**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


**FORM
      10-KSB**


(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, 2006**





|_|              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
            (I.R.S.
                Employer Identification No.)of
                incorporation or organization)





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, 2006 were
      $3,800,104.





The
      number of shares of the registrant's common stock, no par value per share,
      outstanding as of April 13, 2007 was 53,083,246 . The aggregate market value
      of
      the voting and non-voting common equity held by non-affiliates of the registrant
      on April 13, 2007, based on the last sales price on the OTC Bulletin Board
      as of
      such date, was approximately $88,483,880.





DOCUMENTS
      INCORPORATED BY REFERENCE  None.


Transition
      Small Business Disclosure Format: Yes |_| No |X|







TABLE
                OF CONTENTS
            PagePARTIITEM1.
            DESCRIPTION
                OF BUSINESS
            4ITEM2.
            DESCRIPTION
                OF PROPERTY
            11ITEM3.
            LEGAL
                PROCEEDINGS
            15ITEM4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            15PARTIIITEM5.
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            15ITEM6.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS
            17ITEM7.
            FINANCIAL
                STATEMENTS AND SUPPLEMENTARY DATA
            24ITEM8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS
            24ON
                ACCOUNTING AND FINANCIAL DISCLOSUREITEM8A.
            CONTROLS
                AND PROCEDURES
            24ITEM8B.
            OTHER
                INFORMATION
            24PARTIIIITEM9.
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS,CONTROL
                PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITHSECTION
                16(a) OF THE EXCHANGE ACT
            25ITEM10.
            EXECUTIVE
                COMPENSATION
            28ITEM11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT
                AND RELATED STOCKHOLDER MATTERS29ITEM12.
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS,
                AND    DIRECTOR INDEPENDENCE
            30ITEM13.
            EXHIBITS
            30ITEM14.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            31SIGNATURES
            32






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.





PARTI





ITEM1.
      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. In 1999 we acquired the Aulbach mining claims for $ 50,000,
      approximately 100 acres of timber and mineral property in northern Idaho. Also
      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 contains a deposit
      of
      high quality clay, which we have put into production. 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 2005 we purchased the Dragon Mine
      for $500,000.





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




3


We
      have brought the Dragon Mine from an exploration stage into a development and
      production 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 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.





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, British Columbia, and Alaska.
      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 mine’s closure, and has worked at the
      Lucky Friday Mine for Hecla Mining Company for the past seven years.
      This past year, AFC has worked at the Sunshine Mine in north Idaho for Sterling
      Mining Company, and at the East Boulder Mine in Montana for Stillwater Mining
      Company.





AFC
      also competes 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.





4


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 our 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 an 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. Timber located in 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 the
      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.







5





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, 2005, and 2006 were $760,347 and $ 2,143,161, respectively on
      the
      halloysite clay project.





The
      halloysite clay is considered a non-toxic material, and we believe we can
      produce a salable 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 2005 and 2006 we completed
      small diamond drilling programs to verify location of clay beds at the Dragon
      Mine. With that information, we have been able to formulate development
      and operating plans. We have continued to explore the Dragon Mine, and we have
      run numerous analytical tests on the halloysite clay to ascertain quality.
      In
      2006 we did not have any significant sales of halloysite clay.





Our
      halloysite clay marketing efforts
      include contacting potential customers and distributors, which we have
      done.  Each buyer may have different uses for the product and,
      therefore, the prices, qualities, and quantities 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 buyer.  From results of the product samples distributed, we
      have numerous potential buyers.  In March 2006 we activated Nano Clay
      and Technologies, Inc., a wholly owned subsidiary, and hired Dr. Ronald Price
      as
      its President and Chief Executive Officer, to pursue these activities. Dr.
      Price
      has developed and installed more efficient processing methods at the Dragon
      Mine
      and has established contacts with potential buyers for both micro-tubular
      encapsulation, as well as conventional users.





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 2006.





We
      have both a mining plan and reclamation bond approved by the proper Utah state
      authorities.  We have also applied for an expanded permit for the
      ability to mine approximately100 acres at the Dragon
      Mine.  We


have
      Mine
      Safety and Health Administration (MSHA) registration, and County permitting
      where applicable.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
      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, 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."





Although
      at the present time we do not anticipate the need for additional funding to
      pursue our business strategy, should we need to do so, we would seek additional
      funding through additional private placements, joint venture agreements,
      production financing, and/or pre-sale loans.





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.






6





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 account
      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 its existing AFC personnel to pursue
      mining 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
      AFC
      for our own exploration projects when those resources are
      available.





Through
      mid-2005, the price of metals and increased costs due to regulations imposed
      on
      the industry had driven mining costs upward making mining less profitable.
      Consequently, the ability to generate a sustainable revenues source from AFC
      had
      been hampered, and management decided to find mineable resources on its own
      properties to utilize the manpower and equipment available to the
      company.   Between fall 2005 through the end of 2006, the market
      for contract mining has had a marked turnaround, and AFC’s projects have helped
      the company realize a greater potential.





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 activity in northern Idaho is seasonal due to the large amount of snow
      that accumulates during the winter. Most logging performed on our property
      occurs in the summer and fall.  We did not do any logging in 2005 or
      2006.





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).  As we
      complete our exploration activities at the Dragon Mine and move into the
      development and production stages, 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 contractor’s 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.





7


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. We notify the ATF 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 provide permit(s) for his project
      with
      the proper regulatory authority prior to beginning work, which relieves us of
      any
      cost or liability. On our own properties, we have spent approximately $2,000
      per
      year to keep permits in place.   However, with the pending
      application for a large mine permit in the state of Utah, a $5,250 cash bond
      has
      been paid as a security deposit.





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
      to
      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 $10,000 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, 2006, Atlas Mining and its subsidiaries have fifty-eight
      employees. As additional projects become available we will hire needed
      employees. In addition, we periodically utilize the services of various
      individuals on a consulting and/or contract basis. In 2006, we hired the
      services of a geologist, prospectors, industrial
      minerals  consultants, and acquisition experts. We currently have one
      employment agreement with our CEO, William Jacobson.  In addition, our
      wholly owned subsidiary, Nano Clay and Technologies, Inc. entered into an
      employment agreement with Dr.  Ronald Price. 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.





8


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 further
      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; however, with the
      increased activities due to stronger metals prices, we may enter into a lease
      or
      option agreement with other parties on the Atlas Mine.





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 Acres


Atlas
                  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 patentedPark
                  Copper & Gold
              99
                  acres patented




The
      largest section is the Atlas Mine. The underground Atlas Mine, idle since the
      early 1980's due to exploration budget constraints, is located on the east
      end
      of the Coeur d'Alene Mining District in Shoshone County, Idaho. 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 Atlas Mine has over 7,000 feet of tunnels with a rail system
      and
      a 2,000-foot internal shaft which may be accessed for future
      exploration.





9


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, we will find ways to either make
      these properties more productive, or to sell them.





The
      Atlas Mine property carried a first mortgage to CLS Mortgage, which was paid
      in
      full in 2005.





Timber





We
      estimate that our properties in Shoshone County contain approximately two
      million board feet of harvestable timber. We contract independent loggers to
      harvest the timber and deliver the harvest to local 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


this
      timber supply. Much of the remaining timber on Atlas lands requires access
      through U S Forest Service or BLM properties. Acquiring permits 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.





Through
      the acquisition of Sierra
      Silver Lead Mining Company, the Company acquired its Sierra properties which
      consisted of 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.





In
      March 1999, we acquired
      approximately 100 acres of surface land and mineral rights, including timber
      rights, by purchasing the Aulbach claims. 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. 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 quitclaim 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 had 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 prior mining techniques were likely inefficient
      which, combined
      with the development of synthetic catalysts (the halloysite was mined for
      petroleum cracking), led the mine to price itself out of business.





Previous
      owners' records indicate that over 1.1 million tons were mined at the property
      from 1950 until its closure in 1977. Those records also indicate approximately
      300,000 tons of mineralized material remains on the property. The previous
      owners also conducted some exploration core and 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, 2005 and 2006 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.







10


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, approximately one
      million tons of waste material, and an abandoned head frame and shaft. The
      Union
      Pacific Railroad has a spur approximately 2 miles from the property. Electrical
      power was approximately 1.5 miles from the site, and there was no


evidence
      of water except in the shaft.





In
      2005 and 2006 we were able to bring the property into the development and
      production  stage. We built a mill site which includes a lay down and
      sorting area for product, and a 50ftX60ft building with a KDS processing
      machine. We installed a 650 kw electrical generator, and have also installed
      electrical lines from the Utah Power lines to the site, to service the mill,
      office and mine. A water and septic system, and compressors have been installed.
      We have developed the underground mine with over 1600 feet of decline and access
      tunnels and have exposed the halloysite clay bed approximately
      100 feet underground. To facilitate these activities we  increased our
      equipment purchases during both 2005 and 2006.





We
      believe the halloysite material was 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.





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 beneath the surface, the halloysite material turns to
      a
      soft, wet-looking and soapy feeling material, often with a bluish tinge.
      However, this material loses its water content and turns chalky within a few
      days of exposure to air.


DESCRIPTION
                  OF PROPERTY GLOSSARYAlteration:
              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.






11




ITEM3.
      LEGAL PROCEEDINGS





None.





ITEM4.
      SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS





None.





PARTII





ITEM5.
      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://stockhouse.com.




2006
              
              2005High
              Low
              High
              LowFirst
                  Quarter
              $1.49
              $0.90
              $1.51
              $0.38Second
                  Quarter
              $1.94
              $1.37
              $1.32
              $0.77Third
                  Quarter
              $2.44
              $1.71
              $1.27
              $0.96Fourth
                  Quarter
              $1.98
              $1.33
              $1.14
              $.078




As
      of April 13, 2006, there were approximately 1,613 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
      Company. Both plans were adopted in 1998, and expire on November 18, 2008.
      The
      Stock Option Plan allowed 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, 2006, two options 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, 2006, no options have been granted under the Incentive Stock Option
      Plan of Atlas Mining Company.





12


RECENT
      SALES OF UNREGISTERED SECURITIES




On
                  January 13, 2006, the Company issued 50,000 shares of its common
                  stock
                  valued at $45,000 for services.On
                  February 6, 2006, the Company issued 20,000 shares of its common
                  stock to
                  an accredited investor for $10,000 cash for redemption of a
                  warrant.On
                  April 7, 2006, the Company issued 8,000 shares of its common stock
                  to an
                  accredited investor valued at  $10,000 for the acquisition of a
                  gold property.On
                  April 25, 2006, the Company issued 3,465 shares of its common stock
                  to an
                  accredited investor for $866 cash for redemption of a
                  warrant,On
                  April 25, 2006, the Company issued 50,000 shares of its common
                  stock to
                  accredited investors for $25,000 cash for redemption of a
                  warrant.On
                  May 11, 2006, the Company issued 340,500 shares of its common stock
                  to an
                  accredited investor for $681,000 cash.On
                  May 11, 2006, the Company issued 715 shares of its common stock
                  to an
                  accredited investor for $179 cash for redemption of a
                  warrant.On
                  May 11, 2006, the Company issued 50,000 shares of its common stock
                  to an
                  accredited investor for $25,000 cash for redemption of a
                  warrant.On
                  June 30, 2006, the Company issued 60,000 shares of its common stock
                  to an
                  accredited investor for $30,000 cash for redemption of a
                  warrant.On
                  August 23, 2006, the Company issued 1,000 shares of its common
                  stock to an
                  accredited investor for $250 cash for redemption of a
                  warrant.On
                  August 23, 2006, the Company issued 10,000 shares of its common
                  stock to
                  an accredited investor for $5,000 cash for redemption of a
                  warrant.On
                  September 22 2006, the Company issued 40,000 shares of its common
                  stock to
                  an accredited investor for $20,000 cash for redemption of a
                  warrant.On
                  September 27, 2006, the Company issued 2,000 shares of its common
                  stock to
                  an accredited investor for $500 cash for redemption of a
                  warrant.On
                  October 27, 2006, the Company issued 750,000 shares of its common
                  stock to
                  an accredited investor for $300,000 cash for redemption of a
                  warrant.On
                  November 3, 2006, the Company issued 40,000 shares of its common
                  stock to
                  an accredited investor for $20,000 cash for redemption of a
                  warrant.On
                  December 5, 2006 the Company issued 560,000 shares for $100,800
                  cash to
                  its CEO as a result of exercised stock options.On
                  December 9, 2006, the Company issued 50,000 shares of its common
                  stock to
                  an accredited investor for $25,000 cash for redemption of a
                  warrant.On
                  December 15, 2006, the Company issued 100,000 shares of its common
                  stock
                  to an accredited investor for $50,000 cash for redemption of a
                  warrant.On
                  December 15, 2006, the Company issued 30,000 shares of its common
                  stock to
                  an accredited investor for $15,000 cash for redemption of a
                  warrant.On
                  December 22, 2006, the Company issued 20,000 shares of its common
                  stock to
                  an accredited investor for $10,000 cash for redemption of a
                  warrant.On
                  December 22, 2006 the Company issued 166,667 shares of its common
                  stock to
                  its CEO valued at $30,000 as a result of exercised stock
                  options.On
                  December 27, 2006, the Company issued 19,800 shares of its common
                  stock to
                  an accredited investor for $4,950 cash for redemption of a
                  warrant.On
                  December 27, 2006, the Company issued 10,000 shares of its common
                  stock to
                  an accredited investor for $5,000 cash for redemption of a
                  warrant.







13


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.





ITEM6.
      MANAGEMENT'S DISCUSSION AND ANALYSIS





The
      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.





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
      contract mining will still be a significant, 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 production stage
      company.





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. We have moved into the development and production stage
      of
      this property.





14


Timber





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





FISCAL
      YEAR ENDED DECEMBER 31, 2006 COMPARED TO FISCAL YEAR ENDED DECEMBER
      31,


2005.





Our
      operations for the period ended December 31, 2006, and the period ended December
      31, 2005 consisted mostly of our contracting work, and development and
      exploration activities.





Revenues





Our
      total
      revenues for the period ending December 31, 2006 were $3,800,104, compared
      to
      $628,176 for the period ending December 31, 2005, resulting in a five times
      increase from the same period the previous fiscal year. Our contract mining
      revenue for the period ending December 31, 2006 was $3,799,204 compared to
      $628,176 for the period ended December 31, 2005, or an increase of 500%. We
      received no timber revenue for the period ending December 31, 2006 or the same
      period ended December 31, 2005. We received $900 from halloysite clay sales
      in
      2006 compared to $ 0 for the same period ended December 31, 2005.  The
      revenues recognized from clay sales was from a sample sold during the year
      ended
      December 31, 2006.





Gross
      Profit





Our
      Gross
      profit for the year ended December 31, 2006 was $1,110,574 compared to $76,917
      for the year ended December 31, 2005, resulting in an increase of over 13.4
      times from the same period the previous year. The main reason for this sharp
      increase was the increased contracting sales in 2006, compared to
      2005.





General
      and Administrative Expenditures





Our
      general and administrative expenditures for the period ending December 31,
      2006
      were $991,266 compared to $3,221,583 in 2005, which is a
      69.3%  decrease from the same period the previous fiscal year. The
      reason for this is attributable
      to a reduction in professional fees and streamlining internal processes with
      administrative staff.





Capital
      Expenditures





During
      2006, we increased our assets by $1,550,595 which consisted mostly of
      improvements to the Dragon Mine, and the acquisition of equipment for both
      the
      Dragon Mine and contracting activities.  In 2005, we purchased the
      Dragon Mine in Juab County Utah for $600,000 and added $321,258 to mining,
      milling and related equipment.





Interest
      Payments





Our
      interest payments for the period ending December 31, 2006 were $20,074, compared
      to $65,089 from the same period the previous fiscal year or a decrease of
      69%.  In 2006, all interest payments were related to equipment
      financing. In 2005, we liquidated the American National Mortgage debt, our
      major
      creditor, resulting in a one time interest payment in the settlement of the
      debt.





Exploration
      & Development Expenditures





Our
      exploration expenses for the period ending December 31, 2006 were $2,143,161
      compared to $760,347 for the previous fiscal year, which is an 182% increase
      from the same period the previous fiscal year. The 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, 2006, were ($1,992,922), compared
      to
      ($3,788,265) for the same period ended December 31, 2005, or a 47.4% decrease
      over the same period the previous fiscal year. Although we had more exploration
      and development expenses in 2006, our contracting revenues and gross profit
      helped offset those  expenses and attributed to reduced losses in 2006
      compared to 2005.





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. We intend
      to continue pursuing contracting work and to sell halloysite clay.  If
      necessary, we will selectively harvest timber on our properties to raise the
      necessary funds to continue daily operations.





In
      2006
      and 2005 the contracting work accounted for nearly100% of the total revenues.
      Halloysite clay sales accounted for $900 of the revenue in 2006, while there
      were none in 2005. In 2006 and 2005 timber sales accounted for 0% of
      the
      total revenue. 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
                  have a note payable to a leasing company for a piece of equipment
                  with a
                  $31,905 balance with payments of $2,135 per month at 9.75% interest
                  and
                  maturing in March 2008.We
                  have a note payable to a leasing company for equipment with a $44,944
                  balance with monthly installments of $1,605 at 5.41% interest and
                  maturing
                  in May 2009.We
                  have a note payable to a leasing company for the acquisition of
                  equipment
                  with a $12,096 balance and monthly payments of $676 at 1.35% interest,
                  maturing in June 2008.We
                  have a note payable to a leasing company for the acquisition of
                  equipment
                  with a $16,716 balance and monthly payments of $13,000 at 10% interest
                  and
                  maturing in February 2007.We
                  have a note payable to a leasing company for the acquisition of
                  equipment
                  with a $61,225 balance and monthly payments of $15,573 at 5% interest
                  and
                  maturing in August 2011.We
                  have a note payable to a leasing company for the acquisition of
                  equipment
                  with a $48,250 balance and monthly payments of $7,500 at 25.9%
                  interest
                  and maturing in January 2007.We
                  have a note payable to a lending company for the acquisition of
                  equipment
                  with a $15,822 balance and monthly payments of $479 at 0% interest
                  and
                  maturing in December 2008.We
                  have a note payable to a lending company for the acquisition of
                  equipment
                  with a $23,697 balance and monthly payments of $688 at 7.59% interest
                  and
                  maturing in March 2010.We
                  have a note payable to a private party with a $100,677 balance
                  due in
                  annual installments of between $15,000 to $54,000 with an interest
                  rate of
                  0%.  The note matures in April 2009.We
                  have a note payable to an insurance company with a $77,454 balance
                  due in
                  monthly installments of $12,767 at 8.85% interest and maturing
                  in July
                  2007.




Our
      principal source of cash flow is from our contract mining, which averaged
      $316,675 per month in fiscal year 2006 and $52,348 per month in 2005. Our timber
      and halloysite clay sales were minimal or nonexistent in both 2006 and
      2005.  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, 2006 was
      $1,795,666 compared to $4,178,834 for the same period in 2005, a difference
      of
      $2,383,168. The main difference was the sale of common stock and payoff of
      notes
      payable in 2005.





16


The
      Company realized a use of funds of ($1,582,286) from investing activities for
      the fiscal year ended December 31, 2006, compared to ($799,611) for the same
      period in 2005, a difference of $782,675he main difference is attributed to land
      and
      equipment purchases in 2006 of $1,550,595 compared to $748,861 for the same
      period ended December 31, 2005.





Cash
      flow
      from operating activities for the fiscal year ended December 31, 2006, was
      ($2,212,207) compared to ($1,369,929) for the same period in 2005, a difference
      of $842,278. Although operating losses were less in 2006, accounts receivable
      and depreciation increased considerably compared to the same period ended
      December 31, 2005.





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.





We
      have a
      monthly obligation specific to debt payments of $23,601 per month or $283,217
      for the next fiscal year.





In
      anticipation of the cash needs for the upcoming year, we completed a sale of
      restricted common stock in January 2007 to an affiliate to the
      company.  The transaction was the sale of 1,481,482 shares of common
      stock for $2,000,000 cash.





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


Year
                          Ended December 31,2006
                      
                      
                      2005Net
                          revenues
                      
                      $
                      3,800,104
                      
                      
                      $
                      628,178Cost
                          of revenues
                      
                      $
                      2,689,530
                      
                      
                      $
                      551,259Gross
                          profit
                      
                      $
                      1,110,574
                      
                      
                      $
                      76,917Selling,
                          general and administrative
                      
                      $
                      991,266
                      
                      
                      $
                      3,221,583Gain
                          (Loss) from operations,
                      
                      $
                      (2,023,853
                      )
                      
                      $
                      (3,905,013
                      )Net
                          gain (loss)
                      
                      $
                      (1,992,922
                      )
                      
                      $
                      (3,788,265
                      )




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 CONTINUED, ANNUAL OPERATING LOSSES SINCE SEPTEMBER
      1997.





We
      have experienced annual operating losses since our reactivation in September
      1997. As of December 31, 2006, we had an accumulated deficit of $(11,642,427).
      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.





17


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.





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:





o    Costs
      of bringing each property into production, including exploration work,
      preparation of production feasibility studies, and construction of production
      facilities;





o     Availability
      and costs of financing;





o     Ongoing
      costs of production;





o     Market
      prices for the minerals to be produced;





o     Environmental
      compliance regulations and restraints; and





o     Political
      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 our 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.





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 and CEO,
      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 currently have an employment
      agreement with Mr. Jacobson.  In addition, Dr. Ronald Price, president
      and CEO of our subsidiary, Nano Clay and Technologies, Inc., is employed under
      an employment agreement.  With the exclusion of Mr. Jacobson and Dr.
      Price, we do not have any employment agreements with other officers, directors,
      or employees.





18


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 proceeding with any
      logging program.   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.  At this time, we do not
      currently have any agreements with timber mills.





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.





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 our financial position. 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.





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:




o     a
      risk disclosure document,





o     disclosure
      of market quotations, if any,





o     disclosure
      of the compensation of the broker and its





o     salespersons
      in the transaction, and





o     monthly
      account statements showing the market values of our





o     securities
      held in the customer's accounts.





19


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.





ITEM7.
      FINANCIAL STATEMENTS





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














20


**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, 2006 and 2005 and the related consolidated statements of
        operations, stockholders’ equity and comprehensive loss 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.   An audit also 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, 2006 and 2005 and the results of its operations
        and
        cash flows for the years then ended in conformity with U.S. generally accepted
        accounting principles.
 
 
 
 /S/ Chisholm, Bierwolf & Nilson, LLC
 
 Chisholm,
        Bierwolf & Nilson, LLC
 Bountiful,
        Utah
 February
        2, 2007




F-2




**Atlas
                        Mining Company and Subsidiary**Consolidated
                        Balance Sheets**ASSETS**December
                        31,2006
                    
                    
                    2005Current
                        AssetsCash
                    
                    
                    $
                    217,102
                    
                    
                    $
                    2,215,929Accounts
                        receivable
                    
                    
                    
                    887,494
                    
                    
                    
                    40,173Investments
                        - available for sale
                    
                    
                    3,794
                    
                    
                    
                    3,754Advances
                    
                    
                    
                    618
                    
                    
                    
                    750Mining
                        supplies
                    
                    
                    
                    2,000
                    
                    
                    
                    9,000Deposits
                        and prepaids
                    
                    
                    
                    170,731
                    
                    
                    
                    120,103Total
                        Current Assets
                    
                    
                    
                    1,281,739
                    
                    
                    
                    2,380,709Property
                        and EquipmentLand
                        and tunnels
                    
                    
                    
                    1,225,412
                    
                    
                    
                    1,005,159Land
                        improvements
                    
                    
                    
                    83,987
                    
                    
                    
                    -Buildings
                        and equipment
                    
                    
                    
                    291,214
                    
                    
                    
                    188,192Mining
                        equipment
                    
                    
                    
                    972,060
                    
                    
                    
                    283,999Milling
                        equipment
                    
                    
                    
                    586,979
                    
                    
                    
                    247,714Laboratory
                        equipment
                    
                    
                    
                    74,174
                    
                    
                    
                    5,740Office
                        equipment
                    
                    
                    
                    1,300
                    
                    
                    
                    1,300Vehicles
                    
                    
                    
                    150,952
                    
                    
                    
                    111,259Less:  Accumulated
                        depreciation
                    
                    
                    (408,145
                    )
                    
                    
                    (229,313
                    )Total
                        Property and Equipment
                    
                    
                    2,977,933
                    
                    
                    
                    1,614,050Other
                        AssetsLong-term
                        Note Receivable
                    
                    
                    
                    50,209
                    
                    
                    
                    50,000Total
                        Other Assets
                    
                    
                    
                    50,209
                    
                    
                    
                    50,000Total
                        Assets
                    
                    
                    $
                    4,309,881
                    
                    
                    $
                    4,044,759






F-3






**Atlas
                          Mining Company and Subsidiary**Consolidated
                          Balance Sheets**LIABILITIES
                          AND STOCKHOLDERS' EQUITY**December
                          31,2006
                      
                      
                      2005Current
                          LiabilitiesAccounts
                          payable and accrued liabilities
                      
                      $
                      359,527
                      
                      
                      $
                      101,532Current
                          portion of notes payable
                      
                      
                      229,304
                      
                      
                      
                      12,473Current
                          portion of leases payable
                      
                      
                      49,537
                      
                      
                      
                      26,000Total
                          Current Liabilities
                      
                      
                      638,368
                      
                      
                      
                      140,005Long-Term
                          LiabilitiesNotes
                          payable
                      
                      
                      432,786
                      
                      
                      
                      49,661Leases
                          payable
                      
                      
                      62,776
                      
                      
                      
                      26,000Less:
                          current portion of long-term debt
                      
                      
                      (278,841
                      )
                      
                      
                      (38,473
                      )Total
                          Long-Term Liabilities
                      
                      
                      216,721
                      
                      
                      
                      37,188Minority
                          Interest
                      
                      
                      52,287
                      
                      
                      
                      52,797Commitments
                          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,51,275,539
                          and 48,852,892 shares issued and outstanding, respectively
                      
                      
                      15,209,933
                      
                      
                      
                      13,596,492Accumulated
                          Deficit
                      
                      
                      (11,642,427
                      )
                      
                      
                      (9,649,505
                      )Accumulated
                          other comprehensive income
                      
                      
                      (165,001
                      )
                      
                      
                      (123,218
                      )Total
                          Stockholders' Equity
                      
                      
                      3,402,505
                      
                      
                      
                      3,823,769Total
                          Liabilities and Stockholders' Equity
                      
                      $
                      4,309,881
                      
                      
                      $
                      4,053,759








F-4






**Atlas
                            Mining Company and Subsidiary**Consolidated
                            Statements of OperationsFor
                            the Year EndedDecember
                            31,2006
                        
                        
                        2005Revenues
                            - Contract Mining
                        
                        $
                        3,799,204
                        
                        
                        $
                        628,176Revenues
                            - Mining Production
                        
                        
                        900
                        
                        
                        
                        -Total
                            Revenues
                        
                        
                        3,800,104
                        
                        
                        $
                        628,176Cost
                            of Sales - Contract Mining
                        
                        
                        2,611,819
                        
                        
                        $
                        441,617Cost
                            of Sales - Mining Production
                        
                        
                        77,711
                        
                        
                        
                        98,946Cost
                            of Sales - Timber
                        
                        
                        -
                        
                        
                        
                        10,696Total
                            Cost of Sales
                        
                        
                        2,689,530
                        
                        
                        
                        551,259Gross
                            Profit
                        
                        
                        1,110,574
                        
                        
                        
                        76,917Operating
                            ExpensesExploration
                            & development costs
                        
                        
                        2,143,161
                        
                        
                        
                        760,347General
                            & administrative
                        
                        
                        991,266
                        
                        
                        
                        3,221,583Total
                            Operating Expenses
                        
                        
                        3,134,427
                        
                        
                        
                        3,981,930Net
                            Operating (Loss)
                        
                        
                        (2,023,853
                        )
                        
                        
                        (3,905,013
                        )Other
                            Income(Expense)Interest
                            income
                        
                        
                        30,188
                        
                        
                        
                        26,131Interest
                            expense
                        
                        
                        (20,074
                        )
                        
                        
                        (65,089
                        )Miscellaneous
                            income
                        
                        
                        21,327
                        
                        
                        
                        146Gain
                            (loss) on sale of assets
                        
                        
                        -
                        
                        
                        
                        (3,393
                        )Gain
                            (loss) on settlement of debt
                        
                        
                        -
                        
                        
                        
                        159,098Total
                            Other Income
                        
                        
                        31,441
                        
                        
                        
                        116,893Minority
                            interest
                        
                        
                        (510
                        )
                        
                        
                        (145
                        )(Loss)
                            Before Income Taxes
                        
                        
                        (1,992,922
                        )
                        
                        
                        (3,788,265
                        )Provision
                            (Benefit) for Income Taxes
                        
                        
                        -
                        
                        
                        
                        -Net
                            (Loss)
                        
                        $
                        (1,992,922
                        )
                        
                        $
                        (3,788,265
                        )Net
                            Income (Loss) Per Share (Basic and Diluted)
                        
                        $
                        (0.04
                        )
                        
                        $
                        (0.08
                        )Weighted
                            Average Shares Outstanding
                        
                        
                        49,446,722
                        
                        
                        
                        45,222,704




F-5




**Atlas
                                                    Mining Company and Subsidiary**Consolidated
                                                    Statements of Stockholders' Equity
                                                    and Comprehensive LossFor
                                                    the Years Ended December 31,
                                                    2006 and 2005 (continued)OtherAccumulatedPreferred
                                                  Stock
                                                
                                                
                                                Common
                                                  Stock
                                                
                                                
                                                Accumulated
                                                
                                                
                                                Comprehensive
                                                
                                                
                                                PrepaidShares
                                                
                                                Amount
                                                
                                                
                                                Shares
                                                
                                                
                                                Amount
                                                
                                                
                                                Deficit
                                                
                                                
                                                (Loss)
                                                
                                                
                                                ExpensesBalance,
                                                    January 1, 2005-
                                                
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                
                                                39,892,422
                                                
                                                
                                                $
                                                5,875,436
                                                
                                                
                                                $
                                                (5,861,240
                                                )
                                                
                                                $
                                                174
                                                
                                                
                                                $
                                                (10,000
                                                )-
                                                    Shares issued for Dragon Mine
                                                    lease at $1.00-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                100,000
                                                
                                                
                                                
                                                100,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                --Shares
                                                    issued for settlement of debt
                                                    at $0.60negotiated in January,
                                                    2005-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                175,000
                                                
                                                
                                                
                                                105,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Shares
                                                    issued for cash:$-
                                                  at 0.50-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,000,000
                                                
                                                
                                                
                                                500,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 0.91-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                4,880,090
                                                
                                                
                                                
                                                4,431,122
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 1.02
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                40,000
                                                
                                                
                                                
                                                40,800
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Shares
                                                    issued for services:$-
                                                  at 0.40-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                450,000
                                                
                                                
                                                
                                                180,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 0.50-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                360,000
                                                
                                                
                                                
                                                180,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 0.65-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                7,170
                                                
                                                
                                                
                                                4,661
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 0.80-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                7,200
                                                
                                                
                                                
                                                5,760
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 0.91-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                465,000
                                                
                                                
                                                
                                                423,150
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 0.92-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                30,000
                                                
                                                
                                                
                                                27,600
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 0.95-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                300,000
                                                
                                                
                                                
                                                285,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 0.98-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                140,000
                                                
                                                
                                                
                                                137,200
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 1.01-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                22,420
                                                
                                                
                                                
                                                22,644
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 1.05-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                50,000
                                                
                                                
                                                
                                                52,500
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 1.07-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                250,000
                                                
                                                
                                                
                                                267,500
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 1.10-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                250,000
                                                
                                                
                                                
                                                275,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 1.14-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                62,000
                                                
                                                
                                                
                                                70,680
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Shares
                                                    issued for exercise of warrants:-
                                                    at $0.25-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                371,590
                                                
                                                
                                                
                                                92,898
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                --
                                                    Warrants issued valued at $0.664-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                390,489
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                --
                                                    Stock warrant expense-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                129,053
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                --
                                                    Amortization of prepaid expenses-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                10,000-
                                                    Net loss for the year ended December
                                                    31, 2005-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (3,788,265
                                                )
                                                
                                                
                                                (123,392
                                                )
                                                
                                                
                                                -Balance,
                                                    December 31, 2005-
                                                
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                
                                                48,852,892
                                                
                                                
                                                $
                                                13,596,493
                                                
                                                
                                                $
                                                (9,649,505
                                                )
                                                
                                                $
                                                (123,218
                                                )
                                                
                                                $
                                                -Shares
                                                    issued for services:$-
                                                  at 0.90-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                50,000
                                                
                                                
                                                
                                                45,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 1.40-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                40,500
                                                
                                                
                                                
                                                56,700
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Shares
                                                    issued for exercise of warrants:$-
                                                  at 0.25-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                26,980
                                                
                                                
                                                
                                                6,745
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 0.40-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                750,000
                                                
                                                
                                                
                                                300,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -$-
                                                  at 0.50-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                480,000
                                                
                                                
                                                
                                                240,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                --
                                                    Shares issued for cash at $2.00
                                                    per share-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                340,500
                                                
                                                
                                                
                                                681,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                --
                                                    Shares issued for payment of
                                                    note at $1.25-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                8,000
                                                
                                                
                                                
                                                10,000
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                --
                                                    Shares issued for stock options
                                                    exercised at $0.18-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                726,667
                                                
                                                
                                                
                                                130,800
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
                                                    change in unrealized loss on
                                                    available forsale securities-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (41,783
                                                )
                                                
                                                
                                                -Compensation
                                                    for options issued to employees-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                143,195
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
                                                    loss for the year ended December
                                                    31, 2006-
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (1,992,922
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Balance,
                                                    December 31, 2006-
                                                
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                
                                                51,275,539
                                                
                                                
                                                $
                                                15,209,933
                                                
                                                
                                                $
                                                (11,642,427
                                                )
                                                
                                                $
                                                (165,001
                                                )
                                                
                                                $
                                                -






F-6




**Atlas
                                Mining Company and Subsidiary**Consolidated
                                Statements of Cash FlowsFor
                                the Year EndedDecember
                                31,2006
                            
                            
                            2005Cash
                                Flows from Operating Activities:Net
                                Loss
                            
                            $
                            (1,992,922
                            )
                            
                            $
                            (3,788,265
                            )Adjustments
                                to Reconcile Net Loss to Net CashProvided
                                by Operations:Depreciation
                            
                            
                            178,832
                            
                            
                            
                            80,914Stock
                                issued for services
                            
                            
                            101,700
                            
                            
                            
                            1,931,695Securities
                                received for services
                            
                            
                            (10,000
                            )
                            
                            
                            -Valuation
                                for options and warrants issued for service
                            
                            
                            143,195
                            
                            
                            
                            519,542Amortization
                                of prepaid expenses (equity)
                            
                            
                            -
                            
                            
                            
                            10,000Minority
                                Interest in Loss of Subsidiary
                            
                            
                            510
                            
                            
                            
                            148Loss
                                on sale of assets
                            
                            
                            -
                            
                            
                            
                            3,393Gain
                                on settlement of debt
                            
                            
                            -
                            
                            
                            
                            (159,098
                            )Change
                                in Operating Assets and Liabilities:(Increase)
                                Decrease in:Accounts
                                receivable
                            
                            
                            (847,321
                            )
                            
                            
                            232,842Deposits
                                and prepaids
                            
                            
                            (50,628
                            )
                            
                            
                            (54,365
                            )Inventory
                            
                            
                            7,000
                            
                            
                            
                            -Interest
                                accrued on note receivable
                            
                            
                            (209
                            )
                            
                            
                            -Accounts
                                payable and accrued expenses
                            
                            
                            257,995
                            
                            
                            
                            (146,735
                            )Net
                                Cash Provided Used by Operating Activities
                            
                            
                            (2,211,848
                            )
                            
                            
                            (1,369,929
                            )Cash
                                Flows from Investing Activities:Purchases
                                of land and equipment
                            
                            
                            (1,540,595
                            )
                            
                            
                            (748,861
                            )Purchases
                                of invesments available for sale
                            
                            
                            (31,823
                            )
                            
                            
                            -Proceeds
                                from (payments for) advances
                            
                            
                            132
                            
                            
                            
                            (750
                            )Proceeds
                                (payments) on notes receivable
                            
                            
                            -
                            
                            
                            
                            (50,000
                            )Net
                                Cash Used by Investing Activities
                            
                            
                            (1,572,286
                            )
                            
                            
                            (799,611
                            )Cash
                                Flows from Financing Activities:Proceeds
                                from notes payable
                            
                            
                            669,001
                            
                            
                            
                            210,979Proceeds
                                from leases payable
                            
                            
                            113,769
                            
                            
                            
                            39,500Payments
                                for notes payable
                            
                            
                            (279,015
                            )
                            
                            
                            (1,122,964
                            )Payments
                                for leases payable
                            
                            
                            (76,993
                            )
                            
                            
                            (13,500
                            )Proceeds
                                from exercised stock options
                            
                            
                            130,800
                            
                            
                            
                            -Proceeds
                                from issuance of common stock
                            
                            
                            1,227,745
                            
                            
                            
                            5,064,819Net
                                Cash Provided (Used) by Financing Activities
                            
                            
                            1,785,307
                            
                            
                            
                            4,178,834Increase
                                (Decrease) in cash
                            
                            $
                            (1,998,827
                            )
                            
                            $
                            2,009,294***(CONTINUED
                                NEXT PAGE)***


F-7




**Atlas
                                    Mining Company and Subsidiary**Consolidated
                                    Statements of Cash FlowsFor
                                    the Year EndedDecember
                                    31,2006
                                
                                
                                2005***(CONTINUED
                                    FROM PREVIOUS PAGE)***Increase
                                    (Decrease) in Cash
                                
                                $
                                (1,998,827
                                )
                                
                                $
                                2,009,294Cash
                                    and Cash Equivalents at Beginning of Period
                                
                                
                                2,215,929
                                
                                
                                
                                206,635Cash
                                    and Cash Equivalents at End of Period
                                
                                $
                                217,102
                                
                                
                                $
                                2,215,929Supplemental
                                    Disclosure of Cash Flows Information:Cash
                                    Paid For:Interest
                                
                                $
                                20,074
                                
                                
                                $
                                65,089Income
                                    Taxes
                                
                                $
                                -
                                
                                
                                $
                                -Supplemental
                                    Disclosure of Non-Cash Investing and Financing
                                    Activities:Stock
                                    issued for services
                                
                                $
                                101,700
                                
                                
                                $
                                1,931,695Stock
                                    issued for land
                                
                                $
                                10,000
                                
                                
                                $
                                -Warrants
                                    issued for services
                                
                                $
                                -
                                
                                
                                $
                                390,489Stock
                                    issued for notes payable
                                
                                $
                                -
                                
                                
                                $
                                105,000Stock
                                    issued for Dragon Mine
                                
                                $
                                -
                                
                                
                                $
                                100,000








F-8






**Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 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, 2006, 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.  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
        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.  An initial payment was made
        in the amount of 400,000 shares of our common
   F-9
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        1
        -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 stock,
        valued at $100,000, for a one-year lease. Under the terms of the lease
        agreement, the right to renew the lease annually in exchange for 100,000
        additional shares of common stock existed.  As an alternative, there
        was an option to purchase the property for $500,000 if  $1,000,000 in
        sales revenue from the mine was recognized in a 12-month period.  On
        August 18, 2005, the option to purchase the Dragon Mine for $500,000 was
        exercised. The property consists of 38 patented mining claims on approximately
        230 acres.
 
 The
        Company has 10,000,000 shares of preferred stock authorized at $1.00 par
        value.
        No preferred shares are issued and outstanding at December 31, 2006 and 2005.
        The stock is nonvoting, nonconvertible, and noncumulative.
 
 The
        Company has 60,000,000 shares of common stock authorized with no par value.
        All
        common shares are entitled to one vote per share in all matters submitted
        to the
        shareholders.
 
 b.  Revenue
        Recognition
 
 Revenue
        is recognized when earned. The Company's revenue recognition policies are
        in
        compliance with 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 reasonably assured 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.
 
 c.  Accounts
        Receivable
 
 Accounts
        receivable are carried at original invoice amount less an estimate made for
        doubtful receivables based on a review of all outstanding amounts on a monthly
        basis.  Specific reserves are estimated by management based on certain
        assumptions and variables, including the customer’s financial condition, age of
        the customer’s receivables, and changes in payment histories.  As of December
          31, 2006 and 2005, no allowance for doubtful accounts was considered
          necessary.  Trade receivables are written off when deemed
          uncollectible.  Recoveries of trade receivables previously written off
          are recorded when received.
  F-10
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        1
        -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  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, 2006 and 2005 the Company held a 53% ownership interest in Park Copper
&
Gold.  A minority interest has been recorded as a liability, and is based
        on the allocation of the initial cost of the investment allocated over the
        underlying assets and liabilities at the time of the acquisition, and increased
        or decreased annually by 47% of the net income or loss recognized by the
        subsidiary.  All significant inter-company transactions between the parent
        and subsidiary have been eliminated in consolidation.
 
 e.  Earnings
        (Loss) Per Share
 
 The
        computation of earnings (loss) per
        share of common stock is based on the weighted average number of shares
        outstanding at the date of the financial statements.  The computation
        of diluted earnings per common share is based on the weighted average number
        of
        shares outstanding during the year plus the common stock equivalents 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 3,773,333 in options
        and 323,430 in warrants were considered but were not included in the computation
        of loss per share at December 31, 2006 and 2005 because they would have been
        anti-dilutive.
 
 
 Net
                                              Loss
                                          
                                          
                                          Shares
                                          
                                          
                                          Per-Share(Numerator)
                                          
                                          
                                          (Denominator)
                                          
                                          
                                          AmountFor
                                              the year ended December 31, 2006:Basic
                                              EPSNet
                                              loss to common shareholders
                                          
                                          $
                                          (1,929,922
                                          )
                                          
                                          
                                          49,446,722
                                          
                                          
                                          $
                                          (0.04
                                          )For
                                              the year ended December 31, 2005:Basic
                                              EPSNet
                                              loss to common shareholders
                                          
                                          $
                                          (3,788,265
                                          )
                                          
                                          
                                          45,222,704
                                          
                                          
                                          $
                                          (0.08
                                          )
  
 F-11
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        1
        -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 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
 
 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.
  2006
                                      
                                      
                                      2005Deferred
                                          Tax Assets:Net
                                          Operating Loss Carry-forwards
                                      
                                      $
                                      3,958,425
                                      
                                      
                                      $
                                      3,280,832Contribution
                                          Carry-forwards
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Tax
                                          over Book Depreciation
                                      
                                      
                                      10,857
                                      
                                      
                                      
                                      6,750Unrealized
                                          Loss on Available for Sale Securities
                                      
                                      
                                      (41,857
                                      )
                                      
                                      
                                      (123,392Total
                                          Deferred Tax Assets
                                      
                                      
                                      3,927,499
                                      
                                      
                                      
                                      3,164,190Valuation
                                          Allowance for Deferred Tax Assets
                                      
                                      
                                      (3,927,499
                                      )
                                      
                                      
                                      (3,164,190
                                      )Total
                                          Deferred Tax Asset (Liability)
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -The
                                          components of income tax expense are as
                                          follows:Current
                                          Federal Tax
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Current
                                          State Tax
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Change
                                          in NOL Benefit
                                      
                                      
                                      677,593
                                      
                                      
                                      
                                      1,288,010Change
                                          in Allowance
                                      
                                      
                                      (677,593
                                      )
                                      
                                      
                                      (1,288,010
                                      )
 
 At
        December 31, 2006, the Company has net operating losses of approximately
        $9,924,239 which expire from 2007 through 2020.
   F-12
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        1
        -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 h.  Available
        for Sale Investments
 
 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, 2005
                          
                          $
                          19,364Marketable
                              securities received
                          
                          
                          107,608Net
                              unrealized losses
                          
                          
                          (123,218
                          )Balance,
                              December 31, 2005
                          
                          
                          3,754Marketable
                              securities received for services and debt repayment
                              in
                              2006
                          
                          
                          41,823Net
                              unrealized losses
                          
                          
                          (41,783
                          )Balance,
                              December 31, 2006
                          
                          $
                          3,794
 
 i.  Mining
        Supplies
 
 Mining
        supplies, consisting primarily of bits, steel, and other mining related
        equipment, are charged to cost of goods sold upon acquisition as the items
        purchased are used within thirty days. In addition, equipment repair parts
        and
        maintenance items are also included at cost.  The amounts held in
        mining supplies at December 31, 2006 and 2005 were $2,000 and $9,000,
        respectively, and consisted of mining equipment parts.
 
 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.
  F-13
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        1
        -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
 k.  Property
        and Equipment
 
 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:
   EstimatedUseful
                          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, 2006 and 2005, no impairments were
        recognized.  Depreciation expense for the years ended December 31,
        2006 and 2005 totaled $178,832 and $80,914, respectively and
        was
        included in general and administrative expenses in the statement of operations
        for December 31, 2006 and 2005.
 
 l.  Fair
        Value of Financial Instruments
 
 The
        recorded amounts of financial instruments, including cash equivalents, available
        for sale securities, receivables, investments, accounts payable and accrued
        expenses, and long-term debt approximate their market values as of December
        31,
        2006 and 2005.  The Company has no investments in derivative financial
        instruments. (See Note 1h).
 
 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, 2006, all costs associated with the Company's mines have been
        expensed. During the year ended December 31, 2006, the Company recognized
        revenue of $900 from the sale of halloysite clay.
   F-14
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        1
        -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 
  n.  Stock
        Options and Warrants
  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. For the years ended December 31, 2006 and 2005, expense totaling
        $143,195 and $519,542, respectively, has been recorded to recognize compensation
        related to outstanding stock options and warrants available for
        exercise.
  o.  Concentration
        of Risk
 
 The
        Company maintains cash balances in two checking accounts at two separate
        financial institutions.  At December 31, 2006 and 2005, total cash
        balances were $217,102 and $2,215,929, respectively.  Such funds
        exceed Federal Deposit Insurance Corporation limits, and amounts exceeding
        $100,000 are not insured.
  The
        Company receives 90% of contract service revenue from two
        customers.  For the year ended December 31, 2006, customers who
        account for 10% or more of revenues are presented as follows:
  %
                                    ofCustomers
                                
                                RevenuesCustomer
                                    A
                                
                                
                                75
                                %Customer
                                    B
                                
                                
                                16
                                %
 
 NOTE
        2 –
RELATED PARTY TRANSACTIONS
  In
        December 2005, the Company loaned $50,000 to Clearwater Mines, Inc., a related
        party.  Interest accrues on the loan at federal applicable rates at
        the mid-term rate.  During the year ended December 31, 2006, $209 was
        accrued on the note as interest expense.  The note was paid in full in
        January 2007 (see Note 8).
  F-15
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        3 –
NOTES PAYABLE
 
 Notes
        payable are detailed in the following schedules as of December 31, 2006
        and  2005:
  December
                                  31,
                              
                              
                              December
                                  31,2006
                              
                              
                              2005Note
                                  payable to a company, due inmonthly
                                  installments of $2,135, includinginterest
                                  at 9.75%.  The note matures in March2008
                                  and is collateralized equipment.
                              
                              $
                              31,905
                              
                              
                              $
                              -Note
                                  payable to a company, due inmonthly
                                  installments of $1,605, includinginterest
                                  at 5.41%.  The note matures in May2009
                                  and is collateralized equipment.
                              
                              
                              44,944
                              
                              
                              
                              -Note
                                  payable to a company, due inmonthly
                                  installments of $676, includinginterest
                                  at 1.35%.  The note matures in June2008
                                  and is collateralized equipment.
                              
                              
                              12,096
                              
                              
                              
                              -Note
                                  payable to a company, due inmonthly
                                  installments of $13,000, includinginterest
                                  at 10%.  The note matures in February2007
                                  and is collateralized equipment.
                              
                              
                              16,716
                              
                              
                              
                              -Note
                                  payable to a company, due inannual
                                  installments of $15,573, includinginterest
                                  at 5%.  The note matures in August2011
                                  and is collateralized equipment.
                              
                              
                              61,225
                              
                              
                              
                              -Note
                                  payable to a company, due inmonthly
                                  installments of $7,500, includinginterest
                                  at 25.9%.  The note matures in January2007
                                  and is collateralized equipment.
                              
                              
                              48,250
                              
                              
                              
                              -Note
                                  payable to a company, due inmonthly
                                  installments of $479, includinginterest
                                  at 0%.  The note matures in December2008
                                  and is collateralized equipment.
                              
                              
                              15,822
                              
                              
                              
                              -Note
                                payable to a company, due inmonthly
                                installments of $688, including interestat
                                7.59%.  The note matures in March 2010 andis
                                collateralized by a vehicle.
                              
                              
                              23,697
                              
                              
                              
                              29,888Note
                                payable to a private party, due in annualinstallments
                                of between $15,000 to $54,000.The
                                note matures in April 2009 and iscollateralized
                                by property with mineral rights.
                              
                              
                              100,677
                              
                              
                              
                              -Note
                                payable to an insurance company, due inmonthly
                                installments of $12,767.  The note maturesin
                                July 2007.
                              
                              
                              19,773
                              
                              
                              
                              49,661Total
                                Notes Payable
                              
                              
                              432,786
                              
                              
                              
                              49,661Less
                                Current Portion
                              
                              
                              (229,304)
                              
                              
                              
                              (25,973)Total Long-Term Liabilities
                              
                              $
                              203,482
                              
                              
                              $
                              23,688
   Future
                            minimum principal payments on notes payable are as
                            follows:2007
                          
                          
                          $
                          229,3042008
                          
                          
                          
                          881,8752009
                          
                          
                          
                          88,4802010
                          
                          
                          
                          18,7862011
                          
                          
                          
                          14,341Thereafter
                          
                          
                          
                          0Total
                          
                          
                          $
                          432,786
 
 NOTE
        4
        - STOCK OPTIONS AND WARRANTS TO PURCHASE COMMON STOCK
  Stock
        Options
 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.
   F-16
  **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        4
        -  STOCK OPTIONS AND WARRANTS TO PURCHASE COMMON
        STOCK  (continued)
 
 
 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, 2006, no options have been granted under
        this plan.
 
 The
        Company is authorized to issue stock options under one existing stock option
        plan approved by stockholders. The fair value of each of the Company’s stock
        option awards is estimated on the date of grant using a Black-Scholes
        option-pricing model that uses the assumptions noted in the table
        below.  Expected volatility is based on an average of historical
        volatility of the company’s stock.  The risk-free interest rate for
        periods within the contractual life of the stock option award is based on
        the
        yield curve of a zero-coupon U.S. Treasury bond on the date the award is
        granted
        with a maturity equal to the expected term of the award.  The Company
        uses historical data to estimate forfeitures within its valuation
        model.
 
 The
        expected term of awards granted is derived from historical experience under
        the
        Company’s stock-based compensation plans and represents the period of time that
        awards granted are expected to be outstanding.
 
 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.
  During
        2006, the Company’s board of directors approved an option to the CEO of the
        Company’s wholly owned subsidiary, Nano Clay and Technologies, Inc., to acquire
        up to one million shares of common stock over a two year period.  The
        first 500,000 shares are exercisable at $1.51 per share and
        the
        remaining 500,000 shares are exercisable at 85% of the common stock price
        on
        given anniversary dates.  These options were issued under the
        non-qualified stock option plan.  The options vested 25% on July 14,
        2006, and will continue to vest in 25% increments on January 14, 2007, July
        14,
        2007, and January 14, 2008.
   F-17
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        4
        -    STOCK OPTIONS AND WARRANTS TO PURCHASE COMMON
        STOCK  (continued)
 
 
 The
        significant weighted average assumptions relating to the valuation of the
        Stock
        Options for the Company’s subsidiary’s CEO from the option issuance on July 14,
        2006 through the December 31, 2006 were as follows:
 
 2006Dividend
                                                                        Yield
                                                                    
                                                                    
                                                                    0
                                                                    %Expected
                                                                        Life
                                                                    
                                                                    1.5
                                                                        yearsExpected
                                                                        Volatility
                                                                    
                                                                    
                                                                    59
                                                                    %Risk-Free
                                                                        Interest
                                                                        Rate
                                                                    
                                                                    
                                                                    4.90
                                                                    %
 A
        summary
        of the status of the options granted under the Company’s 1998 stock option plan
        and other agreements and changes for the year ended December 31, 2006 and
        2005,
        are as follows:
  December
                                                                                                                                                                          31,
                                                                                                                                                                          2006
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      December
                                                                                                                                                                          31,
                                                                                                                                                                          2006Shares
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      Weighted
                                                                                                                                                                          Average
Exercise
                                                                                                                                                                          Price
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      Shares
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      Weighted
                                                                                                                                                                            Average
                                                                                                                                                                          Exercise
                                                                                                                                                                            PriceOutstanding
                                                                                                                                                                          at
                                                                                                                                                                          beginning
                                                                                                                                                                          of
                                                                                                                                                                          period
                                                                                                                                                                      
                                                                                                                                                                      3,500,000
                                                                                                                                                                      
                                                                                                                                                                      $
                                                                                                                                                                      0.18
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      3,500,000
                                                                                                                                                                      
                                                                                                                                                                      $
                                                                                                                                                                      0.181,000,000
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      1.59
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      -
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      1.59726,667
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      0.18
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      -
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      0.18-
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      -
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      -
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      --
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      -
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      -
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      -3,773,333
                                                                                                                                                                      
                                                                                                                                                                      $
                                                                                                                                                                      0.49
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      3,500,000
                                                                                                                                                                      
                                                                                                                                                                      $
                                                                                                                                                                      0.181,523,333
                                                                                                                                                                      
                                                                                                                                                                      $
                                                                                                                                                                      0.59
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      
                                                                                                                                                                      1,500,000
                                                                                                                                                                      
                                                                                                                                                                      $
                                                                                                                                                                      0.18
  A
        summary
        of the status of the options outstanding at December 31, 2006 is presented
        below:
 
 Options
                                  Outstanding
                              
                              
                              Options
                                  ExercisableRange
                                  of
                                Exercise
                                  Price
                              
                              
                              Number
                                  Outstanding
                              
                              Weighted-Average
                                RemainingContractual
                                  Life
                              
                              Weighted
                                  Average
                                Exercise
                                  Price
                              
                              
                              Number
                                Exercisable
                              
                              
                              Weighted-Average
                                Exersice
                                  Price$
                              0.18
                              
                              
                              
                              2,773,333
                              
                              3.75
                                  years
                              
                              $
                              0.18
                              
                              
                              
                              1,273,333
                              
                              
                              $
                              0.18$
                              1.59
                              
                              
                              
                              1,000,000
                              
                              1.50
                                  years
                              
                              $
                              1.59
                              
                              
                              
                              250,000
                              
                              
                              $
                              1.593,773,333
                              
                              
                              
                              
                              
                              
                              
                              
                              1,523,333
   F-18
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        4
        -     STOCK OPTIONS AND WARRANTS TO PURCHASE COMMON
        STOCK  (continued)
 
 The
        Company had 1,995,000 non-vested options at the beginning of the period with
        a
        weighted average grant date fair value of $0.269.  At December 31,
        2006 the Company had 1,518,333 non-vested options with a weighted average
        grant
        date fair value of $0.62.
 
 The
        total
        intrinsic value of options exercised during years December 31, 2006 and 2005
        was
        $1,065,467 and $0, respectively.  Intrinsic value is measured using
        the fair market value at the date of exercise (for shares exercised) or at
        December 31, 2006 and 2005 (for outstanding options), less the applicable
        exercise price.  During the year ended December 31, 2006 and 2005,
        amounts expensed for stock option and warrants was $143,195 and $519,542,
        respectively.
 
 Stock
        Warrants
 During
        2005, the Company granted warrants to purchase up to 1,174,000 of its common
        shares at between $0.25 to $0.50 per share expiring in January 2007 with
        a
        calculated weighted average fair value of $0.44 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-19
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        4
        -    OPTIONS AND WARRANTS TO PURCHASE COMMON
        STOCK  (continued)
 
 A
        summary
        of the status of the warrants granted at December 31, 2006 and 2005, and
        changes
        during the years then ended is presented below:
 
 December
                                                  31, 2006
                                              
                                              
                                              December
                                                  31, 2005Shares
                                              
                                              
                                              Weighted
                                                  Average Exercise Price
                                              
                                              
                                              Shares
                                              
                                              
                                              Weighted
                                                  Average Exercise PriceOutstanding
                                                  at beginning of period
                                              
                                              
                                              1,580,980
                                              
                                              
                                              $
                                              0.45
                                              
                                              
                                              
                                              1,504,000
                                              
                                              
                                              $
                                              0.37Granted
                                              
                                              
                                              
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,174,000
                                              
                                              
                                              
                                              0.44Exercised
                                              
                                              
                                              (1,256,980
                                              )
                                              
                                              
                                              0.38
                                              
                                              
                                              
                                              (97,020
                                              )
                                              
                                              
                                              0.25Forfeited
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Expired
                                              
                                              
                                              (20,000
                                              )
                                              
                                              
                                              0.50
                                              
                                              
                                              
                                              (1,000,000
                                              )
                                              
                                              
                                              0.35Outstanding
                                                  at end of Period
                                              
                                              
                                              304,000
                                              
                                              
                                              $
                                              0.50
                                              
                                              
                                              
                                              1,580,980
                                              
                                              
                                              $
                                              0.45Exercisable
                                                  at end of Period
                                              
                                              
                                              304,000
                                              
                                              
                                              $
                                              0.50
                                              
                                              
                                              
                                              1,580,980
                                              
                                              
                                              $
                                              0.45
  A
        summary
        of the status of the warrants outstanding at December 31, 2006 is presented
        below:
  Options
                                    Outstanding
                                
                                
                                Options
                                    ExercisableRange
                                    of
                                  Exercise
                                    Price
                                
                                
                                Number
                                    Outstanding
                                
                                Weighted-Average
                                  RemainingContractual
                                    Life
                                
                                Weighted
                                    Average
                                  Exercise
                                    Price
                                
                                
                                Number
                                  Exercisable
                                
                                
                                Weighted-Average
                                  Exersice
                                    Price$
                                0.50
                                
                                
                                
                                304,000
                                
                                0.08 years
                                
                                $
                                0.50
                                
                                
                                
                                304,000
                                
                                
                                $
                                0.50304,000
                                
                                
                                
                                
                                
                                
                                
                                
                                304,000
    F-20
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        5 –
STOCKHOLDERS’ EQUITY
 
 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.  In addition, 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.
 
 During
        the year ended December 31, 2006, the Company recognized the following
        transactions related to common stock:
  1.
              50,000
                  shares of restricted stock at $0.90 per share were issued in payment
                  for
                  services.
 2.
              8,000
                  shares of restricted stock at $1.25 per share were issued for payment
                  on a
                  note payable.
 3.
              40,500
                  shares of stock were issued to selected employees at $1.40 per
                  share as a
                  year end stock bonus.
 4.
              726,667
                  shares of restricted stock were issued as a result of stock options
                  being
                  exercised at $0.18 per share.
 5.
              1,256,980
                  shares of restricted stock were sold for cash through the exercise
                  of
                  warrants at a price ranging between $0.25 to $0.50 per
                  share.
 6.
              340,500
                  shares of restricted stock were sold for cash at $2.00 per
                  share.
 
 NOTE
        6 –
CAPITAL LEASES
 
 The
        company leases equipment under capital leases that expire in March through
        December 2008.  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,
                                                    
                                                    
                                                    December
                                                        31,2006
                                                    
                                                    
                                                    2005Mining
                                                        Equipment
                                                    
                                                    $
                                                    100,363
                                                    
                                                    
                                                    $
                                                    39,500Total
                                                    
                                                    
                                                    100,363
                                                    
                                                    
                                                    
                                                    39,500Less
                                                        Accumulated Depreciation
                                                    
                                                    
                                                    (11,657
                                                    )
                                                    
                                                    
                                                    (420
                                                    ))Net
                                                        Leased Equipment
                                                    
                                                    $
                                                    88,706
                                                    
                                                    
                                                    $
                                                    39,080
  The
        Company depreciates its leases over the estimated useful life of the
        equipment.  Depreciation expense was $11,657 and $420 for the periods
        ended December 31, 2006 and 2005, respectively and
        were
        included in general and administrative expenses in the statements of operation
        for December 31, 2006 and 2005.
   F-21
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        6 –
CAPITAL LEASES (Continued)
 
 During
        the year ended December 31, 2006, the Company concluded payment of a capital
        lease.  Such lease contained a purchase clause that the Company
        exercised.
  The
                            future minimum lease payments are as follows for the
                            twelve-month periods
                            ended:December
                            31,
                        
                        Amount
                          Due2007
                        
                        $
                        53,9132008
                        
                        
                        13,4782009
                        
                        
                        -2010
                        
                        
                        -2011
                        
                        
                        -Thereafter
                        
                        
                        -Total
                            minimum obligations
                        
                        
                        67,391Executory
                            costs and interest
                        
                        
                        (4,615
                        )PV
                            of minimum obligations
                        
                        
                        62,776Current
                            portion
                        
                        
                        (49,537
                        )Long-term
                            obligations
                        
                        
                        13,239
  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.
   F-22
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        7 -
        COMMITMENTS AND CONTINGENCIES (Continued)
 
 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.
 
 On
        April
        3, 2006, the Company entered into an agreement to obtain the property and
        mineral rights of the Handcamp property located in Newfoundland,
        Canada.  The terms of the agreement include payment of a four year
        note, beginning in 2006, and such payments are in the form of both cash and
        the
        Company’s common stock.  The agreement was valued at $117,757 on the
        date of signing.  During the year ended December 31, 2006, $7,080 in
        cash and 8,000 shares of the Company’s stock valued at $1.25, or $10,000, was
        paid on the note.
 
 NOTE
        8 –
SEGMENT REPORTING
 
 The
        Company's Chief Operating Decision-maker, as defined in SFAS No. 131, is
        considered to be Atlas' 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
        2005 to 2006 as follows:  (i) contract mining, (ii) mining production,
        and (iii) timber.
 
 F-23
 **Atlas
          Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        8 –
SEGMENT REPORTING (continued)
 
 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
                        31,2006
                    
                    
                    2005**Contract
                        Mining:**Net
                        Revenue
                    
                    $
                    3,799,204
                    
                    
                    $
                    628,176Operating
                        ExpensesCost
                        of Sales
                    
                    
                    2,611,819
                    
                    
                    
                    441,617General
                        & Administrative
                    
                    
                    495,633
                    
                    
                    
                    1,522,268Total
                        Operating Expenses
                    
                    
                    3,107,452
                    
                    
                    
                    1,963,885Net
                        Operating
                      Profit
                        (Loss)
                    
                    $
                    691,752
                    
                    
                    $
                    (1,335,709
                    )Capital
                        Expenditures:
                    
                    $
                    726,275
                    
                    
                    $
                    41,721Depreciation:
                    
                    $
                    66,895
                    
                    
                    $
                    4,316Total
                        Assets:
                    
                    $
                    2,591,934
                    
                    
                    $
                    198,320
 
 **Mining
                      Production:**Net
                      Revenue
                  
                  $
                  900
                  
                  
                  $
                  -Operating
                      ExpensesCost
                      of Sales
                  
                  
                  77,711
                  
                  
                  
                  98,946Exploration
                      & Development Costs
                  
                  
                  2,143,161
                  
                  
                  
                  760,347General
                      & Administrative
                  
                  
                  495,633
                  
                  
                  
                  1,397,712Total
                      Operating Expenses
                  
                  
                  2,716,505
                  
                  
                  
                  2,257,005Net
                      Operating (Loss)
                  
                  $
                  (2,715,605
                  )
                  
                  $
                  (2,257,005
                  )Capital
                      Expenditures:
                  
                  $
                  84,319
                  
                  
                  $
                  707,140Depreciation:
                  
                  $
                  111,937
                  
                  
                  $
                  76,598Total
                      Assets:
                  
                  $
                  1,312,537
                  
                  
                  $
                  3,465,813
   F-24
 **Atlas
        Mining Company and Subsidiaries**
 Notes
        to
        the Consolidated Financial Statements
 December
        31, 2006 and 2005
 
 NOTE
        8 –
SEGMENT REPORTING (continued)
 **Timber:**Net
                        Revenue
                    
                    $
                    -
                    
                    
                    $
                    -Operating
                        ExpensesCost
                        of Sales
                    
                    
                    -
                    
                    
                    
                    10,696General
                        & Administrative
                    
                    
                    -
                    
                    
                    
                    301,603-
                    
                    
                    
                    312,299Net
                        Operating (Loss)
                    
                    $
                    -
                    
                    
                    $
                    (312,299
                    )Capital
                        Expenditures:
                    
                    $
                    -
                    
                    
                    $
                    -Depreciation:
                    
                    $
                    -
                    
                    
                    $
                    -Total
                        Assets:
                    
                    $
                    405,410
                    
                    
                    $
                    405,410
 
 **Consolidated
                        on Financial Statements:**Total
                        Revenues
                    
                    $
                    3,800,104
                    
                    
                    $
                    628,176Operating
                        ExpensesTotal
                        Cost of Sales
                    
                    
                    2,689,530
                    
                    
                    
                    551,259Exploration
                        & development costs
                    
                    
                    2,143,161
                    
                    
                    
                    760,347Total
                        General & Administrative
                    
                    
                    991,266
                    
                    
                    
                    3,221,583Total
                        Operating Expenses
                    
                    
                    5,823,957
                    
                    
                    
                    4,453,189Net
                        Operating (Loss)
                    
                    $
                    (2,023,853
                    )
                    
                    $
                    (3,905,013
                    )Capital
                        Expenditures:
                    
                    $
                    1,550,594
                    
                    
                    $
                    748,861Depreciation:
                    
                    $
                    178,832
                    
                    
                    $
                    80,914Total
                        Assets
                    
                    $
                    4,309,881
                    
                    
                    $
                    4,069,543
 
 NOTE
        9 –
SUBSEQUENT EVENTS
 
 In
        January 2007, the Company entered into a subscription agreement with an investor
        where the company received $2,000,000 in exchange for 1,481,482 shares of
        common
        stock.
 
 Also
        in
        January 2007, the Company accepted shares 502,094 shares of stock from a
        related
        party that owed $50,209 at December 31, 2006.  The acceptance of the
        stock was for the balance owing in full.
 
 Warrants
        totaling 323,430 shares of the Company’s common stock were exercised during the
        month of January 2007.  Total proceeds from warrants exercised was
        $160,858.
  NOTE
            10 –
ALLEVIATION OF GOING CONCERN
 
 At
            December 31, 2005, the Company disclosed that there was substantial doubt
            about  its ability to continue as a going concern.   In
            the financial statements at December 31, 2005, the Company disclosed
            the
            following:
 
 “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.”
 
 During
            the year ended December 31, 2006, the Company has achieved a positive
            working
            capital, and net losses have decreased by more than $1.8 million. In
            addition,
            subsequent to December 31, 2006, the Company has collected cash on their
            accounts receivable in the amount of $887,494.   The Company also
            has two continuing contracts in the contract mining division that has
            provided
            continued positive cash flows, and, subsequent to year end, the Company
            has
            received funding through private placement and exercised warrants totaling
            $2,160,858.  These events will help the Company in alleviating their
            negative cash flows from operations during the 2007 year.


F-25


ITEM8.
      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, Chisolm, 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 Chisolm, Bierwolf & Nilson, LLC as its
      auditor for the foreseeable future.





ITEM8A
      CONTROLS AND PROCEDURES





As
      of
      December 31, 2006, 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.





ITEM8B     OTHER
      INFORMATION





On
      October 1, 2004, we entered into 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.





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.





Bonus
      payments will be no more than
      40% of Mr. Jacobson’s 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.





45


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 hereunder; 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.





On
      March 21, 2006, Nano Clay and
      Technologies, Inc. (a wholly owned subsidiary of Atlas Mining Company) entered
      into an employment agreement with Dr. Ronald Price, who was earlier appointed
      a
      director of Atlas Mining Company on July 12, 2005.





Pursuant
      to the Agreement, Dr. Price
      shall be employed for three years as Nano’s President and Chief Executive
      Officer, and will also continue as a member of the Nano and Atlas Mining
      Company's Board of Directors.
      Dr. Price shall be paid compensation as follows:  (i) for the first
      year of the term of employment, a salary at the annual rate of
      $150,000;   (ii) for the second year, a salary at the annual rate
      of $175,000; and (iii) for the third year of the Term of Employment, a salary
      at
      the annual rate of $200,000. Dr. Price is also entitled to 20% ownership of
      any
      patents filed by him on behalf of the Company. In the event of a consolidation
      or merger of the Company, or transfer of  substantially all of the
      Company assets, into such another entity, Dr. Price may, within 180 days of
      such
      consolidation or merger, deem such a merger or consolidation an involuntary
      termination of his employment and be paid an


amount
      equal to his annual base salary at the time of termination.








46


PARTIII





ITEM9.
      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL
      PERSONS AND CORPORATE GOVERNANCE; 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
              60
              Chairman
                  of the Board, Chief Executive Officer, Chief Financial Officer,
                  DirectorJack
                  Harvey
              85
              Vice
                  President, DirectorKurt
                  Hoffman
              41
              Treasurer,
                  DirectorRonald
                  Price
              58
              DirectorMarqueta
                  Martinez
              57
              Secretary


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





BUSINESS
      EXPERIENCE





WILLIAM
      T. JACOBSON, PRESIDENT, CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL; OFFICER,
      DIRECTOR.  Mr. Jacobson has been Chairman of the Board and Chief
      Executive Officer and Chief Financial 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),
      an
      unrelated entity.





JOHN
      "JACK" HARVEY, VICE PRESIDENT, DIRECTOR. Mr. Harvey has been Vice President
      of
      Atlas Mining Company since 1987, and a director since 1997. He received his
      mining engineering degree from Montana Tech. He worked in Butte, Montana with
      Anaconda and Arco until he retired 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 director since 1997.  Mr. Hoffman 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 a director of Atlas Mining Company
      in 2005, and president of its subsidiary, Nano Clay and Technologies,
      Inc..  He 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  Atlas Mining
      Company since 1997, and works as a full time employee for the Company. She
      has
      worked in the mining industry since 1983, and for Atlas since 1997. Ms. Martinez
      is also a past treasurer and past board member 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.





47


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 2006 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:  Kurt Hoffman and Ronald Price
      failed to timely file Form 5’s within 45 days of the end of fiscal
      2006.





ITEM10.
      EXECUTIVE COMPENSATION





COMPENSATION
      DISCUSSION AND ANALYSIS


Name
                                and Principal Position
                            Year
                            
                            Salary
                              ($)
                            
                            
                            Bonus
                              ($)
                            
                            
                            StockAwards
                              ($)
                            
                            
                            OptionAwards($)
                            
                            
                            Non-
                                Equity
                              Incentive
                                Plan
                              Compensation
                              ($)
                            
                            
                            Nonqualified
                            
                            
                            AllWilliam
                                Jacobson
                            12/31/2006
                            
                            $
                            120,000
                            
                            
                            $
                            -
                            
                            
                            $
                            30,000
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -President,
                              CEO,
                                CFO
                            12/31/2005
                            
                            $
                            120,000
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -Ronald
                                Price,
                            12/31/2006
                            
                            $
                            118,750
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            58,466
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -President,
                                CEO
                              Nano
                                Clay and Technologies, Inc.
                            12/31/2005
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -Ronald
                                Short,
                            12/31/2006
                            
                            $
                            66,644
                            
                            
                            $
                            14,000
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -Operations
                                Manager,
                              Atlas
                                Fausett Cpntracting
                            12/31/2005
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -






48




Name
                    
                    Number
                        of
                      Securities
                      Underlying
                      Unexercised
                      Options
                      (#)
                      Exercisable
                    
                    
                    Number
                        of
                      Securities
                      Underlying
                      Unexercised
                      Options
                      (#)
                      Unexercisable
                    
                    
                    Equity
                      Incentive
                      Plan
                      Awards:
                      Number
                        of
                      Securities
                      Underlying
                      Unexercised
                      Unearned
                      Options
                      (#)
                    
                    
                    Option
                      Exercise
                      Price
                      ($)
                    
                    Option
                      Expiration
                      Date
                    
                    Number
                      of
                        Shares
                      or
                        Units
                      of
                        Stock
                      That
                        Have
                      Not
                      Vested
                      (#)
                    
                    
                    Market
                      Value
                        of
                      Shares
                        or
                      units
                        of
                      Stock
                      That
                        have
                      Not
                      Vested
                      ($)
                    
                    
                    Equity
                      Incentive
                      Plan
                      Awards:
                      Number
                      of
                      Unearned
                      Shares,
                      Units
                        or
                      Other
                      Rights
                      That
                        Have
                      Not
                      Vested
                      (#)
                    
                    
                    Equity
                      Incentive
                      Plan
                      Awards:
                      Market
                        or
                      Payout
                      Value
                      of
                      Unearned
                      Shares,
                      Units
                        or
                      Other
                      Rights
                      That
                        Have
                      Not
                      Vested
                      ($)William
                        Jacobson
                    
                    
                    1,268,333
                    
                    
                    
                    1,505,000
                    
                    
                    
                    -
                    
                    
                    $
                    0.18
                    
                    9/30/2009
                    
                    
                    1,505,000
                    
                    
                    $
                    2,212,350
                    
                    
                    
                    -
                    
                    
                    $
                    -Ronald
                        Price
                    
                    
                    250,000
                    
                    
                    
                    750,000
                    
                    
                    
                    -
                    
                    
                    $
                    1.51
                    
                    1/14/2011
                    
                    
                    750,000
                    
                    
                    $
                    1,102,500
                    
                    
                    
                    -
                    
                    
                    $
                    -Ronald
                        Short
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    N/A
                    
                    
                    -
                    
                    
                    $
                    -
                    
                    
                    
                    -
                    
                    
                    $
                    -






49






Name
                                  and
                                Principal
                                Position
                              
                              Fees
                                Earned
                                or
                                Paid
                                  In
                                Cash
                                ($)
                              
                              
                              Stock
                                Awards
                                ($)
                              
                              
                              Option
                                Awards
                                ($)
                              
                              
                              Non-
                                Equity
                                Incentive
                                Plan
                                Compensation
                                ($)
                              
                              
                              Nonqualified
                                Deferred
                                Compensa-
                                tion
                                Earnings
                                ($)
                              
                              
                              All
                                Other
                                Compensation
                                ($)
                              
                              
                              Total
                                ($)William
                                  Jacobson Director, Atlas Mining Company
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -Ronald
                                  Price Director, Atlas Mining Company
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -Jack
                                  Harvey, Director
                                Atlas Mining Company
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -Kurt
                                  Hoffman, Director
                                Atlas Mining Company
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -






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:





(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:





(d.)  Obtain
      adequate funding package for Company.





(e.)  Achieve
      profitability through the Company's activities.





(f.)  Increase
      market cap of Company stock to the benefit of


shareholders.





Bonus
      payments will be no more than 40% of Mr. Jacobson’s 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.





50


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.








On
      March
      21, 2006, Nano Clay and Technologies, Inc. (a wholly owned subsidiary of Atlas
      Mining Company) entered into an employment agreement with Dr. Ronald Price,
      who
      was earlier appointed a director of Atlas Mining Company on July 12, 2005.
      Pursuant to the Agreement, Dr. Price shall be employed for three years as Nano’s
      President and Chief Executive Officer, and will also continue as a member of
      the
      Nano and Atlas Mining Company's Board of Directors. Dr. Price shall be paid
      compensation as follows:  (i) for the first year of the term of
      employment, a salary at the annual rate of $150,000;   (ii)
      for the second year, a salary at the annual rate of $175,000; and (iii) for
      the
      third year of the Term of Employment, a salary at the annual rate of $200,000.
      Dr. Price is also entitled to 20% ownership of any patents filed by him on
      behalf of the Company. In the event of a consolidation or merger of the Company,
      or transfer of substantially all of the
      Company assets, into such another entity, Dr. Price may,  within 180
      days of such consolidation or merger, deem such a merger or consolidation an
      involuntary termination of his employment and be paid an amount equal to his
      annual base salary at the time of termination.








ITEM11.
      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT AND RELATED STOCKHOLDER MATTERS





The
      following table sets forth, as of April 13, 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 53,083,246 shares of common stock
      outstanding as of April 13, 2007.




51


Number
                  ofShares
                  of
              Percentage
                  ofCommon
                  Stock
              Common
                  StockBeneficially
              BeneficiallyName
                  and Address (1)
              Owned
                  (2)
              OwnedWilliam
                  T. Jacobson (3)(4)
              2,370,327
              4.5%John
                  Harvey (3)(4)
              60,767
              *Kurt
                  Hoffman (3)(4)
              7,000
              *Ronald
                  R .Price  (4)
              10,000
              *Marqueta
                  Martinez (3)
              3,000
              *All
                  Officers and Directors as a Group (5 persons)
              2,451,094
              4.6%*     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.





ITEM12.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
      DIRECTOR INDEPENDENCE





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 loan balance. In 2005 the
      loan balance of $34,659 was paid off.





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








ITEM13.
      EXHIBITS





(a)      Exhibits


ExhibitNumber
              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)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 Officer




(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.





99.1       Location
      map, Dragon Mine







52


ITEM14.
      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 2006 and 2005 and reviews of the consolidated
      financial statements included in the Company's Forms 10-QSB were $13,600 and
      $25,000 in 2005 and 2006, respectively.





Audit-Related
      Fees





For
      fiscal 2006 and 2005, the Company's auditors did not bill any fees for assurance
      and related services that are not reported under "Audit Fees"
      above.





Tax
      Fees





The
      Company's auditors billed $3,550 and $0 for professional services for tax
      compliance, tax advice, and tax planning for fiscal 2006 and 2005,
      respectively.





All
      Other
      Fees





The
      Company's auditors billed $676 and $1,084 for all other non-audit services
      rendered to the Company, such as attending meetings and other miscellaneous
      financial consulting during the fiscal years ended December 31, 2006 and
      2005.  All amounts billed were for EDGAR filing services.





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.








53







******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 13th 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
                13, 2007William
              T. Jacobson/s/
                John Harvey
            Vice-President,
                Director
            April
                13, 2007John
                Harvey/s/
                Kurt Hoffman
            Treasurer,
                Director
            April
                13, 2007Kurt
                Hoffman/s/
                Ronald R Price
            Director
            April
                13, 2007Ronald
                R Price/s/
                Marqueta Martinez
            Secretary
            April
                13, 2007Marqueta
                Martinez