying obligations to
Creditors, the Company has not paid any cash dividends on its Common Stock in
the past and does not anticipate paying any dividends in the foreseeable future.
Earnings, if any, are expected to be retained to fund future operations of the
Company. There can be no assurance that the Company will pay dividends at any
time in the future.
As of March 26, 2003, there were approximately 350 holders of record of the
Company's Common Stock. Based upon information provided to the Company by
persons holding securities for the benefits of others, it is estimated that the
Company has in excess of 1480 beneficial owners of its Common Stock as of that
date.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and accompanying notes.
General Overview
----------------
On September 22, 1998, Predecessor Entity filed a petition for relief under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
for the District of Colorado. On January 26, 1999, APMI and AGMI also filed
petitions for relief under Chapter 11. On December 11, 1999, the Bankruptcy
Court approved the Reorganization Plan of Atlas, APMI and AGMI. Having
consummated the Reorganization Plan, Atlas, APMI and AGMI emerged from Chapter
11 on January 10,
12
2000. Final decrees were issued by the Bankruptcy Court officially closing the
APMI and AGMI cases on November 8, 2000 and the Atlas case effective December
31, 2001.
The Predecessor Entity's largest pre-petition liability was its approximately
$21 million obligation to decommission and reclaim its uranium millsite (the
"Millsite") located near Moab, Utah. On April 28, 1999, the Company, along with
the U.S. Nuclear Regulatory Commission, the State of Utah, ACSTAR (surety
provider for Atlas) and others, executed the Moab Utah Millsite Transfer
Agreement, which absolved the Company from all future liability with respect to
the Millsite. The agreement, approved by the Bankruptcy Court on June 22, 1999,
was reached to avoid lengthy and expensive litigation over the future of the
Millsite
As a result of the bankruptcy proceedings, the majority of any remaining claims
against the Company are unsecured claims (the "Creditors"). Under the
Reorganization Plan, these claims received stock representing 67.5% of the
Reorganized Company. In addition, the Creditors could receive future cash
distributions upon the sale of certain assets of the Reorganized Company,
including the possible salvaging of the Company's Gold Bar mill facility and
related assets located near Eureka, Nevada (of which Creditors would receive
approximately 45.9% of net proceeds after payment of certain general and
administration costs) and the sale of the Company's Grassy Mountain property
located in eastern Oregon (of which Creditors would receive approximately 65.4%
of net proceeds).
The Reorganization Plan also provided for the distribution of stock representing
12.5% of the Reorganized Company to the then-Management and employees of the
Company as recognition for their efforts in the reorganization process and 2.5%
to each of ACSTAR and Moab Reclamation Trust for assumption by them of certain
future liabilities relating to the environmental cleanup and reclamation of
various of the Company's mine sites. The remaining 15% of the Reorganized
Company remains with the equity holders of the Predecessor Entity, which ceased
to exist on December 11, 1999 when the Reorganized Company came into existence.
In July 2001, an agreement was reached with TRW, Inc. ("TRW") to settle the one
remaining adversary proceeding. Under the terms of the agreement, the Company
agreed to make a total cash payment of $30,000 to TRW in three equal
installments due in October 2001, January 2002, and April 2002. In exchange, TRW
agreed to transfer back to the Company all common stock of the Company (146,415
shares) owned by it upon payment of the final installment. This matter was
finalized in July 2002 and the returned shares were subsequently cancelled by
the Company effective in August 2002.
In May 1999, Arisur defaulted on a payment of $478,000 due under its loan
agreement with Corporacion Andina de Fomento ("CAF"). During the first quarter
of 2001, CAF began foreclosure proceedings against Arisur, and the Company's
participation in Arisur's operations was terminated. As a result of this action,
the investment in Arisur was effectively abandoned as of January 1, 2001.
During the year ended December 31, 2000, the Company recorded an impairment
charge of $683,000 related to the Andacaba mine. Neither the Company nor its
subsidiaries have guaranteed any liabilities of Arisur. As a result, all
13
revenue, cost of operations, assets and liabilities of Arisur have been
eliminated from the financial statements of the Company during 2001 and future
years.
During December 2001, the Company took additional steps to ensure that any and
all remaining liabilities associated with termination of Arisur's operations
were extinguished. On December 24, 2001, the Company transferred all of the
common stock of Arisur to a Bolivian group, which signed an agreement releasing
and indemnifying the Company from any and all liabilities that could be
associated with Arisur.
During 2001 and through April 10, 2002, the Company reached final settlement
agreements with all insurance carriers regarding the ongoing CGL Claims, which
the Company had against various insurance carriers for their failure to cover
certain environmental costs previously incurred by the Company that were the
result of permitting and remediation activities at the Company's past-producing
uranium processing mill in Utah. Effective May 2002, cash settlement amounts had
been received from all such carriers providing the Company in aggregate
$2,373,000 net proceeds for the years 2001 and 2002. The net proceeds exceeded
the carrying amount of the CGL Claims resulting in a gain of $66,000 and
$455,000 being recognized in 2002 and 2001, respectively.
In June 2002, the Company purchased the White Cliffs Diatomite Mine and
processing facilities located approximately 30 miles north of Tucson, Arizona
("White Cliffs"). The property, which has been dormant for several years,
consists of approximately 3,200 acres of unpatented placer claims, a fully
permitted mine and a processing plant with a nominal annual capacity of at least
50,000 tons of finished product.
The largest current use of diatomaceous earth is in filtering applications. It
is also used as an absorbent, in filler applications and in manufacture of
insulation. One of the fastest growing uses is as a livestock feed supplement
and first production from the property was pre-sold as livestock feed
supplement. The majority of U.S. production currently comes from California and
Nevada which accounted for 87% of the production in 2000.
It is estimated from previous drilling, face sampling, and testing that there
are approximately 2,500,000 tons of diatomite mineralization on the property.
Based on internal and third party analyses, it appears that the known diatomite
material should be able to meet specifications for most end products. The
property is located adjacent to the Copper Basin Railroad which accesses the
Southern Pacific Line and within five miles of Highway 77, both of which will
serve for product distribution.
In July 2002, the Company incorporated a wholly-owned subsidiary in Arizona,
White Cliffs Mining, Inc., in which is held the White Cliffs Diatomite Mine and
related assets in Arizona.
In September 2002, the Company entered into a 120-day exclusive option agreement
(the "Option Agreement') to acquire 100% of the outstanding shares of Western
Gold Resources, Inc., a private Florida company whose primary asset is the
Estrades polymetallic mine located in northwestern Quebec. In December 2002,
this Option Agreement was amended extending the option period to March 31, 2003.
While the Company expects this transaction to occur at a future date, management
believes that in all likelihood this Option Agreement will be extended beyond
March 31, 2003.
The Company subsequently assigned the Option Agreement to APMI. Western Gold's
primary asset is the Estrades polymetallic mine located northwest of Val-d'Or in
northwestern Quebec. The Company is in the process of completing extensive due
diligence of the Estrades mine.
14
During 2002, the Company entered into transactions with the Pension Benefit
Guaranty Corporation ("PBGC"), U.S. Fire Insurance Company ("US Fire") and
Newmont Grassy Mountain Corporation ("Newmont") whereby the Company effectively
settled a portion of its "estimated reorganization liabilities". The Company
paid $50,000, $7,000 and $2,000 to PBGC, Newmont and US Fire, respectively, in
exchange for each company's rights to receive future creditor distributions
under APMI's and AGMI's Reorganization Plan as well as to acquire the portion of
APMI's and AGMI's outstanding common stock owned by PBGC, US Fire and Newmont.
As a result of these transactions, the Company now controls 100% of the voting
stock of both APMI and AGMI. See Item 7, Financial Statements, Note 7 for
further discussion of this transaction.
In March 2003, the Company merged these two subsidiaries, APMI and AGMI, with
APMI remaining as the surviving entity. As a result of the merger, APMI now owns
100% of the gold processing mill and related facilities and infrastructure
related to the Gold Bar mine in Eureka County, Nevada, previously held by AGMI
as well as the Grassy Mountain property in Malheur County, Oregon, a property
known to host gold mineralization.
Also in March 2003, the Board of Directors of the Company approved an option for
the possible future acquisition of a fluorite property in Sonora, Mexico, by the
Company and authorized management to enter into negotiations on behalf of APMI
for: 1) the acquisition of a property in Sonora, Mexico, on which both copper
oxide material and gold have been identified; and 2) the acquisition of a
property in Sinoloa, Mexico, containing primarily zinc and silver
mineralization.
It is the intention of Management for the Company to remain in the business of
development and exploitation of natural resource properties. Management's
current efforts regarding this are being directed toward the identification of
possible acquisition opportunities of smaller-scale properties, primarily in the
sectors of industrial minerals, base metals, precious metals and oil/natural
gas. In the opinion of Management, the Company may have a competitive edge in
making such acquisitions in that, being smaller than many of its competitors, it
may be able to act more quickly and the smaller, possibly higher grade,
properties on which it will most likely focus its efforts should be of little
interest to the larger companies.
Working Capital, Liquidity and Capital Resources
------------------------------------------------
During 2002 working capital decreased approximately $918,000 from $1,386,000 at
December 31, 2001 to a $468,000 at December 31, 2002. Cash also decreased from
$417,000 at December 31, 2001 to $396,000 at December 31, 2002. The change in
the cash balance from the prior year is due to net proceeds from CGL receivables
and assets held for sale of $1,549,000, which were reduced by payments and
settlements of estimated reorganization liabilities of $712,000, property, plant
and equipment additions primarily related to White Cliffs mine of $204,000,
expenditures on deferred acquisition costs relating to Estrades of $86,000 and
cash used in operations of $568,000.
15
During the years ended December 31, 2002 and 2001, the Company had capital
expenditures of $204,000 and $0, respectively. The 2002 expenditures consisted
almost entirely of the initial asset acquisition of White Cliffs and related
mobile mining equipment.
The Company expects to generate cash adequate to pay general, administrative and
other operating expenses through the bankruptcy-mandated sale of certain
remaining assets (see Item 6. General Overview). Assets held for sale include
the Gold Bar mill and related assets (see "Item 2. Properties, Gold Bar and
Related Assets"), and the Grassy Mountain property (see "Item 2. Properties,
Grassy Mountain Property"). While the Company is confident in the ultimate
realization of these assets, it cannot be certain as to the timing or the exact
amount of proceeds that will be received. The Company believes, however, that
cash from such activities will be sufficient to cover its current operations
through 2003. Additionally, during the first quarter 2003, the Company was able
to have released from a trust account $30,000, which was held pending proof of
compliance with Canadian tax authorities. Should the Company proceed with the
merger with Western Gold Resources, Inc. a cash payment of approximately
$100,000 will be required at the time of merger. The Company paid $50,000 in
January 2003 to extend the option period through March 31, 2003. While the
Company expects this transaction to occur at a future date, management believes
that in all likelihood this Option Agreement will be extended beyond March 31,
2003. It is further anticipated that up to $100,000 could be required to modify
the mill operations at White Cliffs to better ensure that specifications of
existing products can be continuously met and to allow the production of new
product lines. Management is continuing to explore possible acquisitions and
business combinations, although, as of this date, no definitive agreements have
been reached. In 2003, the Company also entered into a two-year non-cancelable
lease commitment for office space that expires in January 2005. Future cash
requirements for these activities will be funded from the sources noted above
and/or alternative sources of financing including loans against the
aforementioned assets, equity financing or project financing as deemed
necessary.
Recent Accounting Pronouncements
--------------------------------
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements. SAB No. 101, as amended by SAB No. 101A and SAB No. 101B, is
effective no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. SAB No. 101 provides the Staff's views in applying
generally accepted accounting principles to selected revenue recognition issues.
The Company believes that it complies with the accounting and disclosure
described in SAB No. 101; therefore, Management believes that SAB No. 101 did
not impact the Company's financial statements.
In July 2001, The Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method will be
prohibited after that date. SFAS No. 142 changes the accounting for goodwill and
intangible assets with indefinite lives from an amortization method to an
impairment-only approach and requires intangible assets with finite lives to be
amortized over their useful lives. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001. The adoption of SFAS No. 141 and No. 142 did
not have an impact on the Company's financial condition or results of
operations, as the Company did not enter into any business combinations during
the year and has no goodwill or intangible assets with indefinite live.
16
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations, which addresses accounting and financial accounting and reporting
for obligations associated with the retirement of tangible long-lived asset
retirement costs. This statement requires that the fair value of a liability for
an asset retirement be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying value of the long-lived asset.
This statement is effective for fiscal years beginning after June 15, 2002. The
Company is currently assessing the impact, if any, that SFAS No. 143 may have on
its financial condition or results of operations.
In 2002, the Company adopted SFAS No. 144, Accounting for Impairment or Disposal
of Long-Lived Assets, which addresses accounting and financial reporting for the
impairment or disposal of long-lived assets (which was previously accounted for
under SFAS No. 121, among other standards). The Company applies this standard in
accounting for the value of the assets held for sale and the related estimated
reorganization liabilities. In addition, the impairment recorded in 2002 was
determined in accordance with SFAS 144 (which was not significantly different
than the impairment that would have been determined under SFAS No.121).
In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities. This statement
supersedes Emerging Issues Task Force Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity. The
Company does not expect that the adoption of SFAS No. 146 will have a
significant immediate impact on the financial condition or results of operations
of the Company.
In November 2002, the FASB issued SFAS Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees and Indebtedness of Others. FIN 45 elaborates on the
disclosures to be made by the guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also requires that a guarantor recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002, while the provisions of the disclosure
requirements are effective for financial statements of interim or annual reports
ending after December 15, 2002. The Company is currently evaluating the
recognition provisions of FIN 45, but does not expect that the adoption of FIN
45 will have a significant immediate impact on the financial condition or
results of operations of the Company, as the Company has made no guarantees.
In January 2003, the FASB issued SFAS Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"), which changes the criteria by which one
company includes another entity in its consolidated financial statements. FIN 46
requires a variable interest entity ("VIE") to be consolidated by a company if
that company is subject to a majority of the risk of loss from the variable
interest entity's activities or entitled to receive a majority of the entity's
residual returns or both. The consolidation requirements of FIN 46 apply
17
immediately to VIE's created after January 31, 2003, and apply in the first
fiscal period beginning after June 15, 2003, for VIE's created prior to February
1, 2003. As the Company does not currently have an interest in a VIE, management
does not expect that the adoption of FIN 46 will have a significant immediate
impact on the financial condition or results of operations of the Company.
Results of Operations
---------------------
Year Ended December 31, 2002 Compared to the Year Ended December 31, 2001
-------------------------------------------------------------------------
Revenues
During the year ended December 31, 2002, the Company had mining revenue of
$22,000 from the shipment of approximately 200 tons of product from September
through the end of the year 2002, compared to $0 in the year ended December 31,
2001, attributable to the start up of the White Cliffs Mine (see "Item 2.
Properties, White Cliffs Mine").
Production Costs and Depreciation, Depletion and Amortization
Production costs during the year ended December 31, 2002 were $89,000 compared
to $0 for the same period in 2001. These costs include inefficiencies incurred
with the mill start-up during the initial production phase of the White Cliffs
operation. Depreciation, depletion and amortization relate primarily to the
White Cliffs operations and increased to $15,000 in 2002, from $2,000 in 2001.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2002 were
$655,000, which compares to $289,000 for the year ended December 31, 2001,
reflecting the Company's efforts to put White Cliffs into production and explore
business opportunities. As a result of staff additions at the Company's White
Cliffs operations and at headquarters, payroll costs and benefits have increased
from $78,000 in 2001 to $219,000 in 2002. Director fees and expenses increased
during the year ended December 31, 2002 by $18,000 over the same period in 2001
due to an increased number of board meetings, audit, compensation and
independent committee meetings due to the additional activity of the Company.
Insurance costs were $52,000 during 2002 versus $25,000 during 2001 primarily
due to an increase in premiums for Directors and Officers insurance and
additional insurance coverage required for the White Cliffs operations. Legal
and accounting and audit fees decreased $17,000 during the year ended December
31, 2002 from the same period in 2001 due to the absence of the legal costs
related to the management takeover bid in 2001. Other professional fees
increased during 2002 by $138,000 due to the hiring of contractors at White
Cliffs during the preoperational stage, hiring of an engineering firm to provide
environmental and permitting work at White Cliffs, and the use of contractors at
headquarters for business development, compliance and administrative support.
The Company also retained the services of a public relations firm during 2002.
In 2002 the Company incurred business development costs to pursue new business
opportunities and incurred $13,000 while $0 was incurred in 2001. Travel costs
also increased from $9,000 in 2001 to $28,000 in 2002 due to travel associated
with White Cliffs ($11,000) and travel by management for planning and evaluation
of potential acquisition opportunities.
18
Other
Interest income was $8,000 for 2002 and $5,000 for 2001. The increase in 2002 is
attributable to higher average cash balances due to the settlement of the CGL
claims.
Interest expense for the year ended December 31, 2002 was $0 compared to $1,000
for the same period in 2001.
The gain on settlement of CGL claims was $66,000 in 2002 versus $455,000 in 2001
due to the signed settlements from all outstanding insurance carriers regarding
the ongoing CGL Claims litigation. The gains arose as the anticipated net
proceeds from the settlements exceeded the carrying value of the CGL claims and
the related estimated reorganization liabilities.
During 2002 the Company recorded impairments on the assets held for sale
relating to Gold Bar of $60,000 and on the assets held for sale relating to
Grassy Mountain of $14,000. The impairment charges were the result of reducing
the assets held for sale by $515,000 and the related estimated reorganization
liabilities by $441,000 collectively. The impairments to Gold Bar were deemed
necessary due to net receipts from sale of equipment not meeting management's
expectations due to the continued overall slowdown in the mining industry.
Management also determined Grassy Mountain to be impaired as a result of the
restructured option agreement executed with Seabridge in December 2002. During
2001 the Company recorded a $13,000 impairment of assets held for sale relating
to Gold Bar. The impairment charge was the net result of reducing the assets
held for sale by $100,000 and the related estimated reorganization liabilities
by $87,000.
Other income of $300,000 was recognized during 2002 due to the receipt of the
non-refundable option payment from Seabridge that is not to be applied against
the future purchase price of the assets held for sale at Grassy Mountain.
Environmental Matters
---------------------
The Company is subject to extensive federal, state and local environmental laws
and regulations. These laws, which are constantly changing, regulate the
discharge of materials into the environment and may require the Company to
mitigate any environmental effects caused by its past and present operations.
The Company believes that it has taken reasonable steps to be in substantial
compliance with all federal, state and local environmental regulations
applicable to its current and discontinued operations. Also see "Item 1.
Description of Business, Risk Factors."
During 2002, the Company established a performance bond in the amount of $45,900
for the future reclamation of the White Cliffs mine and mill areas.
Critical Accounting Policies
----------------------------
The discussion and analysis of the financial condition and results of operations
of the Company are based upon the consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
the Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, Management evaluates these
19
estimates, including estimates related to impairment of assets and the carrying
amount of the reorganization liabilities. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances. This forms the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
Management believes the most critical accounting policies include those related
to impairment of assets held for sale and the CGL Claims, revenue recognition,
the carrying amounts of the estimated reorganization liabilities, and the
current or long-term classification of these items.
Whenever events or changes in circumstances indicate that the carrying values of
assets held for sale or the CGL Claims (and also including all other long-lived
assets) may be impaired, the Company performs an analysis to determine the
recoverability of the carrying value. If the analysis indicates that the
carrying value is not recoverable from future cash flows, the asset is written
down to its estimated fair value and an impairment loss is recognized. As
discussed above, during 2000, the Company recognized an impairment loss of
$683,000 related to the Andacaba mine that was effectively abandoned in January
2001. During 2001, management determined the assets held for sale relating to
Gold Bar to be impaired due to the declining equipment sales from the mill
facility and reduced the carrying value of these assets by $100,000. Similarly,
during 2002, the Company determined the assets held for sale relating to Gold
Bar were further impaired and reduced the assets by $450,000. Management also
determined Grassy Mountain to be impaired as a result of the restructured option
agreement executed with Seabridge in December 2002 and reduced the carrying
value of these assets by $65,000. The amounts that the Company ultimately
realizes (and the periods of realization) could differ materially in the near
term from the carrying amounts (and the current or long-term classification of
these items).
Revenue represents amounts received from customers for mined and processed
material from the White Cliffs operation. Revenue is recognized when the product
is shipped and the title is passed to the customer.
As a result of the bankruptcy proceedings, the majority of any remaining claims
against the Company are unsecured claims (the "Creditors"). Under the
Reorganization Plan, these claims received stock representing 67.5% of the
Reorganized Company. In addition, the Creditors could receive future cash
distributions upon the sale of certain assets of the Reorganized Company,
including the possible salvaging of the Company's Gold Bar mill facility and
related assets located near Eureka, Nevada (of which Creditors would receive
approximately 45.9% of net proceeds after payment of certain general and
administration costs) and the sale of the Company's Grassy Mountain property
located in eastern Oregon (of which Creditors would receive approximately 65.4%
of net proceeds).
20
ITEM 7. FINANCIAL STATEMENTS
--------------------
Index to Financial Statements
Page
Independent Auditors' Report 22
Consolidated Statements of Operations for the Years Ended
December 31, 2002 and 2001 23
Consolidated Balance Sheet as of December 31, 2002 24
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 2002 and 2001 25
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2002 and 2001 26
Notes to Consolidated Financial Statements 27 - 40
21
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Atlas Minerals Inc.
We have audited the accompanying consolidated balance sheet of Atlas Minerals
Inc. and subsidiaries as of December 31, 2002 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the two-year period ended December 31, 2002. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the 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 aforementioned consolidated financial statements present
fairly, in all material respects, the financial position of Atlas Minerals Inc.
and subsidiaries as of December 31, 2002, and the results of their operations
and their cash flows for each of the years in the two-year period ended December
31, 2002 in conformity with accounting principles generally accepted in the
United States of America.
/s/ Horwath Gelfond Hochstadt Pangburn, P.C.
Horwath Gelfond Hochstadt Pangburn, P.C.
Denver, Colorado
March 20, 2003
22
Atlas Minerals Inc.
Consolidated Statements of Operations
(in thousands, except earnings per share)
For Years Ended December 31,
2002 2001
-------------------------------------------------------------------- ------------ ------------
Mining revenue $ 22 $ -
-------------------------------------------------------------------- ------------ ------------
Costs and expenses:
Production costs 89 -
Depreciation, depletion and amortization 15 2
General and administrative expenses 655 289
-------------------------------------------------------------------- ------------ ------------
Gross operating loss (737) (291)
-------------------------------------------------------------------- ------------ ------------
Other (income) and expense:
Interest expense - 1
Interest income (8) (5)
Gain from settlement of CGL claims (Note 12) (66) (455)
Impairment of assets held for sale (Note 12) 74 13
Other income, net (300) (1)
-------------------------------------------------------------------- ------------ ------------
Income (loss) before income taxes (437) 156
Provision for income taxes (Note 17) - -
-------------------------------------------------------------------- ------------ ------------
Net income (loss) $ (437) $ 156
==================================================================== ============ ============
Basic and diluted income (loss) per share of common stock (Note 16): $ (.07) $ .03
-------------------------------------------------------------------- ------------ ------------
See accompanying notes
23
Atlas Minerals Inc.
Consolidated Balance Sheet
(In thousands)
December 31,
2002
---------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 396
Trade and other accounts receivable 25
Inventories (Note 5) 45
Prepaid expenses and other current assets 21
Assets held for sale (Notes 2 and 12) 580
---------------------------------------------------------------------------------------------
Total current assets 1,067
---------------------------------------------------------------------------------------------
Property, plant and equipment (Note 7) 210
Less: Accumulated depreciation, depletion and amortization (19)
---------------------------------------------------------------------------------------------
191
Other assets 4
Restricted cash equivalents and securities (Note 12) 45
Deferred acquisition costs (Note 8) 86
Assets held for sale (Notes 2 and 12) 413
---------------------------------------------------------------------------------------------
$ 1,806
=============================================================================================
Liabilities
Current liabilities:
Trade accounts payable $ 149
Accrued liabilities 44
Estimated reorganization liabilities (Note 2) 406
---------------------------------------------------------------------------------------------
Total current liabilities 599
---------------------------------------------------------------------------------------------
Estimated reorganization liabilities (Note 2) 12
Deferred gain (Note 9) 44
Other liabilities, long-term 129
---------------------------------------------------------------------------------------------
Total long-term liabilities 185
---------------------------------------------------------------------------------------------
Total liabilities 784
---------------------------------------------------------------------------------------------
Commitments and contingencies (Note 14)
Stockholders' equity (Notes 2, 10 and 11)
Preferred stock, par value $1 per share; authorized 1,000,000; 0 issued and -
outstanding
Common stock, par value $0.01 per share; authorized
100,000,000; issued and outstanding, 5,915,000 59
Capital in excess of par value 2,980
Deficit (2,017)
---------------------------------------------------------------------------------------------
Total stockholders' equity 1,022
---------------------------------------------------------------------------------------------
$ 1,806
=============================================================================================
See accompanying notes
24
Atlas Minerals Inc.
Consolidated Statements of Stockholders' Equity
(In thousands)
Capital in
Common Common excess of
shares stock par value Deficit Total
---------------------------------- ------------- ------------- ------------- -------------- -------------
Balance at January 1, 2001 6,064 $ 61 $ 2,999 $ (1,736) $ 1,324
Shares voided (2) -
Current period income 156 156
---------------------------------- ------------- ------------- ------------- -------------- -------------
Balance at December 31, 2001 6,062 61 2,999 (1,580) 1,480
Shares repurchased and cancelled (147) (2) (19) (21)
Current period loss (437) (437)
---------------------------------- ------------- ------------- ------------- -------------- -------------
Balance December 31, 2002 5,915 $ 59 $ 2,980 $ (2,017) $ 1,022
================================== ============= ============= ============= ============== =============
See accompanying notes
25
Atlas Minerals Inc.
Consolidated Statements of Cash Flows
(In thousands)
For Years Ended December 31,
2002 2001
--------------------------------------------------------------------------------------------------------
Operating activities:
Net income (loss) $ (437) $ 156
Adjustments to reconcile net income (loss) to net cash used
in operations (Note 13) 23 15
Changes in operating assets and liabilities (Note 13) (154) (583)
-----------------------------------------------------------------------------------------------------
Net cash used in operations (568) (412)
-----------------------------------------------------------------------------------------------------
Investing activities:
Additions to property, plant and equipment (204) -
Investment in CGL claims receivable (24) (55)
Investment in assets held for sale (126) (117)
Settlement of estimated reorganization liabilities (59) -
Deferred acquisition costs (86) -
Proceeds from settlement of CGL receivable 1,639 710
Proceeds from assets held for sale 60 238
Reduction in cash resulting from abandonment of Arisur (Note 13) - (6)
Proceeds from sale of equipment and reduction in other assets - 1
-----------------------------------------------------------------------------------------------------
Net cash provided by investing activities 1,200 771
-----------------------------------------------------------------------------------------------------
Financing activities:
Payment of estimated reorganization liabilities (653) (61)
-----------------------------------------------------------------------------------------------------
Net cash used in financing activities (653) (61)
-----------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (21) 298
Cash and cash equivalents at beginning of period 417 119
-----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 396 $ 417
====================================================================================================
See accompanying notes
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Principles of Consolidation - The accompanying consolidated financial statements
include the accounts of Atlas Minerals Inc. ("Atlas") and its subsidiaries as
follows: Atlas Precious Metals Inc. ("APMI") (approximately 85% owned at
December 31, 2001 and 96% owned at December 31, 2002), which in turn owns Atlas
Gold Mining Inc. ("AGMI") (approximately 63% owned at December 31, 2001 and 96%
owned at December 31, 2002) and as of July 2002, White Cliffs Mining, Inc., a
wholly-owned subsidiary in which the White Cliffs property is held (Note 3)
(collectively the "Company"). All inter-company transactions have been
eliminated. Prior to December 11, 1999, the date of confirmation of its plan of
reorganization under the U.S. Bankruptcy Code (Note 2), APMI was wholly-owned by
Atlas which in turn owned 100% of AGMI (the "Predecessor Entity"). References to
the Predecessor Entity throughout the financial statements refer to Atlas and
its subsidiaries prior to December 11, 1999 and references to the Reorganized
Company refer to Atlas and its subsidiaries from and after December 12, 1999.
Assets Held For Sale - Assets held for sale consist of the Company's Gold Bar
mill facility and equipment and the Grassy Mountain mining property. At the date
that the Plan of Reorganization was confirmed, these assets were stated at
reorganization values (Note 2) and subsequently are reported at the lower of
this carrying amount or fair value less costs to sell. The current portion of
assets held for sale is based on Management's estimates of the amounts that are
reasonably expected to be realized during the next twelve months. The amounts
the Company will ultimately realize (and the periods of realization) could
differ materially in the near term from the recorded carrying amounts (and from
the periods of realization assumed). Assets held for sale are not subject to
depreciation under SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets."
Inventories - Inventories are recorded at the lower of average cost or net
realizable value.
Property, Plant and Equipment - Property, plant and equipment is stated at the
lower of cost or estimated net realizable value. Depreciation of the milling
facilities and the depletion of the mineral properties is determined by the
units of production method. Equipment depreciation is recorded on the
straight-line basis over the estimated useful asset lives of 3 to 10 years.
Expenditures for maintenance and repairs are charged to operations as incurred.
Expenditures for additions and major renewals are added to the property, plant
and equipment accounts.
Impairment - Management assesses the carrying value of assets held for sale and
property, plant and equipment for impairment when circumstances warrant such a
review.
Generally, assets to be used in operations are considered impaired if the sum of
expected undiscounted future cash flows is less than the assets' carrying
values. If impairment is indicated, the loss is measured based on the amounts by
which the assets' carrying values exceed their fair values. During 2002, the
Company incurred a $60,000 impairment charge related to the assets held for sale
by Gold Bar and a $14,000 impairment charge related to the assets held for sale
by Grassy Mountain (Note 12). During 2001, the Company incurred a $13,000
impairment charge related to the assets held for sale by Gold Bar (Note 12).
27
Generally, assets to be disposed of are considered impaired if the sum of
expected undiscounted future cash flows, less costs to sell or realize, is less
than the assets' carrying values. If impairment is indicated, the loss is
measured by the amount by which the assets' carrying values exceed their fair
values less costs to sell or realize. Revisions in estimates of fair value less
costs to sell or realize are reported as adjustments to the carrying amount of
an asset to be disposed of, provided that the carrying amount of the asset does
not exceed the reorganization value of the asset. Based on its review,
Management does not believe that there has been any significant impairment of
the carrying amounts of assets to be disposed of at December 31, 2002.
Estimated Reorganization Liabilities - Estimated reorganization liabilities
represent amounts that are due to the creditors of the Predecessor Entity.
Generally, the estimated reorganization liabilities are equal to approximately
54% and 65% of the expected proceeds from the sale of the Gold Bar and Grassy
Mountain assets, respectively. The estimated reorganization liabilities are
non-interest bearing and payable as the Company realizes proceeds from the
underlying assets. At the date the Plan of Reorganization was confirmed, these
liabilities were stated at estimated present values of amounts to be paid (Note
2) and subsequently are adjusted for payments made to the creditors and any
adjustments made to the carrying amounts of the underlying assets. The current
portion of the estimated reorganization liabilities is based on Management's
estimates of the amounts that are reasonably expected to be paid during the next
twelve months. The amounts the Company will ultimately pay (and the periods in
which these amounts will be paid) could differ materially in the near term from
the recorded carrying amount (and from the periods in which these amounts were
estimated to be paid at the date of reorganization).
Foreign Currencies - The functional currency of the Company's subsidiaries was
the U. S. Dollar. Gains and losses on foreign currency transactions are included
in determining consolidated earnings/losses.
Mining Revenue - Revenues on diatomaceous earth are recorded at the time of
shipment. During 2002 White Cliffs sold all of its diatomaceous earth to a
single customer.
Income Taxes - The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
Income tax information is disclosed in Note 17 to the consolidated financial
statements.
Cash Equivalents - The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash equivalents.
Earnings per Share - Basic income (loss) per share is computed by dividing
income (loss) applicable to common shareholders by the weighted-average number
of common shares outstanding for the period. Diluted income (loss) per share
reflects the potential dilution that could occur if dilutive securities and
other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the
earnings of the Company, unless the effect is to reduce a loss or increase
earnings per share. The Company had no potential common stock instruments, which
would result in diluted loss per share in 2002. During 2001, the impact of
28
potential dilutive securities did not result in a change to basic earnings per
share. At December 31, 2002 and 2001, the total number of common shares issuable
under the exercise of outstanding options was 725,000 and 600,000, respectively.
Reverse Stock Split - Effective January 10, 2000, there was a 1 for 30 reverse
stock split. All share and per share amounts have been adjusted to reflect this
reverse split. In 2001, the Company voided approximately 2,000 shares of common
stock which represented partial shares cancelled in connection with the split.
Environmental Remediation Liabilities - The Company accounts for environmental
remediation liabilities under Statement of Position 96-1 "Environmental
Remediation Liabilities", which requires the accrual of environmental
remediation liabilities when the criteria for SFAS No. 5 "Accounting for
Contingencies" are met. As of December 31, 2002 Management does not anticipate
significant environmental remediation liabilities.
Comprehensive Income - SFAS No. 130, "Reporting Comprehensive Income", requires
companies to classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position. During 2002 and 2001, the
Company had no items of comprehensive income.
Derivative Instruments - In June 1998, the FASB issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities". This statement as amended by
SFAS No. 137 is effective for fiscal years beginning after June 15, 2000.
Currently, the Company does not have any derivative financial instruments and
does not participate in hedging activities. Therefore, SFAS No. 133 did not have
an impact on its financial position or results of operations for 2002.
Revenue Recognition - In December 1999, the staff of the Securities and Exchange
Commission issued Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition
in Financial Statements. SAB No. 101, as amended by SAB No. 101A and SAB No.
101B, is effective no later than the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. SAB No. 101 provides the Staff's views in
applying generally accepted accounting principles to selected revenue
recognition issues. The Company believes that it complies with the accounting
and disclosure described in SAB No. 101; therefore, Management believes that SAB
No. 101 did not impact the Company's financial statements.
Business Combinations - In July 2001, the FASB issued SFAS No. 141, "Business
Combinations". SFAS No. 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. Use of the
pooling-of-interests method is prohibited after that date. The adoption of SFAS
No. 141 has not had a significant impact on the financial condition or results
of operations as the Company had no business combinations in 2001 or 2002.
Goodwill and Other Intangible Assets - In July 2001, the FASB issued SFAS No.
142, "Goodwill and Other Intangible Assets". SFAS No. 142 changes the accounting
for goodwill and intangible assets with indefinite lives from an amortization
method to an impairment-only approach and requires intangible assets with finite
lives to be amortized over their useful lives. Thus, amortization of goodwill
and intangible assets with indefinite lives will cease upon adoption of the
29
statement. SFAS 142 is required to be applied to fiscal years beginning after
December 15, 2001. The adoption of SFAS No. 142 has not had a significant impact
on its financial condition or results of operation as the Company has no
goodwill or other intangible assets with indefinite lives at December 31, 2002.
Accounting for Impairment or Disposal of Long-Lived Assets - In 2002, the
Company adopted SFAS No. 144, Accounting for Impairment or Disposal of
Long-Lived Assets, which addresses accounting and financial reporting for the
impairment or disposal of long-lived assets (which was previously accounted for
under SFAS No. 121, among other standards). The Company applies this standard in
accounting for the value of the assets held for sale and the related estimated
reorganization liabilities. In addition, the impairment recorded by the Company
during 2002 was in accordance with SFAS 144 (which was not significantly
different than the impairment that would have been determined under SFAS No. 12.
Accounting for Asset Retirement Obligations - In June 2001, the FASB issued SFAS
No. 143, Accounting for Asset Retirement Obligations, which addresses accounting
and financial accounting and reporting for obligations associated with the
retirement of tangible long-lived asset retirement costs. This statement
requires that the fair value of a liability for an asset retirement be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized as
part of the carrying value of the long-lived asset. This statement is effective
for fiscal years beginning after June 15, 2002. The Company is currently
assessing the impact, if any, that SFAS No. 143 may have on its financial
condition or results of operations.
Accounting Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally accepted
accounting principles requires Management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure 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.
Stock-Based Compensation - SFAS No. 123, Accounting for Stock-Based
Compensation, defines a fair-value-based method of accounting for stock-based
employee compensation and transactions in which an entity issues its equity
instruments to acquire goods or services from non-employees, and encourages but
does not require companies to record compensation cost for stock-based employee
compensation at fair value. The Company has chosen to account for stock-based
employee compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and
related interpretations. Accordingly, compensation cost for stock options is
measured for the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee must pay to acquire
the stock.
Other Recently Issued Accounting Pronouncements - In June 2002, FASB issued SFAS
No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS
No. 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities. This statement supersedes Emerging Issues Task
Force Issue No. 94-3, Liability Recognition for Certain Employee Termination
30
Benefits and Other Costs to Exit an Activity. The Company does not expect that
the adoption of SFAS No. 146 will have a significant immediate impact on the
financial condition or results of operations of the Company.
In November 2002, the FASB issued SFAS Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees and Indebtedness of Others. FIN 45 elaborates on the
disclosures to be made by the guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also requires that a guarantor recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002, while the provisions of the disclosure
requirements are effective for financial statements of interim or annual reports
ending after December 15, 2002. The Company is currently evaluating the
recognition provisions of FIN 45, but does not expect that the adoption of FIN
45 will have a significant immediate impact on the financial condition or
results of operations of the Company, as the Company has made no guarantees.
In January 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"),
which changes the criteria by which one company includes another entity in its
consolidated financial statements. FIN 46 requires a variable interest entity
("VIE") to be consolidated by a company if that company is subject to a majority
of the risk of loss from the variable interest entity's activities or entitled
to receive a majority of the entity's residual returns or both. The
consolidation requirements of FIN 46 apply immediately to VIE's created after
January 31, 2003, and apply in the first fiscal period beginning after June 15,
2003, for VIE's created prior to February 1, 2003. As the Company does not
currently have an interest in a VIE, management does not expect that the
adoption of FIN 46 will have a significant immediate impact on the financial
condition or results of operations of the Company.
2. REORGANIZATION
In September 1998, the Predecessor Entity filed a petition for relief under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
of the District of Colorado (the "Court"). On January 26, 1999, APMI and AGMI
also filed for relief under Chapter 11. The Company's other subsidiary; Arisur
did not file for Chapter 11 protection. Under a plan of reorganization approved
by the Court on December 11, 1999 (the "Reorganization Plan"), primarily all of
Atlas', APMI's, and AGMI's liabilities were discharged for consideration of
stock in the Reorganized Company and contingent cash distributions to be made
upon the sale/realization of certain assets of the Reorganized Company. Arisur's
liabilities were not affected by the reorganization. Approximately 5,154,000
shares of common stock were issued in connection with the Reorganization Plan
resulting in 5,915,000 shares outstanding at December 31, 2002.
As a result of the bankruptcy proceedings, the majority of any remaining claims
against the Company are unsecured claims (the "Creditors"). Under the
Reorganization Plan, these claims received stock representing 67.5% of the
Reorganized Company. In addition, the Creditors could receive future cash
distributions upon the sale of certain assets of the Reorganized Company,
including the possible salvaging of the Company's Gold Bar mill facility and
31
related assets located near Eureka, Nevada (of which Creditors would receive
approximately 45.9% of net proceeds after payment of certain general and
administration costs) and the sale of the Company's Grassy Mountain property
located in eastern Oregon (of which Creditors would receive approximately 65.4%
of net proceeds).
The Company accounted for the Reorganization Plan under fresh-start reporting
under Statement of Position 90-7, whereby assets were recorded at their
estimated reorganization value and liabilities at discounted present values of
amounts to be paid.
3. WHITE CLIFFS MINE
In June 2002, the Company purchased the White Cliffs Diatomite Mine and
processing facilities located approximately 30 miles north of Tucson, Arizona
("White Cliffs") for $50,000. The property, which has been dormant for several
years, consists of approximately 3,200 acres of unpatented placer claims, a
fully permitted mine and a processing plant with a nominal annual capacity of
50,000 tons of finished product. Currently, there are approximately 32,000 tons
of diatomite mineralization permitted for mining. The property was purchased
from Arimetco, Inc., of which the Company's Chairman and Chief Executive
Officer, is President.
4. BOLIVIAN OPERATIONS
In May 1999, Arisur defaulted on a payment due under its loan agreement with
Corporacion Andina de Fomento ("CAF"). During the first quarter of 2001, CAF
began foreclosure proceedings against Arisur and the Company's participation in
Arisur's operations was terminated and the investment in Arisur was effectively
abandoned as of January 1, 2001. As a result, all revenue, cost of operations,
assets and liabilities of Arisur have been eliminated from the financial
statements of the Company during 2001 and future years.
5. INVENTORIES
Inventories consisted of the following at December 31, 2002:
--------------------------------------------------------------- ----------------
(In thousands)
--------------------------------------------------------------- ----------------
Stockpiled ore $ 30
Bagged diatomaceous earth 12
Materials and supplies 3
----------------
$ 45
================
6. FINANCIAL INSTRUMENTS
Financial instruments consisted of the following at December 31, 2002:
Carrying
(In thousands) Value Fair Value
------------------------------------------------------- ----------- -----------
Assets
Short-term assets $ 421 $ 421
Liabilities
Short-term liabilities 599 599
Estimated reorganization liabilities, long-term 12 (1)
32
Short-Term Assets and Liabilities: The fair value of cash and cash equivalents,
accounts receivable, accounts payable, other accrued liabilities and short-term
estimated reorganization liabilities approximates their carrying value due to
the short-term nature of these instruments.
(1) It is not practicable to estimate the fair value of the estimated
reorganization liabilities due to uncertainties regarding the amounts and
dates that these liabilities will ultimately be paid and due to the
uncertainties in estimating an incremental rate of borrowing due to the
Company's current financial condition.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31, 2002:
Acquisition Accumulated Depreciation,
(In thousands) Costs Depletion & Amortization Net Book Value
-------------- ----- ------------------------ --------------
Mineral property $ 25 $ - $ 25
Milling facility 21 (1) 20
Mobile mining equipment 154 (12) 142
Furniture and office equipment 10 (6) 4
---------------------------------------------------------
Total $ 210 $ (19) $ 191
========== ========================= ============
8. DEFERRED ACQUISITION COSTS
In September 2002, the Company signed a 120-day exclusive option agreement to
acquire 100% of the outstanding shares of Western Gold Resources, a private
Florida company whose primary asset is the Estrades polymetallic mine. The
option agreement was subsequently amended on January 3, 2003 to extend the
option period until March 31, 2003 and transferred all rights under the option
to APMI. At this time the Company paid an additional $50,000 to keep the option
period open. During the option period, the Company will be conducting extensive
due diligence of the property and is seeking financing for the project as will
be required should the Company exercise the option and proceed with development.
Assuming positive results from the due diligence and approval from the Board
and, as required, by the Company's shareholders, the Company would subsequently
merge with Western Gold Resources. The Board has approved the terms of the
merger, which contemplates the issuance of 1.2 common shares of the Company for
each share of Western Gold, payment of $100,000 in cash, and other
considerations. Western Gold has outstanding 11,550,000 shares. The primary
shareholder of Western Gold Resources is the Company's Chief Executive Officer.
The Company has spent $86,000 as of December 31, 2002 in deferred acquisition
costs relating to this option agreement. Should the Company exercise the option
agreement, the related deferred acquisition costs will be added to the purchase
price and allocated to the assets acquired. If the Company does not exercise the
option agreement, the deferred acquisition costs will be expensed.
9. DEFERRED GAIN
During 2002, the Company entered into transactions with the Pension Benefit
Guaranty Corporation ("PBGC"), U.S. Fire Insurance Company ("US Fire") and
Newmont Grassy Mountain Corporation ("Newmont") whereby the Company effectively
settled a portion of its "estimated reorganization liabilities". The Company
paid $50,000, $7,000 and $2,000 to PBGC, Newmont and US Fire, respectively, in
exchange for each company's rights to receive future creditor distributions
33
under APMI's and AGMI's 2000 bankruptcy reorganization plan as well as to
acquire the portion of APMI's and AGMI's outstanding common stock owned by PBGC,
US Fire and Newmont. The common stock owned by PBGC consisted of 133 common
share of APMI (11.41% of outstanding shares) and 391 common shares of AGMI
(25.78% of outstanding shares). The common stock owned by US Fire consisted of
98 common shares of AGMI (6.31% of the outstanding shares). The common stock
owned by Newmont consisted of 23 shares of APMI (1.99% of outstanding shares).
Under the bankruptcy reorganization plan, APMI and AGMI are to sell the "assets
held for sale" and distribute the related proceeds to their creditors. At
December 31, 2002, APMI and AGMI have no other assets. Therefore, the Company
believes that the common stock acquired from PBGC, US Fire and Newmont has
little to no fair value as of December 31, 2002 and the Company allocated the
$59,000 cash paid to the effective settlement of the estimated reorganization
liabilities. The carrying value of PBGC, US Fire and Newmont's portion of the
estimated reorganization liabilities was approximately $103,000. The Company has
deferred the $44,000 settlement gain because the ultimate realization of the
gain is not assured until APMI and AGMI sell their assets and distribute the
proceeds, which management expects to occur over the next several years.
10. STOCK OPTION PLAN
On September 7, 2001, the Board of Directors of the Company authorized the
approval of a stock option plan (the "Plan") which was subsequently approved by
the shareholders at the 2002 annual meeting. The Plan allows the Board of
Directors, or a committee thereof at the Board's discretion, to grant stock
options to officers, directors, key employees, and consultants of the Company
and its affiliates. An aggregate of 900,000 shares of common stock has been
reserved for issuance upon exercise of the options granted under the Plan.
Pursuant to the Plan, the exercise price shall in no event be less than the fair
market value of the shares of common stock at the date of grant.
During the year ended December 31, 2001, stock options for 600,000 shares were
granted to employees and directors under the Plan. Of these options, 500,000
were granted on September 7, 2001 at an exercise price of $0.12, being the
quoted market price of the Company's shares at the date of grant, are fully
vested and expire on September 6, 2011. The remaining 100,000 were granted on
November 1, 2001, at an exercise price of $0.09, being the quoted market price
of the Company's shares at the date of grant, are fully vested and expire on
October 31, 2011. No options were exercised or forfeited during 2002 or 2001.
During the year ended December 31, 2002, stock options for 125,000 shares have
been granted to employees under the Plan. The options were granted on August 9,
2002, at an exercise price of $0.21, being the quoted market price of the
Company's shares at the date of grant, are fully vested and expire on August 9,
2007. No options were exercised during 2002.
Had compensation expense been determined as provided in SFAS No. 123 using the
Black-Scholes option-pricing model, the pro forma effect of options issued
during the year ended December 31, 2002 on the Company's net income and per
share amounts would have been as follows:
Net loss, as reported $ 437,000
Net loss, pro forma $ 463,000
Net loss per share, as reported $ 0.07
Net loss per share, pro forma $ 0.08
34
The fair value of each option grant is calculated assuming an expected life of
three years, volatility of 297%, an interest rate of 2.85% and a dividend yield
of zero.
A summary of the status of the Company's stock options as of December 31, 2002
and 2001, and changes during the years then ended, is presented below:
2002 2001
---------------------------- ---------------------------
Weighted- Weighted-
average average
Shares exercise Shares exercise
price price
---------- -------------- ----------- ------------
Outstanding, beginning of year 600,000 $ 0.12 - $ -
============== ============
Granted 125,000 $ 0.21 600,000 $ 0.12
============== ============
Exercised - -
Forfeited - -
---------- -----------
Outstanding, end of the year 725,000 $ 0.13 600,000 $ 0.12
========== ============== =========== ============
Options exercisable at year end 725,000 $ 0.13 600,000 $ 0.12
========== ============== =========== ============
The following table summarizes information about options outstanding at December
31, 2002:
Weighted-average
Exercise Number remaining
price outstanding contractual life
----------------------- -------------------- ------------------------
$ 0.09 100,000 8.8 years
$ 0.12 500,000 8.7 years
$ 0.21 125,000 4.6 years
11. STOCKHOLDERS' EQUITY
The Company is authorized to issue 1,000,000 shares of preferred stock, par
value $1 per share. The preferred stock is issuable in series, with
designations, rights and preferences to be fixed by the Board of Directors.
During 2002 the Company effectively cancelled 146,415 common shares it
repurchased from TRW, Inc. (Note 14).
12. DETAILS OF CERTAIN BALANCE SHEET CAPTIONS
A summary of assets held for sale at December 31, 2002 is as follows:
(In thousands)
---------------------------------------------------------- ------------------
Gold Bar mill facility and other assets $ 413
Grassy Mountain property 580
------------------
$ 993
==================
Current portion $ 580
Long-term portion 413
------------------
$ 993
==================
35
During the year ended December 31, 2002 net receipts from the sale of equipment
at the Gold Bar property did not meet management's expectations. Due to the
continued declining equipment sales and an overall slowdown in the mining
industry, the carrying value of the assets held for sale relating to the Gold
Bar property and the related estimated reorganization liabilities were reduced
by $450,000 and $390,000 respectively and a $60,000 impairment charge was
recorded. On December 20, 2002, APMI and Seabridge Gold Inc., ("Seabridge")
(formerly known as Seabridge Resources Inc.) executed an amendment to the option
agreement related to the Grassy Mountain property. Pursuant to the agreement,
Seabridge made an option payment on December 23, 2002 of $300,000 which was
non-refundable and will not be credited against the purchase price of the option
should Seabridge exercise the option. The amendment establishes the purchase
price for the Grassy Mountain properties at $600,000 payable prior to March 31,
2003. Based upon the amended agreement, the carrying value of the assets held
for sale relating to the Grassy Mountain property and the related estimated
reorganization liabilities were reduced by $65,000 and $51,000 respectively and
a $14,000 impairment charge was recorded. Effective April 2002, management was
able to reach settlement agreements with all of the remaining insurance carriers
regarding the ongoing CGL Claims litigation. The final CGL claims settlements
net of expenses exceeded the recorded book value of the CGL claims at December
31, 2001 of $1,549,000 which resulted in a gain from CGL claims of $66,000 being
recognized during 2002.
A summary of restricted cash and securities at December 31, 2002 is as follows:
(In thousands)
--------------------------------------------------------------
Collateral for a reclamation bond (1) $ 45
================
(1) Securing performance bond relating to White Cliff's reclamation obligation.
13. DETAILS OF CERTAIN STATEMENTS OF CASH FLOWS CAPTIONS
The components of the adjustment to reconcile net loss to net cash used in
operations as reflected in the Consolidated Statements of Cash Flows are as
follows:
For Years Ended December 31,
(In thousands) 2002 2001
---------------------------------------------------- -------------- -------------
Depreciation, depletion and amortization $ 15 $ 2
Gain from CGL claims (66) -
Impairment of assets held for sale 74 13
-------------- -------------
$ 23 $ 15
============== =============
Increase in trade/other accounts receivable $ (25) $ -
Increase in inventories (45) -
Increase in prepaid expense and other current assets (16) (922)
Increase in other assets and restricted cash (44) -
Increase (decrease) in trade accounts payable 10 (89)
Decrease in accrued liabilities (27) -
Increase in estimated reorganization liabilities 6 443
Decrease in other liabilities, long-term (13) (15)
-------------- -------------
$ (154) $ (583)
============== =============
36
During 2001, the Company abandoned its investment in Arisur (Note 4).
Assets abandoned: (thousands)
--------------------------------------------------------------------------------
Current assets, net of cash and cash equivalents $2,517
Property, plant and equipment, net 3,601
Long-lived assets 17
------
6,135
------
Liabilities abandoned:
Current liabilities 5,710
Long-term liabilities 431
------
6,141
------
Cash and cash equivalents abandoned $ 6
======
Net cash required for operating activities reflects cash payments for interest
and income taxes as follows:
For the years ended
December 31,
(In thousands) 2002 2001
--------------------------------------------------------------------------------
Interest $ - $ 1
Income taxes - -
14. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
Atlas was in an adversary proceeding against TRW, Inc. ("TRW") and the United
States Environmental Protection Agency (the "EPA") pending before the Bankruptcy
Court, District of Colorado. This action was brought by Atlas seeking a
declaratory judgment that Atlas' obligations under a Consent Decree between
Atlas, TRW and the EPA (the "Decree") have been discharged under its confirmed
Reorganization Plan. TRW and the EPA asserted that obligations under the Decree
are not dischargeable under federal bankruptcy laws.
On October 4, 2000, Atlas and the EPA entered into a settlement agreement
whereby the EPA concurred with Atlas that all obligations to reimburse the EPA
for response and oversight costs at the Coalinga mine-site ("Coalinga") under
the Decree are discharged. The parties also agreed that Atlas "remains obligated
to perform any further "injunctive relief" which may be required under the
Decree." Injunctive relief constitutes clean-up, maintenance or operation
activities at the Coalinga mine-site should they become necessary in the future,
but does not include ongoing oversight and response costs as defined in the
Decree. The Company considers the chance of future "injunctive relief" costs to
be remote.
On February 5, 2001, the Court granted a partial summary judgment, in favor of
Atlas, discharging $411,000 of the $534,000 TRW claim. The remaining claim for
$123,000, which represents TRW's estimate of future response cost obligations
37
under the Decree, was still pending before the Court until October 2001. In
October 2001, the Bankruptcy Court approved a settlement between the Company and
TRW under which the Company agreed to repurchase 146,415 shares of common stock
owned by TRW for $30,000 payable in three equal installments. The first and
second installments were paid to TRW in October 2001 and January 2002,
respectively and the final payment was made in July 2002. At the time of the
final payment, TRW transferred ownership of its shares to the Company. The
Company cancelled the shares during August 2002.
Other Commitments
During 2002 and 2001 the Company leased office space on a month- to-month basis
from an entity affiliated with the Company's President. In February 2003, the
Company entered into a two-year non-cancelable lease with a third party, that
expires in January 2005. Future minimum lease payments related to this lease are
as follows:
For the years ended December 31: (thousands)
2003 $ 26,437
2004 28,840
2005 2,403
-----------------
$57,680
-----------------
Amounts charged to rent expense for the years ended December 31, 2002 and 2001
were $15,000 and $7,000, respectively.
15. RELATED PARTY TRANSACTION
During 2002, the Company paid its one secured creditor, who held a lien on the
Gold Bar mill site and equipment as part of a Court-approved claim against the
Company, $60,000. The secured creditor is the Company's President and Chief
Financial Officer.
16. INCOME (LOSS) PER SHARE
The following sets forth the computation of basic and diluted income (loss) per
share:
For Years Ended December 31,
(In thousands, except per share data) 2002 2001
--------------------------------------------------------------------------------
Numerator:
Income (loss) from continuing operations $ (437) $ 156
-------------- --------------
Denominator:
Basic
Weighted average shares outstanding 6,000 6,062
============== ==============
Diluted
Weighted average shares outstanding (1) 6,000 6,138
Basic and diluted income (loss) per share $ (0.07) $ 0.03
============== ==============
(1) Outstanding options are not included in the 2002 calculation because the
effect would be to reduce the loss per share.
38
17. INCOME TAXES
The Company had no provision for income taxes for the years ended December 31,
2002 and 2001.
Deferred income taxes result from temporary differences in the timing of income
and expenses for financial and income tax reporting purposes. The primary
components of deferred income taxes result from exploration and development
costs; depreciation, depletion and amortization expenses; impairments; and
reclamation accruals.
The net deferred tax balances in the accompanying December 31, 2002 balance
sheet include the following components:
(In thousands)
--------------------------------------------------------------------------------
Deferred tax assets:
Net operating loss ("NOL") carryovers $ 8,299
Capital loss ("CL") carryovers 5,601
Post retirement benefit accrual 55
Reorganization expenses 234
Depreciation, depletion and amortization 2,924
--------
Total deferred tax assets 17,113
Deferred tax asset valuation allowance (17,113)
Net deferred tax assets $ -
========
The change in the Company's valuation allowance is summarized as follows:
For Years Ended December 31,
(In thousands) 2002 2001
--------------------------------------------------------------------------------
Valuation allowance, beginning of period $ 17,517 $ 19,418
Continuing operations 151 (54)
Restriction of carryforwards (554) (1,846)
Other (1) (1)
-------- --------
$ 17,113 $ 17,517
======== ========
A reconciliation of expected federal income taxes on income from continuing
operations at statutory rates with the expense for income taxes is as follows:
For Years Ended December 31,
(In thousands) 2002 2001
--------------------------------------------------------------------------------
Income tax at statutory rates $ 151 $ 54
Increase (decrease) in deferred
tax asset valuation allowance (151) (54)
---------- ----------
Income tax expense $ - $ -
========== ==========
At December 31, 2002 the Company has unused U.S. CL carryovers of $4,127,000
which began expiring in 2002 and go through 2022. The Company also has U.S.
alternative minimum tax credit (AMT) carryovers of $127,000, which can be
carried forward indefinitely through 2022. Unused U.S. NOL carryovers at
December 31, 2002 are as follows:
39
Expiring in year ending December 31 (in thousands)
-------------------------------------------------------------- -----------------
2002 $ 4,127
2003 2,050
2004 5,368
2005 5,037
Later years 57,333
-----------------
$ 73,915
=================
The U.S. carryovers are subject to restrictions due to change of ownerships, as
defined by U.S. tax laws, occurring in October 1996 when the Company issued
stock for the acquisition of Arisur and in December 1999 when the Company
emerged from bankruptcy. These restrictions limit the future utilization of
carryovers that existed at the date of the ownership changes.
________________________________________
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
----------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Not Applicable.
40
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
--------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------
The information required for this item appears in the Company's Proxy Statement
for the 2002 Annual Meeting to be filed within 120 days after the end of the
fiscal year and is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
----------------------
The information required for this item appears in the Company's Proxy Statement
for the 2002 Annual Meeting to be filed within 120 days after the end of the
fiscal year and is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information required for this item appears in the Company's Proxy Statement
for the 2002 Annual Meeting to be filed within 120 days after the end of the
fiscal year and is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information required for this item appears in the Company's Proxy Statement
for the 2002 Annual Meeting to be filed within 120 days after the end of the
fiscal year and is incorporated herein by reference.
41
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) Exhibits:
Exhibit
Number Exhibit
----------- --------------------------------------------------------------------------------------------- ------
2.1 Atlas Corporation's second amended plan of reorganization (1)
----------- --------------------------------------------------------------------------------------------- ------
2.2 Atlas Precious Metals Inc.'s second amended plan of reorganization (1)
----------- --------------------------------------------------------------------------------------------- ------
2.3 Atlas Gold Mining Inc.'s revised second amended plan of reorganization (1)
----------- --------------------------------------------------------------------------------------------- ------
3.1 Articles of Incorporation of Atlas Minerals Inc. dated February 3, 2000 (1)
----------- --------------------------------------------------------------------------------------------- ------
3.2 Bylaws of Atlas Minerals Inc. dated February 10, 2000 (2)
----------- --------------------------------------------------------------------------------------------- ------
10.1 Moab Utah Millsite Transfer Agreement dated April 28, 1999 between Atlas Corporation, the (3)
Official Unsecured Creditors Committee, the NRC, the State of Utah and ACSTAR Insurance
Companies
----------- --------------------------------------------------------------------------------------------- ------
10.2 Revised second amended joint disclosure statement of Atlas Corporation, Atlas Gold Mining (4)
Inc. and Atlas Precious Metals Inc.
----------- --------------------------------------------------------------------------------------------- ------
10.6 Option Agreement among Seabridge Resources Inc., Newco, Atlas Precious Metals Inc. and (5)
Atlas Minerals Inc. effective February 14, 2000
----------- --------------------------------------------------------------------------------------------- ------
10.7 First Amendment to Option Agreement effective December 31, 2000, by and among Atlas (5)
Precious Metals Inc, Atlas Minerals Inc., Seabridge Resources Inc., and Newco
----------- --------------------------------------------------------------------------------------------- ------
10.8 Second Amendment to Option Agreement effective July 31, 2001, by and among Atlas Precious (6)
Metals Inc, Atlas Minerals Inc., Seabridge Resources Inc., and Newco
----------- --------------------------------------------------------------------------------------------- ------
10.9 Stock Option Plan dated September 7, 2001 (6)
----------- --------------------------------------------------------------------------------------------- ------
10.10 Form of Stock Option Agreement between the Company and the Optionees (6)
----------- --------------------------------------------------------------------------------------------- ------
10.11 Third Amendment to Option Agreement effective December 20, 2002, by and among Atlas (7)
Precious Metals Inc, Atlas Minerals Inc., and Seabridge Gold Inc.
----------- --------------------------------------------------------------------------------------------- ------
21.0 Subsidiaries of the Company (2)
----------- --------------------------------------------------------------------------------------------- ------
99.1 Certification Of Chief Executive Officer Pursuant To Rule 13a-14 Or 15d-14 Of The (7)
Securities Exchange Act Of 1934, As Adopted Pursuant To Section 302 Of The Sarbanes-Oxley
Act Of 2002
----------- --------------------------------------------------------------------------------------------- ------
99.2 Certification Of President And Chief Financial Officer Pursuant To Rule 13a-14 Or 15d-14 Of (7)
The Securities Exchange Act Of 1934, As Adopted Pursuant To Section 302 Of The
Sarbanes-Oxley Act Of 2002
----------- --------------------------------------------------------------------------------------------- ------
(1) Incorporated by reference to the Company's Report on Form 8-K filed on
February 4, 2000.
(2) Incorporated by reference to the Company's annual report on Form 10-KSB for
the year ended December 31, 1999.
(3) Incorporated by reference to the Company's quarterly report on Form 10-QSB
filed on August 13, 1999.
(4) Incorporated by reference to the Company's quarterly report on Form 10-QSB
filed on November 12, 1999.
(5) Incorporated by reference to the Company's annual report on Form 10-KSB for
the year ended December 31, 2000 and filed May 15, 2001.
(6) Incorporated by reference to the Company's annual report on Form 10-KSB for
the year ended December 31, 2001 and filed April 15, 2002.
(7) Filed herewith and attached to this Form 10-KSB.
42
(b) No reports on Form 8-K were filed during the fourth quarter of 2002.
ITEM 14. CONTROLS AND PROCEDURES
-----------------------
A review and evaluation was performed by the Company's management, including the
Company's Chief Executive Officer (the "CEO') and Chief Financial Officer (the
"CFO"), of the effectiveness of the design and operation of the Company's
disclosure controls and procedures as of a date within 90 days prior to the
filing of this annual report. Based on that review and evaluation, the CEO and
CFO have concluded that Company's current disclosure controls and procedures, as
designed and implemented, were effective. There have been no significant changes
in the Company's internal controls or in other factors that could significantly
affect the Company's internal controls subsequent to the date of their
evaluation. There were no significant material weaknesses identified in the
course of such review and evaluation and, therefore, no corrective measures were
taken by the Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ATLAS MINERALS INC.
By: /s/ Gerald E. Davis
-------------------------------------
Name: Gerald E. Davis
Title: President and Chief Financial Officer
Date: March 26, 2003
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated. Each individual whose signature appears below hereby designates
and appoints Gerald E. Davis as such person's true and lawful attorney-in-fact
and agent (the "Attorney-in-Fact") with full power of substitution and
resubstitution, for each person and in such person's name, place and stead, in
any and all capacities, to sign any and all amendments to this Annual Report on
Form 10-KSB, which amendments may make such changes in this Annual Report on
Form 10-KSB as the Attorney-in-Fact deems appropriate and to file each such
amendment with all exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto the Attorney-in-Fact
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
43
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that the Attorney-in-Fact, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
By: /s/ H.R. (Roy) Shipes March 26, 2003
-----------------------------------------------
Title: Chairman, Chief Executive Officer, Secretary
and Director
By: /s/ Gerald E. Davis March 26, 2003
-----------------------------------------------
Title: President, Chief Financial Officer and Director
By: /s/ Douglas R. Cook March 26, 2003
-----------------------------------------------
Title: Director
By: /s/ David A. Groshoff March 26, 2003
-----------------------------------------------
Title: Director
By: /s/ Robert L. Miller March 26, 2003
-----------------------------------------------
Title: Director
44
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14 OR 15D-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, H.R. (Roy) Shipes, certify that:
1. I have reviewed this annual report on Form 10-KSB of Atlas Minerals
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us during the period
in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report; and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of that date;
5. The registrant's other certifying officer and I have disclosed to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 26, 2003
/s/ H.R. (Roy) Shipes
-----------------------
H.R. (Roy) Shipes
Chief Executive Officer
45
CERTIFICATION OF PRESIDENT AND CHIEF FINANCIAL OFFICER PURSUANT TO
RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gerald E. Davis, certify that:
1. I have reviewed this annual report on Form 10-KSB of Atlas Minerals
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report.
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us during the period
in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report; and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of that date;
5. The registrant's other certifying officer and I have disclosed to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 26, 2003
/s/ Gerald E. Davis
----------------------
Gerald E. Davis
President and Chief Financial Officer
46