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| [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----|--------------------------------------------------------------------------------------|

| ATLAS MINING COMPANY                                           |
|----------------------------------------------------------------|
| (Exact name of registrant as specified in its charter)         |
| Idaho                                                          |   | 82-0096527 |
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.)  |

| 110 Greene Street – Ste 1101, New York, NY |                                           | 10012      |
|--------------------------------------------------|------------------------------------------------|------------|
| (Address of principal executive offices)         |                                           | (Zip Code) |
|                                             | (208) 556-1181                                 |       |   |
|                                             | Issuer's telephone number, including area code |       |   |

|   | YES |   | NO | X |
|--------|-----|--------|----|---|

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act: 

|   | YES |   | NO | X |
|--------|-----|--------|----|---|

|   | YES |   | NO | X |
|--------|-----|--------|----|---|

|   |   |   |   |   |
|--------|--------|--------|--------|--------|

| Large Accelerated Filer |   | Accelerated Filer | X | Non-accelerated Filer |   | Smaller Reporting Company |   |
|-------------------------|--------|-------------------|---|-----------------------|--------|---------------------------|--------|

|   | YES |   | NO | X |
|--------|-----|--------|----|---|

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|     | PART I                                                                                                                        | Page(s)       |
|----------|-------------------------------------------------------------------------------------------------------------------------------|---------------|
|     |                                                                                                                          |          |
| Item 1.  | Business                                                                                                                      | 2 – 6   |
|     |                                                                                                                          |          |
| Item 1A. | Risk Factors                                                                                                                  | 7 – 9   |
|     |                                                                                                                          |          |
| Item 1B. | Unresolved Staff Comments                                                                                                     | 9             |
|     |                                                                                                                          |          |
| Item 2.  | Properties                                                                                                                    | 10 – 11 |
|     |                                                                                                                          |          |
| Item 3.  | Legal Proceedings                                                                                                             | 12 – 13 |
|     |                                                                                                                          |          |
| Item 4.  | Submission of Matters to a Vote of Securities Holders                                                                         | 13            |
|     |                                                                                                                          |          |
|     | PART II                                                                                                                       |          |
|     |                                                                                                                          |          |
| Item 5.  | Market Price for the Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities | 14 – 16 |
|     |                                                                                                                          |          |
| Item 6.  | Selected Financial Data                                                                                                       | 16            |
|     |                                                                                                                          |          |
| Item 7.  | Management’s Discussion and Analysis of Financial Condition and Results of Operation                                    | 17 – 25 |
|     |                                                                                                                          |          |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk                                                                    | 26            |
|     |                                                                                                                          |          |
| Item 8.  | Financial Statements and Supplementary Data                                                                                   | 26            |
|     |                                                                                                                          |          |
| Item 9.  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                                          | 27            |
|     |                                                                                                                          |          |
| Item 9A. | Controls and Procedures                                                                                                       | 27 – 31 |
|     |                                                                                                                          |          |
| Item 9B. | Other Information                                                                                                             | 32            |
|     |                                                                                                                          |          |
|     | PART III                                                                                                                      |          |
|     |                                                                                                                          |          |
| Item 10. | Directors and Executive Officers and Corporate Governance                                                                     | 33 – 34 |
|     |                                                                                                                          |          |
| Item 11. | Executive Compensation                                                                                                        | 35– 36  |
|     |                                                                                                                          |          |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                                | 37            |
|     |                                                                                                                          |          |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence                                                     | 38            |
|     |                                                                                                                          |          |
| Item 14. | Principal Accounting Fees and Services                                                                                        | 39            |
|     |                                                                                                                          |          |
|     | PART IV                                                                                                                       |          |
|     |                                                                                                                          |          |
| Item 15. | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                                               | F-1 to F-42   |

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| ·   | The only revenues from operations during 2007 and 2008 were generated by the Company’s Contract Mining operations.  Those operations were discontinued and shut down permanently on December 31, 2008 and are not expected to be restarted; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Operations at the Dragon Mine were suspended in October 2007 and remained suspended throughout 2008; and |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | The following persons are no longer with the Company: |
|--------------------|-------------------------------------------------------|

| i.   | all persons who were directors as of December 31, 2007; |
|----------------|---------------------------------------------------------|

| ii.   | all other persons who were directors at times prior thereto who are referred to in the narrative portions of this report, |
|-----------------|---------------------------------------------------------------------------------------------------------------------------|

| iii.   | the persons (there were two) who served as president and CEO of the Company at any time during 2007; and |
|------------------|----------------------------------------------------------------------------------------------------------|

| iv.   | the person who was president and CEO of Nano Clay & Technologies, Inc., our subsidiary, during 2007. |
|-----------------|----------------------------------------------------------------------------------------------------------|

| ·   | Because the disclosure in this report makes certain statements as to conditions and beliefs of, and information available to, the Company and management during the period covered by this report and because the management during 2007 has been replaced, it has been necessary for us to make certain assumptions as to what were the Company’s or the Boardof Directors’ conditions, beliefs and information as of December 31, 2007 and prior thereto. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| HISTORY AND DEVELOPMENT OF THE COMPANY |
|----------------------------------------|

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|   | Section of the Coeur d’Alene Mining District | Estimated Acres                   |
|--------|----------------------------------------------------|-----------------------------------|
|   |                                               |                              |
|   | Atlas Mine                                         | 540 acres fee simple and patented |
|   |                                               | 180 unpatented                    |
|   | Sierra Trapper Creek                               | 80 acres patented                 |
|   | Aulback, Section 6 & 7                         | 100 acres patented                |
|   | Sierra Silver, Woodland Park & Nine Mile       | 60 acres patented                 |
|   |                                               | 80 acres mineral rights           |
|   | L & N Claims                                   | 108 acres patented                |
|   | Park Copper & Gold                             | 99 acres patented                 |

----

----

| 1.   | Our making available to NaturalNano a portion of our supply of unprocessed clay at the Dragon Mine, and; |
|----------------|----------------------------------------------------------------------------------------------------------|

| 2.   | A commitment by NaturalNano to process the clay at its expense, including an agreement by NaturalNano to provide, at its expenses, technical, financial and operating support to provide a particle separation and sizing process at the Dragon Mine site. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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| ITEM 5. | MARKET PRICE FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
|---------|-------------------------------------------------------------------------------------------------------------------------------|

| Year 2007      |   |   | Year 2006 |   |
|----------------|--------|--------|-----------|--------|
|           |   | High   |      |   | Low |   |   | High |   |   | Low |   |
| First Quarter  |   | $      | 2.08      |   |   | $ | 1.54 |   |   | $ | 1.49 |   |   | $ | 0.90 |   |
| Second Quarter |   | $      | 2.98      |   |   | $ | 1.81 |   |   | $ | 1.94 |   |   | $ | 1.37 |   |
| Third Quarter  |   | $      | 2.92      |   |   | $ | 1.65 |   |   | $ | 2.44 |   |   | $ | 1.71 |   |
| Fourth Quarter |   | $      | 1.70      |   |   | $ | 0.53 |   |   | $ | 1.98 |   |   | $ | 1.33 |   |

----

| Equity Compensation Plan Information                   |                        |
|--------------------------------------------------------|-----------------------------|
| As of December 31, 2007                                |                        |
|                                                   |                        |   |   |   |   |   |   |   |   |   |
|                                                   |                        |   | Number of securities to be issued upon exercise of outstanding options, warrants, and rights |   |   | Weighted-average exercise price of outstanding options, warrants and rights |   |   | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |   |
|                                                   |                        |   | (a) |   |   | (b) |   |   | (c) |   |
| Equity compensation plans approved by security holders |                        |   |   | - 0 - |   |   |   | - 0 - |   |   |   | N/A |   |
|                                                   |                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity compensation plans                              | Incentive Stock Option Plan |   |   | - 0 - |   |   |   | - 0 - |   |   |   | (1 | ) |
| not approved by security holders                       | Stock Option Plan           |   |   | 2,688,577 |   |   | $ | 0.66 |   |   |   | (1 | ) |
|                                                   |                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                  |                        |   |   | 2,688,577 |   |   | $ | 0.66 |   |   |   |   |   |

----

| On January 3, 2007, we issued 40,000 shares of common stock to two investors for $20,000 for the redemption of outstanding warrants. |
|--------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                 |
| On January 9, 2007, we issued 1,481,482 shares of common stock for $2,000,001 for exercise of a subscription agreement.              |
|                                                                                                                                 |
| Also on January 9, 2007, we issued 230,000 shares of common stock for $115,000 for the redemption of outstanding warrants.           |
|                                                                                                                                 |
| On January 12, 2007, we issued 3,430 shares of common stock for $858 for the redemption of an outstanding warrant.                   |
|                                                                                                                                 |
| On January 29, 2007, we issued 50,000 shares of common stock for $35,000 for the redemption of an outstanding warrant.               |
|                                                                                                                                 |
| On April 9, 2007, we issued 4,592 shares of common stock for $8,633 per an agreement.                                                |
|                                                                                                                                 |
| On April 27, 2007, we issued 1,000 shares of common stock in exchange for $2,000 worth of stock in the minority interest.            |
|                                                                                                                                 |
| On July 11, 2007, we issued 833,330 shares of common stock for $149,999 for the exercise of stock options.                           |
|                                                                                                                                 |
| On July 26, 2007, we issued 251,426 shares of common stock for $45,257 for the exercise of stock options.                            |

| ITEM 6. | SELECTED FINANCIAL DATA |
|---------|-------------------------|

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| ·   | During the period beginning in 2002 and ending in early 2006, approximately 30 million shares of common stock were issued in violation of the federal securities laws, including the registration provisions of Section 5 of the Securities Act of 1933.  The violations involved (a) misuse of SEC Registration Form S-8, a short form registration formfor compensatory issuances to certain officers, directors, employees and consultants (approximately 16 million shares were issued under Form S-8), (b) transfer of 9.9 million shares to related parties and affiliates that were purportedly sold under our Registration Statement on SEC Registration Form SB-2 and subsequent resales without compliance with the plan of distribution contained in our SB-2, and (c) grants of at least 2.8 million shares purportedly made pursuant to the exemption from registration set forthin Section 4(2) of the Securities Act.  These issuances are discussed in more detail in the following three paragraphs. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Between 2002 and 2006, we issued approximately 16 million shares of our common stock that were purportedly issued under our registration statements on Form S-8.  A review of these issuances revealed that approximately 14.6 million of these shares, with an aggregate market value of approximately $3.6 million (based upon the closing sale priceper share on the apparent dates of issuance), were issued to individuals and entities that were ineligible to receive shares registered on Form S-8 because, among other reasons, these individuals or entities provided us with capital raising or stock promotion services and/or did not provide any bona fide consulting services to us.  In addition, some such issuances and other issuances also may have been in excess of the number of shares we had registered on Form S-8 at the time of issuance.  Manyof the shares were issued in violation of the Atlas’ 2002 Consultant Stock Plan.  Certain shares were issued to family members of our then CEO, Mr. Jacobson, and such transactions appear to have been, among other things, director conflict of interest transactions which did not receive proper approval from the Board of Directors. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | In 2003, we registered for sale on SEC Registration Form SB-2 ten million shares of common stock at a fixed price of $0.10 per share on a self-underwritten basis.  Purportedly, to avoid filing a post-effective amendment to update the disclosure in the registration statement, we issued 9.9 million shares to related parties and affiliates.  In2003 and 2004, these shares were provided to third parties for resale and resales were apparently made at times when the market price was greater than $0.10.  Only after such resales did we ultimately receive cash payments in the aggregate of approximately $805,000 for these shares, which is less than the $990,000 that would be expected. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In 2003, we issued 2.8 million restricted shares for supposed services purportedly in reliance on the private placement exemption from registration set forth in Section 4(2) of the Securities Act.  However, we did not determine whether the recipients satisfied a condition of the exemption (that is, that the recipients took with the intent toresell only pursuant to an effective registration statement or an exemption from registration).  In some cases, we instructed our transfer agent to transfer these shares prior to the applicable holding period under Rule 144, which is an exemption from registration.  1.4 million of these shares were issued to a family member of Mr. Jacobson and this transaction appears to have been, among other things, a director conflict of interest transaction that did not receive proper authorization fromthe Board of Directors. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee also determined that we did not properly record compensation expenses associated with the vesting of certain stock options granted to our former officers. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee has determined that Mr. Jacobson was primarily responsible for the securities law violations set forth above. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee also discovered transactions between us and our wholly- or partly-owned subsidiaries or related entities, including stock issuances to those entities that violated Section 5 of the Securities Act and inter-company loans with those entities that appear to have been conflict-of-interest transactions entered into without proper corporateauthorization or business purpose. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee has determined that the accounting treatment of the $250,000 received from NaturalNano as revenue in 2004 was incorrect.  However, the Special Committee has also determined that the treatment of such funds as proposed in the October 9, 2007 press release was also incorrect.  The Special Committee believes thatduring the two-year term of the contract the $250,000 should have been treated as a deposit and, after the expiration of the contract in 2006, the entire $250,000 should have been recognized as other income. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee determined that in 2004 Mr. Jacobson received options to purchase 3.5 million shares of Atlas common stock in violation of the Company’s existing stock option plans.  The options had an exercise price below the market price of the common stock on the date of the grant, which violated the terms of the plan under whichthey were granted. The Company did not properly account for the compensation expenses related to the grant. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee found no evidence of accounting irregularities with respect to fixed asset ownership and long-term liabilities. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our internal controls over financial reporting and disclosure controls contained material weaknesses that led to inadequate and inaccurate disclosures. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | There were inaccurate statements in press releases released by us including a press release dated November 28, 2006 that contained inaccurate statements regarding the production capabilities and activities at the Dragon Mine. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | In June 2008, Mr. Jacobson resigned as an officer and director. |
|--------------------|-----------------------------------------------------------------|

| ·   | As a result of Mr. Jacobson’s resignation, our Board now consists of a majority of independent directors.  As of the date of this report, the board has only one non-independent director. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In July 2008, we hired Michael Lyon as interim Chief Executive Officer until December 31, 2008 who brought more than 35 years of experience in finance, operations, law and strategic planning in a variety of businesses. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We hired experienced securities and disclosure counsel. |
|--------------------|---------------------------------------------------------|

| ·   | We named Morris D. Weiss as Chief Restructuring Officer.  His duties include oversight and management of litigation and property dispositions, other than Dragon Mine, which we intend to operate, advising the Board as to other restructuring matters and such other matters as may be assigned to him by the Board. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We dismissed Chisholm, Bierwolf & Nilson, LLC (“Chisholm”) as independent auditors and retained PMB Helin Donovan LLP (“PMB”) as independent auditors for the purposes of auditing the financial statements for the years ended December 31, 2006 and December 31, 2007, performing other audit procedures on the financial statementsfor the year ended December 31, 2005 and 2004 and reviewing financial statements for the first quarter 2007 and 2006, the second quarter 2007 and 2006, and third quarter 2007 and 2006. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We appointed David A. Taft as a director. |
|--------------------|-------------------------------------------|

| ·   | We entered into a Management Agreement with Material Advisors LLC, a management services company (“Manager”) to perform or engage others, including Andre Zeitoun, a principal of Manager, Chris Carney and Eric Basroon (“Management Personnel”), to perform senior management services including such services as are customarily providedby a chief executive officer but not (unless otherwise agreed) services customarily provided by a chief financial officer. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We appointed Andre Zeitoun as President and Chief Executive Officer and as a director of Company effective January 1, 2009.  Mr. Zeitoun is compensated by Material Advisors LLC. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We appointed Christopher Carney as interim Chief Financial Officer effective February 17, 2009.  Mr. Carney is compensated by Material Advisors LLC.   |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | We have adjusted prior period balances for corrections of errors to properly reflect accounting for the valuation for stock options, related party transactions, impairment of securities available for sale and valuation of common stock issued for services. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
|---------|--------------------------------------------------------------------------------------|

| 1.   | internal controls necessary to develop reliable financial statements did not exist; or |
|----------------|----------------------------------------------------------------------------------------|

| 2.   | information has come to its attention which made the accountant unwilling to rely on management's representations, or unwilling to be associated with the financial statements prepared by management; or |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | the scope of the audit should be expanded significantly, or information has come to its attention that it had concluded will, or if further investigated might, materially impact the fairness or reliability of a previously issued audit report or the underlying financial statements, or the financial statements issued or to be issuedcovering the fiscal period(s) subsequent to the date of the most recent audited financial statements (including information that might preclude the issuance of an unqualified audit report) |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| i.   | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ii.   | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| iii.   | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| i.   | The lack segregation of duties in the period-end financial reporting process.  The Company has historically had limited accounting staff and minimal operating revenue and as such, all accounting and financial reporting operations are performed by one individual. This individual is the only employee with any significant knowledge of generallyaccepted accounting principles and is the only individual in charge of the general ledger (including the preparation of routine and non-routine journal entries and journal entries involving accounting estimates), the preparation of account reconciliations, the selection of accounting principles, and the preparation of interim and annual financial statements (including consolidation entries and footnote disclosures) in accordance with generally accepted accounting principles.  In addition, the lack ofmore than one person with significant knowledge of generally accepted accounting principles has resulted in ineffective oversight and monitoring of the work performed by the employee. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ii.   | The lack of an effective period-end financial statement closing process.  There is no formal guidance or checklist of procedures to facilitate the accounting period end closing process.  Also, general ledger accounting reconciliations, other than cash accounts are not formally performed or documented and, in some cases, subsidiary recordssupporting general ledger balances are not effectively maintained.  In addition, analytical reviews of financial and operational results are not consistently performed on a formal basis or documented. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| iii.   | The lack of adequate board oversight has provided management the opportunity to both override the controls that governed the Company’s normal course business activities and execute transactions without necessary board approval. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| i.   | The institution of certain personnel changes that will result in an appropriate segregation of duties in the period-end financial reporting process. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| ii.   | The implementation of procedures and controls governing the period-end financial statement closing process. |
|-----------------|-------------------------------------------------------------------------------------------------------------|

| iii.   | The creation of an independent, qualified and active Board of Directors that includes a financial expert. |
|------------------|-----------------------------------------------------------------------------------------------------------|

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| Ø   | The lack segregation of duties in the period-end financial reporting process.  The Company has historically had limited accounting staff and minimal operating revenue and as such, all accounting and financial reporting operations are performed by one individual. This individual is the only employee with any significant knowledge of generallyaccepted accounting principles and is the only individual in charge of the general ledger (including the preparation of routine and non-routine journal entries and journal entries involving accounting estimates), the preparation of account reconciliations, the selection of accounting principles, and the preparation of interim and annual financial statements (including consolidation entries and footnote disclosures) in accordance with generally accepted accounting principles.  In addition, the lack ofmore than one person with significant knowledge of generally accepted accounting principles has resulted in ineffective oversight and monitoring of the work performed by the employee. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Ø   |  The lack of an effective period-end financial statement closing process.  There is no formal guidance or checklist of procedures to facilitate the accounting period end closing process.  Also, general ledger accounting reconciliations, other than cash accounts are not formally performed or documented, and in some cases, subsidiaryrecords supporting general ledger balances are not effectively maintained.  In addition, analytical reviews of financial and operational results are not consistently performed on a formal basis or documented. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Ø   | The lack of adequate board oversight has provided management the opportunity to both override the controls that governed the Company’s normal course business activities and execute transactions without necessary board approval. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Name                | Age*   | Position                                                            |
|---------------------|--------|---------------------------------------------------------------------|
|                |   |                                                                |
| William T. Jacobson | 61     | Chairman of the Board, Chief Executive Officer, President, Director |
| Jack Harvey         | 86     | Director                                                            |
| Ronald Price        | 59     | Director                                                            |
| Barbara Suveg       | 36     | Interim Corporate Secretary                                         |

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|                                        |   |   |   |    |   |   |   |   |   |   |   |    |   |   | Non-      |   |   |   |   |
|---------------------------------------------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|-----------|--------|--------|--------|--------|
|                                        |   |   |   |    |   |   |   |   |   |   |   |    |   |   | Equity    |   |   |   |   |
|                                        |   |   |   |    |   |   |   |   |   |   |   |    |   |   | Incentive |   |   |   |   |
|                                        |   |   |   |    |   |   |   |   |   |   |   |    |   |   | Plan      |   |   |   |   |
|                                        |   |   |   |    |   |   |   |   | Stock  |   |   | Option  |   |   | Compen-   |   |   | Non-   |   |
| Name and                                    |   |   | Salary |    |   | Bonus  |   |   | Awards |   |   | Awards  |   |   | sation    |   |   | Qual-  |   |
| Principal Position                          | Year   |   | ($)    |    |   | ($)    |   |   | ($)    |   |   | ($)     |   |   | ($)       |   |   | ified  |   |
|                                        |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |
| William Jacobson                            | 2007   |   | $      | 177,083 |   |   | $      | - 0 -  |   |   | $      | - 0 -   |   |   | $         | - 0 -  |   |   | $      | - 0 - |   |   | $ | - 0 - |   |
| President, CEO (1)                          | 2006   |   |   | 120,000 |   |   |   | - 0 -  |   |   |   | 30,000  |   |   |      | - 0 -  |   |   |   | - 0 - |   |   |   | - 0 - |   |
|                                        |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Robert L. Dumont                            | 2007   |   |   | 124,538 |   |   |   | - 0 -  |   |   |   | 685,000 |   |   |      | (0     | )      |   |   | - 0 - |   |   |   | - 0 - |   |
| President, CEO (2) (3)                      |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
|                                        |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
|                                        |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Ronald Price                                | 2007   |   |   | 167,708 |   |   |   | 51,975 |   |   |   | - 0 -   |   |   |      | - 0 -  |   |   |   | - 0 - |   |   |   | - 0 - |   |
| Director (Atlas),                           | 2006   |   |   | 118,750 |   |   |   | - 0 -  |   |   |   | - 0 -   |   |   |      | 58,466 |   |   |   | - 0 - |   |   |   | - 0 - |   |
| President, CEO                              |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Nano Clay                                   |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Technologies, Inc.                          |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
|                                        |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Barbara Suveg                               | 2007   |   |   | 132,283 |   |   |   | - 0 -  |   |   |   | - 0 -   |   |   |      | - 0 -  |   |   |   | - 0 - |   |   |   | - 0 - |   |
| Interim Corporate Secretary, Accountant (4) |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
|                                        |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Ronald Short                                | 2007   |   |   | 121,713 |   |   |   | - 0 -  |   |   |   | - 0 -   |   |   |      | - 0 -  |   |   |   | - 0 - |   |   |   | - 0 - |   |
| Operations                                  | 2006   |   |   | 66,644  |   |   |   | 14,000 |   |   |   | - 0 -   |   |   |      | - 0 -  |   |   |   | - 0 - |   |   |   | - 0 - |   |
| Manager                                     |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Contract Mining                             |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |
| Division                                    |   |   |   |    |   |   |   |   |   |   |   |    |   |   |      |   |   |   |   |   |   |   |   |   |   |

| (1)   |  Mr. Jacobson was Chairman at all times during 2007, but not CEO, President, or an employee during the period from July 9, 2007 to November 30, 2007.  His employment agreement was in effect at all times. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Mr. Dumont served as President and CEO from July 9, 2007 until November 28, 2007. |
|-----------------|-----------------------------------------------------------------------------------|

| (3)   | Mr. Dumont entered into a three year employment agreement dated July 9, 2007.  The employment agreement called for an annual salary of $300,000, the grant of options to purchase 2.5 million shares of common stock at $2.74 per share, 1 million of which vested on the grant date, and an award of 500,000 shares of common stock, 250,000 of which vestedon the award date.  No options were exercised and no certificates for the 250,000 vested shares of common stock were issued.  Mr. Dumont resigned on November 28, 2007.  We treated Mr. Dumont’s voluntary resignation as a breach of his employment agreement and we recognized no amounts for financial statement reporting purposes in accordance with SFAS 123(R) with respect to the option grants, the stock award is recorded as a liability. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4)   | Ms. Suveg entered into an employment contract dated August 8, 2007.  The employment contract called for the grant of options to purchase 250,000 shares of common stock at $2.41 per share, 100,000 of which vested on the grant date.  No options were exercised.  Ms. Suveg resigned as CFO on November 13, 2007.  We treatedMs. Suveg’s voluntary resignation as a breach of her employment agreement and we recognized no amounts for financial statement reporting purposes in accordance with SFAS 123(R) with respect to the option grants. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|              |   | Number of Securities Underlying Unexercised Options |    |   | Number of Securities Underlying Unexercised Options |   |      | Equity Incentive Plan Awards: Number of Securities Uncerlying Unexercised Unearned |   |    | Option Exercise |   | Option |   | Number of Shares or Units of Stock That Have Not |   |     | Market Value of Shares or Units of Stock That Have Not |   |      | Equity Incentive Plan Awards: Number of Shares or Units of Stock That Have Not |   |   | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not |   |
|-------------------|--------|-----------------------------------------------------|---------|--------|-----------------------------------------------------|--------|-----------|-----------------------------------------------------------------------------------------|--------|---------|-----------------|--------|--------|--------|--------------------------------------------------|--------|----------|--------------------------------------------------------|--------|-----------|-------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------|--------|
|              |   |                                                | (#      | )      |                                                |   | (#        | )                                                                                       |   | Options |            |   | Price  |   | Expiration                                       |   | Vested   |                                                   |   | Vested    |                                                                                |   | Vested |                                                                                                              |   | Vested |   |
| Name              |   | Exercisable                                         |    |   | Unexercisable                                       |   |      |                                                                                    | (#     | )       |            | ($)    |   | Date   |                                             |   | (#       | )                                                      |   | ($)       |                                                                                |   |   | (#                                                                                                                | )      |   | ($) |   |
|              |   |                                                |    |   |                                                |   |      |                                                                                    |   |    |            |   |   |   |                                             |   |     |                                                   |   |      |                                                                                |   |   |                                                                                                              |   |   |   |   |   |   |
| William Jacobson  |   |                                                | 688,577 |   |                                                |   | 1,000,000 |                                                                                    |   |    | - 0 -           |   |   | $      | 0.18                                             |   | 6/27/008 |                                                   |   | 1,000,000 |                                                                                |   | $      | 800,000                                                                                                           |   |   |   | - 0 - |   |   | $ | - 0 - |   |
|              |   |                                                |    |   |                                                |   |      |                                                                                    |   |    |            |   |   |   |                                             |   |     |                                                   |   |      |                                                                                |   |   |                                                                                                              |   |   |   |   |   |   |   |   |   |
| Robert Dumont (1) |   |                                                |    |   |                                                |   |      |                                                                                    |   |    |            |   |   |   |                                             |   |     |                                                   |   |      |                                                                                |   |   |                                                                                                              |   |   |   |   |   |   |   |   |   |
|              |   |                                                |    |   |                                                |   |      |                                                                                    |   |    |            |   |   |   |                                             |   |     |                                                   |   |      |                                                                                |   |   |                                                                                                              |   |   |   |   |   |   |   |   |   |
| Ronald Price      |   |                                                | 750,000 |   |                                                |   | 250,000   |                                                                                    |   |    | - 0 -           |   |   | $      | 1.46                                             |   | 1/14/11  |                                                   |   | 250,000   |                                                                                |   |   | 200,000                                                                                                           |   |   |   | - 0 - |   |   |   | - 0 - |   |
|              |   |                                                |    |   |                                                |   |      |                                                                                    |   |    |            |   |   |   |                                             |   |     |                                                   |   |      |                                                                                |   |   |                                                                                                              |   |   |   |   |   |   |   |   |   |
| Barbara Suveg (2) |   |                                                |    |   |                                                |   |      |                                                                                    |   |    |            |   |   |   |                                             |   |     |                                                   |   |      |                                                                                |   |   |                                                                                                              |   |   |   |   |   |   |   |   |   |
|              |   |                                                |    |   |                                                |   |      |                                                                                    |   |    |            |   |   |   |                                             |   |     |                                                   |   |      |                                                                                |   |   |                                                                                                              |   |   |   |   |   |   |   |   |   |
| Ronald Short      |   |                                                | N/A     |   |                                                |   | N/A       |                                                                                    |   |    | N/A             |   |   |   | N/A                                              |   | N/A      |                                                   |   | N/A       |                                                                                |   |   | N/A                                                                                                               |   |   |   | N/A |   |   |   | N/A |   |

----

| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
|----------|------------------------------------------------------------------------------------------------|

|                                  |   | Number of Shares of    |   | Percentage of Common |
|---------------------------------------|--------|------------------------|--------|----------------------|
|                                  |   | Common Stock           |   | Stock Beneficially   |
| Name and Address (1)                  |   | Beneficially Owned (2) |   | Owned                |
|                                  |   |                   |   |                 |
| William T. Jacobson (3) (4)           |   | 3,320,083              |   | 6.10%                |
| John Harvey (4)                       |   | - 0 -                  |   | 0%                   |
| Ronald R. Price (3) (4)               |   | 60,500                 |   | *                    |
| Barbara Suveg (3)                     |   | 100                    |   | *                    |
| All Officers and Directors as a Group |   | 3,390,183              |   | 6.25%                |
|                                  |   |                   |   |                 |
| IBS Capital LLC (5)                   |   | 9,689,082              |   | 17.89%               |
|                                  |   |                   |   |                 |
| * Less than 1%                        |   |                   |   |                 |

|   | (1) | Unless otherwise indicated, the address of the persons named in this column is c/o Atlas Mining Company, P O Box 968, 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. |
|--------|-----|-----------|

| (5)   | IBS Capital LLC, Two International Place, 24th Floor, Boston, Massachusetts 02110, is the beneficial owner of shares held by funds it manages by virtue of the right to vote and dispose of the securities.  Onefund, the IBS Turnaournd Fund (QP) (A Limited Partnership), owned 11.56% of outstanding shares at December 31, 2007. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|               |   |              |   |   | Chisholm,         |   |   |              |   |   | Chisholm,         |   |
|--------------------|--------|-------------------|--------|--------|-------------------|--------|--------|-------------------|--------|--------|-------------------|--------|
|               |   | PMB Helin         |   |   | Bierwolf and      |   |   | PMB Helin         |   |   | Bierwolf and      |   |
|               |   | Donovan LLC       |   |   | Nilson, LLC       |   |   | Donovan LLC       |   |   | Nilson, LLC       |   |
|               |   | December 31, 2007 |   |   | December 31, 2006 |   |   | December 31, 2006 |   |   | December 31, 2006 |   |
|               |   |              |   |   |              |   |   |              |   |   |              |   |
| Audit Fees (1)     |   | $                 | 48,912 |   |              | $      | 9,608  |              |   | $      | 139,375           |   |   | $ | 48,537 |   |
| Audit-Related Fees |   |              | - 0 -  |   |              |   | - 0 -  |              |   |   | - 0 -             |   |   |   | - 0 - |   |
| Tax Fees (2)       |   |              | - 0 -  |   |              |   | - 0 -  |              |   |   | - 0 -             |   |   |   | - 0 - |   |
| All Other Fees (3) |   |              | - 0 -  |   |              |   | - 0 -  |              |   |   | - 0 -             |   |   |   | - 0 - |   |
| Total              |   | $                 | 48,912 |   |              | $      | 9,608  |              |   | $      | 139,375           |   |   | $ | 48,537 |   |

| (1)   | Fees for audit services billed or expected to be billed relating to fiscal 2007 consisted of (a) audit of our financial statements, (b) reviews of our quarterly financial statements, statutory and regulatory audits, consents and other services related to SEC matters, (c) audit of our internal control over financial reporting with the objective of obtainingreasonable assurance about whether effective control over financial reporting was maintained in all material respects, and (d) attestation of management’s assessment of internal control, as required by the Sarbanes-Oxley Act of 2002, Section 404.  These fees were pre-approved by the Board of Directors. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Tax fees represent the aggregate fees paid for professional services, principally including fees for tax compliance and tax advice. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | All other fees represent the aggregate fees paid for products and services that are not included in the “Audit fees,” “Audi-related fees,” and “Tax fees” sections.  The Board of Directors has considered whether the provision of non-audit services is compatible with maintaining the principal registered publicaccounting firm’s independence. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                    | Page            |
|-------------------------------------------------------------------------------------------------------------------------|-----------------|
|                                                                                                                    |            |
| Report of Independent Registered Public Accounting Firm                                                                 | F-1             |
|                                                                                                                    |            |
| Financial Statements:                                                                                                   |            |
|                                                                                                                    |            |
|  Consolidated Balance Sheets as of December 31, 2007 and 2006 (restated)                                           | F-2 – F-3 |
|                                                                                                                    |            |
|  Consolidated Statement of Operations and Comprehensive Loss for Years Ended December 31, 2007 and 2006 (restated) | F-4 – F-5 |
|                                                                                                                    |            |
|  Consolidated Statement of Shareholders’ Equity for the Years Ended December 31, 2007 and 2006 (restated)    | F-6             |
|                                                                                                                    |            |
|  Consolidated Statement of Cash Flows for Years Ended December 31, 2007 and 2006 (restated)                        | F-7 – F-8 |
|                                                                                                                    |            |
|  Notes to Consolidated Financial Statements                                                                        | F-9– F-43 |

----

----

| ATLAS MINING COMPANY AND SUBSIDIARIES                                                   |   |
|-----------------------------------------------------------------------------------------|--------|
| Consolidated Balance Sheets                                                             |   |
|                                                                                    |   |   |   |   |   |   |
|                                                                                    |   | December 31, |   |   | December 31, |   |
|                                                                                    |   | 2007 |   |   | 2006 |   |
|                                                                                    |   |   |   |   | Restated |   |
| Current Assets                                                                          |   |   |   |   |   |   |
| Cash and cash equivalents                                                               |   | $ | 1,210,621 |   |   | $ | 217,102 |   |
| Accounts receivable (net of allowance of $0)                                            |   |   | 911,710 |   |   |   | 876,355 |   |
| Accounts receivable – related party                                               |   |   | 1,618 |   |   |   | 11,139 |   |
| Investments – available for sale                                                  |   |   | 4,886 |   |   |   | 3,794 |   |
| Advances                                                                                |   |   | 1,054 |   |   |   | 618 |   |
| Mining supplies                                                                         |   |   | 40,544 |   |   |   | 2,000 |   |
| Deposits and prepaids                                                                   |   |   | 396,217 |   |   |   | 169,623 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Current Assets                                                                    |   |   | 2,566,650 |   |   |   | 1,280,631 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Property and Equipment                                                                  |   |   |   |   |   |   |   |   |
| Land and tunnels                                                                        |   |   | 1,062,499 |   |   |   | 1,076,299 |   |
| Land improvements                                                                       |   |   | 91,835 |   |   |   | 83,987 |   |
| Buildings                                                                               |   |   | 551,383 |   |   |   | 291,214 |   |
| Mining equipment                                                                        |   |   | 1,485,936 |   |   |   | 972,060 |   |
| Milling equipment                                                                       |   |   | 886,982 |   |   |   | 586,979 |   |
| Laboratory equipment                                                                    |   |   | 75,968 |   |   |   | 74,174 |   |
| Office furniture and equipment                                                          |   |   | 37,962 |   |   |   | 1,300 |   |
| Vehicles                                                                                |   |   | 236,530 |   |   |   | 150,952 |   |
| Less:  Accumulated depreciation                                               |   |   | (724,102 | ) |   |   | (408,145 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Property and Equipment                                                            |   |   | 3,704,993 |   |   |   | 2,828,820 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| TOTAL ASSETS                                                                            |   | $ | 6,271,643 |   |   | $ | 4,109,451 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |   |

----

| ATLAS MINING COMPANY AND SUBSIDIARIES                                                   |   |
|-----------------------------------------------------------------------------------------|--------|
| Consolidated Balance Sheets                                                             |   |
|                                                                                    |   |   |   |   |   |   |
|                                                                                    |   | December 31, |   |   | December 31, |   |
|                                                                                    |   | 2007 |   |   | 2006 |   |
|                                                                                    |   |   |   |   | Restated |   |
| Current Liabilities                                                                     |   |   |   |   |   |   |
| Accounts payable and accrued liabilities                                                |   | $ | 803,752 |   |   | $ | 486,973 |   |
| Stock awards payable                                                                    |   |   | 280,000 |   |   |   | - 0 - |   |
| Current portion of notes payable                                                        |   |   | 111,571 |   |   |   | 123,588 |   |
| Current portion of leases payable                                                       |   |   | 153,064 |   |   |   | 141,816 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Current Liabilities                                                               |   |   | 1,348,387 |   |   |   | 752,377 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Long-Term Liabilities                                                                   |   |   |   |   |   |   |   |   |
| Long-term portion of notes payable                                                      |   |   | 9,481 |   |   |   | 39,035 |   |
| Long-term portion of leases payable                                                     |   |   | 344,356 |   |   |   | 90,446 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Long-Term Liabilities                                                             |   |   | 353,837 |   |   |   | 129,481 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| TOTAL LIABILITIES                                                                       |   |   | 1,702,224 |   |   |   | 881,858 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Commitments and Contingencies                                                           |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Minority Interest                                                                       |   |   | 52,415 |   |   |   | 52,415 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Stockholders’ Equity                                                              |   |   |   |   |   |   |   |   |
| Preferred stock, $1.00 par value, 10,000,000                                            |   |   |   |   |   |   |   |   |
| shares authorized, noncumulative, nonvoting,                                            |   |   |   |   |   |   |   |   |
| nonconvertible, none issued or outstanding                                              |   |   | - 0 - |   |   |   | - 0 - |   |
| Common stock, no par value, 60,000,000                                                  |   |   |   |   |   |   |   |   |
| shares authorized, 54,173,594 and                                                       |   |   |   |   |   |   |   |   |
| 51,278,334 shares issued and outstanding                                                |   |   |   |   |   |   |   |   |
| at December 31, 2007 and 2006, respectively                                             |   |   | 19,108,111 |   |   |   | 16,087,361 |   |
| Accumulated deficit                                                                     |   |   | (14,589,101 | ) |   |   | (12,907,385 | ) |
| Accumulated other comprehensive loss                                                    |   |   | (2,006 | ) |   |   | (4,798 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Stockholders’ Equity                                                        |   |   | 4,517,004 |   |   |   | 3,175,178 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| TOTAL LIABILITIES AND                                                                   |   |   |   |   |   |   |   |   |
| STOCKHOLDERS’ EQUITY                                                              |   | $ | 6,271,643 |   |   | $ | 4,109,451 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |   |

----

| ATLAS MINING COMPANY AND SUBSIDIARIES                                                   |   |
|-----------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Operations and Comprehensive Loss                            |   |
|                                                                                    |   |   |   |   |   |   |
|                                                                                    |   | For the year ended |   |
|                                                                                    |   | December 31, |   |
|                                                                                    |   | 2007 |   |   | 2006 |   |
|                                                                                    |   |   |   |   | Restated |   |
| REVENUES:                                                                               |   |   |   |   |   |   |
| Contract mining                                                                         |   | $ | 7,731,081 |   |   | $ | 3,800,104 |   |
| Total Revenues                                                                          |   |   | 7,731,081 |   |   |   | 3,800,104 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| COST OF SALES:                                                                          |   |   |   |   |   |   |   |   |
| Contract mining                                                                         |   |   | 4,712,662 |   |   |   | 2,611,819 |   |
| Total Cost of Sales                                                                     |   |   | 4,712,662 |   |   |   | 2,611,819 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Gross Profit                                                                            |   |   | 3,018,419 |   |   |   | 1,188,285 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| OPERATING (INCOME) EXPENSES:                                                            |   |   |   |   |   |   |   |   |
| Exploration & development costs                                                     |   |   | 1,449,526 |   |   |   | 2,150,911 |   |
| Mining production costs                                                                 |   |   | 947,266 |   |   |   | 161,236 |   |
| General & administrative                                                            |   |   | 2,892,004 |   |   |   | 1,225,147 |   |
| Disposition of land and equipment                                                       |   |   | (115,497 | ) |   |   | - 0 - |   |
| Loss on abandonment of equipment                                                        |   |   | 44,406 |   |   |   | - 0 - |   |
| Total Operating Expenses                                                                |   |   | 5,217,705 |   |   |   | 3,537,294 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Net Operating Loss                                                                      |   |   | (2,199,286 | ) |   |   | (2,349,009 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSE):                                                                 |   |   |   |   |   |   |   |   |
| Interest income                                                                         |   |   | 56,873 |   |   |   | 30,076 |   |
| Interest expense                                                                        |   |   | (20,744 | ) |   |   | (20,075 | ) |
| Gain on revaluation of stock awards                                                     |   |   | 646,000 |   |   |   | - 0 - |   |
| Realized loss on securities available for sale                                          |   |   | (414 | ) |   |   | (39,219 | ) |
| Contract settlement                                                                     |   |   | - 0 - |   |   |   | 250,000 |   |
| Other income                                                                            |   |   | 15,000 |   |   |   | 17,554 |   |
| Bad debt                                                                                |   |   | (179,145 | ) |   |   | - 0 - |   |
| Total Other Income (Expenses)                                                           |   |   | 517,570 |   |   |   | 238,336 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Loss Before Income Taxes                                                                |   |   | (1,681,716 | ) |   |   | (2,110,673 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Provision (Benefit) for Income Taxes                                                    |   |   | - 0 - |   |   |   | - 0 - |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Minority Interest                                                                       |   |   | - 0 - |   |   |   | (510 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Net  Loss                                                                     |   | $ | (1,681,716 | ) |   | $ | (2,111,183 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Net Loss Per Share (Basic and Diluted)                                                  |   | $ | (0.03 | ) |   | $ | (0.04 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Weighted Average Shares Outstanding                                                     |   |   | 53,504,206 |   |   |   | 49,446,722 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |   |

----

| ATLAS MINING COMPANY AND SUBSIDIARIES                                                   |   |
|-----------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Operations and Comprehensive Loss                            |   |
|                                                                                    |   |   |   |   |   |   |
|                                                                                    |   | For the year ended |   |
|                                                                                    |   | December 31, |   |
|                                                                                    |   | 2007 |   |   | 2006 |   |
|                                                                                    |   |   |   |   | Restated |   |
|                                                                                    |   |   |   |   |   |   |
| Net Loss                                                                                |   | $ | (1,681,716 | ) |   | $ | (2,111,183 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Comprehensive Gain:                                                                     |   |   |   |   |   |   |   |   |
| Change in Market Value of Investments                                                   |   |   | 2,792 |   |   |   | 1,112 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Net Comprehensive Loss                                                                  |   | $ | (1,678,924 | ) |   | $ | (2,110,071 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |   |

----

| ATLAS MINING COMPANY AND SUBSIDIARIES                                                   |   |
|-----------------------------------------------------------------------------------------|--------|
| Statement of Stockholders’ Equity                                                 |   |
| For the years ended December 31, 2007 and 2006 (restated)                               |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Other |   |   | Total |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   | Accumu- |   |   | Comprehensive |   |   | Stock- |   |
|                                                                                    |   | Preferred Stock |   |   | Common Stock |   |   | lated |   |   | Income |   |   | holders' |   |
|                                                                                    |   | Shares |   |   | Amount |   |   | Shares |   |   | Amount |   |   | Deficit |   |   | (Loss) |   |   | Equity |   |
| Beginning Balance,                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  January 1, 2006 (as previously reported)                                          |   |   | - 0 - |   |   | $ | - 0 - |   |   |   | 48,852,892 |   |   | $ | 13,596,492 |   |   | $ | (9,649,505 | ) |   | $ | (123,218 | ) |   | $ | 3,823,769 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prior period adjustment (see Note 3)                                                    |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 2,795 |   |   |   | 643,548 |   |   |   | (1,146,697 | ) |   |   | 117,308 |   |   |   | (385,841 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for services between $0.90 and $1.40                                      |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 90,500 |   |   |   | 101,700 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 101,700 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for exercise of warrants for cash between $0.25 and $0.50                 |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 1,256,980 |   |   |   | 546,745 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 546,745 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for cash at $2.00                                                         |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 340,500 |   |   |   | 681,000 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 681,000 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for payment of exploration costs at $1.25                                 |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 8,000 |   |   |   | 10,000 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 10,000 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for options exercised at $0.18 cash                                       |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 726,667 |   |   |   | 130,800 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 130,800 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net change in unrealized loss on available for sale securities                          |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 1,112 |   |   |   | 1,112 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation for options issued to employees                                            |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 377,076 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 377,076 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for the year ended December 31, 2006                                           |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | (2,111,183 | ) |   |   | - 0 - |   |   |   | (2,111,183 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2006 (restated)                                                   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 51,278,334 |   |   |   | 16,087,361 |   |   |   | (12,907,385 | ) |   |   | (4,798 | ) |   |   | 3,175,178 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for redemption of warrants between $0.25 and $0.50 for cash and bonus     |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 323,430 |   |   |   | 150,858 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 150,858 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for cash at $1.35                                                         |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 1,481,482 |   |   |   | 2,000,001 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 2,000,001 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for settlement of debt                                                    |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 4,592 |   |   |   | 8,633 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 8,633 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued in conversion of minority interest shares                                 |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 1,000 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 1,000 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for options exercised at $0.18 for cash and compensation                  |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 833,330 |   |   |   | 149,999 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 149,999 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued in cash-less exercise of options for compensation                         |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 251,426 |   |   |   | 45,257 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 45,257 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net change in unrealized gain (loss) on available for sale securities                   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 2,792 |   |   |   | 2,792 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation for options issued to employees                                            |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 666,002 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | 666,002 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for the year ended December 31, 2007                                           |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | (1,681,716 | ) |   |   | - 0 - |   |   |   | (1,681,716 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2007                                                              |   |   | - 0 - |   |   | $ | - 0 - |   |   |   | 54,173,594 |   |   | $ | 19,108,111 |   |   | $ | (14,589,101 | ) |   | $ | (2,006 | ) |   | $ | 4,517,004 |   |
| The accompanying notes are an integral part of these consolidated financial statements. |   |

----

| ATLAS MINING COMPANY AND SUBSIDIARIES                      |   |
|------------------------------------------------------------|--------|
| Consolidated Statements of Cash Flows                      |   |
|                                                       |   | For the year ended |   |
|                                                       |   | December 31, |   |
|                                                       |   | 2007 |   |   | 2006 |   |
|                                                       |   |   |   |   | Restated |   |
| Cash Flows from Operating Activities:                      |   |   |   |   |   |   |
| Net Loss                                                   |   | $ | (1,681,716 | ) |   | $ | (2,111,183 | ) |
| Adjustments to Reconcile Net Loss to                       |   |   |   |   |   |   |   |   |
| Net Cash Used by Operations:                               |   |   |   |   |   |   |   |   |
| Depreciation                                               |   |   | 376,228 |   |   |   | 178,832 |   |
| Non-cash exercise of warrants for bonus                    |   |   | 35,000 |   |   |   | - 0 - |   |
| Non-cash exercise of options for compensation              |   |   | 45,257 |   |   |   | - 0 - |   |
| Stock issued for services                                  |   |   | - 0 - |   |   |   | 111,700 |   |
| Securities received for services                           |   |   | - 0 - |   |   |   | (10,000 | ) |
| Options granted                                            |   |   | 666,002 |   |   |   | 377,076 |   |
| Other non-cash compensation expense                        |   |   | 926,000 |   |   |   | - 0 - |   |
| Gain on revaluation of stock awards                        |   |   | (646,000 | ) |   |   | - 0 - |   |
| Minority interest                                          |   |   | - 0 - |   |   |   | 510 |   |
| Realized (gain) loss on securities available for sale      |   |   | 414 |   |   |   | 39,219 |   |
| Gain on sale of equipment                                  |   |   | (115,497 | ) |   |   | - 0 - |   |
| Loss on disposition of equipment                           |   |   | 44,406 |   |   |   | - 0 - |   |
| Change in Operating Assets and Liabilities:                |   |   |   |   |   |   |   |   |
| (Increase) Decrease in:                                    |   |   |   |   |   |   |   |   |
| Accounts receivable                                        |   |   | (25,834 | ) |   |   | (847,321 | ) |
| Mining supplies                                            |   |   | (38,544 | ) |   |   | 7,000 |   |
| Deposits and prepaids                                      |   |   | (226,594 | ) |   |   | (50,047 | ) |
| Advances                                                   |   |   | (436 | ) |   |   | 40 |   |
| Increase (Decrease) in:                                    |   |   |   |   |   |   |   |   |
| Deferred revenue                                           |   |   | - 0 - |   |   |   | (250,000 | ) |
| Accounts payable and accrued expenses                      |   |   | 316,777 |   |   |   | 287,790 |   |
| Stock award payable                                        |   |   | 280,000 |   |   |   | - 0 - |   |
| Net Cash Used by Operating Activities                      |   |   | (44,537 | ) |   |   | (2,266,384 | ) |
|                                                       |   |   |   |   |   |   |   |   |
| Cash Flows from Investing Activities:                      |   |   |   |   |   |   |   |   |
|     Purchases of land and land improvements |   |   | (28,048)  |   |   |   | (950,263)  |   |
| Purchases of equipment                                     |   |   | (1,158,958) |   |   |   | (304,240) |   |
| Disposal of land and equipment                             |   |   | 195,202 |   |   |   | 169,613 |   |
| Net Cash Used by Investing Activities                      |   |   | (991,804 | ) |   |   | (1,084,890 | ) |
|                                                       |   |   |   |   |   |   |   |   |
| Cash Flows from Financing Activities:                      |   |   |   |   |   |   |   |   |
| Payments on notes payable                                  |   |   | (167,519 | ) |   |   | (105,002 | ) |
| Payments on leases payable                                 |   |   | (194,428 | ) |   |   | (140,975 | ) |
| Proceeds from notes payable                                |   |   | 125,948 |   |   |   | 239,878 |   |
| Proceeds from issuance of common stock                     |   |   | 2,265,859 |   |   |   | 1,358,545 |   |
| Net Cash Provided by Financing Activities                  |   |   | 2,029,860 |   |   |   | 1,352,446 |   |
|                                                       |   |   |   |   |   |   |   |   |
| Increase (Decrease) in Cash                                |   |   | 993,519 |   |   |   | (1,998,828 | ) |

----

| ATLAS MINING COMPANY AND SUBSIDIARIES                                                   |   |
|-----------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Cash Flows                                                   |   |
| (continued)                                                                             |   |
|                                                                                    |   | For the year ended |   |
|                                                                                    |   | December 31, |   |
|                                                                                    |   | 2007 |   |   | 2006 |   |
|                                                                                    |   |   |   |   | Restated |   |
|                                                                                    |   |   |   |   |   |   |
| Increase (Decrease) in Cash, Balance Forward                                            |   | $ | 993,519 |   |   | $ | (1,998,828 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents at Beginning of Period                                        |   |   | 217,102 |   |   |   | 2,215,930 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents at End of Period                                              |   | $ | 1,210,621 |   |   | $ | 217,102 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Cash Paid For:                                                                          |   |   |   |   |   |   |   |   |
| Interest                                                                                |   | $ | 20,744 |   |   | $ | 29,677 |   |
| Income Taxes                                                                            |   | $ | - 0 - |   |   | $ | - 0 - |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Supplemental Disclosure of Non-Cash                                                     |   |   |   |   |   |   |   |   |
| Investing and Financing Activities:                                                     |   |   |   |   |   |   |   |   |
| Equipment financed though leasing                                                       |   | $ | 468,219 |   |   | $ | 298,211 |   |
| Shares issued for settlement of debt                                                    |   | $ | 8,633 |   |   | $ | - 0 - |   |
|                                                                                    |   |
| The accompanying notes are an integral part of these consolidated financial statements. |   |

----

ATLAS MINING COMPANY AND SUBSIDIARIES 

----

----

|   |           | % of     | % of        |   |
|--------|----------------|----------|-------------|--------|
|   | 2007 Customers | Revenues | Receivables |   |
|   | Customer A     | 13%      | 17%         |   |
|   | Customer B     | 38%      | 6%          |   |
|   | Customer C     | 41%      | 56%         |   |
|   |           |     |        |   |
|   |           | % of     | % of        |   |
|   | 2006 Customers | Revenues | Receivables |   |
|   | Customer A     | 16%      | 3%          |   |
|   | Customer B     | 70%      | 48%         |   |

|                                       |   | Net Loss    |       |   | Shares        |   |       | Per-Share |   |
|--------------------------------------------|--------|-------------|------------|--------|---------------|--------|------------|-----------|--------|
|                                       |   | (Numerator) |       |   | (Denominator) |   |       | Amount    |   |
|                                       |   |        |       |   |          |   |       |      |   |
| For the year ended December 31, 2007:      |   |        |       |   |          |   |       |      |   |
| Basic EPS                                  |   |        |       |   |          |   |       |      |   |
| Net loss to common shareholders            |   | $           | (1,681,716 | )      |          |   | 53,504,206 |      |   | $ | (0.03 | ) |
|                                       |   |        |       |   |          |   |       |      |   |   |   |   |
| For the year ended December 31, 2006:      |   |        |       |   |          |   |       |      |   |   |   |   |
| Basic EPS                                  |   |        |       |   |          |   |       |      |   |   |   |   |
| Net loss to common shareholders (restated) |   | $           | (2,111,183 | )      |          |   | 49,446,722 |      |   | $ | (0.04 | ) |

----

|   |                                    | Estimated         |   |
|--------|-----------------------------------------|-------------------|--------|
|   |                                    | Useful Life       |   |
|   | Building                                | 30 years          |   |
|   | Mining equipment                        | 2 – 7 years |   |
|   | Office and shop furniture and equipment | 5 – 7 years |   |
|   | Vehicles                                | 5 years           |   |

----

----

----

----

----

| NOTE 3 – RESULTS OF THE INVESTIGATION AND RESTATEMENT OF PRIOR FINANCIAL INFORMATION |
|--------------------------------------------------------------------------------------------|

----

| NOTE 3 – RESULTS OF THE INVESTIGATION AND RESTATEMENT OF PRIOR FINANCIAL INFORMATION (CONTINUED) |
|--------------------------------------------------------------------------------------------------------|

| ·   | During the period beginning in 2002 and ending in early 2006, approximately 30 million shares of common stock were issued in violation of the federal securities laws, including the registration provisions of Section 5 of the Securities Act of 1933.  The violations involved (a) misuse of SEC Registration Form S-8, a short form registration formfor compensatory issuances to certain officers, directors, employees and consultants (approximately 16 million shares were issued under Form S-8), (b) transfer of 9.9 million shares to related parties and affiliates that were purportedly sold under the Company’s Registration Statement on SEC Registration Form SB-2 and subsequent resales without compliance with the plan of distribution contained in the Company’s SB-2, and (c) grants of at least 2.8 million shares purportedly made pursuant to the exemptionfrom registration set forth in Section 4(2) of the Securities Act.  These issuances are discussed in more detail in the following three paragraphs. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Between 2002 and 2006, the Company issued approximately 16 million shares of the Company’s common stock that were purportedly issued under the Company’s registration statements on Form S-8.  A review of these issuances revealed that approximately 14.6 million of these shares, with an aggregate market value of approximately $3.6 million(based upon the closing sale price per share on the apparent dates of issuance) were issued to individuals and entities that were ineligible to receive shares registered on Form S-8 because, among other reasons, these individuals or entities provided the Company with capital raising or stock promotion services and/or did not provide any bona fide consulting services to the Company.  In addition, some such issuances and other issuances also may have been in excess of the number of shares the Companyhad registered on Form S-8 at the time of issuance.  Many of the shares were issued in violation of the Atlas’ 2002 Consultant Stock Plan.  Certain shares were issued to family members of the Company’s then CEO, Mr. Jacobson, and such transactions appear to have been, among other things, director conflict of interest transactions which did not receive proper approval from the Board of Directors.  Moreover, the values given to the S-8 stock for financial reporting purposesin many cases appear to have been less than market value of the stock on the apparent dates of issuance. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In 2003, the Company registered for sale on SEC Registration Form SB-2 ten million shares of common stock at a fixed price of $0.10 per share on a self-underwritten basis.  Purportedly to avoid filing a post-effective amendment to update the disclosure in the registration statement, the Company issued 9.9 million shares to related parties andaffiliates.  In 2003 and 2004, these shares were provided to third parties for resale and resales were apparently made at times when the market price was greater than $0.10.  Only after such resales did the Company ultimately receive cash payments in the aggregate of approximately $805,000 for these shares, which is less than the $990,000 that would be expected. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In 2003, the Company issued 2.8 million restricted shares for supposed services purportedly in reliance on the private placement exemption from registration set forth in Section 4(2) of the Securities Act.  However, the Company did not determine whether the recipients satisfied a condition of the exemption (that is, that the recipients took withthe intent to resell only pursuant to an effective registration statement or an exemption from registration).  In some cases, the Company instructed the Company’s transfer agent to transfer these shares prior to the applicable holding period under Rule 144, which is an exemption from registration.  1.4 million of these shares were issued to a family member of Mr. Jacobson and this transaction appears to have been, among other things, a director conflict of interest transaction whichdid not receive proper authorization from the Board of Directors |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee also determined that the Company did not properly record compensation expenses associated with the vesting of certain stock options granted to the Company’s former officers. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| NOTE 3 – RESULTS OF THE INVESTIGATION AND RESTATEMENT OF PRIOR FINANCIAL INFORMATION (CONTINUED) |
|--------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee has determined that Mr. Jacobson was primarily responsible for the securities law violations set forth above. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee also discovered transactions between the Company and the Company’s wholly- or partly-owned subsidiaries or related entities, including stock issuances to those entities that violated Section 5 of the Securities Act and intercompany loans with those entities that appear to have been conflict-of-interest transactions entered intowithout proper corporate authorization or business purpose. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee has determined that the accounting treatment of the $250,000 received from NaturalNano as revenue in 2004 was incorrect.  However, the Special Committee has also determined that the treatment of such funds as proposed in the October 9, 2007 Press Release was also incorrect.  The Special Committee believes thatduring the two year term of the contract, the $250,000 should have been treated as a deposit, but after the expiration of the contract in 2006, the entire $250,000 should have been recognized as other income. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee determined that in 2004 Mr. Jacobson received options to purchase 3.5 million shares of Atlas common stock in violation of the Company’s existing stock option plans.  The options had an exercise price below the market price of the common stock on the date of the grant, which violated the terms of the plan under whichthey were granted. The Company did not properly account for the compensation expenses related to the grant. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Special Committee found no evidence of accounting irregularities with respect to fixed asset ownership and long-term liabilities. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company’s internal control over financial reporting and disclosure controls contained material weaknesses, which led to inadequate and inaccurate disclosures. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | There were inaccurate statements in press releases released by the Company including a press release dated November 28, 2006 that contained inaccurate statements regarding the production capabilities and activities at the Dragon Mine. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| NOTE 3 – RESULTS OF THE INVESTIGATION AND RESTATEMENT OF PRIOR FINANCIAL INFORMATION (CONTINUED) |
|--------------------------------------------------------------------------------------------------------|

| ·   | In June 2008, Mr. Jacobson resigned as an officer and director. |
|--------------------|-----------------------------------------------------------------|

| ·   | As a result of Mr. Jacobson’s resignation, the Company’s Board now consists of a majority of independent directors. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | In July 2008, the Company hired Michael Lyon as interim Chief Executive Officer through the period ended December 31, 2008, who brought more than 35 years of experience in finance, operations, law and strategic planning in a variety of businesses. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company hired experienced securities and disclosure counsel. |
|--------------------|------------------------------------------------------------------|

| ·   | Naming Morris D. Weiss as Chief Restructuring Officer.  His duties included oversight and management of litigation and property dispositions, other than Dragon Mine, which the Company intends to operate; advising the Board as to other restructuring matters and such other matters as may be assigned to him by the Board. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company appointed PMB Helin Donovan LLP (“PMB”) as independent auditors for the purposes of auditing the financial statements for the years ended December 31, 2006 and December 31, 2007, and conducting other audit procedures on the financial statements for the year ended December 31, 2005 and 2004, and reviewing financial statements forthe first Quarter 2007 and 2006, the second Quarter 2008, 2007 and 2006, and third Quarter 2007 and 2006. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company appointed David A. Taft as director. |
|--------------------|--------------------------------------------------|

| ·   | The Company entered into a Management Agreement with Material Advisors, LLC, a management services company (“Manager”) to perform or engage others, including Andre Zeitoun, a principal of Manager, Chris Carney and Eric Basroon (“Management Personnel”), to perform senior management services including such services as are customarilyprovided by a chief executive officer but not (unless otherwise agreed) services customarily provided by a chief financial officer. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company appointed Andre Zeitoun as President and Chief Executive Officer and as a director of Company effective January 1, 2009.  Mr. Zeitoun is compensated by Material Advisors LLC. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company appointed Christopher Carney as interim Chief Financial Officer effective February 17, 2009.  Mr. Carney is compensated by Material Advisors LLC. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| NOTE 3 – RESULTS OF THE INVESTIGATION AND RESTATEMENT OF PRIOR FINANCIAL INFORMATION (CONTINUED) |
|--------------------------------------------------------------------------------------------------------|

| Decrease in cost of sales for contract mining              |   | $      | 77,711  |   |
|------------------------------------------------------------|--------|--------|---------|--------|
| Increase in unrecorded liabilities                         |   |   | 7,750   |   |
| Increase in contract mining production costs               |   |   | 161,236 |   |
| Increase in general administrative costs, compensation     |   |   | 233,881 |   |
| Decrease in interest income                                |   |   | 112     |   |
| Increase in realized loss on available for sale securities |   |   | 39,219  |   |
| Increase in a settlement of contract                       |   |   | 250,000 |   |
| Decrease in miscellaneous income                           |   |   | 3,774   |   |
| Subtotal                                                   |   |   | 118,261 |   |
| Income tax effect of restatement                           |   |   | 63,269  |   |
| Increase in 2006 net loss                                  |   | $      | 181,530 |   |

|                                              |   | Previously Reported |        |   | Increase (Decrease) |   |       | Restated |   |
|---------------------------------------------------|--------|---------------------|-------------|--------|---------------------|--------|------------|----------|--------|
|                                              |   |                |        |   |                |   |       |     |   |
| Current Assets (a)(c)                             |   | $                   | 1,281,739   |   |                | $      | (1,108     | )        |   | $ | 1,280,631 |   |
| Property and Equipment (b)                        |   |                | 2,977,933   |   |                |   | (149,113   | )        |   |   | 2,828,820 |   |
| Total Assets                                      |   |                | 4,309,881   |   |                |   | (200,430   | )        |   |   | 4,109,451 |   |
| Current Liabilities (d)                           |   |                | 638,368     |   |                |   | 114,009    |     |   |   | 752,377 |   |
| Long-term Liabilities (e)                         |   |                | 216,721     |   |                |   | (87,240    | )        |   |   | 129,481 |   |
| Total Liabilities                                 |   |                | 855,089     |   |                |   | 26,769     |     |   |   | 881,858 |   |
| Stockholders’ Deficit:                      |   |                |        |   |                |   |       |     |   |   |   |   |
| Accumulated Deficit – December 31, 2005 (f) |   |                | (9,649,505  | )      |                |   | (1,146,697 | )        |   |   | (10,796,202 | ) |
| Net Income (Loss) for 2006                        |   |                | (1,992,922  | )      |                |   | (118,261   | )        |   |   | (2,111,183 | ) |
| Accumulated Deficit – December 31, 2006     |   |                | (12,789,124 | )      |                |   | (118,261   | )        |   |   | (12,907,385 | ) |
| Total Liabilities and Stockholders’ Equity  |   |                | 4,309,881   |   |                |   | (1,134,703 | )        |   |   | 3,175,178 |   |

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| NOTE 3 – RESULTS OF THE INVESTIGATION AND RESTATEMENT OF PRIOR FINANCIAL INFORMATION (CONTINUED) |
|--------------------------------------------------------------------------------------------------------|

|                                        |   | Previously |       |   | Increase   |   |     |     |   |
|---------------------------------------------|--------|------------|------------|--------|------------|--------|----------|----------|--------|
|                                        |   | Reported   |       |   | (Decrease) |   |     | Restated |   |
|                                        |   |       |       |   |       |   |     |     |   |
| Revenue – Contract Mining             |   | $          | 3,799,204  |   |       | $      | 900      |     |   | $ | 3,800,104 |   |
| Cost of Sales (g)                           |   |       | 2,689,530  |   |       |   | (77,711  | )        |   |   | 2,611,819 |   |
| Gross Profit                                |   |       | 1,109,674  |   |       |   | 78,611   |     |   |   | 1,188,285 |   |
| Exploration and Mining Production Costs (h) |   |       | 2,143,161  |   |       |   | 7,750    |     |   |   | 2,150,911 |   |
| General & Administrative Expenses (i)   |   |       | 991,266    |   |       |   | 233,881  |     |   |   | 1,225,147 |   |
| Loss from Operations                        |   |       | (2,024,753 | )      |       |   | (324,256 | )        |   |   | (2,349,009 | ) |
| Interest Expense                            |   |       | (20,074    | )      |       |   | (1       | )        |   |   | (20,075 | ) |
| Interest Income                             |   |       | 30,188     |   |       |   | (112     | )        |   |   | 30,076 |   |
| Realized Loss on Securities (j)             |   |       | -0-        |   |       |   | (39,219  | )        |   |   | (39,219 | ) |
| Settlement on Contract (k)                  |   |       | -0-        |   |       |   | 250,000  |     |   |   | 250,000 |   |
| Other Income                                |   |       | 21,327     |   |       |   | (3,773   | )        |   |   | 17,554 |   |
| Minority Interest                           |   |       | (510       | )      |       |   | -0-      |     |   |   | (510 | ) |
| Income (Loss) Before Taxes                  |   |       | (1,992,922 | )      |       |   | (118,261 | )        |   |   | (2,111,183 | ) |
| Provision for Income Taxes                  |   |       | -0-        |   |       |   | -0-      |     |   |   | -0- |   |
| Net Loss                                    |   | $          | (1,992,922 | )      |       | $      | (118,261 | )        |   | $ | (2,111,183 | ) |

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| NOTE 3 – RESULTS OF THE INVESTIGATION AND RESTATEMENT OF PRIOR FINANCIAL INFORMATION (CONTINUED) |
|--------------------------------------------------------------------------------------------------------|

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|                                                                                                                                                                         |   | December 31, |     |   | December 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------|--------------|--------|
|                                                                                                                                                                         |   | 2007         |     |   | 2006         |   |
|                                                                                                                                                                         |   |         |     |   | (Restated)   |   |
| Note payable to an insurance company due in monthly installments of $2,875, including interest at 5.75%.  The note matures in April 2008                           |   | $            | 8,474    |   |         | $      | 40,223 |   |
|                                                                                                                                                                         |   |         |     |   |         |   |   |   |
| Note payable to a company due in monthly installments of $1,605, including interest at 17.10%.  The note matures in April 2009 and is collateralized by equipment. |   |         | 27,691   |   |         |   | 44,944 |   |
|                                                                                                                                                                         |   |         |     |   |         |   |   |   |
| Note payable to an insurance company due in monthly installments, including interest at 8.60%.  The note matures in May 2008 and 2007.                             |   |         | 84,887   |   |         |   | 77,456 |   |
|                                                                                                                                                                         |   |         |     |   |         |   |   |   |
| Total Notes Payable                                                                                                                                                          |   |         | 121,052  |   |         |   | 162,623 |   |
| Less:  Current Portion                                                                                                                                             |   |         | (111,571 | )      |         |   | (123,588 | ) |
|                                                                                                                                                                         |   |         |     |   |         |   |   |   |
| Total Long-Term Liabilities                                                                                                                                                  |   | $            | 9,481    |   |         | $      | 39,035 |   |

|   | 2008   | $ 111,571 |
|--------|--------|-----------|
|   | 2009   | 9,481     |
|   |   | $ 121,052 |

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|                                          |   | December 31, |     |   | December 31, |   |
|-----------------------------------------------|--------|--------------|----------|--------|--------------|--------|
|                                          |   | 2007         |     |   | 2006         |   |
|                                          |   |         |     |   | (Restated)   |   |
|                                          |   |         |     |   |         |   |
| 2007                                          |   | $            | - 0 -    |   |         | $      | 160,370 |   |
| 2008                                          |   |         | 186,630  |   |         |   | 42,319 |   |
| 2009                                          |   |         | 176,508  |   |         |   | 28,160 |   |
| 2010                                          |   |         | 131,805  |   |         |   | 17,663 |   |
| 2011                                          |   |         | 76,384   |   |         |   | 15,573 |   |
| 2012                                          |   |         | 11,591   |   |         |   | - 0 - |   |
| Thereafter                                    |   |         | - 0 -    |   |         |   | - 0 - |   |
| Total Minimum Lease Payments                  |   |         | 582,918  |   |         |   | 264,085 |   |
|                                          |   |         |     |   |         |   |   |   |
|                                          |   |         |     |   |         |   |   |   |
| Less:  Amount Representing Interest |   |         | (85,498  | )      |         |   | (31,823 | ) |
| Present Value of Net Minimum Lease Payments   |   |         | 497,420  |   |         |   | 232,262 |   |
| Current Net Minimum Lease Payments            |   |         | (153,064 | )      |         |   | (141,816 | ) |
| Long-Term Net Minimum Lease Payments          |   | $            | 344,356  |   |         | $      | 90,446 |   |

| Classes of Property                       |   | December 31, 2007 |     |   | December 31, 2006 |   |
|-------------------------------------------|--------|-------------------|----------|--------|-------------------|--------|
|                                      |   |              |     |   |              |   |
| Mining Equipment                          |   | $                 | 651,161  |   |              | $      | 369,804 |   |
| Vehicles                                  |   |              | 78,373   |   |              |   | 39,660 |   |
| Other                                     |   |              | 286,088  |   |              |   | - 0 - |   |
| Less:  Accumulated Depreciation |   |              | (164,114 | )      |              |   | (49,166 | ) |
| TOTAL                                     |   | $                 | 851,508  |   |              | $      | 360,298 |   |

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|   |                    | 2007            | 2006            |
|--------|-------------------------|-----------------|-----------------|
|   | Dividend Yield          | 0%              | 0%              |
|   | Expected Life           | 3 - 5 years     | 3 - 5 years     |
|   | Expected Volatility     | 39.65% - 86.91% | 39.65% - 86.91% |
|   | Risk-Free Interest Rate | 3.44%           | 3.44%           |

|                               |   | December 31, 2007 |       |   | December 31, 2006 |   |
|------------------------------------|--------|-------------------|------------|--------|-------------------|--------|
|                               |   |              |       |   | Weighted          |   |   |   |   |   | Weighted |   |
|                               |   |              |       |   | Average           |   |   |   |   |   | Average |   |
|                               |   | Shares            |       |   | Exercise Price    |   |   | Shares |   |   | Exercise Price |   |
|                               |   |              |       |   |              |   |   |   |   |   |   |   |
| Outstanding at beginning of period |   |              | 3,773,333  |   |              | $      | 0.52 |   |   |   | 3,500,000 |   |   | $ | 0.18 |   |
| Granted                            |   |              | 4,000,000  |   |              |   | 2.61 |   |   |   | 1,000,000 |   |   |   | 1.51 |   |
| Exercised                          |   |              | (1,084,756 | )      |              |   | 0.18 |   |   |   | (726,667 | ) |   |   | 0.18 |   |
| Forfeited                          |   |              | (4,000,000 | )      |              |   | 2.61 |   |   |   | - 0 - |   |   |   | - 0 - |   |
| Expired                            |   |              | - 0 -      |   |              |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |
| Outstanding at end of period       |   |              | 2,688,577  |   |              | $      | 0.66 |   |   |   | 3,773,333 |   |   | $ | 0.52 |   |
| Exercisable at end of period       |   |              | 1,438,577  |   |              | $      | 1.01 |   |   |   | 1,523,333 |   |   | $ | 0.40 |   |

|           |         |   | Options Outstanding |   |        | Options Exercisable |       |
|----------------|--------------|--------|---------------------|--------|-------------|---------------------|------------|
|           |         |   |                |   | Weighted    |                |       |   |   |   |   |   |   |   |
|           |         |   |                |   | Average     |                | Weighted   |   |   |   |   |   | Weighted |   |
|           |         |   |                |   | Remaining   |                | Average    |   |   |   |   |   | Average |   |
| Range of       |         |   | Number              |   | Contractual |                | Exercise   |   |   | Number |   |   | Exercise |   |
| Exercise Price |         |   | Outstanding         |   | Life        |                | Price      |   |   | Exercisable |   |   | Price |   |
| $              | 0.18         |   |                |   | 1,688,577   |                | 2 years    |   | $ | 0.18 |   |   |   | 688,577 |   |   | $ | 0.18 |   |
| $              | 0.54 - $2.32 |   |                |   | 1,000,000   |                | 1.50 years |   | $ | 1.47 |   |   |   | 750,000 |   |   | $ | 1.78 |   |
|           |         |   |                |   | 2,688,577   |                |       |   |   |   |   |   |   | 1,438,577 |   |   |   |   |   |

----

|                               |   | December 31, 2007 |     |   | December 31, 2006 |   |
|------------------------------------|--------|-------------------|----------|--------|-------------------|--------|
|                               |   |              |     |   | Weighted          |   |   |   |   |   | Weighted |   |
|                               |   |              |     |   | Average           |   |   |   |   |   | Average |   |
|                               |   |              |     |   | Exercise          |   |   |   |   |   | Exercise |   |
|                               |   | Shares            |     |   | Price             |   |   | Shares |   |   | Price |   |
|                               |   |              |     |   |              |   |   |   |   |   |   |   |
| Outstanding at beginning of period |   |              | 327,430  |   |              | $      | 0.50 |   |   |   | 1,604,410 |   |   | $ | 0.45 |   |
| Granted                            |   |              | - 0 -    |   |              |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |
| Exercised                          |   |              | (323,430 | )      |              | $      | 0.50 |   |   |   | (1,256,980 | ) |   | $ | 0.38 |   |
| Forfeited                          |   |              | - 0 -    |   |              |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |
| Expired                            |   |              | (4,000   | )      |              |   | - 0 - |   |   |   | (20,000 | ) |   | $ | 0.50 |   |
| Outstanding at end of period       |   |              | - 0 -    |   |              |   | - 0 - |   |   |   | 327,430 |   |   | $ | 0.50 |   |
| Exercisable at end of period       |   |              | - 0 -    |   |              |   | - 0 - |   |   |   | 327,430 |   |   | $ | 0.50 |   |

----

|                                      | 2007     |   | 2006     |
|-------------------------------------------|----------|--------|----------|
|                                      |     |   |     |
| Statutory regular federal income tax rate | 35%      |   | 35%      |
| Statutory regular state income tax rate   | 19.35%   |   | 19.35%   |
| Change in valuation allowance             | (53.35%) |   | (53.35%) |
| Total                                     | 0%       |   | 0%       |

----

----

| 1.   | The Company making available to NaturalNano a portion of its supply of unprocessed clay at the Dragon Mine, and; |
|----------------|------------------------------------------------------------------------------------------------------------------|

| 2.   | A commitment by NaturalNano to process the clay at its expense, including an agreement by NaturalNano to provide, at its expenses, technical, financial and operating support to provide a particle separation and sizing process at the Dragon Mine site. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   |   | ATLAS MINING COMPANY            |   |
|--------|--------|---------------------------------|--------|
|   |   |                            |   |
|   | By:    | /s/ ANDRE ZEITOUN               |   |
|   |   | Andre Zeitoun                   |   |
|   |   | Chief Executive Officer         |   |
|   |   |                            |   |
|   | By:    | /s/ CHRISTOPHER T. CARNEY       |   |
|   |   | Christopher T. Carney           |   |
|   |   | Interim Chief Financial Officer |   |

| Signature           | Title    | Date          |
|---------------------|----------|---------------|
|                |     |          |
| /s/ JOHN F. LEVY    | Director | July 15, 2009 |
| John F. Levy        |     |          |
|                |     |          |
| /s/ DAVID TAFT      | Director | July 15, 2009 |
| David Taft          |     |          |
|                |     |          |
| /s/ MORRIS D. WEISS | Director | July 15, 2009 |
| Morris D. Weiss     |     |          |
|                |     |          |
| /s/ ANDRE ZEITOUN   | Director | July 15, 2009 |
| Andre Zeitoun       |     |          |

----