UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
COMMISSION FILE NO. 1-2714
(Mark One)
(X) Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended June 30, 2003 or
( ) Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from _________ to ________
ATLAS MINERALS INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1533604
-------------------------------- --------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
10920 W. Alameda Ave., Suite 205, Lakewood, CO 80226
(Address of principal executive offices) (Zip Code)
303-292-1299
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 whether the registrant 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 August 13, 2003, 5,965,103 shares of Common Stock, par value $0.01 per
share, were issued and outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes No X
----- -----
INDEPENDENT ACCOUNTANTS' REPORT
The Board of Directors and Stockholders
Atlas Minerals Inc.
We have reviewed the accompanying consolidated balance sheet of Atlas Minerals
Inc. and subsidiaries as of June 30, 2003 and the related consolidated
statements of operations for the three-month and six-month periods ended June
30, 2003 and 2002 and cash flows for the six-month periods ended June 30, 2003
and 2002. These consolidated financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial statements consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet as of
December 31, 2002, and the related consolidated statements of operations,
stockholders' equity and cash flows (not presented herein) for the year then
ended; and in our report dated March 20, 2003, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 2002, is fairly stated in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
HORWATH GELFOND HOCHSTADT PANGBURN, P.C.
/s/ Horwath Gelfond Hochstadt Pangburn, P.C.
Denver, Colorado
August 7, 2003
Page 2 of 15
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
Atlas Minerals Inc.
Consolidated Balance Sheets
(in Thousands)
June 30, December 31,
2003 2002
----- ---------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 44 $ 396
Trade and other accounts receivable 21 25
Inventories 25 45
Prepaid expenses and other current assets 18 21
Assets held for sale -- 580
------- -------
Total current assets 108 1,067
------- -------
Property, plant and equipment 210 210
Less: accumulated depreciation, depletion and amortization (35) (19)
------- -------
175 191
Other assets -- 4
Restricted cash equivalents and securities 47 45
Deferred acquisition costs 10 86
Investment in affiliate 512 --
Assets held for sale -- 413
------- -------
$ 852 $ 1,806
======= =======
LIABILITIES
Current liabilities:
Trade accounts payable $ 58 $ 149
Accrued liabilities 42 44
Estimated reorganization liabilities -- 406
------- -------
Total current liabilities 100 599
------- -------
Estimated reorganization liabilities 175 12
Deferred gain -- 44
Other liabilities, long-term 125 129
------- -------
Total long-term liabilities 300 185
------- -------
Total liabilities 400 784
------- -------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, par $1 per share; authorized 1,000,000;
no shares issued and outstanding -- --
Common stock, par value $0.01 per share; authorized 100,000,000;
issued and outstanding, 5,965,000 and 5,915,000 at June 30, 2003
and December 31, 2002 respectively 60 59
Capital in excess of par value 2,988 2,980
Deficit (2,596) (2,017)
------- -------
Total stockholders' equity 452 1,022
------- -------
$ 852 $ 1,806
======= =======
See notes to consolidated financial statements.
Page 3 of 15
Atlas Minerals Inc.
Consolidated Statements of Operations
(In Thousands, Except Per Share Data, Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2003 2002 2003 2002
-------- -------- -------- --------
Mining revenue $ 2 $ -- $ 5 $ --
Costs and expenses:
Production costs 35 -- 70 --
Depreciation, depletion and amortization 8 -- 16 --
General and administrative expenses 293 133 546 220
-------- -------- -------- --------
Gross operating loss (334) (133) (627) (220)
-------- -------- -------- --------
Other (income) and expense:
Interest expense -- -- -- --
Interest income (1) (4) (1) (5)
Gain on settlement of environmental liability -- -- (16) --
claims
Gain on settlement of CGL claims -- (66) -- (66)
Other -- -- (31) --
-------- -------- -------- --------
Total other income (1) (70) (48) (71)
-------- -------- -------- --------
Loss before income taxes (333) (63) (579) (149)
Provision for income taxes -- -- -- --
-------- -------- -------- --------
Net loss $ (333) $ (63) $ (579) $ (149)
======== ======== ======== ========
Basic and diluted loss per share of common stock $ (0.06) $ (0.01) $ (0.10) $ (0.02)
======== ======== ======== ========
Weighted average number of common
shares outstanding 5,938 6,062 5,926 6,062
======== ======== ======== ========
See notes to consolidated financial statements.
Page 4 of 15
Atlas Minerals Inc.
Consolidated Statements of Cash Flows
(In Thousands, Unaudited)
Six Months Ended
June 30,
------------------
2003 2002
------- -------
Operating activities:
Net loss $ (579) $ (149)
Add (deduct) non-cash items:
Gain on settlement of CGL and environmental claims (16) (66)
Shares issued for services 9 --
Depreciation, depletion and amortization 16 1
Net change in non-cash items related to operations, net of
effects from deconsolidation of APMI in 2003 (Note 3) 32 (175)
------- -------
Cash used in operating activities (538) (389)
------- -------
Investing activities:
Additions to property, plant and equipment -- (129)
Investment in CGL claims receivable -- (24)
Investment in assets held for sale (65) (72)
Deferred acquisition costs (166) --
Cash effects of deconsolidation of APMI (76) --
Proceeds from settlement of environmental claims 16 --
Proceeds from settlement of CGL receivable -- 1,639
Proceeds from sale of assets held for sale 622 81
------- -------
Cash provided by investing activities 331 1,495
------- -------
Financing activities:
Payment of estimated reorganization liabilities (145) (592)
------- -------
Cash used in financing activities (145) (592)
------- -------
(Decrease) increase in cash and cash equivalents (352) 514
Cash and cash equivalents:
Beginning of period 396 417
------- -------
End of period $ 44 $ 931
======== ========
See notes to consolidated financial statements.
Page 5 of 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by accounting principles for complete
financial statements generally accepted in the United States of America.
There has not been any change in the significant accounting policies of
Atlas Minerals Inc. (the "Company") for the periods presented.
In the opinion of Management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The results for these interim periods are not necessarily
indicative of results for the entire year. These statements should be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2002.
2. The accompanying consolidated financial statements include the accounts of
Atlas Minerals Inc. ("Atlas") and its subsidiaries as follows: White Cliffs
Mining, Inc., a wholly-owned subsidiary in which the White Cliffs property
is held and Minerales Atlas S.A. de C.V., a wholly-owned Mexican subsidiary
incorporated during the second quarter of 2003. Effective June 30, 2003,
the Company's investment in Atlas Precious Metals Inc. ("APMI") will be
reported on the equity method due to the Company's ownership decreasing to
28% from its previously held 97% (see Note 4). The results of APMI's
operations for the six months ended June 30, 2003 are included in the
Company's consolidated statement of operations. The Company's recorded
investment in affiliate at June 30, 2003 consists of $319,000 of advances
and receivables due from APMI in addition to the Company's $193,000
investment in APMI (which represents the retained earnings of APMI on June
30, 2003, prior to its merger with Western Gold Resources). The financial
position of APMI as of June 30, 2003, is as follows:
(unaudited in thousands)
Current assets:
Cash $ 474
Other 5
-----------
479
Non-current assets:
Assets held for sale 431
Deferred acquisition costs 20
Property 4,015
-----------
Total assets $ 4,945
===========
Current liabilities:
Accounts payable and accrued expenses $ 75
Non-current liabilities:
Estimated reorganization liabilities, including $232
payable to Atlas 256
Deferred gain 142
Payable to Atlas 87
Notes payable, related party:
Western Gold Resources Inc. merger 1,136
Other 88
-----------
Total liabilities 1,784
Total shareholders' equity 3,161
-----------
Total liabilities and shareholders' equity $ 4,945
===========
Page 6 of 15
3. The components of the net change in items other than cash related to
operating activities, net of effects from deconsolidation of APMI in 2003,
as reflected in the Consolidated Statements of Cash Flows are as follows:
Six Months Ended
June 30,
--------------------------
(in thousands) 2003 2002
----- ----------------------------------------------- --------------------------
Add (deduct) items other than cash:
Accounts receivable $ 4 $ -
Inventories 20 -
Prepaid expenses and other current assets 2 (26)
Trade accounts payable (29) (92)
Accrued liabilities 13 (50)
Restricted cash (2) -
Other liabilities, long-term 24 (7)
--------------------------
$ 32 $ (175)
==========================
There were no cash payments made for interest or income taxes during the
six months ended June 30, 2003 and 2002.
4. In September 2002, the Company signed a 120-day exclusive option agreement
to acquire 100% of the outstanding shares of Western Gold Resources, Inc.
("WGR"), 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 to transfer
all rights under the option agreement to APMI. At this time the Company
paid WGR an additional $50,000 for such extension and transfer of rights.
The option agreement was again amended on March 31, 2003 to further extend
the option period until June 30, 2003 at no additional cost.
During July 2003, a definitive Amended Agreement and Plan of Merger (the
"Agreement") effective June 30, 2003 was consummated. Under the terms of
the Agreement, APMI acquired all the outstanding common shares of WGR
(14,499,700 shares) in exchange for the issuance of 17,399,640 shares of
APMI common stock (which represents 72% of post transaction outstanding
common stock of APMI), cash of $24,000 and a promissory note payable to the
primary shareholders of WGR, H.R. and Eileen A. Shipes ("Shipes'") (H.R.
Shipes is also the Company's Chief Executive Officer) in the amount of
$64,000. The Agreement also contains a separate repurchase agreement
whereby APMI repurchased 2,400,000 common shares of APMI in exchange for a
promissory note payable to the Shipes' totaling $1,136,000. As a result of
the Agreement, the Company's ownership in APMI is approximately 28% as of
June 30, 2003 and on that date the Company has begun to account for its
investment in APMI under the equity method of accounting.
5. During March 2003, the Company reached a settlement agreement with a group
of the Company's excess insurance carriers relating to environmental
liability claims. The net proceeds from this settlement totaled
approximately $16,000 and were recorded as a gain from settlement of
environmental liability claims.
6. During the first quarter 2003, the Company was informed that money was
being held in trust pending the satisfaction of tax compliance requirements
with Canadian authorities relating to operating activities prior to 2001.
The Company was cleared of the related tax liability and the escrowed money
totaling approximately $30,000 was released and is recognized as other
income in the first quarter 2003.
Page 7 of 15
7. On March 26, 2003, stock options for 50,000 shares were granted to an
employee under the Atlas Minerals Inc. 2001 Stock Option Plan. The options
granted were at an exercise price of $0.22, the quoted market price of the
Company's shares at the date of grant, and expire on March 26, 2008. 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 six months ended June 30, 2003 would have been as follows:
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- ----------------------------------
(in thousands) 2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------------------------
Net loss $ (333) $ (63) $ (579) $ (149)
ADD: Stock-based employee compensation included in
reported net income, net of related tax effects -- -- -- --
DEDUCT: Total stock-based employee compensation
expense determined under fair value based method
for all award, net of related tax effects -- -- (11) --
--------------- --------------- --------------- ---------------
Pro forma net loss $ (333) $ (63) $ (590) $ (149)
=============== =============== =============== ===============
Loss per share:
Basic and diluted - as reported $ (0.06) $ (0.01) $ (0.10) $ (0.02)
=============== =============== =============== ===============
Basic and diluted - pro forma $ (0.06) $ (0.01) $ (0.10) $ (0.02)
=============== =============== =============== ===============
8. On April 3, 2003, the Company completed the sale of the Grassy Mountain
property to Seabridge Gold Inc., formerly Seabridge Gold Resources, Inc.,
and received the final cash payment of $600,000 on that date, which
resulted in net creditor distributions of $145,000 during the second
quarter. There was no gain or loss on this transaction, as the sales
proceeds equaled the carrying value of the property.
9. On May 20, 2003, 50,000 common shares of the Company were issued to a
consultant under the terms of a consulting agreement entered into in
February 2000. The shares were expensed at fair market value as
professional services totaling $9,000.
10. During second quarter the Company incorporated a wholly-owned subsidiary,
Minerales Atlas S.A. de C.V., in Mexico. The Company subsequently executed
a six-month option to purchase the La Barra fluorite property located 50
miles south of Douglas, Arizona, near Esqueda, Sonora, Mexico. The Company
has incurred $10,000 of deferred acquisition costs related to this option.
Page 8 of 15
Item 2. Management's Discussion and Analysis
------------------------------------
"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.
This Form 10-QSB contains forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Atlas Minerals Inc. is referred to herein as "we" or
"our". The words or phrases "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 and uncertainties. Statements made herein are as of the date of
the filing of this Form 10-QSB with the Securities and Exchange Commission
and should not be relied upon as of any subsequent date. Except as may
otherwise be required by applicable law, we do not undertake, and
specifically disclaim, any obligation to update any forward-looking
statements contained in this Form 10-QSB to reflect occurrences,
developments, unanticipated events or circumstances after the date of such
statement.
RECENT EVENTS
On September 22, 1998, Atlas 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 (the
"Reorganized Company"). Having consummated 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.
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 and the sale of the
Company's Grassy Mountain property located in eastern Oregon (of which
Creditors would receive approximately 45.9% and 65.4%, respectively, of net
proceeds after payment of certain general and administrative costs).
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.
Page 9 of 15
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. ("WGR"), a private Florida company
whose primary asset is the Estrades polymetallic mine located in
northwestern Quebec. In January 2003, this Option Agreement was amended
extending the option period to March 31, 2003, and transferring all rights
under the Option Agreement to APMI. At this time, the Company paid WGR an
additional $50,000 for such extension and transfer of rights. The Option
Agreement was again amended during March 2003 to further extend the option
period to June 30, 2003, at no additional cost. This merger was
subsequently completed effective June 30, 2003 (see further discussion
below).
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 controlled 100% of the voting stock of each AGMI
and APMI.
In March 2003, the Company merged APMI and AGMI, with APMI remaining as the
surviving entity. As a result of the merger, APMI 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.
Page 10 of 15
Also as a result, APMI owned 100% of the Grassy Mountain property in
Malheur County, Oregon, a property known to host gold mineralization, which
was subsequently sold (see discussion below). At the time of this merger
and prior to the merger of APMI and WGR, the Company controlled 100% of the
voting stock and 97% of the issued stock of the resulting APMI.
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 in Sonora Mexico, of
a) a property on which both copper oxide material and gold have been
identified, and b) the long-term lease of an existing processing plant with
nominal capacity of 100 tonnes per day based on processing of sulfide ores;
and 2) the acquisition of a property package in Sinoloa, Mexico, containing
primarily zinc and silver mineralization.
On April 3, 2003 the Company completed the sale of the Grassy Mountain
property located in Malheur County, Oregon to Seabridge Gold Inc., formerly
Seabridge Gold Resources, Inc. and its wholly-owned subsidiary, Seabridge
Gold Corporation. Under the terms of the final agreement entered into in
December 2002 the Company received the final payment of $600,000 upon
closing, of which, after repayment of certain priority claims, $145,000 was
distributed to creditors in May 2003. There was no gain or loss on this
transaction as the sales proceeds equaled the carrying value of the
property.
On June 23, 2003 the Company, through its wholly-owned Mexican subsidiary
Minerales Atlas S.A. de C.V., executed a six-month option to purchase the
La Barra fluorite property. The property is comprised of three claims
covering 300 hectares, or approximately 740 acres, and has on it two
underground mines that last produced in 1974. At the time the mines were
idled, a reserve study prepared by the owner, Fluoresqueda, S.A., reported
nearly 195,000 tons of ore at an average grade of 46% CaF2. The Company has
not independently verified the accuracy of this report, and, as such, there
can be no assurance that the reported quantity and quality of ore will be
available for mining or will meet the current SEC definition of reserves.
The La Barra property is located approximately 50 miles south of Douglas,
Arizona, near Esqueda, Sonora, Mexico. Any new mining operations on the
property would be within 12 miles of both an existing highway and railroad,
with direct access by either means to U.S. markets via Douglas. During
prior operations, raw ore was trucked to Esqueda where it was milled and
concentrated for final sale and distribution. The mill foundations and rail
siding remain and will be evaluated for possible acquisition during the
option period.
Currently the U.S. consumes approximately 600,000 tons of fluorite per
annum. In 2001, all consumption was from imports, primarily from China
(66%), South Africa (23%) and Mexico (11%). There are three grades of
fluorite - acid grade (containing more than 97% CaF2), ceramic grade (85%
to 95% CaF2), and metallurgical grade (60% to 85% CaF2). Nearly 80% of U.S.
consumption is for the production of hydrofluoric acid, primarily in
Louisiana and Texas, and aluminium fluoride in Texas. The 2001 average U.S.
Gulf import price for acid grade product was approximately $150 per ton
with metallurgical grade averaging $115 per ton FOB millsite in Tampico,
Mexico. Given the apparent high grade of the La Barra fluorite and its
proximity and access to the U.S. Gulf Coast, the Company believes that it
could have a competitive advantage in supplying product to the southern
U.S. markets.
During July 2003 a definitive Amended Agreement and Plan of Merger (the
"Agreement") effective June 30, 2003 was consummated between APMI and
Western Gold Resources, Inc. ("WGR"). Under the terms of the Agreement,
APMI acquired all the outstanding common shares of WGR (14,499,700 shares)
in exchange for the issuance of 17,399,640 shares of APMI common stock
(which represents 72% of post transaction outstanding common stock of
APMI), cash of $24,000 and a promissory note payable to the primary
shareholders of WGR, H.R. and Eileen A. Shipes ("Shipes'") (H.R. Shipes is
Page 11 of 15
also the Company's Chief Executive Officer), in the amount of $64,000. The
Agreement also contains a separate repurchase agreement whereby APMI has
agreed to repurchase 2,400,000 common shares of APMI in exchange for a
promissory note payable to the Shipes' totaling $1,136,000. As a result of
the Agreement, the Company's ownership in APMI is approximately 28% as of
June 30, 2003.
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 properties,
primarily in the sectors of industrial minerals, base metals, and precious
metals.
CAPITAL RESOURCE REQUIREMENTS
Liquidity
As of June 30, 2003, the Company's working capital was $8,000, compared to
$468,000 as of December 31, 2002. The Company's cash balance decreased from
$396,000 at December 31, 2002 to $44,000 at June 30, 2003. The decrease of
$352,000 was primarily the result of utilizing cash to fund operating
activities for the first half of the year of $540,000. Proceeds from the
gain on settlement of environmental liability claims and the sale of assets
held for sale were $16,000 and $622,000, respectively; however, this amount
was offset by expenses for the sale of assets held for sale of $65,000 and
the deferred acquisition costs related to Estrades of $136,000 and
exploration of certain Mexican properties of $30,000. The Company also paid
$145,000 in creditor distributions due to the sale of the Grassy Mountain
property in April 2003.
Should funds be available, during the next twelve months approximately
$150,000 could be required in support of the White Cliffs diatomite
operation. Such funds would be used to modify mill operations to ensure
that specifications of existing products can be continuously met and to
allow the production of new product lines. An additional $50,000 could be
required for drilling, assaying, testing, and permitting of a new quarry
adequate to sustain production under a 20-year mine plan.
During the next six months, it is the intention of the Company to perform
adequate work on the La Barra fluorite property to be able to determine
whether the option to purchase the property should be exercised. Depending
on the detail of the work performed and assuming funds are available, the
Company could require up to $150,000 for review of existing data, drilling,
testing, assaying, and completing preliminary mine and mill design,
including $20,000 for final acquisition of the property.
In 2003, the Company also entered into a two-year non-cancelable lease
commitment for office space that expires in January 2005. Payments on this
lease total $26,000 in 2003, $29,000 in 2004, and $2,000 in 2005.
To support the above activities and commitments, the Company will need to
seek additional financing including loans against the aforementioned
assets, equity financing or project financing. On August 1, 2003, the
Company signed an agreement with IBK Capital Corp. of Toronto, Ontario,
Canada, whereby IBK Capital will assist the Company in raising up to $2.5
million through a private placement of common stock or some other financing
arrangement on terms and conditions acceptable to the Company. It is
anticipated that such financing should be completed within 60 days,
although there is no assurance that these or any efforts to raise financing
will be successful.
RESULTS OF OPERATIONS
The Company had revenues from production of diatomite at the White Cliffs
property, which commenced mining operations in August 2002, of $2,000 and
$5,000 during the three-month and six-month periods ended June 30, 2003
Page 12 of 15
compared to zero for the comparable periods in 2002. Production costs were
$35,000 and $70,000 for the three-month and six-month periods ended June
30, 2003 versus zero for the same periods in 2002.
General and administrative expenses for the six months ended June 30, 2003
were $546,000 compared to $220,000 for the comparable period in 2002.
Salaries and benefits increased $175,000 from the first half of 2002
compared to the same period in 2003 due to the salaries and benefits of the
administrative employees at White Cliffs, the addition of one employee at
headquarters, and other general salary increases. Legal and accounting fees
for the first half of 2003 were $107,000 compared to $40,000 for the first
half of 2002 due to the merger of APMI and AGMI, the restructuring of APMI
and overall increased business activity. Insurance costs increased $19,000
due to higher directors and officers insurance premiums and additional
coverage due to the equipment, property and liability insurance at White
Cliffs. During the first half of 2003, the Company incurred $16,000 in
business development costs to explore business opportunities to advance the
Company's interests, while there were no business development costs during
the same period in 2002. Director's fees and expenses decreased from
$24,000 to $14,000 due to less board and committee meetings in the first
half of 2003 over the same period in 2002. Rents and office administration
costs for the first half of 2003 have increased $17,000 from the same
period in 2002 due to the incremental cost of having offices in both
Colorado and Arizona due to the White Cliffs operation.
General and administrative expenses for the three-month period ended June
30, 2003 were $293,000 compared to $133,000 for the comparable period in
2002, resulting in an increase in costs during the quarter of $160,000. The
increases in costs during the quarter are primarily due to higher salaries
and benefit costs of $90,000 due to the additional employees at White
Cliffs and Atlas during second quarter 2003 versus the same period in 2002
as well as higher legal and accounting fees for the second quarter 2003 of
$44,000 versus $9,000 during the same period in 2002 due to the increased
work associated with the restructuring of APMI and the merger with WGR.
Interest income was $1,000 for both the three-month and six-month period
ended June 30, 2003, compared to $4,000 and $5,000 for the three-month and
six-month period ended June 30, 2002. Interest was higher in 2002 due to
slightly larger cash balances available for investment.
During the first half of 2003, the Company recognized a gain on the
settlement of environmental liability claims of $16,000 and also recognized
as other income the release of $30,000 from a trust account, which was held
pending proof of compliance with Canadian tax authorities. During the same
period in 2002, the Company recognized a gain from the settlement of CGL
claims of $66,000.
Item 3. 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 quarterly 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.
Page 13 of 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
----- ---------------------------------------------------------------------
31.1 Certification of Chief Executive Officer pursuant to
Rule 13A-14 or 15D-14 of the Securities Exchange Act of 1934.
----- ---------------------------------------------------------------------
31.2 Certification of Chief Financial Officer pursuant to
Rule 13A-14 or 15D-14 of the Securities Exchange Act of
1934.
----- ---------------------------------------------------------------------
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350.
----- ---------------------------------------------------------------------
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350.
----- ---------------------------------------------------------------------
b. Reports on Form 8-K
------------------------------- ----------------------------------------------------------------------
Date Filed on Form 8-K
------------------------------- ----------------------------------------------------------------------
January 9, 2003 Press Release dated January 8, 2003, announcing that the Company had
restructured the Option Agreement for sale of the Grassy Mountain
property to Seabridge Gold, Inc. (f/k/a Seabridge Resources Inc.)
and had also assigned the option held by the Company for possible
merger with Western Gold Resources, Inc. whose primary asset is the
Estrades polymetallic mine located in Quebec, to its wholly-owned
subsidiary, Atlas Precious Metals Inc.
------------------------------- ----------------------------------------------------------------------
April 17, 2003 Press Release dated April 7, 2003, wherein the Company announced
that, through its wholly-owned subsidiary, APMI, it completed the
sale of the Grassy Mountain gold property located in eastern Oregon
to Seabridge Gold Inc. (formerly Seabridge Gold Resources, Inc.) and
its wholly-owned subsidiary, Seabridge Gold Corporation
(collectively "Seabridge").
------------------------------- ----------------------------------------------------------------------
July 9, 2003 Press Release dated June 18, 2003, announcing that the Company,
through its wholly-owned Mexican subsidiary, Minerales Atlas S.A. de
C.V., executed a six-month option to purchase the La Barra fluorite
property located approximately 50 miles south of Douglas, Arizona.
------------------------------- ----------------------------------------------------------------------
Page 14 of 15
August 7, 2003 On July 23, 2003, Atlas Minerals Inc., a Colorado corporation
("AMI"), through a wholly owned subsidiary, Atlas Precious Metals
Inc., a Nevada corporation, ("APMI" or the "Company") consummated
the transactions contemplated under a definitive Amended Agreement
and Plan of Merger dated as of June 30, 2003, (the "Agreement")
between the Company and Western Gold Resources, Inc., a Florida
corporation, ("WGR" or "Seller"), pursuant to which WGR was merged
with and into the Company, with the Company remaining as the
surviving entity (the "Merger").
------------------------------- ----------------------------------------------------------------------
August 7, 2003 Press Release dated August 5, 2003, announcing that, through its
subsidiary, Atlas Precious Metals Inc. ("APMI") or with Atlas
Minerals collectively referred to as "Atlas") it has completed the
acquisition of 100% of the outstanding shares of Western Gold
Resources, Inc. ("Western Gold"), a private Florida company, and the
corresponding merger of Western Gold with and into APMI (the
"Merger"), with APMI remaining as the surviving corporation.
------------------------------- ----------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATLAS MINERALS INC.
-------------------
(Registrant)
Date: August 13, 2003 By: /s/ H.R. (Roy) Shipes
---------------------
H.R. (Roy) Shipes
Chief Executive Officer
Date: August 13, 2003 By: /s/ Gary E. Davis
-----------------
Gary E. Davis
President and Chief Financial Officer
Page 15 of 15