SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      10-KSB/A





(MARK
      ONE)





[X]      ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the Fiscal Year Ended December 31, 2005





[
      ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d)
      OF THE SECURITIES EXCHANGE ACT OF 1934





For
      the
      transition period from _______________ to _______________





Commission
      File Number 000-31380





ATLAS
      MINING COMPANY


(Name
      of small business issuer in its charter)





Idaho
                  
                  82-0096527(State
                      or other jurisdiction of incorporation or organization)
                  
                  (I.R.S.
                      Employer Identification
                      No.)





630
      East
      Mullan Avenue


Osburn,
      Idaho 83849


(Address
      of principal executive offices)(Zip code)





Issuer's
      telephone number, including area code:  (208) 556-1181





Securities
      registered pursuant to Section 12(b) of the Act:





Title
                of each class
            
            Name
                of each exchange on which each is registeredNone
            
            None





Securities
      registered pursuant to Section 12(g) of the Act:





Common
      Stock, no par value


(Title
      of
      class)




Check
      whether
      the issuer: (1) 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
      if
      disclosure of delinquent filers in response to Item 405 of Regulation S-B is
      not
      contained in this form, and will not be contained, to the best of registrant's
      knowledge, in definitive proxy or information statements incorporated by
      reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
      [ ]




Indicate
      by
      check mark whether the Registrant is a shell company (as defined in Rule 12b-2
      of the Exchange Act) Yes
      [  ]  No [X]





The
      issuer's
      revenues for the fiscal year ended December 31, 2005 were $628,176.




The
      number of
      shares of the registrant's common stock, no par value per share, outstanding
      as
      of March 28, 2006 was 48,925,687. The aggregate market value of the voting
      and
      non-voting common equity held by non-affiliates of the registrant on March
      24,
      2006, based on the last sales price on the OTC Bulletin Board as of such date,
      was approximately $68,495,961.






DOCUMENTS
      INCORPORATED BY REFERENCE






None.




Transition
      Small Business Disclosure Format:     Yes [
      ]       No [X]














TABLE
      OF
      CONTENTS





PagePARTIITEM1.
            DESCRIPTION
                OF BUSINESS
            4ITEM2.
            DESCRIPTION
                OF PROPERTY
            10ITEM3.
            LEGAL
                PROCEEDINGS
            13ITEM4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            13PARTIIITEM5.
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            13ITEM6.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS.
            13ITEM7.
            FINANCIAL
                STATEMENTS AND SUPPLEMENTARY DATA.
            21ITEM8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE.
            21ITEM8A
            CONTROLS
                AND PROCEDURES
            21ITEM8B
            OTHER
                INFORMATION
            21PARTIIIITEM9.
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(a) OF THE EXCHANGE ACT
            22ITEM10.
            EXECUTIVE
                COMPENSATION
            24ITEM11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS
            26ITEM12.
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS
            26ITEM13.
            EXHIBITS
            27ITEM14.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            27SIGNATURES
            28











2


NOTE
      REGARDING 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.
      These forward-looking statements are based on our current expectations,
      assumptions, estimates and projections about our business and our
      industry.  Words such as "believe," "anticipate," "expect," "intend,"
      "plan," "will," "may," and other similar expressions identify


forward-looking
      statements. In addition, any statements that refer to expectations, projections
      or other characterizations of future events or circumstances are forward-looking
      statements. These forward-looking statements are subject to certain risks and
      uncertainties that could cause actual results to differ materially from those
      reflected in the forward-looking statements.  Factors that might cause
      such a difference include, but are not limited to, those discussed in the
      section of this Annual Report entitled "Management's Discussion and Analysis
      of
      Financial Condition and Results of Operations -


Factors
      Affecting Business, Operating Results and Financial Condition", as well as
      the
      following:





o        our
      uncertainty whether a commercially viable deposits or "reserves" exist on any
      of
      our properties;





o        our
      lack of capital and whether or not we will be able to raise capital when we
      need
      it;





o        risks
      of loss of timber revenues due to fire, disease or weather;





o        change
      of market prices for timber, halloysite clay or other marketable deposits we
      may
      find on any of our properties;





o        whether
      or not we will continue to receive the services of our executive officers and
      directors, particularly our President, William T. Jacobson;





and
      other
      factors, some of which will be outside our control. You are cautioned not to
      place undue reliance on these forward-looking statements, which relate only
      to
      events as of the date on which the statements are made. We undertake no
      obligation to publicly revise these forward-looking statements to reflect events
      or circumstances that arise after the date hereof. You should refer to and
      carefully review the information in future documents we file with the
      Securities


and
      Exchange Commission.











3





PART
      I





ITEM
      1.  BUSINESS





HISTORY
      AND DEVELOPMENT OF THE COMPANY






We
      are a
      natural resources company engaged in the acquisition,  exploration and
      development of our resource properties in the states of Idaho and
      Utah.  We also provide contract mining services and specialized civil
      construction services for mine operators, exploration companies and the
      construction and natural resources industries through our trade name "Atlas
      Fausett Contracting." We were originally incorporated on March 4, 1924 in Idaho
      and commenced our operations on that date.






From
      1980 to
      1997, we had no activities. In 1997, we acquired the  equipment of
      Fausett International, Inc. for $1,416,099 and began our contracting business.
      In 1998, we acquired the Sierra Silver Lead Mining Company, an Idaho corporation
      for $276,157. This merger added an additional 329.18 acres of mineral rights
      to
      our current holdings. In 1999, we also acquired the majority outstanding shares
      of Olympic Silver Resources, Inc., a Nevada corporation for $228,566. The
      acquisition of Olympic gave us control of an Olympic subsidiary mine in
      Zacatecas, Mexico. In 2001 our agreement on the mine in Zacatecas expired and
      we
      no longer have any interest there. In 1999 we acquired the Aulbach mining claims
      for $ 50,000, approximately 100 acres of timber and mineral property in northern
      Idaho. In 1999 we acquired 53% interest in the Park Copper Mining Company for
      $72,825, which holds 100 acres of timber and mineral property in northern Idaho.
      In 2001, we entered into a lease purchase agreement on the Dragon Mine in Juab
      County, Utah for $100,000. We believe this property may contain a deposit of
      high quality clay, which we are putting into production. In 2005 we purchased
      the Dragon Mine for $500,000.  In 2002, we cancelled our agreement
      with Fausett International, Inc., returned the equipment, and settled the
      remaining debt. We were not able to utilize this equipment enough to justify
      the
      cost related to owning it.






In
      the
      future, we intend to be able to acquire additional properties near our current
      mines and elsewhere.






We
      have
      brought the Dragon Mine from an exploration stage into a  Development
      stage.  We intend to find other properties that can be acquired,
      developed and mined  with minimal costs, and environmental
      problems.






In
      addition
      to the mineral resources, we also have harvestable timber resources on our
      properties. We contract out logging of our timber to create revenues and cash
      flows for our other operations. We have also harvested timber on
      approximately 420 acres of our previously owned and newly acquired
      properties.  We hope to acquire more properties in the future with
      timber resources.





We
      also intend to continue our
      contract mining services. These services were originally developed and marketed
      to provide us with operating revenues. We hope to increase the revenue derived
      from these services and to utilize our expertise in this area to mine our owned
      properties.











4






CONTRACT
      MINING




Because
      of
      exploration costs and other budget constraints, mining activity on our Idaho
      properties has remained idle since the 1980s. However, on August 10, 1997 our
      board met and approved a plan to revitalize Atlas Mining Company for the purpose
      of increasing shareholder value and, in the long term, of making us an operating
      company with producing mines.





The
      first
      step in this process was to form a contract mining service under the trade
      name
      of Atlas Fausett Contracting, which we refer to as AFC. We acquired equipment
      and tools and hired key employees from Fausett International, Inc., or Fausett,
      a privately held mining contracting firm with over 30 years experience in the
      mining industry. These employees brought with them extensive knowledge and
      expertise in all aspects of underground mining.




AFC
      began
      contracting work on August 15, 1997. Among its many services, AFC performs
      site
      evaluation, feasibility studies, trouble-shooting and consultation prior to
      the
      undertaking of exploration and mine development. AFC's projects
      include all types of underground mine development, rehabilitation and
      specialized civil construction. Services are contracted for either individually
      or as joint ventures depending on the requirements of a particular project
      or
      the specific needs of an individual client. AFC also handles work under contract
      from government agencies.






AFC
      crews are
      experienced and have worked on projects in Idaho, Montana, Oregon, Washington,
      Nevada, Colorado, Arizona, New Mexico, and British Columbia. AFC has the
      required licenses to work in Idaho, Washington and Montana and has the ability
      to be licensed in most states in the western United States. AFC operates under
      a
      permit from the Mine Safety and Health Administration and also possesses a
      permit to handle explosives from the Bureau of Alcohol, Tobacco and
      Firearms.






AFC
      was the
      main contractor at the Mayflower Mine, a Brimstone Gold Corp. project, outside
      of Whitehall, Montana, and for the Holden Mine closure, a U.S. Government and
      U.R.S. Corporation project on Lake Chelan, Washington.




AFC
      maintained a labor contract with Echo Bay Mines, now Kinross Gold Corporation,
      At Republic, Washington for five years, prior to the mines closure, and has
      worked at the Lucky Friday Mine for Hecla Mining Company for the past seven
      years.






AFC
      must also
      compete with other smaller companies that provide  contract services
      related to underground mining. However, AFC has experience in a number of
      different mining techniques. Besides normal underground mining


activities,
      AFC has expertise in ground stabilization (such as grouting, shotcrete, and
      rock
      bolting). AFC has provided tunnel construction expertise for hydroelectric
      work.






AFC
      also
      works with government agencies and other mining companies with respect to mine
      closures to help with industry efforts to alleviate potential hazards from
      abandoned mines.






Since
      AFC
      mainly concentrates on underground mining activities, there is very little
      surface disturbance, which is the main environmental concern faced by mining
      companies whose activities are centered on surface mining.








5
 
   TIMBER
  Our
        entry
        into the timber industry was commenced primarily as a means of generating
        cash
        flow from our exploration properties in northern Idaho. Our intention is
        to
        remain in this industry only to the extent that it supplements our
        revenue while we are conducting our exploration activities. With the amount
        of
        timber remaining on Atlas property, we can supplement our revenue for the
        next
        couple of years. As we harvest this timber, we will continue to seek out additional
        exploration properties with harvestable timber. It takes approximately fifteen
        to twenty years for a tree to mature in northern Idaho, and our current goal
        is
        to acquire enough harvestable land to enable us to rotate our logging activities
        on a yearly basis to allow previously harvested areas the time to grow and
        mature marketable trees.


When
      we sell
      or timber we contract our logging to a qualified logger.  We depend on
      the logger’s experience and reputation in the industry and sometimes use him to
      negotiate the sale of our timber to various lumber mills in the area. We
      contract a logger on a as needed basis.  As with most commodities,
      timber is subject to price fluctuations and to government
      regulation.






The
      timber
      business is a cyclical business with lumber prices that fluctuate based on
      a
      number of factors including new housing starts, imports, and government
      regulations. North Idaho is predominately held by the U.S. government,
      either by the Forest Service or by the Bureau of Land Management. When these
      agencies decide to harvest timber the excess timber can affect the price the
      mills are willing to pay. In recent years there have been less government
      sales of timber due to the environmental and bureaucratic policies related
      to
      these sales. This has created more demand for privately held timber. We do
      not
      hold any contracts with any particular mills at this time. We do, however,
      maintain a good relationship with local mills, and are able to enter into sales
      agreements with them as needed.   Another factor that makes this
      aspect of our business cyclical is the weather. North Idaho has a heavy snowfall
      each winter, making logging difficult during those months. Consequently we
      do
      the majority of our logging efforts in the summer and fall. Our property
      consists primarily of pine, fir and larch, which is used predominately in the
      building industry.






Our
      logging
      activities are regulated by the Idaho State Department of Lands. They inspect
      our logging practices and inform us of any activities that may cause either
      a
      safety or an environmental problem. Our logger carries workers compensation
      and
      liability insurance, and falls under the guidelines of Occupational Safety
      and
      Health Act.






EXPLORATION




We
      intend to
      conduct our exploration activities for halloysite clay and other minerals,
      and
      intend to acquire commercially feasible properties that can be put into
      production with minimal environmental problems and with limited financial
      resources. We do not intend to seek out and acquire other properties unless
      they
      fit into the parameters we have set.  Further, we will limit our
      acquisitions based on our ability to conduct our feasibility surveys and other
      exploration work
      on
      these properties, and until we have been able to bring our existing acquisitions
      into a income generating stage.








6




In
      August
      2001, we acquired the Dragon Mine in Juab, Utah and began our clay exploration.
      Our exploration and development expenses for the period ending December 31,
      2004, and 2005 were $340,657 and $760,347, respectively on the halloysite clay
      project.




The
      halloysite clay is considered a non-toxic material, and we feel we can produce
      a
      sellable product with minimal environmental consequences using proper
      containment and processing techniques. The intended processing will be the
      crushing, drying, and packaging of the product for shipment. In 2003 and again
      in 2005 we completed small
      diamond drilling programs to verify location of clay beds at the Dragon
      Mine.   With that information we have begun to formulate
      development and operating plans.   During 2005 we continued to
      explore the Dragon Mine, and we have run numerous analytical test on the
      halloysite clay to ascertain quality.   In 2005 we did not have
      any sales of halloysite clay






Our
      halloysite clay marketing efforts include contacting potential customers and
      distributors, which we have done.  Each buyer may have a different use
      for the product and the price and quantity will vary as a result.  The
      sale of product cannot be formalized until we have verified our ability to
      provide the quality and quantities as required by the potential
      buyers.  From results of the product samples distributed we have
      numerous potential buyers.




Until
      the
      Dragon Mine is in a profitable stage we do not anticipate trying to develop
      other properties. However we will continue to look for other properties that
      can
      be acquired, developed and mined with minimal costs, and environmental problems,
      which we have done in 2005.






We
      have
      submitted a reclamation bond to the proper state authorities, and have received
      acceptance of our plan. In the future, we may pursue additional acquisitions
      and
      exploration of other properties for metals and industrial minerals, development
      of which will require submission of new reclamation plans to the proper state
      and federal authorities.





BUSINESS
      STRATEGY






As
      was noted
      above, the creation of AFC was done for the purpose of creating operating
      revenues for us. We also intend to expand our exploration, and our timber
      production.






To
      date our
      activities have been financed primarily through debt and  the sale of
      equity securities and the issuance of equity for the acquisition of mining
      property. See "Management's Discussion and Analysis - Results of


Operations."






We
      will need
      to obtain additional funding to pursue our business strategy. At the present
      time, we anticipate seeking additional funding through additional private
      placements, joint venture agreements, production financing, and/or
      pre-sale loans.   Our inability to raise additional capital to
      fund operations through the remainder of this year and through the next fiscal
      year would have a detrimental effect on our viability and ability to pursue
      our
      business plan.





7


COMPETITION






CONTRACT
      MINING




A
      review of
      Dun and Bradstreet shows that the main competitors of AFC in the contract mining
      business are: American Mine Services, Inc.; Dynatec Mining Corporation; Tyson;
      J.S. Redpath and Small Mines Development. Each of these companies are larger
      than AFC or part of larger companies which gives them the depth to take on
      larger projects that require large capital investments.






Similarly,
      AFC must compete with other companies that provide contract services related
      to
      underground mining. AFC has had the opportunity to compete outside of this
      area
      on occasion in that it has used its underground mining expertise in different
      ways. Such related use of this expertise has been in such things as rock
      bolting, shotcrete, and grouting for ground support. AFC has provided tunnel
      construction expertise for hydroelectric work. AFC has also acquired
      and completed mine closure projects under the jurisdiction of the Forest Service
      and State and Federal Environmental Agencies.




The
      amount of
      underground contracts for which AFC could bid fluctuates greatly depending
      on
      the economic climate of the industry. However on average the total contracts
      offered are generally between $100 and $120 million per year.
      Over the past year AFC has not pursued any of the larger projects
      which  accounts for 80% to 90% of all projects available, and has only
      looked at smaller projects in the three state area of Idaho,
      Montana  and Washington. In the future the company intends to use some
      of it existing AFC personnel to pursue any activities on its other
      properties.






However,
      we
      believe we are in a unique position due to our manpower and mining knowledge
      and
      experience. AFC has the ability to compete on larger projects because of its
      expertise. However, the issue of whether to compete on larger
      projects depends on our willingness to devote the necessary capital, bonding,
      and other resources to larger  projects when these resources might be
      better used in the exploration of our own properties. The goal of our management at
      this
      time is to show continued growth and profitability in AFC in order to support
      the total corporate structure, and to utilize the talents and resources of
      the
      AFC for our own exploration projects when those resources are
      available.






Up
      until this
      past year we have noticed less activity in the mining industry in the United
      States.  The price of metals and increased costs due to regulations
      imposed on the industry have driven mining costs upward making mining less
      profitable. Consequently, the  ability to generate a sustainable
      revenues source from AFC has been hampered, and management
      has decided to find mineable resources on its own properties to utilize the
      manpower and equipment available to the company.  As the trend in
      metals prices improves, the possibility of more contracting activity should
      also
      improve.





TIMBER






Although
      our
      logging is a very small percentage of our activities, we face large numbers
      of
      competitors in this industry, and our competitors include individuals who may
      own property in northern Idaho and wish to sell their lumber at market prices
      to
      local mills. We are affected by market prices, and as prices fall and competing
      suppliers increase, our revenues from this business may fall significantly.
      Logging activities in northern Idaho are seasonal due to the large amount of
      snow that accumulates during the winter. We do most of our logging activity
      in
      the summer and fall.





8


EXPLORATION






We
      face a
      large number of competitors with respect to our exploration
      activities.  Although we may have some advantage with respect to
      companies smaller than ours, we also face the common disadvantage against larger
      companies with more available capital. Consequently over the past three years
      we
      have limited our exploration activities
      to the clay property (Dragon Mine). However as we complete our exploration
      activities at the Dragon Mine, we will look more actively at other exploration
      targets.  Our one advantage over many other smaller mining companies
      is that we have the ability to actually mine.





GOVERNMENTAL
      REGULATION




CONTRACT
      MINING




We
      are
      subject to a variety of state and federal regulations with respect to this
      aspect of our business. Most states require a contractors' license before
      conducting business in their state. Each state has a different procedure for
      licensing. We estimate the annual cost to maintain our state Contractor’s
      licenses to be approximately $500 per year. We obtain and pay workers
      compensation insurance, unemployment, and state withholding in all states in
      which we work. We handle these functions as a part of our normal clerical
      process.





Several
      states that we operate in
      require a permit to handle explosives, and we maintain such a license under
      the
      U.S. Bureau of Alcohol Tobacco and Firearms (ATF, USC18, (Chapter 40). This
      license must be renewed every
      three years. If we hire new employees that will handle our explosives, we are
      required to submit information to the ATF. Over the past year, the ATF has
      asked
      that we keep in contact with them regarding any projects that require the use
      of
      explosives.






Property
      owners must also obtain permits prior to mining. From the contracting side,
      we
      have always required that the mine owner permit his project with the proper
      regulatory authority prior to beginning work, which relieves us of any cost
      or
      liability.  On our own properties, we will spend approximately $2,000
      per year to keep permits in place.






We
      are
      licensed under the Mine Safety and Health Act of 1997 (MSHA) (License number:
      VL-2). We are required to submit quarterly reports of our activities MSHA and
      to
      conduct annual refresher courses for our employees. The annual cost of these
      functions varies based on the amount of activity.   We estimate
      that compliance with the described state and federal regulations costs us
      approximately $3,000 per year.




TIMBER





Our
      timber
      business is regulated by the Idaho state Department of Lands under the Idaho
      Forestry Act Title 38, Chapter 1. Under this regulation, a logger must apply
      for
      and obtain a Notification of Forest Practices prior to starting a logging
      project. This permit requires the logger to maintain proper logging practices,
      including erosion abatement, and fire prevention. The State of Idaho retains
      $4
      per thousand board feet from all logs hauled to the mill, and once the project
      is completed, along with a State inspection verifying that the project was
      completed according to Idaho Forest Practices Act, the logger applies for a
      release of these funds. Although we contract out our logging, we may be liable,
      as the landowner, for problems created by the logger. However, we take measures
      to ensure that our contracted loggers are reputable and incidents do not occur.
      We do not currently have any direct costs related to this
      regulation.  The process of obtaining access to our ground when it is
      necessary to enter through Forest Service or BLM property can delay timber
      harvesting.  Although the law does not allow either of these agencies
      to restrict access to the private landowner, the permitting process is time
      consuming and reflects a cost to the landowner.  We estimate the cost
      of this process will be about $5,000 per year.






EXPLORATION
      AND
      DEVELOPMENT '




Should
      we
      decide to conduct exploration activities in Idaho, we must notify the Idaho
      State Bureau of Mines as required under Title 47, Chapter 1, the Department
      of
      Lands, and the federal Mine Safety and Health Administration of
      our
      intent. If we produce any ground disturbance, we will then need to notify the
      State Department of Environmental Quality to ensure that we are working within
      their guidelines. However, we do not intend to conduct any exploration in Idaho
      at
      this time.






We
      have
      conducted some exploration activities at the Dragon Mine in Juab County, Utah.
      The Utah Department of Natural Resources sets the guidelines for Exploration,
      and other mineral related activities based on provisions of the Mined Land
      Reclamation Act, Title 40-8, Utah Code Annotated 1953, as amended, and the
      General Rules and Rules of Practice
      and Procedures, R647-1 through R647-5. We have applied for and received the
      proper permit from them.  We also applied for and received authority
      from the Utah Department of Commerce to conduct business as a foreign
      corporation in the state as required by Utah Code, Title
      16-10A-1501.  Compliance with these regulations is expected to cost us
      approximately $1,200 per year.  As we hire additional people for this
      project we have covered them under proper state workman compensation,
      withholding and unemployment laws as required by both Utah and Idaho State
      employment regulations. We carry a Mine Safety and Health Administration (MSHA)
      license (#4202383) for this property and report as required to this agency.
      We
      estimate the cost of compliance to MSHA to be approximately $5,000 per
      year.






EMPLOYEES






As
      of
      December 31, 2005, Atlas Mining and its subsidiaries have fourteen employees.
      As
      additional projects becomes available we will hire needed
      employees.   We have also outsourced some of our logging work to
      a logging contractor who employs approximately six people. In addition, we
      periodically utilize the services of various individuals on a consulting basis.
      In  2005, we hired the services of a geologist, prospectors,
      industrial minerals consultants, and acquisition experts. We have one employment
      agreement with our CEO. None of our employees are covered by a collective
      bargaining agreement, we have never experienced a work stoppage, and we consider
      our labor relations to be excellent.





9





ITEM
      2.  DESCRIPTION OF PROPERTY





PRINCIPAL
      OFFICE






We
      rent
      office space from the McGillvray Environmental in Osburn, Shoshone County,
      Idaho. The address of the property is 630 East Mullan Avenue, Osburn, Idaho
      83849. The property is a two-room office, containing approximately 800 square
      feet, in a business complex in the downtown area of Osburn, Idaho. The rent
      is
      $300 per month and there is no rental agreement.





MINING
      PROPERTIES






We
      have
      assets of real property, mineral leases and options. The following section
      describes our right, title, or claim to our properties and each property's
      location. This section also discusses our present plans for exploration of
      the
      properties, and an estimate of mineralized material located on each property.
      Please refer to our Glossary at the end of this section for definitions of
      technical terms used in our discussion.





SHOSHONE
      COUNTY, IDAHO






Exploration




We
      own
      approximately 900 acres of fee simple property and patented mining claims,
      and
      260 acres of mineral rights and unpatented claims, located in the Coeur d'Alene
      mining district in Shoshone County, Idaho, commonly referred to
      as the
      Silver Valley of North Idaho. Atlas was originally incorporated to pursue mining
      activities on the Atlas mine property near Mullan, Idaho. This property had
      some
      past production of silver, lead, zinc and copper in the early 1900's.
      However, the existence of minerals on this property cannot be determined without
      extensive exploration. Any revenues we may eventually generate may be used
      to
      further explore mines within the Shoshone County area or to acquire and explore
      new properties wholly unrelated to our Shoshone County properties. We have
      no plans for exploration of the Shoshone County mines at this time.




Our
      properties in Shoshone County are divided into five separate tracts. These
      sections are named for the mines located in that specific section. The section
      location and estimated acreage are as follows:





Section
                Of The Coeur D’Alene Mining District Estimated AcresAtlas
                Mine
            540
                acres fee simple and patented,180
                unpatentedSierra
                Trapper Creek
            80
                acres patentedAulbach,
                Section 6 & 7
            100
                acres patentedSierra
                Silver, Woodland Pk & 9 Mi
            60
                acres patented, 80 acres mineral rightsSierra
                Hardscrabble
            20
                acres patentedL&
                N claims
            108
                acres patented






The
      largest
      section is the Atlas Mine. The underground Atlas Mine, idle since the early
      1980's due to exploration budget restraints, is located on the east end of
      the
      Coeur d'Alene Mining District in Shoshone County. The property is
      accessible by interstate freeway and a county maintained road. Geologically,
      the
      property lies just south of the Osburn Fault in the Wallace and St. Regis
      formations. The Mine has over 7,000 feet of tunnels with a rail system and
      a
      2,000-foot internal shaft which can be accessed for future
      exploration.








10
 
  The
        other
        properties in Shoshone County have no accessible workings. All the properties
        are accessible either by state highway, county road or forest service
        roads.  As time and the economic trends merit it we will be looking
        find ways to make these properties more productive or to sell
        them.




The
      Atlas
      property carried a first mortgage to CLS Mortgage, all of which were paid off
      in
      2005.




Timber




We
      estimate
      that our properties in Shoshone County contain approximately 2 million board
      feet of harvestable timber. We contract with independent loggers to harvest
      the
      timber and deliver it to mills. We contract our logging activities to
      experienced loggers in the industry. The current return to Atlas is
      approximately $150 per  thousand board feet. A board foot of lumber is
      one foot by one foot by one inch. We implement reforestation techniques to
      replenish its timber supply.  Much of the remaining timer on Atlas
      lands requires access through U S Forest Service or BLM
      properties.  Permitting for access through these entities is somewhat
      time consuming and we do not know whether we will be able to log very much
      of
      our properties in the near future.




We
      acquired
      our Sierra properties through the acquisition of Sierra Silver Lead Mining
      Company. Through this purchase the Company acquired approximately 329 acres
      of
      mineral rights that include approximately 250 acres of
      surface land and timber. Although there was a small amount of zinc mined on
      the
      Sierra Silver property, there has been no mining activity for over forty years.
      Subsequent to the purchase we sold approximately 100 acres. The majority of
      the
      Sierra property lies south of the Osburn Fault in the Wallace formation, and
      has
      no reserves. The property does have approximately 500,000 board feet of timber,
      which we value at approximately $75,000.




We
      acquired
      our Aulbach claims in March 1999 from Trail Gulch Gold Mining Company. Through
      this purchase, we acquired approximately 100 acres of surface land and mineral
      rights, including timber rights. To date, we have logged
      approximately 650,000 board feet of timber on the property with an approximate
      net value of $105,000.




JUAB
      COUNTY, UTAH






Dragon
      Mine




The
      Dragon
      Mine property, located in Juab County, Utah near the City of Eureka (Tintic
      Mining District) has been principally exploited for halloysite clay, a rare
      and
      high unit value clay mineral. The property consists of 38 patented
      mining claims, approximately 230 acres, located in the following sections:
      T10S,
      R2W, sections 29, 30, 31, and T10S, R3W, Section 36, all relative to the Salt
      Lake Meridian. Since July 10, 2001, Atlas Mining Company had
      leased the property from Conjecture Silver Mines, Inc., whose address is P.O.B.
      14006, Spokane, Washington 99214. Conjecture Mines has since
      been  merged into Chester Mines, Inc. with the same
      address.  We initially paid 400,000  shares of our common
      stock, valued at $100,000, for a one-year lease. Under the terms of
      the  lease agreement, we have the right to renew the lease annually in
      exchange for 100,000 additional shares of our common stock, or we may buy the
      property for $500,000 if we have $1,000,000 in sales from the mine in a 12-month
      period. On August
      18, 2005, we purchased the property from Conjecture Silver Mines and transferred
      ownership to Atlas Mining Company.




Conjecture
      Mines acquired the claims through a Quit Claim deed and share exchange with
      Grand Central Silver Mines, Inc. From 1950 to 1977, the Dragon Mine was owned
      by
      Anaconda and operated by Filtrol Corporation. The property
      has been idle since 1977. Examination of the mine maps, the open pit and
      surviving correspondence, coupled with informal interviews of former employees,
      all lead us to the conclusion that the mining techniques were likely inefficient
      which combined with developments of synthetic catalysts (the halloysite was
      mined for petroleum cracking) led the mine to price itself out of
      business.  In 2004 Chester Mines, Inc acquired Conjectures Silver
      Mines, Inc.  The address remains the same as does the principal
      officer.






Previous
      owners' records indicate that over 1.1 million tons were mined at the property
      from 1950 until it closed. Those records also indicate approximately 300,000
      tons of mineralized material remain on the property. The previous
      owners also conducted some exploration core drilling and some reverse
      circulation drilling, but the records of the results are incomplete. The figures
      in this paragraph depend on the assumption that the old records and maps are accurate.
      Our analysis of the surviving maps and record lead us to believe that their
      estimates of mineralized material are still valid. In 2003 and 2005
      we  conducted small exploration drilling programs, and have been able
      to further validate
      this information. The previous owners' geologists determined the area
      of  influence was no more than 80 feet along strike and 100 feet along
      dip. There were  no chemically quantifiable cutoffs to the mineralized
      material. It appeared that the  most distinguishable factors were
      visual indicators. The specific gravity they used  was a density of 17
      cubic feet per ton.






The
      property
      is located in the arid mountains approximately 2 miles southwest of Eureka,
      Utah
      and can be accessed via state highway and county road.  The only
      evidence of mining prior to our lease was an open pit area and an abandoned
      head
      frame. The Union Pacific Railroad has a spur approximately 2 miles from the
      property. Power is approximately 1.5 miles from the site, and  no
      evidence of water except in the shaft.






In
      2004 and
      2005 we were able to bring the property into a development stage.  We
      built a mill site which includes a lay down and sorting area for product, a
      50X60 building with KDS processing machine. We installed a 650 KW electrical
      generator with service to the mill, office and mine, a water and septic system,
      and compressor.  We have developed the underground mine with over 800
      feet of decline and access tunnels and have exposed the halloysite clay bed
      approximately 100 feet underground.  To facilitate these activities we
      have increased our equipment purchases in 2004 and 2005.






We
      believe
      the halloysite material formed through the alteration of a shale bed lying
      between a limestone bed and igneous rocks. The base of the limestone was
      selectively replaced by iron oxide material with abundant manganese.
      The shale was altered to halloysite. This unit is evident in the open pit.
      Following the alteration event, halloysite was squeezed into northeast-striking
      faults upward through the limestone to the top of the bedrock in
      places. Our geologists see added potential to the northeast along these faults
      and in the replaced beds to the east and northeast. This potential has not
      yet
      been quantified.






Samples
      taken
      from surface and underground exposures of the halloysite material have been
      made
      available to parties interested in conducting suitability
      tests.  Samples have been taken from seven areas within the open pit.
      On the surface, the halloysite material is chalky white, often stained by iron
      leaking downward from the iron cap, but a few inches beneath the surface, the
      halloysite material turns to soft, wet-looking and soapy feeling, often with
      a
      bluish tinge. However,
      this material loses its water content and turns chalky within a few days of
      exposure to air.





11
 
   DESCRIPTION
        OF PROPERTY GLOSSARY





Alteration:
              Changes
                  in chemical or mineralogical composition of a rock generally produced
                  by
                  weathering or hydrothermal solutions.Clay:
              A
                  size term regarding particles, regardless of mineral composition,
                  with a
                  diameter of less than four microns, or a group of hydrous alumino-silicate
                  minerals related to the micas.Development:
              The
                  preparation of an established commercially mineable deposit (reserves)
                  for
                  its extraction which are not in the production stage.Exploration:
              The
                  search for mineral deposits (reserves) which are not in either
                  the
                  development or production stage.Fault:
              A
                  fracture or fracture zone along which there has been displacement
                  of the
                  sides relative to one another parallel to the fracture.Formation:
              The
                  primary unit of formal mapping or description.Grout:
              A
                  form of ground stabilization where in cement is pumped into the
                  rock
                  formation.Halloysite:
              A
                  clay mineral related to kaolin with essentially the same chemical
                  composition, but has crystals which are slender hollow
                  tubes.Mineral:
              A
                  naturally formed chemical element or compound having a definite
                  range in
                  chemical composition and usually a characteristic crystal
                  form.Mining
                  Claim:
              That
                  portion of mineral lands that a miner takes and holds in accordance
                  with
                  mining laws.Open
                  Pit:
              A
                  hole in the ground left by the extraction of material.Reserve:
              That
                  part of an identified resource from which a useable commodity can
                  be
                  economically and legally extracted at the time of
                  determination.Resource:
              A
                  concentration of naturally occurring materials in such form that
                  economic
                  extraction is currently or potentially feasible.Shaft:
              An
                  excavation of limited area compared to its depth.Shotcrete:
              A
                  form of ground stabilization where concrete is sprayed on the rock
                  to give
                  it strength.


12




ITEM
      3. LEGAL PROCEEDINGS





None.





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





None.





PART
      II





ITEM
      5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND
      RELATED STOCKHOLDER MATTERS




Our
      common
      stock is quoted on the National Association of Securities Dealers, Inc.
      Electronic Bulletin Board (the "OTC Bulletin Board"), and is traded under the
      symbol "ALMI". Our common stock began trading on the OTC Bulleting
      Board on July 19, 2002; prior to that date our stock traded on the
      Over-The-Counter Pink Sheets under the symbol "ALMI". These quotations reflect
      inter-dealer prices, without retail mark-up, mark-down or commission and may
      not
      represent actual transactions. The source of this information was found at
      http://moneycentral.msn.com.





2005
                          
                          
                          2004High
                          
                          
                          Low
                          
                          
                          High
                          
                          
                          LowFirst
                              Quarter
                          
                          $
                          1.51
                          
                          
                          $
                          0.38
                          
                          
                          $
                          0.25
                          
                          
                          $
                          0.105Second
                              Quarter
                          
                          $
                          1.32
                          
                          
                          $
                          0.77
                          
                          
                          $
                          0.255
                          
                          
                          $
                          0.15Third
                              Quarter
                          
                          $
                          1.27
                          
                          
                          $
                          0.96
                          
                          
                          $
                          0.33
                          
                          
                          $
                          0.17Fourth
                              Quarter
                          
                          $
                          1.14
                          
                          
                          $
                          .078
                          
                          
                          $
                          0.40
                          
                          
                          $
                          0.245




As
      of March
      28, 2006, there were approximately 1,633 holders of record of our common stock.
      This number does not include an indeterminate number of shareholders whose
      shares are held by brokers in street name. Since we have become a reporting
      company, we have never declared or paid any cash dividend on our common stock.
      We expect to continue to retain all earnings generated by our operations for
      the
      development and growth of our business, and do not anticipate paying any cash
      dividends to our shareholders in the foreseeable future. The payment of future
      dividends on our common stock and the rate of such dividends, if any, will
      be
      determined by our board of directors in light of our earnings, financial
      condition, capital requirements and other factors.




Our
      Board of
      Directors has adopted two equity compensation plans, the Stock Option Plan
      of
      Atlas Mining Company, and the Incentive Stock Option Plan of Atlas Mining mpany.
      Both plans were adopted in 1998, and expire on December 31, 2008. The Stock
      Option Plan allows the Company to grant options to purchase up to 10% of the
      then  outstanding shares of common stock, and the Incentive Stock
      Option Plan allows the Company to grant options to purchase up to a total of
      10%
      of the then outstanding shares of common stock.  The price per share
      for each option granted will be set by the Administrative Committee. As of
      December 31, 2005, one option has been granted under
      the
      Stock Option Plan of Atlas Mining Company to the CEO. Options issued under
      the
      Incentive Stock Option Plan of Atlas Mining Company will have a price per share
      at least equal to the fair market value of the Company's common stock on the
      date of the grant. As of December 31, 2005, no options have been granted under
      the Incentive Stock Option Plan of Atlas Mining Company.





RECENT
      SALES OF UNREGISTERED SECURITIES





On
                  January 27, 2005, the Company issued 110,000 shares of its common
                  stock
                  valued at $27,500 for cash to accredited investors.On
                  February 3, 2005, the Company issued 8,000 shares of its common
                  stock
                  valued at $2,000 for cash to an accredited investor.On
                  February 14, 2005, the Company issued 30,000 shares of its common
                  stock
                  valued at $7,500 for cash to an accredited investor.On
                  February 22, 2005, the Company issued 1,000,000 shares of its common
                  stock
                  valued at $500,000 for cash  to accredited
                  investors.On
                  February 24, 2005, the Company issued 50,000 shares of its common
                  stock
                  valued at $25,000 for services.On
                  July 1, 2005, the Company issued 4,880,090 shares of its common
                  stock
                  valued at $4,430,602.80 for cash to accredited investors.On
                  July 8, 2005, the Company issued 100,000 shares of its common stock
                  valued
                  at $100,000 to Conjecture Mines, Inc for payment its annual lease
                  payment
                  on the Dragon Mine.On
                  August 25, 2005, the Company issued 35,650 shares of its common
                  stock
                  valued at $8,910 for cash to an accredited investor.On
                  August 29, 2005, the Company issued 175,000 shares of its common
                  stock
                  valued at $105,000 for settlement of debt negotiated in January,
                  2005.On
                  September 23, 2005, the Company issued 33,680 shares of its common
                  stock
                  valued at $8,420 for cash to an accredited investor.On
                  September 27, 2005, the Company issued 2,310 shares of its common
                  stock
                  valued at $578 for cash to an accredited investor.On
                  September 30, 2005, the Company issued 46,100 shares of its common
                  stock
                  valued at $11,525 for cash to an accredited investor.On
                  October 3, 2005, the Company issued 40,000 shares of its common
                  stock
                  valued at $40,800 for services.On
                  November 23, 2005, the Company issued 2,000 shares of its common
                  stock
                  valued at $500 for cash to an accredited investor.On
                  December 14, 2005, the Company issued 3,850 shares of its common
                  stock
                  valued at $963 for cash to an accredited investor.All
                  of the above issuances were exempt from registration pursuant to
                  Section
                  4(2) of the Securities Act of 1933 because none of the issuances
                  were a
                  public offering.





ITEM
      6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
      OF OPERATIONS






Our
      discussion and analysis of our financial condition and results of operations
      are
      based upon our financial statements, which have been prepared in accordance
      with
      accounting principles generally accepted in the United States. The
      preparation of these financial statements requires us to make estimates and
      judgments that affect the reported amounts of assets, liabilities, revenues
      and
      expenses. On an on-going basis, we evaluate our estimates based on historical
      experience and various other assumptions that are believed to be reasonable
      under the circumstances, the results of which form 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.






We
      are a
      natural resources company engaged in the acquisition and exploration of our
      resource properties in the states of Idaho, Utah and Canada. We also provide
      contract mining services and specialized civil construction services for mine
      operators, exploration companies and the construction and natural resource
      industries through our trade name “Atlas Fausett Contracting.”




Currently,
      our primary source of revenue is generated by our Atlas Fausett Contracting
      operations. However, we also have our halloysite clay deposit and
      timber.




13




***Contract
      Mining***




In
      the past
      our contract mining normally generates 80% or more of our revenues. This may
      decrease as we are able to increase operations on our owned properties, and
      we
      will adjust our resources accordingly. At this time, we anticipate that our
      contracting will still be a contributing factor to our revenues.




***Property
      Exploration***




We
      are
      currently considered an exploration company. Our efforts in exploration are
      dependent upon the available funds we can raise to pursue our exploration
      efforts.  We have no assurances that our exploration will result in
      proving any commercially viable deposits. We realize that additional steps
      will
      need to be taken to move from an exploration stage to a development or
      productions stage.




The
      majority
      of our exploration has been at the Dragon Mine in Juab County, Utah. We have
      furnished samples of the halloysite clay extracted from this property to
      potential buyers and distributors. The preliminary results of these samples
      have
      been favorable, and we have received purchase orders as a result; and we have
      received non binding letters of intent from potential buyers. We have moved
      into
      the production stage of this property.




***Timber***




We
      will
      continue to harvest timber on our property. Timber harvesting will be dependent
      upon lumber prices and weather.






**FISCAL
      YEAR ENDED DECEMBER 31, 2005 COMPARED TO FISCAL YEAR ENDED DECEMBER
      31,  2004.**




Our
      operations for the period ended December 31, 2005, and the period ended December
      31, 2004 consisted mostly of our contracting work, logging income, and
      development and exploration activities.






**Revenues**






Our
      total
      revenues for the period ending December 31, 2005 were $628,176, compared to
      $1,035,329 for the period ending December 31, 2004, resulting in a 39% decrease
      from the same period the previous fiscal year.  Our contract mining
      revenue for the period ending December 31, 2005 was $628,176 compared to
      $696,264 for the period ended December 31, 2004, or a decrease of
      10%.  Our timber revenue for the period ending December 31, 2005 was
      $0 compared to $89,064, for the same period ended December 31, 2004, and we
      received $0 from halloysite clay sales in 2005 compared to $ 250,000 for the
      same period ended December 31, 2004, making up the remaining decrease in
      revenues.







14




**Gross
      Profit**




Our
        Gross
        profit for the year ended December 31, 2005 was $76,917 compared to $467,784
        for
        the year ended December 31, 2004, resulting in a decrease of 83% from the
        same
        period the previous year.  The main reason for this decrease was the
        lack of timber sales and the sale of halloysite clay in 2005, compared to
        2004.




***General
      and Administrative Expenditures***




Our
        general and administrative
        expenditures for the period ending December 31, 2005 were $3,221,583 compared
        to
        $1,010,781 in 2004, which is a 2.19 times increase from the same period the
        previous fiscal year. The reason for this is attributable to additional costs
        in
        professional fees and warrant expenses recognized in 2005 which had not occurred
        in 2004.






***Capital
      Expenditures***




During
        2005, we purchased the Dragon
        Mine in Juab County Utah for $500,000 and added $207,087 to mining, milling
        and
        related equipment.  During 2004 we purchased approximately 100 acres
        in north Idaho for $60,250, and we constructed a mill site for $100,688 and
        bought mining, milling and related equipment for $363,180.






***Interest
      Payments***




Our
      interest
      payments for the period ending December 31, 2005 were $65,089 compared to
      $56,224 from the same period the previous fiscal year or an increase of
      16%.  In 2005, we liquidated the American National Mortgage debt, our
      major creditor, resulting in a one time interest payment in the
      settlement.




***Exploration
      & Development Expenditures***




Our
      exploration expenses for the period
      ending December 31, 2005 was $760,347 compared to $340,657 for the previous
      fiscal year, which is a 123% increase from the same period the previous fiscal
      year.  Some of these expenses were in Canada, but the majority of
      expenses were incurred at the Dragon Mine, in Juab County, Utah, where we have
      continued our work to develop the property into a production stage.







15




**Net
      Profit (Loss)**




Our
        net losses for the period ending
        December 31, 2005, ($3,788,265), compared to ($946,274) for the same period
        ended December 31, 2004, or a 300% increase over the same period the previous
        fiscal year. The reason for this is attributed to less revenue and more expenses
        in 2005 compared to 2004.






***Liquidity
      And Capital Resources***




To
      date our
      activities have been financed primarily through the sale of equity securities,
      borrowings, and revenues from Atlas Fausett Contracting, logging operations
      and
      the sale of halloysite clay. We intend to continue pursuing contracting work
      and
      to log our timber properties to help pay for our operations.  We also
      intend to sell more halloysite clay.   In 2005 and 2004 the
      contracting work accounted for about 100% and 67% of the total revenues
      respectively. Halloysite clay sales accounted for 24% of the revenue in 2004,
      while there were none in 2005.  In 2005 and 2004 timber sales
      accounted for 0% and 8% of the total revenue, respectively.  We have
      also issued common shares of restricted stock and borrowed from various sources
      to finance our activities. Our current debt structure is explained
      below.




We
        had a note
        payable to William Jacobson, an officer and director, which was payable on
        demand and bearing no interest. The proceeds of this obligation were used
        for  general working capital. The current amount due as of December 31,
        2005 and 2004, was $–0- and  $91,488,
        respectively.  Accounts payable and accrued liabilities due as of
        December 31**,**2005 were $101,532 and are the result of daily
        operations and taxes owed.




We
        had a note payable to Moss Adams,
        LLP, an accounting firm, which matured on August 16, 2002. As of December
        31,
        2005 and 2004 our current balance, including interest was $–0-
        and  $77,370 respectively.  We had notes in the amount
        $582,498 plus interest payable to American National Mortgage, maturing on
        May
        31, 2003, and secured by property in northern Idaho. American National Mortgage
        has filed bankruptcy, and we had negotiated a settlement on this debt and
        paid
        off this obligation in 2005. We also had a note payable to CLS Mortgage Company,
        with a current balance on December 31, 2005 and 2004, of $-0- and $118,920
        respectively.  We have a note payable to a lending company for the
        acquisition of equipment with a $29,888 balance and monthly payments of $688
        at
        7.59% interest and maturing in March 2010.   We
        have a
        note payable to an insurance company with a $19,773 balance due in monthly
        installments of $2,825 and maturing in July 2006.  We have a lease payable
        for the acquisition of equipment with a $39,500 balance and monthly payments
        of
        $4,500 and maturing in July 2006.




Our principal sources of cash flow are from our timber properties, which
      averaged  $-0- per month in fiscal year 2005 and $7,422 per month in
      2004, our contract mining, which averaged $52,348 per month in fiscal year
      2005
      and $58,022 in 2004, and halloysite clay sales which were $-0- in 2005 and
      averaged $20,833 per month in fiscal year 2004   In addition, we
      also rely on our credit facilities and any public or private equity issuances
      we
      may conduct in the future.




Cash
        flow
        from financing activities for the fiscal year ended December 31, 2005 was
        $
        4,178,834 compared to $1,138,553 for the same period in 2004, a difference
        of
        $3,040,281. The main difference was the sale of common stock in
        2005.




The
        Company
        realized a use of funds of ($799,611) from investing activities for the fiscal
        year ended December 31, 2005, compared to ($447,504) for the same period
        in
        2004, a difference of $352,107.  The main difference is attributed to
        the purchase of equipment in 2005 of $ 748,861 compared to $524,119 for the
        same
        period ended December 31, 2004.




Cash
        flow
        from operating activities for the fiscal year ended December 31, 2005, was
        ($
        1,369,929) compared to ($491,228) for the same period in 2004, a difference
        of $
        878,701.  The Company had more operating losses in 2005 because of the
        increase increased operating expenses.




As
        of April 1, 2003, we rent office
        space at 630 E. Mullan Avenue in Osburn, Idaho for $300 per month, on a
        month-to-month basis from the McGillvray Environmental.




If
        we do not create additional debt or
        repay the current debt, we would be obligated to pay an average of $5,627
        per
        month or $67,529 for the next fiscal year.




In
      anticipation of the cash needs for
      the upcoming year, we have completed a sale of restricted common stock in
      2005.




16
 
  If
        we will
        need to obtain additional funding to pursue our business strategy during
        the
        next fiscal year, we anticipate seeking additional funding through additional
        private placements, joint venture agreements, production financing, and/or
        pre-sale loans. Our inability to raise additional capital to fund operations
        through the remainder of this year and through the next fiscal year could
        have a
        detrimental effect on our ability to pursue our business plan, and possibly
        our
        ability to continue as a going concern.




Following
      is summary financial information reflecting our operations for the periods
      indicated.





Year
                            Ended
                          December
                            31,2005
                        
                        
                        2004----
                        
                        
                        
                        ----Net
                            revenues
                        
                        $
                        628,178
                        
                        
                        $
                        1,035,329Cost
                            of revenues
                        
                        $
                        551,258
                        
                        
                        $
                        567,545Gross
                            profit
                        
                        $
                        76,918
                        
                        
                        $
                        467,784Selling,
                            general and administrative
                        
                        $
                        3,106,027
                        
                        
                        $
                        1,010,781Gain
                            (Loss) from operations
                        
                        $
                        (3,789,456
                        )
                        
                        $
                        (883,654
                        )Net
                            gain (loss)
                        
                        $
                        (3,780,318
                        )
                        
                        $
                        (946,274
                        )








FACTORS
      AFFECTING BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION




AN
      INVESTMENT
      IN OUR SECURITIES IS VERY SPECULATIVE AND INVOLVES A HIGH DEGREE
      OF
      RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, ALONG WITH
      THE
      OTHER MATTERS REFERRED TO IN THIS ANNUAL REPORT, BEFORE YOU DECIDE TO BUY
      OUR
      SECURITIES. IF YOU DECIDE TO BUY OUR SECURITIES, YOU SHOULD BE ABLE TO AFFORD
      A
      COMPLETE LOSS OF YOUR INVESTMENT.




WE
      HAVE
      EXPERIENCED ANNUAL OPERATING LOSSES SINCE SEPTEMBER 1997 AND OUR
      AUDITORS HAVE INDICATED UNCERTAINTY CONCERNING OUR ABILITY TO CONTINUE OPERATIONS
      AS A GOING CONCERN.




We
        have
        experienced annual operating losses since our reactivation in September 1997.
        As
        of December 31, 2005, we had an accumulated deficit of $(9,649,505). We may
        need
        to raise additional capital to continue as a going concern.
        Our auditors have indicated uncertainty concerning our ability
        to   continue as a going concern. We can not assure you that that
        our proposed projects and services, if fully developed, can be successfully
        marketed or that we
        will
        ever achieve significant revenues or profitable margins.




WE
      ARE AN
      EXPLORATION STAGE COMPANY, AND THERE IS NO ASSURANCE THAT A COMMERCIALLY
      VIABLE DEPOSIT OR "RESERVE" EXISTS IN ANY OF OUR PROPERTIES.




We
      are an
      exploration stage company and cannot assure you that a commercially viable
      deposit, or "reserve," exists in any of our exploration properties. Therefore,
      determination of the existence of a reserve will depend on
      appropriate and sufficient exploration work and the evaluation of legal,
      economic, and environmental factors. If we fail to find a commercially viable
      deposit on any of our properties, or if we fail to bring one of our properties
      into a profitable operating
      mode,  our financial condition and results of operations will be
      materially adversely affected.




WE
      HAVE
      RECORDED MINIMAL INCOME FOR OUR EXPLORATION/DEVELOPMENT ACTIVITIES, AND MAY
      DO
      SO IN THE FUTURE.




To
      date, our
      exploration properties have produced minimal income from
      activities.  Additionally, although our timber harvesting and
      contracting activities have generated revenue, we as a company have not yet
      generated any profit. We may not be able to develop these activities to
      commercially viable enterprises or to obtain additional properties that are
      commercially viable. The commodities extracted from our properties may never
      generate significant revenues or achieve profitability, which will adversely
      impact our financial condition.





17






WE
      MAY NEED
      ADDITIONAL FINANCING TO FULLY IMPLEMENT OUR BUSINESS PLAN, AND IF WE FAIL TO
      OBTAIN ADDITIONAL FUNDING WE MAY NOT BE ABLE TO CONTINUE OUR
      OPERATIONS.




Since
      September 1997, we have focused our efforts on developing our business in
      underground mine contracting primarily to companies in the mining and civil
      industries, and other resource development and property acquisitions.
      We may need to raise additional capital to implement fully our business plan
      and
      establish adequate operations. We cannot assure you that we will be able to
      recover additional public or private financing, including debt or
      equity
      financing, as needed, or, if available, on terms favorable to
      us.  Furthermore, debt financing, if available, will require payment
      of interest and may involve restrictive covenants that could impose limitations
      on our operating flexibility.
      Our failure to successfully obtain additional future funding may jeopardize
      our
      ability to continue our business and operations.






WE
      REQUIRE
      SUBSTANTIAL FUNDS MERELY TO DETERMINE WHETHER COMMERCIAL MINERAL DEPOSITS EXIST
      ON OUR PROPERTIES.




Any
      potential
      development and production of our exploration properties depends upon the
      results of exploration programs and/or feasibility studies and the
      recommendations of duly qualified engineers and geologists. Such programs require
      substantial additional funds. Any decision to further expand our operations
      on
      these exploration properties will involve consideration and evaluation of
      several significant factors including, but not limited to:





Costs
                of bringing each property into production, including exploration
                work,
                preparation of production feasibility studies, and construction of
                production facilities;Availability
                  and costs of financing;Ongoing
                  costs of production;Market
                  prices for the minerals to be produced;Environmental
                  compliance regulations and restraints; andPolitical
                  climate and/or governmental regulation and
                  control.
  WE
        DO NOT
        CARRY INSURANCE ON OUR TIMBER ASSETS AND A SIGNIFICANT LOSS OF STOCK DUE
        TO
        FIRE, DISEASE OR OTHER CATASTROPHE MAY MATERIALLY REDUCE THE VALUE OF OUR
        TIMBER
        ASSETS.




We
      do not
      carry insurance for fire or disease on its timber reserves due to the
      prohibitive cost and our limited financial resources. As a result, any
      catastrophic event may significantly reduce the value of our reserves, and consequently
      reduce our financial position. The timber industry is affected by  lumber
      price movements and adjustments, downturns in the housing industry, and interest
      rate movements. These factors can reduce the price of timber and lumber on
      the
      open market. A significant decrease in the price of timber may reduce income
      and
      therefore reduce the value of our stock.





18




OUR
      SUCCESS
      DEPENDS A LARGE PART ON OUR ABILITY TO ATTRACT AND RETAIN OR HIRE KEY PERSONNEL,
      WHICH WE MAY OR MAY NOT BE ABLE TO DO.




To
      operate
      successfully and manage our potential future growth, we must attract and retain
      highly qualified key engineering, managerial and financial personnel. We face
      intense competition for qualified personnel in these areas, and
      we
      cannot assure you that we will be able to attract and retain qualified
      personnel. If we lose our key personnel, which includes our president, William
      T. Jacobson, or are unable to hire and retain additional qualified personnel
      in the
      future, our business, financial condition and operating results could be
      adversely affected. We do not have any employment agreements with any of our
      officers, directors or employees.




WE
      MAY NOT BE
      ABLE TO IMPLEMENT OR MAINTAIN FINANCIAL AND MANAGEMENT SYSTEMS WHICH COULD
      HAVE
      A MATERIAL ADVERSE AFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS
      OF
      OPERATIONS.




If
      we fail to
      implement and maintain financial and management information systems, controls
      and procedures, add internal capacity, facilities and third-party sourcing
      arrangements or attract, train, retain, motivate and manage effectively our
      employees, it could have a material adverse effect on our business, financial
      condition and results of operations.




THE
      VALUE OF
      TIMBER ASSETS MAY FLUCTUATE DUE TO CHANGING TIMBER PRICES, WHICH MAY ADVERSELY
      IMPACT OUR REVENUES AND OUR FINANCIAL POSITION.




Although
      we
      attempt to harvest timber only when the lumber prices merit it, timber is
      subject to fluctuation in price. To help offset a change in prices, we try
      to
      obtain a price agreement with the lumber mills prior to going into
      any
      logging program. We do not currently have any agreements with mills. Although
      we
      attempt to offset this by obtaining agreements with our purchasing mills prior
      to beginning our logging, we may not be able to account entirely for price
      variations, which may result in lower revenues than anticipated.




OUR
      MARKET
      VALUE MAY DECREASE IN THE FUTURE.




Our
      stock is
      listed on the over-the-counter market. There has been significant fluctuation
      in
      our market price, and the market price of our common stock may decrease at
      any
      time as a result of poor operating results, sales of our
      shares, and other factors.





19




THERE
      IS
      COMPREHENSIVE FEDERAL, STATE AND LOCAL REGULATION OF THE EXPLORATION
      INDUSTRY THAT COULD HAVE A NEGATIVE IMPACT OUR MINING OPERATIONS.




Exploration
      operations are subject to federal, state and local laws relating to the
      protection of the environment, including laws regulating removal of natural
      resources from the ground and the discharge of materials into the environment.
      Exploration operations are also subject to federal, state and local laws and
      regulations which seek to maintain health and safety standards by regulating
      the
      design and use of exploration methods and equipment. We require various
      permits from government bodies for exploration operations to be conducted.
      We
      cannot assure you that such permits will be received. No assurance can be given
      that environmental standards imposed by federal, state or local authorities
      will not be changed or that any such changes would not have material adverse
      effects on our activities. Moreover, compliance with such laws may cause
      substantial delays or require capital outlays in excess of those anticipated,
      thus causing an adverse effect on us. Additionally, we may be subject to
      liability for pollution or other environmental damages that we may elect not
      to
      insure against due to prohibitive premium costs and other reasons. Management
      is
      aware of the necessity of obtaining proper permits prior to conducting any
      exploration activity. However, at this point we are not close enough to the
      production stage to start the permitting process.




APPLICABILITY
      OF "PENNY STOCK RULES" TO BROKER-DEALER SALES OF OUR COMMON STOCK COULD HAVE
      A
      NEGATIVE EFFECT ON THE LIQUIDITY AND MARKET PRICE OF OUR COMMON
      STOCK.




Our
      common
      stock is listed on the Over-the-Counter Bulletin Board. It is not quoted on
      any
      exchange or on NASDAQ, and no other exemptions currently apply. Therefore,
      the
      SEC "penny stock" rules govern the trading in our common stock. These rules
      require, among other things, that any broker engaging in a transaction in our
      securities provide its customers with the following:





a
                risk disclosure document,disclosure
                  of market quotations, if any,disclosure
                  of the compensation of the broker and itssalespersons
                  in the transaction, andmonthly
                  account statements showing the market values of oursecurities
                  held in the customer's
                  accounts.






20






The
      broker
      must provide the bid and offer quotations and compensation information before
      effecting the transaction. This information must be contained on the customer's
      confirmation. Generally, brokers subject to the "penny stock" rules when
      effecting transactions in our securities may be less willing to do so. This
      may
      make it more difficult for investors to dispose of our common stock. In
      addition, the broker prepares the information provided to the broker's customer.
      Because we do not prepare the information, we cannot assure you that such
      information is accurate, complete or current.





ITEM
      7.FINANCIAL
      STATEMENTS




The
      financial
      statements, together with the independent auditors' report  thereon of
      Chisholm, Bierwolf & Nilson, LLC, appears beginning on page F-1 of this
      report.





ITEM
      8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
      ON ACCOUNTING AND FINANCIAL DISCLOSURE




We
      have
      experienced no recent change in or disagreement with our accountant. Our present
      auditor, Chisholm, Bierwolf & Nilson, LLC, 533 West 2600 South, Suite 25,
      Bountiful, Utah 84010, has been the Company's auditor since 1999. Management
      of
      the Company intends to keep Chisholm, Bierwolf & Nilson, LLC as its auditor
      for the foreseeable future.





ITEM
      8ACONTROLS AND PROCEDURES






As
      of
      December 31, 2005, an evaluation was performed under the supervision and with
      the participation of the Company's management, including the Chief Executive
      Officer, who is our principal executive officer and principal financial officer,
      of the effectiveness of the design and operation of our disclosure controls
      and
      procedures. Based on that evaluation, our management, including the Chief
      Executive Officer, concluded that our disclosure controls and procedures were
      effective as of that date. There have been no significant changes in our
      internal controls or in other factors that could


significantly
      affect internal controls subsequent to that date.





ITEM
      8BOTHER
      INFORMATION




We
      entered into, on
      October 1, 2004, an employment agreement with our CEO, William T Jacobson,
      commencing on October 1, 2004 and ending September 30, 2009.  At the
      end of the initial term of employment, the agreement shall automatically be
      renewed for additional one-year periods, unless either party provides at least
      120 days written notice of its decision not to renew the
      agreement.  Mr. Jacobson shall be paid compensation as
      follows:




(i)
              
              for
                  the first year, a salary at the annual rate of $120,000;(ii)
              
              for
                  the second year, a salary at the annual rate of $150,000;(iii)
              
              for
                  the third year, a salary at the annual rate of $200,000;(iv)
              
              for
                  the fourth year,, a salary at the annual rate of $225,000;(v)
              
              for
                  the fifth year, a salary at the annual rate of $250,000.







(i)
            
            for
              the first year, a salary at the annual rate of $120,000;(ii)
            
            for
              the second year, a salary at the annual rate of $150,000;(iii)
            
            for
              the third year, a salary at the annual rate of $200,000;(iv)
            
            for
              the fourth year, a salary at the annual rate of $225,000;(v)
            
            for
              the fifth year, a salary at the annual rate of
              $250,000;





Mr.
                Jacobson is entitled to a bonus program based on hallmarks as
                follows:




(a.)Obtain
                  adequate funding package for Company.(b.)Achieve
                  profitability through the Company’s activities.(c.)Increase
                  market cap of Company stock to the benefit of
                  shareholders.




21




payments
      will be no more than 40% of Mr. Jacobson base salary for each
      hallmark.  Payments may be in the form of cash or common stock as
      mutually agreed by Mr. Jacobson and the Company.




In
      addition to the
      foregoing salary, the Company granted Mr. Jacobson an option to purchase up
      to
      3,500,000 shares of the Company’s common stock at an option exercise price of
      $.18 per share during the term of employment as follows:




(a)
              1,500,000
                  shares shall vest and become exercisable commencing January 1,
                  2005;(b)
              500,000
                  shares shall vest and become exercisable commencing on January
                  1,
                  2006;(c)
              500,000
                  shares shall vest and become exercisable commencing on January
                  1,
                  2007;(d)
              500,000
                  shares shall vest and become exercisable commencing on January
                  1,
                  2008;(e)
              500,000
                  shares shall vest and become exercisable commencing on January
                  1,
                  2009.Any
                  options, which are not exercised during the Term of Employment,
                  shall
                  terminate and be of no further force and effect at the end of the
                  Term of
                  Employment.






In
      the event of the
      Mr. Jacobson’s involuntary termination of employment for any reason, other than
      for just cause due to theft or fraud, Mr. Jacobson shall be entitled to
      immediate severance compensation equal to an amount equal to Mr. Jacobson’s base
      salary for the remaining period of the term of employment. Additionally,Mr.
      Jacobson will be eligible to continue to participate in the employee health
      and
      dental benefit plans (to the extent permissible therein) for a period of one
      and
      one half years from the date of such involuntary termination of
      employment.  Cost of such participation for Mr. Jacobson and eligible
      dependents shall be born by the Company.




During
      the Term of
      Employment, if Executive shall, for a period of more than three (3) consecutive
      months or for periods aggregating more than twelve (12) weeks in any fifty-two
      consecutive weeks, be unable to perform the services provided for herein, as
      a
      result of illness or incapacity or a physical, mental, or other disability
      of
      any nature, the Company may, upon not less than thirty (30) days notice,
      terminate the Executive’s employment hereunder.  The Executive shall
      be considered unable to perform the services provided for herein if he is unable
      to attend to the normal duties required of him.  In such event, the
      Company shall pay to the Executive, or to his legal representatives, his base
      compensation for a period of twelve (12) months from the date of
      termination.




The
      Company
      has agreed that it will not consolidate or merge into or with another
      corporation or entity, or transfer all or substantially all of its business
      and/or assets to another entity, directly or indirectly, unless such other
      entity (hereinafter referred to as the “Successor”) shall assume Mr. Jacobson’s
      employment agreement and the obligations of the Company thereunder; and upon
      such assumption, the Executive and the Successor shall become obligated to
      perform the terms and conditions thereof.  However, if during the
      first 180 days following any such consolidation or merger, the Executive
      determines that he does not desire to remain employed by the Successor or the
      Successor determines that the services of the Executive are no longer required,
      such consolidation or merger shall be deemed an involuntary termination of
      the
      Executive’s employment, and the Executive shall be paid an amount equal to his
      annual base salary at the time of the consolidation or merger.  This
      payment will be made to the Executive in a single lump sum at the time of the
      termination.





PART
      III





ITEM
      9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
      CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
      ACT


IDENTIFICATION
      OF DIRECTORS AND EXECUTIVE OFFICERS





The
      following table sets forth
      certain information regarding our directors and executive officers.





Name
                    
                    Age
                    
                    PositionWilliam
                        T. Jacobson
                    
                    
                    59
                    
                    Chairman
                        of the Board, Chief Executive OfficerJack
                        Harvey
                    
                    
                    84
                    
                    Vice
                        President, DirectorKurt
                        Hoffman
                    
                    
                    40
                    
                    Treasurer,
                        DirectorRonald
                        Price
                    
                    
                    57
                    
                    DirectorMarqueta
                        Martinez
                    
                    
                    56
                    
                    Secretary





There
      are no family relationships among any of the directors or officers of the
      Company.





22





BUSINESS
      EXPERIENCE





WILLIAM
      T.
      JACOBSON, CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
      OFFICER. Mr.
      Jacobson has been Chairman of the Board and Chief Executive Officer of Atlas
      Mining Company since August 1997. From 1994 to 1997, Mr. Jacobson served as
      Secretary of Atlas and Treasurer of Fausett International, Inc. He has had
      a twenty
      year career in the mining industry and spent fifteen years in the banking
      industry. Prior to joining the Company, Mr. Jacobson was a president and
      director of the Silver Trend Mining Company, located in Kellogg, Idaho. Mr.
      Jacobson holds a business degree from the University of Idaho. Mr. Jacobson
      is
      also a board of director for  Transnational Automotive Group, Inc.
      (symbol: tamg).





JOHN
      "JACK" HARVEY, VICE PRESIDENT, DIRECTOR. Mr. Harvey has been Vice President
      of
      Atlas Mining Company for 20 years. He received his mining engineering degree
      from Montana Tech. He worked in Butte, Montana with Anaconda and Arco until
      he
      retired about 17 years ago, after a 41 year career. Mr. Harvey


does
      not
      hold a board seat in any other public company.





KURT
      HOFFMAN, TREASURER, DIRECTOR. Mr. Hoffman is the treasurer of Atlas Mining
      Company and has been the president of Trend Mining Company since 1998 which
      is a
      publicly traded company traded on the over the counter bulletin board under
      the
      symbol "TRDM." Mr. Hoffman also owns and has operated Hoffman Mining and Land
      Services since 1995. Other than TRDM, Mr. Hoffman does not hold a board seat
      in
      any other public company.





RONALD
      R PRICE, DIRECTOR. Mr. Price was appointed as a director of Atlas Mining Company
      in 2005. He has recently retired after a 20-year career at The US Naval Research
      Laboratory where he used halloysite clay in entrapment and time release
      processes.  He does not hold a board seat in any other public
      company.





MARQUETA
      MARTINEZ. SECRETARY. Ms. Martinez is the secretary for the corporation, and
      works as a full time employee for the Company. She has worked in the mining
      industry since 1991. Ms. Martinez does not hold a board seat in any other public
      company. Ms. Martinez is also a past treasurer for the Shoshone County Habitat
      for Humanity.




All
      directors
      hold office until the next annual meeting of shareholders and the election
      and
      qualification of their successors. Officers are elected annually by, and serve
      at the discretion of, the Board of Directors. Members of the Board of Directors
      are not compensated for serving as directors of Atlas Mining, however expenses
      may be reimbursed.





None
      of the foregoing Directors or Executive Officers has, during the past five
      years:





(a)
      Had any bankruptcy petition filed by or against any business of which such
      person was a general partner or executive officer either at the time of the
      bankruptcy or within two years prior to that time;





(b)
      Been convicted in a criminal proceeding or subject to a pending criminal
      proceeding;





(c)
      Been subject to any order, judgment, or decree, not subsequently reversed,
      suspended or vacated, of any court of competent jurisdiction, permanently or
      temporarily enjoining, barring, suspending or otherwise limiting his involvement
      in any type of business, securities or banking activities; and





(d)
      Been found by a court of competent jurisdiction (in a civil action), the
      Commission or the Commodity Futures Trading Commission to have violated a
      federal or state securities or commodities law, and the judgment has not been
      reversed, suspended, or vacated.





23


No
      individual on our Board of Directors possesses all of the attributes of an
      audit
      committee financial expert and no one on our Board of Directors is deemed to
      be
      an audit committee financial expert. In forming our Board of Directors,
      we sought out individuals who would be able to guide our operations based on
      their business experience, both past and present, or their
      education.  Our business model is not complex and our accounting
      issues are straightforward. Responsibility
      for our operations is centralized within management. We rely on the assistance
      of others, such as our accountant, to help us with the preparation of our
      financial information. We recognize that having a person who possesses
      all of the attributes of an audit committee financial expert would be a valuable
      addition to our Board of Directors, however, we are not, at this time, able
      to
      compensate such a person therefore, we may find it difficult to


attract
      such a candidate.





Atlas
      Mining Company has adopted a Code of Ethical Conduct.





COMPLIANCE
      WITH SECTION 16(A) OF EXCHANGE ACT





Section
      16(a) of the Securities Exchange Act requires our directors, executive officers
      and persons who own more than 10% of our Common Stock to file reports of
      ownership and changes in ownership of our common stock with the Securities
      and Exchange Commission. Directors, executive officers and persons who own
      more
      than 10% of our common stock are required by Securities and Exchange Commission
      regulations to furnish to us copies of all Section 16(a) forms
      they file.





To
      our knowledge, based solely upon review of the copies of such reports received
      or written representations from the reporting persons, we believe that during
      our 2005 fiscal year our directors, executive officers and persons who own
      more
      than 10% of our common stock complied with all Section 16(a) filing requirements
      with the exception of the following: Form 3s for William T. Jacobson, John
      Harvey, Kurt Hoffman, Ronald Price and Marqueta Martinez were filed in March
      2003 rather than in July 2002.





ITEM
      10. EXECUTIVE COMPENSATION





During
      the 2005 fiscal year, except for William T Jacobson, no officer received
      compensation in excess of
      $100,000 per year. The following table sets forth information as to the
      compensation paid or accrued to William T. Jacobson, our Chairman and Chief
      Executive Officer, for the three years ended December 31, 2005, December 31, 2004
      and
      December 31, 2003:




Compensation
                                                    
                                                    
                                                    Awards
                                                    
                                                    
                                                    PayoutsName
                                                        and
                                                      Principal
                                                        Position
                                                    Year
                                                    
                                                    Salary($)
                                                    
                                                    
                                                    Bonus
                                                        ($)
                                                    
                                                    
                                                    Other
                                                        Annual Compensation($)
                                                    
                                                    
                                                    Restricted
                                                        Stock Awards ($)
                                                    
                                                    
                                                    Securities
                                                        Underlying Options/(SARS)
                                                    
                                                    
                                                    LTIP
                                                        Payout ($) (1)
                                                    
                                                    
                                                    All
                                                        Other CompensationWilliam
                                                        Jacobson
                                                    2005
                                                    
                                                    $
                                                    120,000
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -President,
                                                    2004
                                                    
                                                    $
                                                    78,000
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -CEO,
                                                      CFO
                                                    2003
                                                    
                                                    $
                                                    78,000
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    -
  (1)
        Mr.
        Jacobson owns 1,643,660 shares of restricted stock worth approximately
        $2,301,124.






24


EMPLOYMENT
      AGREEMENTS




We
      have an
      employment agreement with our CEO, William T Jacobson, commencing on October
      1,
      2004 and ending September 30, 2009.  At the end of the initial term of
      employment, the agreement shall automatically be renewed for additional one-year
      periods, unless either party provides at least 120 days written notice of its
      decision not to renew the agreement.  , Mr. Jacobson shall be paid
      compensation as follows:




(ii)
            for
                the first year, a salary at the anuual rate of
                $120,000; (ii)
            for
              the second year, a salary at the annual rate of
              $150,000;


(iii)
            for
                the third year, a salary at the annual rate of
                $200,000; (iv)
            for
              the fourth year, a salary at the annual rate of
              $225,000;


(v)
            for
                the fifth year,a salary
                at the annual rate of
                $250,000.


Mr.
        Jacobsonis entitled to a bonus
        program based on hallmarksas follows:




(a.)
              Obtain
                  adequate funding package for
                  Company.
 (b.)
              Achieve
                  profitability through the Company’s
                  activities.
 (c.)
              Increase
                  market cap of Company stock to the benefit of
                  shareholders.




Bonus
        payments will be no more than 40% of Mr. Jacobson base salary for each
        hallmark.  Payments may be in the form of cash or common stock as
        mutually agreed by Mr. Jacobson and the Company.
  In
        addition
        to the foregoing salary, the Company granted Mr. Jacobson an option to purchase
        up to 3,500,000 shares of the Company’s common stock at an option exercise price
        of $.18 per share during the term of employment as follows:




(a)
              1,500,000
                  shares shall vest and become exercisable commencing January 1,
                  2005;(b)
              500,000
                  shares shall vest and become exercisable commencing on January
                  1,
                  2006;(c)
              500,000
                  shares shall vest and become exercisable commencing on January
                  1,
                  2007;(d)
              500,000
                  shares shall vest and become exercisable commencing on January
                  1,
                  2008;(e)
              500,000
                  shares shall vest and become exercisable commencing on January
                  1,
                  2009.
  In
        the
        event of the Mr. Jacobson’s involuntary termination of employment for any
        reason, other than for just cause due to theft or fraud, Mr. Jacobson shall
        be
        entitled to immediate severance compensation equal to an amount equal to
        Mr.
        Jacobson’s base salary for the remaining period of the term of employment.
        Additionally,Mr. Jacobson will be eligible to continue to participate in
        the
        employee health and dental benefit plans (to the extent permissible therein)
        for
        a period of one and one half years from the date of such involuntary termination
        of employment.  Cost of such participation for Mr. Jacobson and
        eligible dependents shall be born by the Company.
  During
        the Term of Employment, if Executive shall,
        for a period of more than three (3) consecutive months or for periods
        aggregating more than twelve (12) weeks in any fifty-two consecutive weeks,
        be
        unable to perform the services provided for herein, as a result of illness
        or
        incapacity or a physical, mental, or other disability of any nature, the
        Company
        may, upon not less than thirty (30) days notice, terminate the Executive’s
        employment hereunder.  The Executive shall be considered unable to
        perform the services provided for herein if he is unable to attend to the
        normal
        duties required of him.  In such event, the Company shall pay to the
        Executive, or to his legal representatives, his base compensation for a period
        of twelve (12) months from the date of termination.
  The
        Company has agreed that it will not consolidate
        or merge into or with another corporation or entity, or transfer all or
        substantially all of its business and/or assets to another entity, directly
        or
        indirectly, unless such other entity (hereinafter referred to as the
“Successor”) shall assume Mr. Jacobson’s employment agreement and the
        obligations of the Company thereunder; and upon such assumption, the Executive
        and the Successor shall become obligated to perform the terms and conditions
        thereof.  However, if during the first 180 days following any such
        consolidation or merger, the Executive determines that he does not desire
        to
        remain employed by the Successor or the Successor determines that the services
        of the Executive are no longer required, such consolidation or merger shall
        be
        deemed an involuntary termination of the Executive’s employment, and the
        Executive shall be paid an amount equal to his annual base salary at the
        time of
        the consolidation or merger.  This payment will be made to the
        Executive in a single lump sum at the time of the
        termination.




25


ITEM
      11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT





The
      following table sets forth, as of March 28 2006, information regarding the
      beneficial ownership of our common stock with respect to each of our executive
      officers, each of our directors, each person known by us to own beneficially
      more than 5% of the common stock, and all of our directors and executive
      officers as a group. The term "executive officer" is defined as the Chief
      Executive Officer, Secretary, Treasurer and the Vice-President. Each individual
      or entity named has sole investment and voting power with respect to shares
      of
      common stock indicated as beneficially owned by them, subject to community
      property laws, where applicable, except where otherwise noted. The percentage
      of
      common stock beneficially owned is based on 48,925,687 shares of common stock
      outstanding as of March 28, 2006.




Name
                                  and Address (1)
                              
                              Number
                                  of Shares of Common Stock Beneficially Owned (2)
                              
                              
                              Percentage
                                  of Common Stock Beneficially OwnedWilliam
                                  T. Jacobson (3)(4)
                              
                              
                              1,643,660
                              
                              
                              
                              3.3
                              %John
                                  Harvey (3)(4)
                              
                              
                              60,767
                              
                              
                              
                              *Kurt
                                  Hoffman (3)(4)
                              
                              
                              22,500
                              
                              
                              
                              *Ronald
                                  R Price  (4)
                              
                              
                              10,000
                              
                              
                              
                              *Marqueta
                                  Martinez (3)
                              
                              
                              47,728
                              
                              
                              
                              *All
                                  Officers and Directors as a Group (5 persons)
                              
                              
                              1,784,655
                              
                              
                              
                              3.6%





*        Less
      than 1%.


(1)      Unless
      otherwise indicated, the address of the persons named in this column
      is
      c/o Atlas Mining Company, 630 East Mullan Avenue, Osburn, Idaho
      83849.


(2)      Included
      in this calculation are shares deemed beneficially owned by virtue
      of
      the individual's right to acquire them within 60 days of the date
      of
      this report that would be required  to be reported pursuant
      to Rule
      13d-3 of the Securities Exchange Act of 1934.


(3)      Executive
      Officer.


(4)      Director.










ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS





We
      engage in a number of transactions with interested parties. We make every effort
      to ensure that these transactions are conducted as arm length transactions.
      However, at this time we do not have a formal conflicts of interest
      policy.





William
      Jacobson has loaned Atlas Mining sums of money over the past several years.
      In
      January 2003, Mr. Jacobson accepted 1,000,000 shares of our common stock, valued
      at $0.10 per share, for a $100,000 reduction in the note balance. In 2005 the
      balance of $34,659 was paid off.





Further
      discussions of these transactions are described in "Management's Discussion
      and
      Analysis of Plan of Operation - Liquidity and Capital Resources."








26








ITEM
      13.EXHIBITS





(a)      Exhibits




Exhibit
                        Number
                      
                      Description
                          of Exhibit3.1
                      
                      Articles
                          of Incorporation, as amended.
                      (1)3.2
                      
                      Bylaws,
                          as amended.
                      (1)10.1
                      
                      Atlas
                          Mining Company Common Stock Subscription Agreement.
                      (1)10.2
                      
                      Dragon
                          Mine Lease Purchase Agreement.(1)10.3
                      
                      Article
                          of Merger of Sierra Silver-Lead Mining Company and Atlas
                          Mining
                          Company.
                      (1)10.4
                      
                      Stock
                          Option Plan of Atlas Mining Company.
                      (1)10.5
                      
                      Incentive
                          Stock Option Plan of Atlas Mining Company.
                      (1)10.6
                      
                      Investment
                          Marketing Agreement.
                      (1)10.7
                      
                      Moss
                          Adams, LLP Promissory Note.
                      (1)10.8
                      
                      CLS
                          Mortgage Company Promissory Note.
                      (1)10.9
                      
                      Attorney-Client
                          Fee Agreement.
                      (2)10.10
                      
                      Professional
                          Adjusters Inc. Appraisal and Clyde James Resume.
                      (2)10.11
                      
                      Employment
                          Agreement—William Jacobson20.1
                      
                      Code
                          of Ethical Conduct adopted December 15, 200421.1
                      
                      Subsidiaries
                          of the Registrant.
                      (1)23.1
                      
                      Independent
                          Auditors Consent.31.1
                      
                      Certification
                          pursuant to Rule 13a-14 of the Securities Exchange Act,
                          as adopted
                          pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
                          of the Chief
                          Executive Officer and Principal Financial Officer32.1
                      
                      Certification
                          pursuant to 18 U.S.C. Section 1350,  as  adopted
                          pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, of
                          the Chief Executive Officer and Principal Financial
                          Officer99.1
                      
                      Location
                        map, Dragon Mine
                      (3)(1)
                      
                      Incorporated
                          by reference to the similarly described exhibit included
                          in the
                          Registrant's Amendment No. 4 to its SB-2, Commission File
                          No. 333-72830,
                          filed with the Commission on June 11, 2002(2)
                      
                      Incorporated
                          by reference to the similarly described exhibit included
                          in the
                          Registrant's Amendment No. 5 to its SB-2, Commission File
                          No. 333-72830,
                          filed with the Commission on July 1, 2002.(3)
                      
                      Incorporated
                        by reference.





ITEM
      14.PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit
      Fees





The
      aggregate fees billed by the Company's auditors for professional services
      rendered in connection with the audit of the Company's annual consolidated
      financial statements for fiscal 2005 and 2004 and reviews of the consolidated
      financial statements included in the Company's Forms 10-QSB were $12,096.71for 2004, and $34,685.05
      in 2005.





Audit-Related
      Fees





For
      fiscal 2005 and 2004, the Company's auditors did not bill any fees for assurance
      and related services that are reasonably related to the performance of the
      audit
      or review of the Company's financial statements and are not reported under
      "Audit Fees" above.




Tax
      Fees





No
      fees
      were billed by the Company's auditors for professional services for tax
      compliance, tax advice, and tax planning for fiscal 2005 and 2004,
      respectively.





All
      Other
      Fees





No
      fees
      were billed by the Company's auditors for all other non-audit services rendered
      to the Company, such as attending meetings and other miscellaneous financial
      consulting, in fiscal 2005 and 2004.





Audit
      Committee





The
      audit
      committee meets prior to filing of any Form 10-QSB or 10-KSB to approve those
      filings. In addition, the committee meets to discuss audit plans and anticipated
      fees for audit and tax work prior to the commencement of that work.
      Approximately 100% of all fees paid to our independent auditors for fiscal
      2005
      are pre-approved by the audit committee.








27








SIGNATURES





In
      accordance
      with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized on this 23rd day of April 2007.





ATLAS
                    MINING COMPANYBy:
                /s/
                    William T. JacobsonWilliam
                    T. JacobsonChairman
                    of the Board and Chief Executive Officer






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.




Signature
                              Title
                              Date/s/
                                  William T. Jacobson
                              Chairman
                                  of the Board and Chief Executive Officer
                              April
                                  23, 2007William
                                  T. Jacobson/s/
                                  John Harvey
                              Vice-President,
                                  Director
                              April
                                  23, 2007John
                                  Harvey/s/
                                  Kurt Hoffman
                              Treasurer,
                                  Director
                              April
                                  23, 2007Kurt
                                  Hoffman/s/
                                  Ronald R Price
                              Director
                              April
                                  23, 2007Ronald
                                  R Price/s/
                                  Marqueta Martinez
                              Secretary
                              April
                                  23, 2007Marqueta
                                  Martinez







28




**Atlas
      Mining Company and Subsidiary**


Consolidated
      Financial Statements


December
      31, 2005 and 2004






F-1




**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors and Stockholders
 Atlas
        Mining Company
 
 We
        have
        audited the accompanying consolidated balance sheets of Atlas Mining Company
        as
        of December 31, 2005 and 2004 and the related consolidated statements of
        operations, stockholders' equity and cash flows for the years then ended.
        These
        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 the standards of the PCAOB (United
        States).  Those standards require that we plan and perform the audits
        to obtain reasonable assurance about whether the consolidated financial
        statements are free of material misstatement.  The Company is not
        required to have, nor were we engaged to perform, an audit of its internal
        control over financial reporting. Our audit included consideration of internal
        control over financial reporting as a
        basis  for  designing   audit   procedures   that  are   appropriate  in  the
        circumstances,  but  not  for  the  purpose  of  expressing  an  opinion  on
        the effectiveness of
        the  Company's  internal  control  over  financial  reporting.
        Accordingly, we express no such opinion.  The Company has determined
        that it is not required to have, nor were we engaged to perform, an audit
        of its
        internal control over financial reporting.  An audit includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the consolidated financial statements.  An audit also includes
        assessing the accounting principles used and significant estimates made by
        management, as well as evaluating the overall consolidated financial statement
        presentation.  We believe that our audits provide a reasonable basis
        for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects,  the consolidated  financial
        position of Atlas Mining  Company  as
        of  December  31,  2005  and  2004  and
        the  results  of its operations and cash  flows
        for the years  then  ended
        in  conformity  with U.S. generally accepted accounting
        principles.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern.  The Company has suffered recurring
        losses from operations which raises substantial doubt about its ability to
        continue as a going concern.  Management's plans in regard to these
        matters are described in Note 2. The financial statements do not include
        any
        adjustments that might result from the outcome of this uncertainty.
 
 As
        discussed in Note 11 to the consolidated financial statements, management
        discovered errors in the reporting of the Company's accounting for
        available-for-sale securities, valuation of stock warrants, capital leases
        and
        their classification of fixed assets at December 31,
        2005.  Accordingly, the consolidated financial statements as of and
        for the year ended December 31, 2005 have been restated to correct the
        errors.
 
 
 
 Chisholm,
        Bierwolf & Nilson, LLC
 Bountiful,
        UT
 January
        26, 2006 except for Note 1e, g, h, k, 3, 5, 6 and 8 dated April 17,
        2007
 F-2




**Atlas
                            Mining Company and Subsidiary**Consolidated
                            Balance Sheets**ASSETS**December
                            31,2005
                        
                        
                        2004***(Restated)***Current
                            AssetsCash
                        
                        
                        $
                        2,215,929
                        
                        
                        $
                        206,635Accounts
                            receivable (net of allowance of $0)
                        
                        
                        40,173
                        
                        
                        
                        273,014Investments
                            - available for sale
                        
                        
                        3,754
                        
                        
                        
                        19,538Advances
                        
                        
                        
                        750
                        
                        
                        
                        -Mining
                            supplies
                        
                        
                        
                        9,000
                        
                        
                        
                        9,000Deposits
                            and prepaids
                        
                        
                        
                        120,103
                        
                        
                        
                        65,738Total
                            Current Assets
                        
                        
                        
                        2,389,709
                        
                        
                        
                        573,925Property
                            and EquipmentLand
                            and tunnels
                        
                        
                        
                        1,005,159
                        
                        
                        
                        405,410Buildings
                            and equipment
                        
                        
                        
                        188,192
                        
                        
                        
                        178,368Mining
                            equipment
                        
                        
                        
                        283,999
                        
                        
                        
                        104,201Milling
                            equipment
                        
                        
                        
                        247,714
                        
                        
                        
                        242,669Laboratory
                            equipment
                        
                        
                        
                        5,740
                        
                        
                        
                        -Office
                            equipment
                        
                        
                        
                        1,300
                        
                        
                        
                        1,300Vehicles
                        
                        
                        
                        111,259
                        
                        
                        
                        70,305Less:  Accumulated
                            depreciation
                        
                        
                        (229,313
                        )
                        
                        
                        (152,507
                        )Total
                            Property and Equipment
                        
                        
                        1,614,050
                        
                        
                        
                        849,746Other
                            AssetsLong-term
                            Note Receivable
                        
                        
                        
                        50,000
                        
                        
                        
                        -Total
                            Other Assets
                        
                        
                        
                        50,000
                        
                        
                        
                        -Total
                            Assets
                        
                        
                        $
                        4,053,759
                        
                        
                        $
                        1,423,671






F-3


**Atlas
                              Mining Company and Subsidiary**Consolidated
                              Balance Sheets**LIABILITIES
                              AND STOCKHOLDERS' EQUITY**December
                              31,2005
                          
                          
                          2004***(Restated)***Current
                              LiabilitiesAccounts
                              payable and accrued liabilities
                          
                          $
                          101,532
                          
                          
                          $
                          304,925Current
                              portion of notes payable
                          
                          
                          12,473
                          
                          
                          
                          1,031,672Current
                              portion of leases payable
                          
                          
                          26,000
                          
                          
                          
                          -Total
                              Current Liabilities
                          
                          
                          140,005
                          
                          
                          
                          1,336,597Long-Term
                              LiabilitiesNotes
                              payable
                          
                          
                          49,661
                          
                          
                          
                          970,239Leases
                              payable
                          
                          
                          26,000
                          
                          
                          
                          -Notes
                              payable - related party
                          
                          
                          -
                          
                          
                          
                          91,488Less:
                              current portion of long-term debt
                          
                          
                          (38,473
                          )
                          
                          
                          (1,031,672
                          )Total
                              Long-Term Liabilities
                          
                          
                          37,188
                          
                          
                          
                          30,055Minority
                              Interest
                          
                          
                          52,797
                          
                          
                          
                          52,649Commitments
                              and Contingencies
                          
                          
                          -
                          
                          
                          
                          -Stockholders'
                              Equity (Deficit)Preferred
                              stock, $1.00 par value, 10,000,000 shares authorized,noncumulative,
                              nonvoting, nonconvertible, none issued or outstanding
                          
                          
                          -
                          
                          
                          
                          -Common
                              stock, no par value, 60,000,000 shares authorized,48,852,892
                              and 39,892,422 shares issued and outstanding, respectively
                          
                          
                          13,596,492
                          
                          
                          
                          5,875,436Accumulated
                              Deficit
                          
                          
                          (9,649,505
                          )
                          
                          
                          (5,861,240
                          )Accumulated
                              other comprehensive income (loss)
                          
                          
                          (123,218
                          )
                          
                          
                          174Prepaid
                              expenses
                          
                          
                          -
                          
                          
                          
                          (10,000
                          )Total
                              Stockholders' Equity (Deficit)
                          
                          
                          3,823,769
                          
                          
                          
                          4,370Total
                              Liabilities and Stockholders' Equity
                          
                          $
                          4,053,759
                          
                          
                          $
                          1,423,671
    F-4
  **Atlas
                                Mining Company and Subsidiary**Consolidated
                                Statements of OperationsFor
                                the Year EndedDecember
                                31,2005
                            
                            
                            2004***(Restated)***Revenues
                                - Contract Mining
                            
                            $
                            628,176
                            
                            
                            $
                            696,264Revenues
                                - Mining Production
                            
                            
                            -
                            
                            
                            
                            250,000Revenues
                                - Timber
                            
                            
                            -
                            
                            
                            
                            89,064Total
                                Revenues
                            
                            
                            628,176
                            
                            
                            $
                            1,035,328Cost
                                of Sales - Contract Mining
                            
                            
                            441,617
                            
                            
                            $
                            532,324Cost
                                of Sales - Mining Production
                            
                            
                            98,946
                            
                            
                            
                            33,925Cost
                                of Sales - Timber
                            
                            
                            10,696
                            
                            
                            
                            1,295Total
                                Cost of Sales
                            
                            
                            551,259
                            
                            
                            
                            567,544Gross
                                Profit (Loss)
                            
                            
                            76,917
                            
                            
                            
                            467,784Operating
                                ExpensesExploration
                                & development costs
                            
                            
                            760,347
                            
                            
                            
                            340,657General
                                & administrative
                            
                            
                            3,221,583
                            
                            
                            
                            1,010,781Total
                                Operating Expenses
                            
                            
                            3,981,930
                            
                            
                            
                            1,351,438Net
                                Operating Income (Loss)
                            
                            
                            (3,905,013
                            )
                            
                            
                            (883,654
                            )Other
                                Income(Expense)Interest
                                income
                            
                            
                            26,131
                            
                            
                            
                            36Interest
                                expense
                            
                            
                            (65,089
                            )
                            
                            
                            (56,224
                            )Miscellaneous
                                income
                            
                            
                            146
                            
                            
                            
                            750Minority
                                interest
                            
                            
                            (145
                            )
                            
                            
                            3Gain
                                (loss) on sale of assets
                            
                            
                            (3,393
                            )
                            
                            
                            (10,049
                            )Gain
                                (loss) on settlement of debt
                            
                            
                            159,098
                            
                            
                            
                            2,864Total
                                Other Income(Expense)
                            
                            
                            116,748
                            
                            
                            
                            (62,620
                            )Income
                                (Loss) Before Income Taxes
                            
                            
                            (3,788,265
                            )
                            
                            
                            (946,274
                            )Provision
                                (Benefit) for Income Taxes
                            
                            
                            -
                            
                            
                            
                            -Net
                                Income (Loss)
                            
                            $
                            (3,788,265
                            )
                            
                            $
                            (946,274
                            )Net
                                Income (Loss) Per Share (Basic and Diluted)
                            
                            $
                            (0.08
                            )
                            
                            $
                            (0.03
                            )Weighted
                                Average Shares Outstanding
                            
                            
                            45,222,704
                            
                            
                            
                            37,268,310
    F-5
  **Atlas
                                                        Mining Company and Subsidiary**Consolidated
                                                        Statements of Stockholders'
                                                        EquityFor
                                                        the Period January 1, 2004
                                                        through December 31, 2005AccumulatedOtherPreferred
                                                        Stock
                                                    
                                                    
                                                    Common
                                                        Stock
                                                    
                                                    
                                                    Accumulated
                                                    
                                                    
                                                    Comprehensive
                                                    
                                                    
                                                    Prepaid
                                                    
                                                    
                                                    SubscriptionShares
                                                    
                                                    Amount
                                                    
                                                    
                                                    Shares
                                                    
                                                    
                                                    Amount
                                                    
                                                    
                                                    Deficit
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    Income
                                                    
                                                    
                                                    Expenses
                                                    
                                                    
                                                    ReceivableBalance,
                                                        December 31, 2003
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    34,725,151
                                                    
                                                    
                                                    $
                                                    4,863,756
                                                    
                                                    
                                                    $
                                                    (4,914,966
                                                    )
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    (10,843
                                                    )
                                                    
                                                    $
                                                    (5,000
                                                    )
                                                    
                                                    $
                                                    (524,700
                                                    )1/22/04
                                                        -Shares
                                                        issued for services at $.10
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    50,000
                                                    
                                                    
                                                    
                                                    5,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    #
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -2/12/04
                                                        -Shares
                                                        issued for services at $.10
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    500,000
                                                    
                                                    
                                                    
                                                    50,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -2/13/04
                                                        -Shares
                                                        issued for services at $.10
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    250,000
                                                    
                                                    
                                                    
                                                    25,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -2/20/04
                                                        -Shares
                                                        issued for services at $.10
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    500,000
                                                    
                                                    
                                                    
                                                    50,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -2/24/04
                                                        -Shares
                                                        issued for services at $.10
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    150,000
                                                    
                                                    
                                                    
                                                    15,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -3/5/04
                                                        -Shares
                                                        issued for cash at $.14
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    1,071
                                                    
                                                    
                                                    
                                                    150
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -3/6/04
                                                        -Shares
                                                        issued for services at $.15
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    500,000
                                                    
                                                    
                                                    
                                                    75,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -3/19/04
                                                        -Shares
                                                        issued for services at $.15
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    150,000
                                                    
                                                    
                                                    
                                                    22,500
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -4/19/04
                                                        -Shares
                                                        issued for services at $.20
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    195,000
                                                    
                                                    
                                                    
                                                    39,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -5/17/04
                                                        -Shares
                                                        issued for services at $.20
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    200
                                                    
                                                    
                                                    
                                                    40
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -7/08/04
                                                        -Shares
                                                        issued for services at $.20
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    100,000
                                                    
                                                    
                                                    
                                                    20,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -7/15/04
                                                        -Shares
                                                        issued for Dragon Mine lease
                                                        at $.20
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    100,000
                                                    
                                                    
                                                    
                                                    20,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (20,000.00
                                                    )
                                                    
                                                    
                                                    -7/15/04
                                                        -Shares
                                                        issued for services at $.20
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    10,000
                                                    
                                                    
                                                    
                                                    2,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -8/10/04
                                                        -Shares
                                                        issued for services at $.20
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    50,000
                                                    
                                                    
                                                    
                                                    10,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -8/10/04
                                                        -Shares
                                                        issued for services at $.20
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    250,000
                                                    
                                                    
                                                    
                                                    50,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -8/10/04
                                                        -Shares
                                                        issued for services at $.20
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    200,000
                                                    
                                                    
                                                    
                                                    40,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -10/13/04
                                                        -Shares
                                                        issued for services at $.30
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    150,000
                                                    
                                                    
                                                    
                                                    45,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -10/15/04
                                                        -Shares
                                                        issued for services at $.30
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    1,000
                                                    
                                                    
                                                    
                                                    300
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -10/26/04
                                                        -Shares
                                                        issued for services at $
                                                        .29
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    10,000
                                                    
                                                    
                                                    
                                                    2,900
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -10/26/04
                                                        -Shares
                                                        issued for services at $.29
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    90,000
                                                    
                                                    
                                                    
                                                    26,100
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -11/8/04
                                                        -Shares
                                                        issued for services at $.27
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    200,000
                                                    
                                                    
                                                    
                                                    54,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -11/30/04
                                                        -Shares
                                                        issued for services at $.25
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    30,000
                                                    
                                                    
                                                    
                                                    7,500
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -12/7/04
                                                        -Shares
                                                        issued for cash at $.25
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    400,000
                                                    
                                                    
                                                    
                                                    100,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -12/8/04
                                                        -Shares
                                                        issued for services at $.30
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    5,000
                                                    
                                                    
                                                    
                                                    1,500
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -12/8/04
                                                        -Shares
                                                        issued for cash at $.25
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    200,000
                                                    
                                                    
                                                    
                                                    50,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -12/9/04
                                                        -Shares
                                                        issued for serices at $.31
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    250,000
                                                    
                                                    
                                                    
                                                    77,500
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -12/9/04
                                                        -Shares
                                                        issued for cash at $.25
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    120,000
                                                    
                                                    
                                                    
                                                    30,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -12/10/04
                                                        -Shares
                                                        issued for cash at $.25
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    180,000
                                                    
                                                    
                                                    
                                                    45,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -12/16/04
                                                        -Shares
                                                        issued for cash at $.25
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    420,000
                                                    
                                                    
                                                    
                                                    105,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -12/27/04
                                                        -Shares
                                                        issued for serices at $.25
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    20,000
                                                    
                                                    
                                                    
                                                    5,000
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -12/27/04
                                                        -Shares
                                                        issued for cash at $.25
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    85,000
                                                    
                                                    
                                                    
                                                    21,250
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -12/31/2004
                                                        - Warrants issued for brokerage
                                                        fee
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    16,940
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Cash
                                                      received for subscriptions
                                                      receivable
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    524,700Amortization
                                                        of prepaid expenses
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    15,000
                                                    
                                                    
                                                    
                                                    -Net
                                                        change in unrealized gains
                                                        (losses) on available for  sale
                                                        securities
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    11,017.00
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Net
                                                        loss for the year ended December
                                                        31, 2004
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (946,274
                                                    )
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Balance,
                                                        December 31, 2004
                                                    
                                                    
                                                    -
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    
                                                    39,892,422
                                                    
                                                    
                                                    $
                                                    5,875,436
                                                    
                                                    
                                                    $
                                                    (5,861,240
                                                    )
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    174
                                                    
                                                    
                                                    $
                                                    (10,000
                                                    )
                                                    
                                                    $
                                                    -
    F-6
  **Atlas
                                                                Mining Company and
                                                                Subsidiary**Consolidated
                                                                Statements of Stockholders'
                                                                EquityFor
                                                                the Period January
                                                                1, 2004 through December
                                                                31, 2005
                                                                (continued)AccumulatedOtherPreferred
                                                                Stock
                                                            
                                                            
                                                            Common
                                                                Stock
                                                            
                                                            
                                                            Accumulated
                                                            
                                                            
                                                            Comprehensive
                                                            
                                                            
                                                            Prepaid
                                                            
                                                            
                                                            SubscriptionShares
                                                            
                                                            Amount
                                                            
                                                            
                                                            Shares
                                                            
                                                            
                                                            Amount
                                                            
                                                            
                                                            Deficit
                                                            
                                                            
                                                            Income
                                                            
                                                            
                                                            Expenses
                                                            
                                                            
                                                            ReceivableBalance,
                                                                January 1, 2005
                                                            
                                                            
                                                            -
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            
                                                            39,892,422
                                                            
                                                            
                                                            $
                                                            5,875,436
                                                            
                                                            
                                                            $
                                                            (5,861,240
                                                            )
                                                            
                                                            $
                                                            174
                                                            
                                                            
                                                            $
                                                            (10,000
                                                            )
                                                            
                                                            $
                                                            -1/3/05-Shares
                                                                issued for services
                                                                at $0.40
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            100,000
                                                            
                                                            
                                                            
                                                            40,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -1/4/05-Shares
                                                                issued for services
                                                                at $0.40
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            400,000
                                                            
                                                            
                                                            
                                                            160,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -1/12/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.25
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            100,000
                                                            
                                                            
                                                            
                                                            25,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -1/21/05
                                                                -Shares
                                                                issued for services
                                                                at $0.50
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            10,000
                                                            
                                                            
                                                            
                                                            5,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -1/24/05-Shares
                                                                issued for services
                                                                at $0.50
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            350,000
                                                            
                                                            
                                                            
                                                            175,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -1/27/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.25
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            110,000
                                                            
                                                            
                                                            
                                                            27,500
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -1/28/05
                                                                -Warrants
                                                                issued valued at
                                                                $0.664
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            390,489
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            -2/2/05
                                                                -Shares
                                                                issued for services
                                                                at $0.65
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            7,170
                                                            
                                                            
                                                            
                                                            4,661
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -2/3/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.25
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            8,000
                                                            
                                                            
                                                            
                                                            2,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -2/14/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.25
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            30,000
                                                            
                                                            
                                                            
                                                            7,500
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -2/16/05
                                                                -Shares
                                                                issued for services
                                                                at $0.80
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            7,200
                                                            
                                                            
                                                            
                                                            5,760
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -2/22/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.50
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            1,000,000
                                                            
                                                            
                                                            
                                                            500,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -4/1/05
                                                                -Shares
                                                                issued for services
                                                                at $0.91
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            465,000
                                                            
                                                            
                                                            
                                                            423,150
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -4/11/05
                                                                -Shares
                                                                issued for services
                                                                at $1.01
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            22,420
                                                            
                                                            
                                                            
                                                            22,644
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -4/14/05
                                                                -Shares
                                                                issued for services
                                                                at $0.92
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            30,000
                                                            
                                                            
                                                            
                                                            27,600
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -4/15/05
                                                                -Shares
                                                                issued for services
                                                                at $0.95
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            200,000
                                                            
                                                            
                                                            
                                                            190,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -4/19/05
                                                                -Shares
                                                                issued for services
                                                                at $0.95
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            100,000
                                                            
                                                            
                                                            
                                                            95,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -5/4/05
                                                                -Shares
                                                                issued for services
                                                                at $1.14
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            62,000
                                                            
                                                            
                                                            
                                                            70,680
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -5/25/05
                                                                -Shares
                                                                issued for services
                                                                at $1.10
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            250,000
                                                            
                                                            
                                                            
                                                            275,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -6/29/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.908
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            4,880,090
                                                            
                                                            
                                                            
                                                            4,431,122
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -7/7/05
                                                                -Shares
                                                                issued for services
                                                                at $1.05
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            50,000
                                                            
                                                            
                                                            
                                                            52,500
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -7/8/05
                                                                -Shares
                                                                issued for Dragon
                                                                Mine lease at $1.00
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            100,000
                                                            
                                                            
                                                            
                                                            100,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -8/24/05
                                                                -Shares
                                                                issued for services
                                                                at $0.40
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (50,000
                                                            )
                                                            
                                                            
                                                            (20,000
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -8/25/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.25
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            35,650
                                                            
                                                            
                                                            
                                                            8,913
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -8/29/05
                                                                -Shares
                                                                issued for settlement
                                                                of debt at $0.60
                                                              negotiated
                                                                in January, 2005
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            175,000
                                                            
                                                            
                                                            
                                                            105,000
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -9/23/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.25
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            33,680
                                                            
                                                            
                                                            
                                                            8,420
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -9/27/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.25
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            2,310
                                                            
                                                            
                                                            
                                                            578
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -9/30/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.25
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            46,100
                                                            
                                                            
                                                            
                                                            11,525
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -10/3/05
                                                                -Shares
                                                                issued for cash at
                                                                $1.02
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            40,000
                                                            
                                                            
                                                            
                                                            40,800
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -10/7/05
                                                                -Shares
                                                                issued for services
                                                                at $0.98
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            140,000
                                                            
                                                            
                                                            
                                                            137,200
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -11/2/05
                                                                -Shares
                                                                issued for services
                                                                at $1.07
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            250,000
                                                            
                                                            
                                                            
                                                            267,500
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -11/23/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.25
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            2,000
                                                            
                                                            
                                                            
                                                            500
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -12/14/05
                                                                -Shares
                                                                issued for cash at
                                                                $0.25
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            3,850
                                                            
                                                            
                                                            
                                                            963
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Valuation
                                                                of Stock Warrants
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            129,053
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            -Amortization
                                                                of prepaid expenses
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            10,000
                                                            
                                                            
                                                            
                                                            -Unrealized
                                                                loss on available
                                                                for sale securities
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (123,392
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Net
                                                                loss for the year
                                                                ended December 31,
                                                                2005
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (3,788,265
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Balance,
                                                                December 31, 2005
***(restated)***
                                                            
                                                            
                                                            -
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            
                                                            48,852,892
                                                            
                                                            
                                                            $
                                                            13,596,492
                                                            
                                                            
                                                            $
                                                            (9,649,505
                                                            )
                                                            
                                                            $
                                                            (123,218
                                                            )
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            -
    F-7
 **Atlas
                                Mining Company and Subsidiary**Consolidated
                                Statements of Cash FlowsFor
                                the Year EndedDecember
                                31,2005
                            
                            
                            2004***(Restated)***Cash
                                Flows from Operating Activities:Net
                                Income (Loss)
                            
                            $
                            (3,788,265
                            )
                            
                            $
                            (946,274
                            )Adjustments
                                to Reconcile Net Loss to Net CashProvided
                                by Operations:Depreciation
                            
                            
                            80,914
                            
                            
                            
                            30,593(Gain)
                                loss on sale of investments available for sale
                            
                            
                            -
                            
                            
                            
                            10,049Stock
                                issued for services
                            
                            
                            1,931,695
                            
                            
                            
                            620,590Valuation
                                of stock warrants
                            
                            
                            519,542
                            
                            
                            
                            16,940Amortization
                                of prepaid expenses (equity)
                            
                            
                            10,000
                            
                            
                            
                            15,000Minority
                                Interest
                            
                            
                            148
                            
                            
                            
                            (3
                            )Loss
                                on sale of assets
                            
                            
                            3,393
                            
                            
                            
                            -(Gain)
                                loss on settlement of debt
                            
                            
                            (159,098
                            )
                            
                            
                            -Change
                                in Operating Assets and Liabilities:(Increase)
                                Decrease in:Accounts
                                receivable
                            
                            
                            232,841
                            
                            
                            
                            (240,761
                            )Deposits
                                and prepaids
                            
                            
                            (54,365
                            )
                            
                            
                            (65,738
                            )Accounts
                                payable and accrued expenses
                            
                            
                            (146,735
                            )
                            
                            
                            68,376Net
                                Cash Provided(Used) by Operating Activities
                            
                            
                            (1,369,929
                            )
                            
                            
                            (491,228
                            )Cash
                                Flows from Investing Activities:Purchases
                                of equipment
                            
                            
                            (748,861
                            )
                            
                            
                            (524,119
                            )Proceeds
                                from advances (payments)
                            
                            
                            (750
                            )
                            
                            
                            320,693Proceeds
                                from sale of investments available for sale
                            
                            
                            -
                            
                            
                            
                            1,922Proceeds
                                (payments) on notes receivable
                            
                            
                            (50,000
                            )
                            
                            
                            -Payments
                                for advances
                            
                            
                            -
                            
                            
                            
                            (246,000
                            )Net
                                Cash Provided (Used) by Investing Activities
                            
                            
                            (799,611
                            )
                            
                            
                            (447,504
                            )Cash
                                Flows from Financing Activities:Proceeds
                                from notes payable
                            
                            
                            210,979
                            
                            
                            
                            328,489Proceeds
                                from leases payable
                            
                            
                            39,500
                            
                            
                            
                            -Proceeds
                                (payments) on leases payable
                            
                            
                            (13,500
                            )
                            
                            
                            -Payments
                                for notes payable
                            
                            
                            (1,122,964
                            )
                            
                            
                            (67,386
                            )Payments
                                for line of credit
                            
                            
                            -
                            
                            
                            
                            (1,400
                            )Proceeds
                                from issuance of common stock
                            
                            
                            5,064,819
                            
                            
                            
                            354,150Proceeds
                                from collection of subscriptions receivable
                            
                            
                            -
                            
                            
                            
                            524,700Net
                                Cash Provided (Used) by Financing Activities
                            
                            
                            4,178,834
                            
                            
                            
                            1,138,553Increase
                                (Decrease) in Cash
                            
                            
                            2,009,294
                            
                            
                            
                            199,821Cash
                                and Cash Equivalents at Beginning of Period
                            
                            
                            206,635
                            
                            
                            
                            6,814Cash
                                and Cash Equivalents at End of Period
                            
                            $
                            2,215,929
                            
                            
                            $
                            206,635
    F-8
 **Atlas
                                          Mining Company and Subsidiary**Consolidated
                                          Statements of Cash Flows (Continued)For
                                          the Year EndedDecember
                                          31,2005
                                      
                                      
                                      2004***(Restated)***Cash
                                          Paid For:Interest
                                      
                                      $
                                      65,089
                                      
                                      
                                      $
                                      23,210Income
                                          Taxes
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -Supplemental
                                          Disclosure of Non-Cash Investing and FinancingActivities:Stock
                                          issued for services
                                      
                                      $
                                      1,931,695
                                      
                                      
                                      $
                                      620,590Valuation
                                          for stock warrants
                                      
                                      $
                                      519,542
                                      
                                      
                                      $
                                      20,000Stock
                                          issued for notes payable
                                      
                                      $
                                      105,000
                                      
                                      
                                      $
                                      -Stock
                                          issued for Dragon Mine
                                      
                                      $
                                      100,000
                                      
                                      
                                      $
                                      -


F-9


**Atlas
          Mining Company and Subsidiary**
 Notes
          to
          the Consolidated Financial Statements
 December
          31, 2005 and 2004
 NOTE
        1
        -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 a.  Organization
 
 Atlas
        Mining Company, (“the Company”) was incorporated in the state of Idaho on March
        4, 1924.  The Company was formed for the purpose of exploring and
        developing the Atlas mine, a consolidation of several patented mining claims
        located in Coeur d’Alene Mining District near Mullan, Idaho.  The
        Company eventually became inactive as a result of low silver
        prices.
 
 In
        September 1997, the Company became active and purchased substantially all
        of the
        operating equipment and mining supplies from Fausett International, Inc.,
        a
        related party.  The purchase price totaled $1,416,099, which consisted
        of $50,000 cash, 875,000 shares of the Company’s common stock valued at $350,000
        and a note payable of $1,016,094.  After the purchase, the Company
        commenced contracting operations through the trade name, Atlas Fausett
        Contracting.  Through Atlas Fausett Contracting, the Company provides
        shaft sinking, underground mine development and contracting primarily to
        companies in the mining and civil industries.  The Company also
        pursues property acquisitions and resource development projects.  In
        2002, the Company settled out the debt to Fausett International and returned
        the
        majority of the unusable equipment; however the Company continues to pursue
        contracting activities.
 
 In
        1997
        and 1998, the Company was to exchange 844,560 shares of its common stock
        for all
        of the outstanding shares of Sierra Silver Lead Mines, Inc. (Sierra), an
        Idaho
        corporation.  As of December 31, 2005, 384,465 shares of the Company’s
        common stock had not been exchanged.  The Company was unable to locate
        some of the shareholders of Sierra.  Therefore, the Company agreed to
        transfer the stock to an Atlas Mining Company Trust account in trust for
        the
        unlocated shareholders of Sierra Silver. The acquisition of Sierra has been
        recorded as a purchase.  The purchase price totaled
        $276,157.  All of the assets and liabilities of Sierra were
        transferred to the Company and Sierra ceased to exist.
 
 In
        April
        1999, the Company exchanged 741,816 shares of its common stock and paid cash
        of
        $15,770 for all of the outstanding shares of Olympic Silver Resources, Inc.
        (Olympic), a Nevada corporation.  Olympic holds the rights to the San
        Acacio Mine in Zacatecas, Mexico.  The purchase price totaled
        $228,566.  The acquisition has been recorded as a purchase and all of
        the assets and liabilities were transferred to the Company.  In 2001,
        the Company did not renew the rights to the property due to increased carrying
        costs.
 
 
 
 
 
 F-10
 
 
 **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
                  1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                  (continued)
 
 In
        1998
        and 1999, the Company exchanged 71,238 shares of its common stock for 53%
        of the
        outstanding shares of Park Copper and Gold Mining, Ltd. (Park Copper), an
        Idaho
        corporation.  The purchase price totaled $72,825.  The
        acquisition was recorded as a purchase.
 
 In
        July
        2001, Atlas Mining Company began leasing the Dragon Mine from Conjecture
        Silver
        Mines, Inc. in Spokane, Washington. Conjecture Mines has since been merged
        into
        Chester Mines, Inc. at the same location.  We initially paid 400,000
        shares of our common stock, valued at $100,000, for a one-year lease. Under
        the
        terms of the lease agreement, we had the right to renew the lease annually
        in
        exchange for 100,000 additional shares of our common stock, or the option
        to
        purchase the property for $500,000 if we had $1,000,000 in sales from the
        mine
        in a 12-month period.  We exercised the option to purchase the Dragon
        Mine on August 18, 2005 for $500,000. The property consists of 38 patented
        mining claims on approximately 230 acres.
 
 b.  Revenue
        Recognition
 
 Revenue
        is recognized when earned. The Company's revenue recognition policies are
        in
        compliance the Securities and Exchange Commission Staff Accounting Bulletin
        No.
        101 and 104. The Company sells contract mining services, mined halloysite
        clay
        and raw timber.
  Revenue
        for contract mining services is recognized once a contract with a fixed and
        determinable fee has been established the services have been rendered and
        collection is reasonably assured.
  Revenue
        for mined halloysite clay is recognized upon shipment and customer acceptance
        once a contract with a fixed and determinable fee has been established and
        collection is received or the resulting receivable is deemed
        probable.  Certain of the Company’s sales contracts call for a fixed
        price per ton plus a percentage of future sales revenue on the resale of
        product.  Revenues are recorded at the time of sale based upon the
        fixed price per ton upon shipment.  Revenues from the future resale of
        the product are recognized upon receipt as amounts are not
        determinable.
  Revenue
        for harvested raw timber is recognized once it has been shipped to the mill,
        a
        contract with a fixed and determinable fee has been established and collection
        is received or the resulting receivable is deemed probable.
  
 
 F-11
 
 **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
        1 -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 c.  Bad
        Debts
 
 Bad
        debts
        on receivables are charged to expense in the year the receivable is determined
        uncollectible, therefore, no allowance for doubtful accounts is included
        in the
        financial statements.  Amounts determined as uncollectible are not
        significant to the overall presentation of the financial
        statements.
 
 d.  Basis
        of Consolidation
 
 The
        Company’s investments representing a 50% or greater interest are
        consolidated.  The consolidated financial statements presented reflect the
        accounts of Atlas Mining Company and Park Copper & Gold.  At December
        31, 2005 and 2004 the Company held a 53% and 53% ownership interest in Park
        Copper & Gold, respectively.  The Company recorded no liability for the
        47% and 47% non-controlling interest as Park Copper & Gold had a
        stockholders deficit at the time of merger.  Further, the net loss for Park
        Copper & Gold for the years ended December 31, 2005 and 2004 applicable to
        the 47% and 47% non-controlling interest were not allocated to the
        non-controlling interest as there is no obligation of the non-controlling
        interest to share in such losses.  All significant inter-company
        transactions between the parent and subsidiary have been eliminated in
        consolidation.
 
 e.  Earnings
        (Loss) Per Share ***(restated)***
 
 The
        computation of earnings (loss) per share of common stock is based on the
        weighted average number of shares outstanding at the date of the financial
        statements.  The computation of diluted earnings per common share is
        based on the weighted average number of shares outstanding during the year
        plus
        the common stock equivalents which would arise from the exercise of stock
        options and warrants outstanding using the treasury stock method and the
        average
        market price per share during the year.  Common stock equivalents,
        consisting of 3,500,000 in options and 1,434,000 in warrants were considered
        but
        were not included in the computation of loss per share at December 31, 2005
        and
        2004 because they would have been anti-dilutive.
   F-12
 
  **Atlas
          Mining Company and Subsidiary**
 Notes
          to
          the Consolidated Financial Statements
 December
          31, 2005 and 2004
 
 NOTE
        1 -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 e.  Earnings
        (Loss) Per Share (continued) ***(restated)***
  Net
                                    Loss
                                  (Numerator)
                                
                                
                                Shares
                                  (Denominator)
                                
                                
                                Per-Share
                                  AmountFor
                                    the year ended December 31, 2005:Basic
                                    EPSNet
                                    loss to common shareholders
                                
                                $
                                (3,788,265
                                )
                                
                                
                                45,222,704
                                
                                
                                $
                                (0.08
                                )For
                                    the year ended December 31, 2004:Basic
                                    EPSNet
                                    loss to common shareholders
                                
                                $
                                (946,274
                                )
                                
                                
                                37,268,310
                                
                                
                                $
                                (0.03
                                )
 f.  Cash
          and Cash Equivalents
 
 The
        Company considers all highly liquid investments with maturities of three
        months
        or less to be cash equivalents.
 
 g.  Income
        Taxes ***(restated)***
 
 Income
        taxes are provided for the tax effects of transactions reported in the financial
        statements and consist of taxes currently due plus deferred taxes. Deferred
        taxes are provided on a liability method whereby deferred tax assets are
        recognized for deductible temporary differences and operating loss, tax credit
        carry-forwards, and deferred tax liabilities are recognized for taxable
        temporary differences. Temporary differences are the differences between
        the
        reported amounts of assets and liabilities and their tax bases. Deferred
        tax
        assets are reduced by a valuation allowance when, in the opinion of management,
        it is more likely than not that some portion or all of the deferred tax will
        not
        be realized. Deferred tax assets and liabilities are adjusted for the effects
        of
        changes in tax laws and rates on the date of enactment.
  F-13
  **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
  NOTE
        1 -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 g.  Income
        Taxes (continued) ***(restated)***
  December
                                                            31,2005
                                                        
                                                        
                                                        2004Deferred
                                                            Tax Assets:Net
                                                            Operating Loss Carry-forwards
                                                        
                                                        $
                                                        3,280,832
                                                        
                                                        
                                                        $
                                                        687,450Contribution
                                                            Carry-forwards
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        148Tax
                                                            over Book Depreciation
                                                        
                                                        
                                                        6,750
                                                        
                                                        
                                                        
                                                        5,584Unrealized
                                                            Gain (Loss) on Available
                                                            for Sale Securities
                                                        
                                                        
                                                        (123,392
                                                        )
                                                        
                                                        
                                                        1,653Total
                                                            Deferred Tax Assets
                                                        
                                                        
                                                        3,164,190
                                                        
                                                        
                                                        
                                                        693,182Valuation
                                                            Allowance for Deferred
                                                            Tax Assets
                                                        
                                                        
                                                        (3,164,190
                                                        )
                                                        
                                                        
                                                        (693,182
                                                        )Total
                                                            Deferred Tax Asset (Liability)
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -The
                                                            components of income
                                                            tax expense are as follows:Current
                                                            Federal Tax
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -Current
                                                            State Tax
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        
                                                        -Change
                                                            in NOL Benefit
                                                        
                                                        
                                                        1,288,010
                                                        
                                                        
                                                        
                                                        1,288,010Change
                                                            in Allowance
                                                        
                                                        
                                                        (1,288,010
                                                        )
                                                        
                                                        
                                                        (1,288,010
                                                        )
  At
        December 31, 2005, the Company has net operating losses of approximately
        $8,038,350 which expire from 2006 through 2020.
 
 h.  Available
        for Sale Investments ***(restated)***
 
 The
        shares are evaluated quarterly using the specific identification method.
        Any
        unrealized holding gains or losses are reported as Other Comprehensive Income
        and as a separate component of stockholder's equity.  Realized gains
        and losses are included in earnings.  Marketable Securities-Available
        for Sale are as follows:
  Balance,
                                  January 1, 2004
                              
                              $
                              12,796Marketable
                                  securities received
                              
                              
                              6,388Net
                                  unrealized gain
                              
                              
                              174Balance,
                                  December 31, 2004
                              
                              
                              19,358Marketable
                                  securities received
                              
                              
                              107,608Net
                                  unrealized losses
                              
                              
                              (123,218
                              )Balance,
                                  December 31, 2005
                              
                              $
                              3,754
   F-14
 **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
        1 -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 i.  Mining
        Supplies
 Mining
        supplies, consisting primarily of bits, steel, and other mining related
        equipment, are stated at the lower of cost (first-in, first-out) or market.
        In
        addition, equipment repair parts and maintenance items are also included
        at
        cost.
 
 j.  Use
        of Estimates
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect reported amounts of assets and liabilities, disclosure of contingent
        assets and liabilities at the date of the financial statements and revenues
        and
        expenses during the reporting period.  In these financial statements
        assets and liabilities involve extensive reliance on management’s
        estimates.  Actual results could differ from those
        estimates.
 
 k.  Property
        and Equipment ***(restated)***
 
 Property
        and equipment are carried at cost. Depreciation and amortization is computed
        on
        the straight-line method over the estimated useful lives of the assets as
        follows:
  
 Estimated
                        Useful LifeBuilding
                    30
                        yearsMining
                      equipment
                    2
                        -
                        8 yearsOffice
                      and shop furniture and equipment
                    5
                        -
                        8 yearsVehicles
                    5
                        years
  In
        accordance with Financial Accounting Standards Board Statement No. 144, the
        Company records impairment of long-lived assets to be held and used or to
        be
        disposed of when indicators of impairment are present and the undiscounted
        cash
        flows estimated to be generated by those assets are less than the carrying
        amount. At December 31, 2005 and 2004, no impairments were
        recognized.  Depreciation expense for the years ended December 31,
        2005 and 2004 totaled $80,914 and $30,593, respectively.
 
 l.  Financial
        Instruments
 
 The
        recorded amounts of financial instruments, including cash equivalents,
        receivables, investments, accounts payable and accrued expenses, and long-term
        debt approximate their market values as of December 31, 2005 and
        2004.  The Company has no investments in derivative financial
        instruments.
   F-15
  **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
        1 -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 m.
        Mining
        Exploration and Development Costs
 
 Land
        and
        mining property acquisitions are carried at cost.  The Company
        expenses prospecting and mining exploration costs. At the point when a property
        is determined to have proven and probable reserves, subsequent development
        costs
        are capitalized as capitalized development costs. Capitalized development
        costs
        will include acquisition costs and property development costs. When these
        properties are developed and operations commence, capitalized costs will
        be
        charged to operations using the units-of-production method over proven and
        probable reserves. Upon abandonment or sale of a mineral property, all
        capitalized costs relating to the specific property are written off in the
        period abandoned or sold and a gain or loss is recognized.
 
 As
        December 31, 2005, all costs associated with the Company's mines have been
        expensed. During the year ended December 31, 2005, the Company recognized
        revenue of $0 from the sale of halloysite clay.
  n.  Stock
        Options and Warrants ***(restated)***
  The
        Company has stock option plans that provide for stock-based employee
        compensation, including the granting of stock options, to certain key employees.
        The plans are more fully described in Note 7. The Company accounts for the
        stock
        option plans in accordance with the recognition and measurement principles
        of
        APB Opinion No. 25, "Accounting for Stock Issued to Employees", and related
        Interpretations. Under this method, compensation expense is recorded on the
        date
        of grant only if the current market price of the underlying stock exceeds
        the
        exercise price.
 
 During
        the periods presented in the accompanying financial statements the Company
        has
        granted options under the 1998 Stock Options Plans. The Corporation has adopted
        the disclosure-only provisions under Statement of Financial Accounting Standards
        No. 123, “Accounting for Stock-Based Compensation.”  Accordingly, no
        compensation cost under SFAS No.123 has been recognized for the stock option
        plans or other agreements in the accompanying statement of
        operations.  Had compensation cost for the Company’s stock option
        plans and agreements been determined based on the fair value at the grant
        date
        for awards in 2005 and 2004 consistent with the provisions of SFAS No. 123,
        the
        Company’s net earnings net of taxes and earnings per share would have been
        reduced to the pro forma amounts indicated below:
   2005
                          
                          
                          2004Net Loss
                          As
                            reported
                          
                          $
                          (3,788,265
                          )
                          
                          $
                          (946,274
                          )Proforma
                          
                          $
                          (4,057,863
                          )
                          
                          $
                          (946,274
                          )Basic
                            earnings per share
                          As
                            reported
                          
                          $
                          (0.08
                          )
                          
                          $
                          (0.03
                          )Proforma
                          
                          $
                          (0.09
                          )
                          
                          $
                          (0.03
                          )
   F-16
 **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
        1 -
        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 o.  Concentration
        of Risk
 
 The
        Company maintains cash balances in two checking accounts at two separate
        financial institutions.  At December 31, 2005 and 2004, total cash
        balances were $2,215,930 and $206,635, respectively.  Such funds
        exceed Federal Deposit Insurance Corporation limits, and amounts exceeding
        $100,000 are not insured.
  p.
        Recently Enacted Accounting Standards
  In
        December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment.” This
        Statement is a revision to SFAS No. 123, “Accounting for Stock-Based
        Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued
        to Employees.” SFAS No. 123(R) requires the measurement of the cost of employee
        services received in exchange for an award of equity instruments based on
        the
        grant-date fair value of the award. The cost will be recognized over the
        period
        during which an employee is required to provide service in exchange for the
        award. No compensation cost is recognized for equity instruments for which
        employees do not render service. When adopted, the Company will be required
        to
        recognize compensation cost as expense for the portion of outstanding unvested
        awards, based on the grant-date fair value of those awards calculated using
        an
        option pricing model. Statement 123(R) is effective for small business issuers
        at the beginning of the first interim or annual period beginning after December
        15, 2005. Management is currently evaluating the impact SFAS No. 123(R) will
        have on the Company’s results of operations as a result of adopting this new
        Standard.
  In
        April
        2004, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues
        Task Force (“EITF”) Issue No. 04-2, which amends Statement of Financial
        Accounting Standards (“SFAS”) No. 141 “Business Combinations” to the extent all
        mineral rights are to be considered tangible assets for accounting purposes.
        There has been diversity in practice related to the application of SFAS No.
        141
        to certain mineral rights held by mining entities that are not within the
        scope
        of SFAS No. 19 “Financial Accounting and Reporting by Oil and Gas Producing
        Companies.” The SEC staff’s position previously was entities outside the scope
        of SFAS No. 19 should account for mineral rights as intangible assets in
        accordance with SFAS No. 142 “Goodwill and Other Intangible Assets.” The
        application of this EITF is not expected to have a material effect on the
        Company’s financial statements.
  In
        November 2004, the FASB issued SFAS No. 151, "Inventory Costs".  SFAS
        No. 151 requires abnormal amounts of inventory costs related to idle facility,
        freight handling and wasted material (spoilage) to be recognized as
        current-period charges.  In addition, SFAS No. 151 requires that
        allocation of fixed production overheads to the costs of conversion be based
        on
        the normal capacity of the production facilities.  The Company will be
        required to adopt the
        provisions of SFAS No. 151 for fiscal years beginning after June 15,
        2005.  Management believes the provisions of this Standard will not
        have a significant effect on our financial position or results of
        operations.
   F-17
 **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
        2
        -GOING CONCERN
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern.  The Company is dependent upon raising
        capital to continue operations.  The financial statements do not include
        any adjustments that might result from the outcome of this uncertainty. 
Management has sold shares of its restricted stock in the past year to help
        support its financing activities and reduced the Company’s debt.  The
        Company has continued to obtain additional work in the contracting entity
        and
        intends to bring the Dragon Mine into production.  The Company believes
        these actions will help to solidify their continued operations.  Management
        feels the elimination of it debts, the revenue stream from contracting and
        halloysite clay sales, and the sale of stock will provide sufficient cash
        flows
        to continue as a going concern.
 
 NOTE
        3 -
        NOTES PAYABLE  ***(restated)***
 
 Notes
        payable are detailed in the following schedules as of December 31, 2005 and
        2004:
  2005
                          
                          
                          2004Note
                            payable to a company, due in monthlypayments
                            of $1,000 with a balloon paymentdue
                            at maturity, including interest at 9%.The
                            note matured August 16, 2001, past due.
                          
                          $
                          -
                          
                          
                          $
                          53,455Note
                            payable to a lending company, due in monthly installments
                            of $688,
                            including interest at 7.59%.  The note matures in 2010 and is
                            collateralized by a vehicle.
                          
                          
                          29,888
                          
                          
                          
                          35,630Note
                            payable to an insuranc company, due in monthly installments of
                            $2,825.  The note matures in July 2006.
                          
                          
                          19,773
                          
                          
                          
                          -Note
                            payable to a mortgage company, due in monthly installments
                            of $1,614,
                            including interest at 16%.  The note is due in August 2005, secured
                            by the proceeds of a logging agreement and collateralized
                            by land and a
                            building.
                          
                          
                          -
                          
                          
                          
                          118,920Note
                            payable to a lending company, balloon payment due at
                            maturity, bears
                            interest at 8% per month.  The note is secured by land owned by a
                            related party and matured in March 2003, past due.
                          
                          
                          -
                          
                          
                          
                          120,700Note
                            payable to a mortgage company, principal due at maturity
                            and bears
                            interest at 3.5% per month.  The note matured in October 2003,
                            secured by property, past due.
                          
                          
                          -
                          
                          
                          
                          86,100Note
                            payable to a company, principal due at maturity and bears
                            interest at 5%
                            per month.  The note matured in May 2003, secured
                            by land, past due.
                          
                          
                          -
                          
                          
                          
                          345,508Note
                            payable to a company, principal due at maturity with
                            no interest. 
                            The note matures in May 2005.
                          
                          
                          -
                          
                          
                          
                          17,000Note
                            payable to a company, principal due at maturity with
                            interest at
                            10.2%.  The note matures in February 2005.
                          
                          
                          -
                          
                          
                          
                          34,060Total Notes
                            Payable
                          
                          $
                          49,661
                          
                          
                          $
                          811,373
   F-18
 **Atlas
          Mining Company and Subsidiary**
 Notes
          to
          the Consolidated Financial Statements
 December
          31, 2005 and 2004
  NOTE
          3 -
          NOTES PAYABLE (continued) 
***(restated)***
  2005
                                  
                                  
                                  2004Notes
                                    payable - related party:Note
                                    payable to a company with a common officer, payable
                                    on demand and bears no
                                    interest.
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  158,866Note
                                    payable to an officer, payable on demand and
                                    bears no interest.
                                  
                                  
                                  -
                                  
                                  
                                  
                                  91,488Total
                                    Notes Payable - Related Party
                                  
                                  
                                  -
                                  
                                  
                                  
                                  250,354Total
                                    Long-Term Liabilities
                                  
                                  
                                  49,661
                                  
                                  
                                  
                                  1,061,727Less
                                    Current Portion
                                  
                                  
                                  (12,473)
                                  
                                  
                                  
                                  1,031,672Less
                                    Current Portion - Related Party
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (250,354)Total
                                    Long-Term Liabilities
                                  
                                  $
                                  49,661
                                  
                                  
                                  $
                                  30,055
      2006
                        
                        $
                        25,9732007
                        
                        
                        6,6882008
                        
                        
                        7,2142009
                        
                        
                        7,7812010
                        
                        
                        2,005Thereafter
                        
                        
                        -Total
                        
                        $
                        49,661
 NOTE
        4
        -RELATED PARTY TRANSACTIONS
 
 During
        2005 and 2004, the Company paid advances to a company with a common
        officer.  During 2005, the other company compensated Atlas with
        100,000 shares of its stock in payment of advances made during the
        year.  Such advances totaled $107,608.  The balance of the
        advances at December 31, 2005 and 2004 is $0 and $0, respectively.
 
 During
        2005 and 2004, an officer loaned the Company $1,670 and $34,659,
        respectively.  The loan was repaid to the officer during the 3rd quarter
        of
        2005.  During 2004, the Company paid cash of $14,000 as partial
        payment for the note.  The balance of the note payable at December 31,
        2005 and 2004 is $­0 and $91,488, respectively.
   F-19
 
  **Atlas
          Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
                  5 -
              STOCK
                  OPTIONS AND WARRANTS TO PURCHASE COMMON STOCK
                  ***(restated)***
 
 In
        1998,
        the Company adopted a non-qualified stock option plan authorizing the granting
        to officers, directors, or employees options to purchase common stock. Options
        are granted by the Administrative Committee, which is elected by the Board
        of
        Directors. The number of options granted under this plan and any other plans
        active may not exceed 10% of the currently issued and outstanding shares
        of the
        Company’s common stock. The term of each option granted is determined by the
        Committee, but cannot be for more than five years from the date the option
        is
        granted. The option price per share with each option granted will be fixed
        by
        the Administrative Committee on the date of grant.
 
 The
        Company adopted an incentive stock option plan in 1998. The stock option
        plan
        permits the Company to grant to key employees options to purchase shares
        of
        stock in the Company at the direction of the Committee. The price of shares
        purchased must be equal to or greater than fair market value of the common
        stock
        at the date.  At December 31, 2005, no options have been granted under
        this plan.
 
 During
        2004, the company’s board of directors approved an option to the Company’s CEO
        to acquire up to 3.5 million shares of common stock over a five year period
        at
        $0.18 per share under the non-qualified stock option plan.  The
        options vested 43% on January 1, 2005, and 14% on January 1, 2006
        -2009.
 
 The
        fair
        value of each option granted is estimated on the date granted using the
        Black-Scholes option pricing model. Assumptions used to compute the
        weighted-average grants during the year ended December 31, 2004 include
        risk-free interest rates of 2%, expected dividend yields of 0%, expected
        life of
        3 years, and expected volatility 150%.  During 2004, the Company
        granted options to purchase up to 3.5 million of its common shares with a
        calculated weighted average fair value of $0.13 each.
 
 A
        summary
        of the status of the options granted under the Company’s 1998 stock option plan
        and other agreements at December 31, 2005 and 2004, and changes during the
        years
        then ended is presented below:
   December
                                  31, 2005
                              
                              
                              December
                                  31, 2004Shares
                              
                              
                              Weighted
                                  Average
                                Exercise
                                  Price
                              
                              
                              Shares
                              
                              
                              Weighted
                                  Average
                                Exercise
                                  PriceOutstanding
                                at beginning of period
                              
                              
                              3,500,000
                              
                              
                              $
                              0.13
                              
                              
                              
                              -
                              
                              
                              $
                              -Granted
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              3,500,000
                              
                              
                              
                              0.13Exercised
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Forfeited
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Expired
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Outstanding
                                at end of period
                              
                              
                              3,500,000
                              
                              
                              $
                              0.13
                              
                              
                              
                              3,500,000
                              
                              
                              $
                              0.13
     F-20
   **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
                  5 -
              STOCK
                  OPTIONS AND WARRANTS TO PURCHASE COMMON
                  STOCK  ***(restated)***
                  (continued)
 
 A
        summary
        of the status of the options outstanding under the Company’s stock option plans
        and employment agreements at December 31, 2005 is presented below:
 
 Options
                                        Outstanding
                                    
                                    
                                    Options
                                        ExercisableRange
                                        of
                                      Exercise
                                        Prices
                                    
                                    
                                    Number Outstanding
                                    
                                    Weighted-Average
                                      Remaining
                                      Contractual
                                        Life
                                    
                                    Weighted Average
                                      Exercise
                                        Price
                                    
                                    
                                    Number
                                      Exercisable
                                    
                                    
                                    Weighted-Average
                                        Exercise Price$
                                    0.10-$0.20
                                    
                                    
                                    
                                    3,500,000
                                    
                                    3
                                        years
                                    
                                    $
                                    0.13
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    0.133,500,000
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
  Common
        Stock
 During
        the year ended December 31, 2005 the Company sold a total of 6,291,680 shares
        of
        restricted common stock at prices ranging from $0.25 to $1.02 per share for
        a
        total of $5,064,019 cash.
 
 During
        the year ended December 31, 2005 the Company issued 2,393,790 shares of stock
        at
        prices ranging from $0.30 to $1.11 in payment of $2,362,984 worth of services
        provided to the company.
 
 Stock
        Warrants
 During
        2005, the Company granted warrants to purchase up to 750,000 of its common
        shares at $0.40 per share expiring in January 2007 with a calculated weighted
        average fair value of $0.52 each for services. The fair value of each option
        granted is estimated on the date granted using the Black-Scholes option pricing
        model. Assumptions used to compute the weighted-average grants during the
        year
        ended December 31, 2005 include risk-free interest rates of 3.25%, expected
        dividend yields of 0%, expected life of 2 years, and expected volatility
        76.36%.
 
 Also
        during 2005, the Company granted warrants to purchase up to 474,000 of its
        common shares at $0.50 per share, with 470,000 shares expiring in January
        2007
        and 4,000 shares expiring in February 2007, with a calculated weighted average
        fair value of $0.27 each.  The fair value of each option granted is
        estimated on the grant date using the Black-Scholes option pricing
        model.  Assumptions used to compute the weighted-average grants during
        the year ended December 31, 2005 include risk-free interest rates of 4.22%,
        expected dividend yields of 0%, expected life of 2 years, and expected
        volatility ranging from 79.75% to 107.77%.
   F-21
  **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
                  5 -
              STOCK
                  OPTIONS AND WARRANTS TO PURCHASE COMMON STOCK (continued)
                   ***(restated)***
  During
        December 2004, the Company had outstanding warrants as follows:
   Number
                              of shares
                            underlying
                              the warrants
                          
                          
                          Exercise
                            price
                          
                          Issued
                          
                          Expire1,000,000
                          
                          
                          $
                          0.35
                          
                          With
                            common shares
                          
                          
                          12/05280,000
                          
                          
                          
                          0.50
                          
                          With
                            common shares
                          
                          
                          12/06154,000
                          
                          
                          
                          0.25
                          
                          For
                            services
                          
                          
                          12/06
  The
        fair
        value of warrants issued for services is estimated on the date issued using
        the
        Black-Scholes option pricing model and totaled $16,940 during 2004 as
        administrative expenses. Assumptions used to compute the weighted-average
        of
        shares underlying warrants during the year ended December 31, 2004 included
        risk-free interest rates of 3.58%, expected dividend yields of 0%, expected
        life
        of 2 years, and expected volatility 75%.
   A
        summary of
        the status of the warrants granted at December 31, 2005 and 2004, and changes
        during the years then ended is presented below:
   December
                                  31, 2005
                              
                              
                              December
                                  31, 2004Shares
                              
                              
                              Weighted
                                  Average
                                Exercise
                                  Price
                              
                              
                              Shares
                              
                              
                              Weighted
                                  Average
                                Exercise PriceOutstanding
                                at beginning of period
                              
                              
                              1,434,000
                              
                              
                              $
                              0.37
                              
                              
                              
                              -
                              
                              
                              $
                              -Granted
                              
                              
                              750,000
                              
                              
                              
                              0.52
                              
                              
                              
                              1,434,000
                              
                              
                              
                              0.37Exercised
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Forfeited
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Expired
                              
                              
                              1,000,000
                              
                              
                              
                              0.35
                              
                              
                              
                              -
                              
                              
                              
                              -Outstanding
                                at end of period
                              
                              
                              1,184,000
                              
                              
                              $
                              0.46
                              
                              
                              
                              1,434,000
                              
                              
                              $
                              0.37
  A
        summary of
        the status of the warrants outstanding at December 31, 2005 is presented
        below:
  Options
                    Outstanding
                
                
                Options
                    ExercisableRange
                    of
                  Exercise
                    Prices
                
                
                Number Outstanding
                
                Weighted-Average
                  Remaining
                  Contractual
                    Life
                
                Weighted Average
                  Exercise
                    Price
                
                
                Number
                  Exercisable
                
                
                Weighted-Average
                    Exercise Price$
                0.25
                
                
                
                154,000
                
                1.1
                    years
                
                $
                0.34
                
                
                
                154,000
                
                
                $
                0.34$
                0.40
                
                
                
                750,000
                
                2
                    years
                
                $
                0.52
                
                
                
                750,000
                
                
                $
                0.52$
                0.50
                
                
                
                280,000
                
                2
                    years
                
                $
                0.50
                
                
                
                280,000
                
                
                $
                0.501,184,000
                
                
                
                
                
                
                
                
                1,184,000
   F-22
  **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
                  6 – CAPITAL LEASES
                  ***(restated)***
 
 The
        company leases equipment under capital leases that expire September
        2006.  The gross amount of assets recorded under capital leases and
        the associated accumulated depreciation are included under property and
        equipment and are as follows:
   December
                                    31, 2005
                                
                                
                                December
                                    31, 2004Mining
                                  Equipment
                                
                                $
                                39,500
                                
                                
                                $
                                -Total
                                
                                $
                                39,500
                                
                                
                                $
                                -Less:
                                  Accumulated Depreciation
                                
                                
                                (420
                                )
                                
                                
                                -Net
                                  Leased Equipment
                                
                                $
                                39,080
                                )
                                
                                
                                -
 
 The
        Company depreciates its leases over the estimated useful life of the
        equipment.  Depreciation expense was $420 and $0 for the year ended
        December 31, 2005 and 2004, respectively.
 
 The
        future minimum lease payments are as follows for the twelve-month periods
        ended
        December 31:
   2006
                              
                              $
                              28,9732007
                              
                              
                              -2008
                              
                              
                              -2009
                              
                              
                              -2010
                              
                              
                              -Thereafter
                              
                              
                              -Total
                                lease obligations
                              
                              
                              28,973Executory
                                costs and interest
                              
                              
                              (2,973
                              )Long-term
                                obligations
                              
                              $
                              -
    F-23
 
   **Atlas
          Mining Company and Subsidiary**
 Notes
          to
          the Consolidated Financial Statements
 December
          31, 2005 and 2004
 
 NOTE
        7 -
        COMMITMENTS AND CONTINGENCIES
 
 On
        July
        10, 2001, the Company entered into an agreement to lease and possibly purchase
        a
        mine in Juab County, Utah.  The Company had the sole option to renew
        the lease on an annual basis.  The agreement required the lease
        payments be made through the issuance of 100,000 shares of the Company’s common
        stock each year.  In July 2005, the Company issued 100,000 shares of
        common stock valued at $100,000 to renew the lease.  In July 2004, the
        Company issued 100,000 shares of common stock valued at $20,000 to renew
        the
        lease.  In July 2003, the Company issued 100,000 shares of common
        stock valued at $10,000 to renew the lease.  The Company had the
        option to purchase the mine for $500,000 at anytime, or when it sold $1,000,000
        of product from the mine during a twelve month period.
 
 During
        the 3rd quarter
        of 2005, the Company exercised the purchase option on the Dragon Mine in
        Juab
        County, Utah for $500,000.  The Company also paid $30,000 in royalties
        which was equivalent to selling $1,000,000 of product from the clay
        mine.
 
 The
        Company has commenced operations at the mine to begin production of halloysite
        clay.
 
 On
        February 16, 2005, a Settlement Agreement was entered into between the Company
        and  the court appointed receiver for American National Mortgage
        Company regarding the resolution of  approximately $711,174 principal
        debt owed by the Company plus unpaid interest.  According to the
        agreement, the Company is to pay $406,000 plus 175,000 shares of common stock
        valued at $105,000.  The agreement became effective upon approval by
        the courts in April 2005.  The Company paid the $406,000 on June 30,
        2005 and issued the stock portion of the settlement agreement on July 8,
        2005.  The Company settled an outstanding debt with Moss Adams, LLP by
        making payments of $53,250 during the month of June 2005.
 NOTE
          8 –
SEGMENT REPORTING (continued)
***(restated)***
  The
        Company's Chief Operating Decision-maker, as defined in SFAS No. 131, is
        considered to be Atlas's CEO. The Chief Operating Decision-maker reviews
        separate financial information for the contract mining business segment,
        the
        mining production business segment and the timber business segment. Each
        of the
        Company's business segments offer and distribute distinct services to different
        customer segments.  The contract mining segment provides mining
        services and specialized civil construction services in various locations
        for
        mine operators, exploration companies and the construction and natural resources
        industries.  Other activities include site evaluation, feasibility
        studies, trouble-shooting and consultation prior to the undertaking of
        exploration and mine development.  The mining production segment is
        located at the Dragon Mine in Juab County, Utah which contains a deposit
        of high
        quality halloysite clay.  The Company is in the process of extracting
        this clay to sell to outside parties.  The Company holds property with
        harvestable timber in Northern Idaho.  Timber harvesting is
        contracted out to a qualified logger, who is able to negotiate with local
        timber
        mills on the price for the timber.  The Company primarily uses the
        timber to generate revenues and cash flows for other operations.  The
        Company therefore considers that it has three reportable segments under SFAS
        131
        during 2004 to 2005 as follows:  (i) contract mining, (ii) mining
        production, and (iii) timber.
   F-24
 
 **Atlas
            Mining Company and Subsidiary**
 Notes
            to
            the Consolidated Financial Statements
 December
            31, 2005 and 2004
  NOTE
          8 –
SEGMENT REPORTING (continued)
***(restated)***
 
 The
        Chief
        Operating Decision-maker evaluates performance and allocates resources based
        on
        revenues produced from operations. The accounting policies of the reportable
        segments are the same as those described in the summary of significant
        accounting policies.  It is the Company's policy that trade between
        the segments is entered into at an arms-length basis.
 
 For
                        the Year EndedDecember
                        31,2005
                    
                    
                    2004**Contract
                        Mining:**Net
                        Revenue
                    
                    $
                    628,176
                    
                    
                    $
                    696,264Operating
                        ExpensesCost
                        of Sales
                    
                    
                    441,617
                    
                    
                    
                    532,324General
                        & Administrative
                    
                    
                    1,522,268
                    
                    
                    
                    464,852Total
                        Operating Expenses
                    
                    
                    1,963,885
                    
                    
                    
                    987,176Net
                        Operating (Loss)
                    
                    
                    (1,335,709
                    )
                    
                    
                    (290,912
                    )Capital
                        Expenditures:
                    
                    
                    41,721
                    
                    
                    
                    15,724Depreciation:
                    
                    
                    4,316
                    
                    
                    
                    29,022Total
                        Assets:
                    
                    
                    198,320
                    
                    
                    
                    22,477**Mining
                        Production:**Net
                        Revenue
                    
                    
                    -
                    
                    
                    
                    250,000Operating
                        ExpensesCost
                        of Sales
                    
                    
                    98,946
                    
                    
                    
                    33,925Exploration
                        & Development Costs
                    
                    
                    760,347
                    
                    
                    
                    340,657General
                        & Administrative
                    
                    
                    1,397,712
                    
                    
                    
                    454,852Total
                        Operating Expenses
                    
                    
                    2,257,005
                    
                    
                    
                    829,434Net
                        Operating (Loss)
                    
                    
                    (2,257,005
                    )
                    
                    
                    (579,434
                    )Capital
                        Expenditures:
                    
                    
                    707,140
                    
                    
                    
                    508,395Depreciation:
                    
                    
                    76,598
                    
                    
                    
                    1,571Total
                        Assets:
                    
                    
                    3,465,813
                    
                    
                    
                    995,784
   F-25
 **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
        8 –
SEGMENT REPORTING (continued) ***(restated)***
 
 For
                          the Year Ended December 31,2005
                      
                      
                      2004**Timber:**Net
                          Revenue
                      
                      
                      -
                      
                      
                      
                      89,064Operating
                          ExpensesCost
                          of Sales
                      
                      
                      10,696
                      
                      
                      
                      1,295General
                          & Administrative
                      
                      
                      301,603
                      
                      
                      
                      101,078312,299
                      
                      
                      
                      102,373Net
                          Operating (Loss)
                      
                      
                      (312,299
                      )
                      
                      
                      (13,309
                      )Capital
                          Expenditures:
                      
                      
                      -
                      
                      
                      
                      -Depreciation:
                      
                      
                      -
                      
                      
                      
                      -Total
                          Assets:
                      
                      
                      405,410
                      
                      
                      
                      405,410
 
 **Consolidated
                      on Financial Statements:**Total
                      Revenues
                  
                  
                  628,176
                  
                  
                  
                  1,035,329Operating
                      ExpensesTotal
                      Cost of Sales
                  
                  
                  551,259
                  
                  
                  
                  567,545Exploration
                      & development costs
                  
                  
                  760,347
                  
                  
                  
                  340,657Total
                      General & Administrative
                  
                  
                  3,221,583
                  
                  
                  
                  1,010,780Total
                      Operating Expenses
                  
                  
                  4,453,189
                  
                  
                  
                  1,918,982Net
                      Operating (Loss)
                  
                  
                  (3,905,013
                  )
                  
                  
                  (883,653
                  )Capital
                      Expenditures:
                  
                  
                  748,861
                  
                  
                  
                  524,119Depreciation:
                  
                  
                  80,914
                  
                  
                  
                  30,593Total
                      Assets
                  
                  
                  4,069,543
                  
                  
                  
                  1,423,671
 
 
 F-26
 
   **Atlas
          Mining Company and Subsidiary**
 Notes
          to
          the Consolidated Financial Statements
 December
          31, 2005 and 2004
 
 NOTE
        9 -
        RESTATEMENT OF FINANCIAL STATEMENTS
 
 During
        the audit of the financial statements at December 31, 2006, management
        discovered four items that had not had proper accounting at its year ended
        December 31, 2005.  The four areas of deficiency included: prepayments
        on equipment that had been classified as fixed assets, equipment purchases
        through leasing classified as lease/rental expense, common stock warrants
        where
        related warrant expense had not been recorded at year end, and available
        for
        sale securities that had been received as payment of amounts owed to the
        company, but not recorded as part of debt forgiveness.  In addition,
        the valuation of available for sales securities had been reviewed and
        recalculated.  Management has also elected to reclassify the
        acquisition of equipment that was originally disclosed as office equipment,
        but
        is better identified as laboratory equipment.  The above deficiencies
        have been adjusted into the December 31, 2005 comparative column of these
        financial statements.
 
 The
        effect of the adjustments and reclassification on the financial statements
        as of
        and for the year ended December 31, 2005 is as follows:
 
 Consolidated
        Balance Sheet at December 31, 2005:
 Investments
        available for sale decreased by $15,784
 Deposits
        increased by $19,649
 Mining
        equipment increased by
        $39,500
 Laboratory
        equipment increased by
        $5,740
 Office
        equipment decreased by
        $25,389
 Total
        assets increased by
        $23,714
 Current
        portion of long term debt
        increased by $12,500
 Leases
        payable increased by
        $26,000
 Common
        stock increased by
        $2,168
 Accumulated
        deficit increased by
        $7,947
 Accumulated
        other comprehensive income
        decreased by $123,392
 Total
        liabilities and stockholders
        equity increased by $23,714
 
 Consolidated
        Statement of Operations for the year ended December 31, 2005:
 General
        and administrative expenses increased by $115,554
 Gain
        on settlement of debt increased by $107,608
 Net
        loss increased by $7,947
   F-27
  **Atlas
        Mining Company and Subsidiary**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2005 and 2004
 
 NOTE
        9 -
        RESTATEMENT OF FINANCIAL STATEMENTS (continued)
 
 Consolidated
        Statement of Stockholders' Equity (Deficit) at December 31,
        2005:
 Warrant
        expense cost was recorded at $129,053
 Net
        loss increased by $7,947
 Accumulated
        deficit increased by $7,947
 Total
        Stockholders' Deficit decreased by $2,314
 
 Consolidated
        Statement of Cash Flows for the year ended December 31, 2005:
 Net
        loss increased by $7,947
 Gain
        on settlement of debt increased by
        $107,608
 Change
        in deposits and prepaids
        increased by $89,081
 Purchases
        of equipment increased by
        $19,851
 Payments
        on leases payable increased by
        $13,500
 Proceeds
        from leases payable increased
        by $39,500
   F-28