----

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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 101, 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 |   | Non-accelerated Filer |   | Smaller Reporting Company | X |
|-------------------------|--------|-------------------|--------|-----------------------|--------|---------------------------|---|

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

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|     | PART I                                                                                                                        | Page(s)          |
|----------|-------------------------------------------------------------------------------------------------------------------------------|------------------|
|     |                                                                                                                          |             |
| Item 1.  | Business                                                                                                                      | 4 - 7            |
|     |                                                                                                                          |             |
| Item 1A. | Risk Factors                                                                                                                  | 8 - 10           |
|     |                                                                                                                          |             |
| Item 1B. | Unresolved Staff Comments                                                                                                     | 11               |
|     |                                                                                                                          |             |
| Item 2.  | Properties                                                                                                                    | 11 - 12          |
|     |                                                                                                                          |             |
| Item 3.  | Legal Proceedings                                                                                                             | 13 - 14          |
|     |                                                                                                                          |             |
| Item 4.  | Submission of Matters to a Vote of Securities Holders                                                                         | 14               |
|     |                                                                                                                          |             |
|     | PART II                                                                                                                       |             |
|     |                                                                                                                          |             |
| Item 5.  | Market Price for the Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities | 15 - 17          |
|     |                                                                                                                          |             |
| Item 6.  | Selected Financial Data                                                                                                       | 17               |
|     |                                                                                                                          |             |
| Item 7.  | Management’s Discussion and Analysis of Financial Condition and Results of Operation                                    | 17 - 23     |
|     |                                                                                                                          |             |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk                                                                    | 24               |
|     |                                                                                                                          |             |
| Item 8.  | Financial Statements and Supplementary Data                                                                                   | 24               |
|     |                                                                                                                          |             |
| Item 9.  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                                          | 24               |
|     |                                                                                                                          |             |
| Item 9A. | Controls and Procedures                                                                                                       | 25 - 26          |
|     |                                                                                                                          |             |
| Item 9B. | Other Information                                                                                                             | 26               |
|     |                                                                                                                          |             |
|     | PART III                                                                                                                      |             |
|     |                                                                                                                          |             |
| Item 10. | Directors and Executive Officers and Corporate Governance                                                                     | 27 - 30     |
|     |                                                                                                                          |             |
| Item 11. | Executive Compensation                                                                                                        | 31 - 35          |
|     |                                                                                                                          |             |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                                | 36 - 39     |
|     |                                                                                                                          |             |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence                                                     | 40 - 42          |
|     |                                                                                                                          |             |
| Item 14. | Exhibits                                                                                                                      | 43 - 44          |
|     |                                                                                                                          |             |
| Item 15. | Principal Accounting Fees and Services                                                                                        | 45               |
|     |                                                                                                                          |             |
|     | PART IV                                                                                                                       |             |
| Item 16. | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                                               | F-1 – F-33 |

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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 will not be revived; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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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                 |

----

----

----

----

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

|                                                                                                                                                                                                                                           Year 2008 |   |   | Year 2007 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | High   |      |   | Low |   |   | High |   |   | Low |   |
| First Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $      | 0.80      |   |   | $ | 0.53 |   |   | $ | 2.08 |   |   | $ | 1.54 |   |
| Second Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $      | 0.53      |   |   | $ | 0.78 |   |   | $ | 2.98 |   |   | $ | 1.81 |   |
| Third Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $      | 0.73      |   |   | $ | 0.45 |   |   | $ | 2.92 |   |   | $ | 1.65 |   |
| Fourth Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $      | 0.47      |   |   | $ | 0.135 |   |   | $ | 1.70 |   |   | $ | 0.53 |   |

----

| Equity Compensation Plan Information                   |
|--------------------------------------------------------|
| As of December 31, 2008                                |
|                                                   |   |   |   |   |
|                                                   |   | 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 - | (1) |
|                                                   |   |   |   |   |
| Equity compensation plans                              | Incentive Stock Option Plan | - 0 - | 0 - | (1) |
| not approved by security holders                       | Stock Option Plan | - 0 - | 0 - | (1) |
|                                                   |   |   |   |   |
| Total                                                  |   | - 0 - | 0 - |   |

----

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

| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------|---------------------------------------------------------------------------------------------|

----

----

----

----

| In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”. This FSP amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments in the financialstatements. The most significant change the FSP brings is a revision to the amount of other-than-temporary loss of a debt security recorded in earnings. FSP FAS 115-2 and FAS 124-2 are effective for interim and annual reporting periods ending after June 15, 2009. The Company does not believe that the implementation of this standard will have a material impact on its financial statements. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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 issuedor to be issued covering 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) 

----

----

| 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. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 knowledgeof generally accepted 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 of more 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. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| i.    | The institution of certain personnel changes that will result in an appropriate segregation of duties in the period-end financial reporting process.  The Company hired a CEO and Interim CFO in early 2009 to resolve, in part, the separation of duties issue.  |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ii.   | The creation of an independent, qualified and active Board of Directors that includes a financial expert.                                                                                                                                                                   |

----

| Name and Position with The Company | Age    | Director/Officer Since                                              | Principal Occupation                                          |
|------------------------------------|--------|---------------------------------------------------------------------|---------------------------------------------------------------|
|                               |   |                                                                |                                                          |
| Andre Zeitoun                      | 36     | Chief Executive Officer, President and Director since January, 2009 | President, Chief Executive Officer and Director of Company    |
| David A. Taft                      | 51     | Director since October, 2008                                        | President, IBS Capital LLC                                    |
| Morris Weiss                       | 50     | Director since January, 2008                                        | Managing Director Investment Banking at MDB Capital Group LLC |
| John Levy                          | 53     | Director since January, 2008                                        | CEO of Board Advisory                                         |
| Christopher T. Carney              | 38     | Officer since February, 2009                                        | Interim Chief Financial Officer of Company                    |

----

----

----

----

|                                             |   |   |   |    |   |   |   |   | Option |   |   |   |   |
|--------------------------------------------------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Name and                                         |   |   | Salary |    |   | Bonus  |   |   | Awards |   |   | Total  |   |
| Principal Position                               | Year   |   | ($)    |    |   | ($)    |   |   | ($)(1) |   |   | ($)    |   |
|                                             |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Michael T. Lyon, Interim CEO (2)(3)              | 2008   |   | $      | 100,417 |   |   |   |   |   |   |   |   | $      | 100,417 |   |
|                                             |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| William Jacobson                                 | 2008   |   |   | 124,583 |   |   |   | - 0 -  |   |   |   | - 0 -  |   |   |   | 124,583 |   |
| President, CEO(4)(5)                             | 2007   |   |   | 177,083 |   |   |   | - 0 -  |   |   |   | - 0 -  |   |   |   | 177,083 |   |
|                                             |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ronald Price                                     | 2008   |   |   | 197,917 |   |   |   | - 0 -  |   |   |   | - 0 -  |   |   |   | 197,917 |   |
| Director, President, CEO                         | 2007   |   |   | 167,708 |   |   |   | 51,975 |   |   |   | - 0 -  |   |   |   | 219,683 |   |
| Nano Clay Technologies, Inc. (6)                 |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Morris D. Weiss                                  | 2008   |   |   | 50,000  |   |   |   |   |   |   |   | - 0 -  |   |   |   | 50,000 |   |
| Chief Restructuring Officer (7)(8)               |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                             |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Barbara Suveg                                    | 2008   |   |   | 182,070 |   |   |   | - 0 -  |   |   |   | - 0 -  |   |   |   | 182, 070 |   |
| Interim Corporate Secretary, Accountant (9) (10) | 2007   |   |   | 132,283 |   |   |   | - 0 -  |   |   |   | - 0 -  |   |   |   | 132,283 |   |
|                                             |   |   |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ronald Short                                     | 2008   |   |   | 167,070 |   |   |   | - 0 -  |   |   |   | - 0 -  |   |   |   | 167,070 |   |
| Operations Manager Contract Mining Division      | 2007   |   |   | 121,713 |   |   |   | - 0 -  |   |   |   | - 0 -  |   |   |   | 121,713 |   |

----

----

----

| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END |
|----------------------------------------------|
| OPTION AWARDS                                |
| Name                                         | Grant Date |   | Number of Securities Underlying Unexercised Options: Exercisable |   |   | Number of Securities Underlying Unexercised Options: Unexercisable |   |   | Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options |   |   | Option Exercise Price |   | Option Expiration Date |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Michael T. Lyon                              | June 30, 2008 |   |   | 50,000 |   |   |   | - 0 - |   |   |   | - 0 - |   |   | $ | 0.65 |   | June 30, 2013 |
|                                         | September 8, 2008 |   |   | 25,000 |   |   |   | - 0 - |   |   |   | - 0 - |   |   | $ | 0.71 |   | September 8, 2013 |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| William T. Jacobson                          |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ronald Price                                 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Morris D. Weiss (1)                          | November 1, 2008 |   |   | 83,334 |   |   |   | 466,666 |   |   |   | 300,000 |   |   | $ | 0.70 |   | October 31, 2019 |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Barbara S. Suveg                             |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ronald Short                                 |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |   |   |   |   |   |

----

| Name             | Fees Earned or Paid in Cash (1) (2) | Stock Awards (1) (3) | Total ($) |
|------------------|-------------------------------------|----------------------|-----------|
|             |                                |                 |      |
| John Levy        | $ 52,000                            | $ 148,000            | $ 200,000 |
|             |                                |                 |      |
| Morris D. Weiss  | $ 56,667                            | $ 60,000             | $ 116,667 |
|             |                                |                 |      |
| David Taft       | $ 10,000                            | $ - 0 -              | $ 10,000  |
|             |                                |                 |      |
| William Jacobson | $ - 0 -                             | $ - 0 -              | $ - 0 -   |
|             |                                |                 |      |
| Ronald Price     | $ - 0 -                             | $ - 0 -              | $ - 0 -   |

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

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| EQUITY COMPENSATION PLAN INFORMATION                      |
|-----------------------------------------------------------|
| Plan                                                      |   | Number of Securities to be issued upon exercise of outstanding options, warrants, and rights(a) | Weighted average exercise price of outstanding options, warrants and rights(b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| Equity compensation plans approved by security holders    |   |   |   |   |
|                                                      | Stock Option Plan (1998) | - 0 - | - 0 - | - 0 - (1) |
|                                                      | Incentive Stock Option Plan (1997) | - 0 - | - 0 - | - 0 - (1) |
|                                                      |   |   |   |   |
| Equity compensation plan not approved by security holders |   |   |   |   |
|                                                      | 2002 Consultant Plan | - 0 - | - 0 - | - 0 - (2) |
|                                                      | Michael Lyon (3) | 75,000 | $ 0.68 | - 0 - |
|                                                      | Morris D. Weiss (4) | 550,000 | $ 0.70 | - 0 - |
|                                                      |   |   |   |   |
| TOTAL                                                     |   | 625,000 | $ 0.70 | - 0 - |

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| ·   | 60,000,000 authorized shares of Common Stock; |
|--------------------|-----------------------------------------------|

| ·   | 59,215,628 issued shares of common stock |
|--------------------|------------------------------------------|

| ·   | 17,151,134 shares of Common Stock issuable on the exercise of outstanding stock options and the conversion of 10% PIK Election Convertible Notes “PIK Notes”. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Obligations to issue shares of common stock issuable to Material Advisors LLC on the exercise of options and the conversion of PIK Notes; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Obligations to issue shares to Andre Zeitoun on conversion of PIK Notes; and |
|--------------------|------------------------------------------------------------------------------|

| ·   | Obligations to issue to IBS Turnaround Fund (QP) and to other funds managed by IBS Capital LLC, whose president is David Taft, on the conversion of PIK Notes. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                  |   | Number of Shares of    |   | Percentage of Common |
|---------------------------------------|--------|------------------------|--------|----------------------|
|                                  |   | Common Stock           |   | Stock Beneficially   |
| Name and Address (1)                  |   | Beneficially Owned (2) |   | Owned                |
|                                  |   |                   |   |                 |
| Andre Zeitoun (3) (4) (5)             |   | 1,179,800              |   | 2.0%                 |
| John Levy (4)                         |   | 82,937                 |   | *                    |
| Morris D. Weiss (4)(6)                |   | 662,849                |   | 1.1%                 |
| David A. Taft (4) (7) (8)             |   | 13,969,915             |   | 23.6%                |
| Barbara Suveg                         |   | 100                    |   | *                    |
| Ronald Short                          |   | 0                      |   | *                    |
| All Officers and Directors as a Group |   | 15,895,601             |   | 26.8%                |
|                                  |   |                   |   |                 |
| IBS Capital LLC (8)                   |   | 13,969,915             |   | 23.6%                |
| William T. Jacobson (9)(10)           |   | 3,320,083              |   | 5.6%                 |
|                                  |   |                   |   |                 |
| * Less than 1%                        |   |                   |   |                 |

|   | (1) | Unless otherwise indicated, the address of the persons named in this column is c/o Atlas Mining Company, 110 Greene Street, Ste. 101, New York, NY 10012. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (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. For purposes of this table, (i) shares issuable on conversion of the PIK Notes are not deemed to acquirable within 60 days and (ii) options held by MaterialAdvisors are not deemed to be exercisable within 60 days. Except as noted below, all shares are owned directly and the person has sole voting power. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Executive Officer. |
|--------|-----|--------------------|

|   | (4) | Director. |
|--------|-----|-----------|

|   | (5) | Number of shares includes 35,500 shares of indirect ownership but not 142,857 shares issuable to Material Advisors LLC on conversion of 10% PIK Election Convertible Notes and on issuance Mr. Zeitoun will have shared voting power |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | Number of shares does not include an option to acquire 100,000 shares granted on May 1, 2009. |
|--------|-----|-----------------------------------------------------------------------------------------------|

|   | (7) | Mr. Taft is the president of IBS Capital, LLC. He has beneficial ownership of shares owned by funds of which IBS Capital LLC is the general partner. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | 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.  One fund, the IBS Turnaournd Fund (QP) (A Limited Partnership), owned 11.56% of outstanding shares at July 27, 2009.  Mr.Taft is president of IBS Capital LLC.  Ownership does not include shares issuable on conversion of PIK Notes. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (9) | Former officer and director. Information in a Form 4 filed July 27, 2007. |
|--------|-----|---------------------------------------------------------------------------|

|   | (10) | The Company has entered to an agreement with Mr. Jacobson whereby he will transfer to the Company 3,044,083 shares of Common Stock upon settlement of certain litigation. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Our Board of Directors reviews any transaction involving the Company and a related party before the transaction or upon any significant change in the transaction or relationship. There are no limitations on the types of transactions, except for ordinary business travel and entertainment.  There are no set standardsother than fairness. For these purposes, a related party transaction includes any transaction required to be disclosed pursuant to Item 404 of Regulation S-K of the SEC. 

| Date of Purchase   |   | IBS Turnaround Fund (QP) |      |   | IBS Turnaround Fund (LP) |   |    | Price Per Share |   |
|--------------------|--------|--------------------------|-----------|--------|--------------------------|--------|---------|-----------------|--------|
| May 23, 2008       |   |                     | 413,262   |   |                     |   | 170,071 |            |   | $ | 0.60 |   |
| June 27, 2008      |   |                     | 1,538,685 |   |                     |   | 461,315 |            |   | $ | 0.50 |   |
| September 23, 2008 |   |                     | 1,019,265 |   |                     |   | 680,735 |            |   | $ | 0.50 |   |

----

|   | Date of Purchase  | Principal Amount | Conversion Price per Share |   |
|--------|-------------------|------------------|----------------------------|--------|
|   |              |             |                       |   |
|   | December 31, 2008 | $ 50,000         | $ 0.35                     |   |
|   |              |             |                       |   |
|   | May 4, 2009       | $ 15,000         | $ 0.50                     |   |

|   | Date of Purchase | Principal Amount | Conversion Price per Share |   |
|--------|------------------|------------------|----------------------------|--------|
|   |             |             |                       |   |
|   | May 8, 2009      | $ 25,000         | $ 0.35                     |   |

|              | Purchaser and Principal Amount |                     |                       |
|-------------------|--------------------------------|--------------------------|----------------------------|
| Date of Purchase  | IBS Turnaround Fund (QP)       | IBS Turnaround Fund (LP) | Conversion Price per Share |   |
|              |                           |                     |                       |   |
| December 30, 2008 | $ 360,000                      | $ 140,000                | $ 0.35                     |   |
|              |                           |                     |                       |   |
| May 4, 2009       | $ 320,000                      | $ 180,000                | $ 0.50                     |   |

----

----

| Exhibit |                                                                                                                                                                           |   |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Number  | Description of Exhibit                                                                                                                                                         |   |
|    |                                                                                                                                                                           |   |
| 3.1     | Articles of Incorporation, as amended                                                                                                                                          | (1)    |
| 3.2     | Bylaws, as amended                                                                                                                                                             | (2)    |
| 4.1     | Form on 10% PIK Election Convertible Note and related Registration Rights Agreement issued December 30, 2008                                                                   | (3)    |
| 4.2     | Form on 10% PIK Election Convertible Note and related Registration Rights Agreement issued April 7 – 9, 2009                                                             | (4)    |
| 4.3     | Form on 10% PIK Election Convertible Note and related Registration Rights Agreement issued May 1, 2009                                                                         | (5)    |
| 10.1    | Dumont Employment Agreement                                                                                                                                                    | (6)    |
| 10.2    | Gaensbauer Employment Agreement                                                                                                                                                | (7)    |
| 10.3    | Suveg Employment Agreement                                                                                                                                                     | (8)    |
| 10.4    | Lyon Employment Agreement                                                                                                                                                      | (9)    |
| 10.5    | Amendment to Lyon Employment Agreement                                                                                                                                         | (10)   |
| 10.6    | Compensation arrangements of directors                                                                                                                                         | (11)   |
| 10.7    | Amendment to compensation arrangements of directors                                                                                                                            | (12)   |
| 10.8    | Compensation arrangements of director Taft                                                                                                                                     | (13)   |
| 10.9    | Consulting Agreement with Morris Weiss                                                                                                                                         | (14)   |
| 10.10   | Additional Consulting Agreement with Morris Weiss                                                                                                                              | (15)   |
| 10.11   | Ronald Price separation agreement                                                                                                                                              |   |
| 10.12   | Agreement with Material Advisors LLC                                                                                                                                           | (16)   |
| 10.13   | Agreement for Appointment of Agent for the Sale of Assets with AAMCOR LLC                                                                                                      |   |
| 10.14   | Settlement Agreement (“Class Action Settlement Agreement”) with the lead plaintiffs in the class action In Re Atlas Mining Company Securities Litigation           |   |
| 10.15   | Settlement Agreement with William Jacobson                                                                                                                                     |   |
| 10.16   | Settlement Agreement with Robert Dumont                                                                                                                                        |   |
| 10.17   | Terms of private placements of securities                                                                                                                                      | (17)   |
| 10.18   | Employment Agreement for William Jacobson                                                                                                                                      | (18)   |
| 10.19   | Employment Agreement for Ronald Price                                                                                                                                          |   |
| 10.20   | Stock Option Plan (1998)                                                                                                                                                       | (19)   |
| 31.1    | Certification pursuant to Rule 13a-14 of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Principal Executive Officer |   |
| 31.2    | Certification pursuant to Rule 13a-14 of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Principal Financial Officer |   |
| 32.1    | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Financial Officer                     |   |
| 32.2    | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Financial Officer                     |   |

| 1)   | Incorporated by reference to exhibit 3.1 included in the Registrant's Amendment No. 4 to its SB-2, Commission File No. 333-72830, filed with the Commission on June 11, 2002 |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2)   | Incorporated by reference to exhibit 3(ii)(1) included in the Registrant's Current Report on Form 8-K filed April 1, 2008. |
|----------------|----------------------------------------------------------------------------------------------------------------------------|

| 3)   | Incorporated by reference to exhibits 99.2 and 99.3 included in the Registrant's Current Report on Form 8-K filed January 7, 2009. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------|

| 4)   | Incorporated by reference to exhibits 99.1 and 99.2  included in the Registrant's Current Report on Form 8-K filed April 10, 2009 |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------|

----

| 5)   | Incorporated by reference to exhibits 99.1 and 99.2 included in the Registrant's Current Report on Form 8-K filed May 4, 2009. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------|

| 6)   | Incorporated by reference to exhibit 99.1 included in the Registrant's Current Report on Form 8-K filed July 13, 2007. |
|----------------|------------------------------------------------------------------------------------------------------------------------|

| 7)   | Incorporated by reference to exhibit 99.1 included in the Registrant's Current Report on Form 8-K filed on August 15, 2007. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------|

| 8)   | Incorporated by reference to exhibit 99.2 included in the Registrant's Current Report on Form 8-K filed on August 15, 2007. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------|

| 9)   | Incorporated by reference to exhibit 99.1 included in the Registrant's Current Report on Form 8-K filed on July 3, 2008 |
|----------------|-------------------------------------------------------------------------------------------------------------------------|

| 10)   | Incorporated by reference to Item 8.01included in the Registrant's Current Report on Form 8-K filed on October 2, 2008 |
|-----------------|------------------------------------------------------------------------------------------------------------------------|

| 11)   | Incorporated by reference to Item 5.02 (ii) and (iii) included in the Registrant's Current Report on Form 8-K filed on January 17, 2008 |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| 12)   | Incorporated by reference to Item 8.01 included in the Registrant's Current Report on Form 8-K filed on October 2, 2008 |
|-----------------|-------------------------------------------------------------------------------------------------------------------------|

| 13)   | Incorporated by reference to Item 5.02  included in the Registrant's Current Report on Form 8-K filed on October 22, 2008 |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------|

| 14)   | Incorporated by reference to exhibit 99.4 included in the Registrant's Current Report on Form 8-K filed on May 4, 2009 |
|-----------------|------------------------------------------------------------------------------------------------------------------------|

| 15)   | Incorporated by reference to Item 5.02 included in the Registrant's Current Report on Form 8-K filed on May 4, 2009 |
|-----------------|---------------------------------------------------------------------------------------------------------------------|

| 16)   | Incorporated by reference to exhibit 99.1 included in the Registrant's Current Report on Form 8-K filed on January 7, 2009 |
|-----------------|----------------------------------------------------------------------------------------------------------------------------|

| 17)   | Incorporated by reference to Items 3.02, 8.01, 8.01,2.03, 2.03, and 2.03 included in the Registrant's Current Reports on Form 8-K filed on January 16, 2009, May 29, 2008, September 29, 2008, January 7, 2009, April 10, 2009, and May 4, 2009 |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 18)   | Incorporated by reference to exhibit 10 included in the Registrant's Annual Report on Form 10-K filed on March 31, 2005 |
|-----------------|-------------------------------------------------------------------------------------------------------------------------|

| 19)   | Incorporated by reference to exhibit 4 included in the Registrant's SB-2 filed with the Commission on November 6, 2001 |
|-----------------|------------------------------------------------------------------------------------------------------------------------|

----

|               |   | PMB Helin         |   |   | PMB Helin         |   |
|--------------------|--------|-------------------|--------|--------|-------------------|--------|
|               |   | Donovan LLC       |   |   | Donovan LLC       |   |
|               |   | December 31, 2008 |   |   | December 31, 2007 |   |
|               |   |              |   |   |              |   |
| Audit Fees (1)     |   | $                 | 44,338 |   |              | $      | 48,912 |   |
| Audit-Related Fees |   |              | - 0 -  |   |              |   | - 0 - |   |
| Tax Fees (2)       |   |              | - 0 -  |   |              |   | - 0 - |   |
| All Other Fees (3) |   |              | - 0 -  |   |              |   | - 0 - |   |
| Total              |   | $                 | 44,338 |   |              | $      | 48,912 |   |

| (1)   | Fees for audit services billed or expected to be billed relating to fiscal 2007 consisted of (a) audit of the Company’s financial statements, (b) reviews of the Company’s quarterly financial statements, statutory and regulatory audits, consents and other services related to SEC matters, (c) audit of the Company’s internal control overfinancial reporting with the objective of obtaining reasonable 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. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (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 Audit Committee has considered whether the provision of non-audit services is compatible with maintaining the principal registered public accountingfirm’s independence. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                              | Page             |
|-------------------------------------------------------------------------------------------------------------------|------------------|
| Report of Independent Registered Public Accounting Firm                                                           | F-1              |
|                                                                                                              |             |
| Financial Statements:                                                                                             |             |
|                                                                                                              |             |
| Consolidated Balance Sheets as of December 31, 2008 and 2007(Restated)                                            | F-2 – F-3  |
|                                                                                                              |             |
| Consolidated Statements of Operations and Comprehensive Loss for Years Ended December 31, 2008 and 2007(Restated) | F-4 – F-5  |
|                                                                                                              |             |
| Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2008 and 2007              | F-6              |
|                                                                                                              |             |
| Consolidated Statements of Cash Flows for Years Ended December 31, 2008 and 2007(Restated)                        | F-7 – F-8  |
|                                                                                                              |             |
| Notes to Consolidated Financial Statements                                                                        | F-9 – F-33 |

----

----

| ATLAS MINING COMPANY AND SUBSIDIARIES                                                   |   |
|-----------------------------------------------------------------------------------------|--------|
| Consolidated Balance Sheets                                                             |   |
|                                                                                    |   |   |   |   |   |   |
|                                                                                    |   | December 31, |   |   | December 31, |   |
|                                                                                    |   | 2008 |   |   | 2007 |   |
|                                                                                    |   |   |   |   | Restated |   |
|                                                                                    |   |   |   |   |   |   |
| Current Assets                                                                          |   |   |   |   |   |   |
| Cash and cash equivalents                                                               |   | $ | 903,001 |   |   | $ | 1,210,621 |   |
| Accounts receivable                                                                     |   |   | 44 |   |   |   | - 0 - |   |
| Accounts receivable – related party                                               |   |   | - 0 - |   |   |   | 1,618 |   |
| Investments – available for sale                                                  |   |   | 5,426 |   |   |   | 4,886 |   |
| Deposits and prepaids                                                                   |   |   | 282,306 |   |   |   | 331,625 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Current Assets                                                                    |   |   | 1,190,776 |   |   |   | 1,548,750 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Property and Equipment                                                                  |   |   |   |   |   |   |   |   |
| Land and tunnels                                                                        |   |   | 523,729 |   |   |   | 523,729 |   |
| Land improvements                                                                       |   |   | 91,835 |   |   |   | 91,835 |   |
| Buildings                                                                               |   |   | 445,197 |   |   |   | 445,197 |   |
| Mining equipment                                                                        |   |   | 389,492 |   |   |   | 855,863 |   |
| Milling equipment                                                                       |   |   | 99,855 |   |   |   | 181,080 |   |
| Laboratory equipment                                                                    |   |   | 75,968 |   |   |   | 75,968 |   |
| Office furniture and equipment                                                          |   |   | 37,962 |   |   |   | 37,962 |   |
| Vehicles                                                                                |   |   | 65,763 |   |   |   | 140,124 |   |
| Less:  Accumulated depreciation                                               |   |   | (287,040 | ) |   |   | (320,853 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Property and Equipment                                                            |   |   | 1,442,761 |   |   |   | 2,030,905 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Other Assets                                                                            |   |   |   |   |   |   |   |   |
| Assets from discontinued operations                                                     |   |   |   |   |   |   |   |   |
| being held for sale                                                                     |   |   | 1,872,577 |   |   |   | 2,691,988 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Other Assets                                                                      |   |   | 1,872,577 |   |   |   | 2,691,988 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| TOTAL ASSETS                                                                            |   | $ | 4,506,114 |   |   | $ | 6,271,643 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |   |

----

| ATLAS MINING COMPANY AND SUBSIDIARIES                                                                                                                                                       |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Consolidated Balance Sheets                                                                                                                                                                 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |
|                                                                                                                                                                                        |   | December 31, |   |   | December 31, |   |
|                                                                                                                                                                                        |   | 2008 |   |   | 2007 |   |
|                                                                                                                                                                                        |   |   |   |   | Restated |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |
| Current Liabilities                                                                                                                                                                         |   |   |   |   |   |   |
| Accounts payable and accrued liabilities                                                                                                                                                    |   | $ | 741,885 |   |   | $ | 595,552 |   |
| Stock awards payable                                                                                                                                                                        |   |   | 52,500 |   |   |   | 280,000 |   |
| Current portion of notes payable                                                                                                                                                            |   |   | 115,836 |   |   |   | 84,887 |   |
| Current portion of leases payable                                                                                                                                                           |   |   | 41,004 |   |   |   | 35,842 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Total Current Liabilities                                                                                                                                                                   |   |   | 951,225 |   |   |   | 996,281 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Long-Term Liabilities                                                                                                                                                                       |   |   |   |   |   |   |   |   |
| Long-term portion of leases payable                                                                                                                                                         |   |   | 118,765 |   |   |   | 159,484 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Total Long-Term Liabilities                                                                                                                                                                 |   |   | 118,765 |   |   |   | 159,484 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Other Liabilities                                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Convertible debt (PIK Notes)                                                                                                                                                                |   |   | 1,000,000 |   |   |   | - 0 - |   |
| Liabilities from discontinued operations                                                                                                                                                    |   |   | 239,128 |   |   |   | 546,459 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Total Other Liabilities                                                                                                                                                                     |   |   | 1,239,128 |   |   |   | 546,459 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| TOTAL LIABILITIES                                                                                                                                                                           |   |   | 2,309,118 |   |   |   | 1,702,224 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Commitments and Contingencies                                                                                                                                                               |   |   | - 0 - |   |   |   | - 0 - |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| 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, 59,215,628 and                                                                                                                                                           |   |   |   |   |   |   |   |   |
| 54,173,594 shares issued and outstanding                                                                                                                                                    |   |   |   |   |   |   |   |   |
| at December 31, 2008 and 2007, respectively                                                                                                                                                 |   |   | 22,155,543 |   |   |   | 19,108,111 |   |
| Accumulated deficit                                                                                                                                                                         |   |   | (20,009,496 | ) |   |   | (14,589,101 | ) |
| Accumulated other comprehensive loss                                                                                                                                                        |   |   | (1,466 | ) |   |   | (2,006 | ) |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Total Stockholders’ Equity                                                                                                                                                            |   |   | 2,144,581 |   |   |   | 4,517,004 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
|                         TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |   | $ | 4,506,114 |   |   | $ | 6,271,643 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| 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, |   |
|                                                                                    |   | 2008 |   |   | 2007 |   |
|                                                                                    |   |   |   |   | Restated |   |
|                                                                                    |   |   |   |   |   |   |
| REVENUES                                                                                |   | $ | - 0 - |   |   | $ | - 0 - |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| COST OF SALES                                                                           |   |   | - 0 - |   |   |   | - 0 - |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Gross Profit                                                                            |   |   | - 0 - |   |   |   | - 0 - |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| OPERATING (INCOME) EXPENSES:                                                            |   |   |   |   |   |   |   |   |
| Exploration & development costs                                                     |   |   | 390,999 |   |   |   | 1,449,526 |   |
| Mining production costs                                                                 |   |   | 965,660 |   |   |   | 947,266 |   |
| General & administrative                                                            |   |   | 3,118,588 |   |   |   | 2,892,004 |   |
| Disposition of land and equipment                                                       |   |   | 232,392 |   |   |   | (115,497 | ) |
| Loss on abandonment of equipment                                                        |   |   | - 0 - |   |   |   | 44,406 |   |
| Total Operating Expenses                                                                |   |   | 4,707,639 |   |   |   | 5,217,705 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Net Operating Loss                                                                      |   |   | (4,707,639 | ) |   |   | (5,217,705 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSE):                                                                 |   |   |   |   |   |   |   |   |
| Interest income                                                                         |   |   | 25,977 |   |   |   | 56,873 |   |
| Interest expense                                                                        |   |   | (85 | ) |   |   | (20,744 | ) |
| Gain on revaluation of stock awards                                                     |   |   | 227,500 |   |   |   | 646,000 |   |
| Realized loss on securities available for sale                                          |   |   | - 0 - |   |   |   | (414 | ) |
| Special investigation fees and expenses                                                 |   |   | (1,479,279 | ) |   |   | - 0 - |   |
| Other income (expense)                                                                  |   |   | (1,056 | ) |   |   | 15,000 |   |
| Bad debt                                                                                |   |   | (281,163 | ) |   |   | (179,145 | ) |
| Total Other Income (Expenses)                                                           |   |   | (1,508,106 | ) |   |   | 517,570 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Loss before income taxes                                                                |   |   | (6,215,745 | ) |   |   | (4,700,135 | ) |
| Provision (benefit) for income taxes                                                    |   |   | - 0 - |   |   |   | - 0 - |   |
| Minority interest in loss                                                               |   |   | - 0 - |   |   |   | - 0 - |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Net Loss Before Discontinued Operations                                                 |   |   | (6,215,745 | ) |   |   | (4,700,135 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Net income from discontinued operations                                                 |   |   | 795,350 |   |   |   | 3,018,419 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Net Loss After Discontinued Operations                                                  |   | $ | (5,420,395 | ) |   | $ | (1,681,716 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Per Share Information (Basic and Diluted):                                              |   |   |   |   |   |   |   |   |
| Net loss per share before income taxes                                                  |   | $ | (0.11 | ) |   | $ | (0.09 | ) |
| Provision (benefit) for income taxes, per share                                         |   |   | (- 0 - | ) |   |   | (- 0 - | ) |
| Minority interest, per share                                                            |   |   | (- 0 - | ) |   |   | (- 0 - | ) |
| Net loss per share before discontinued operations                                       |   |   | (0.11 | ) |   |   | (0.09 | ) |
| Income per share from discontinued operations                                           |   |   | 0.01 |   |   |   | (0.06 | ) |
| Net Loss Per Share After Discontinued Operations                                        |   | $ | (0.10 | ) |   | $ | (0.03 | ) |
| Weighted Average Shares Outstanding                                                     |   |   | 56,340,783 |   |   |   | 53,504,206 |   |
| 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, |   |
|                                                                                    |   | 2008 |   |   | 2007 |   |
|                                                                                    |   |   |   |   | Restated |   |
|                                                                                    |   |   |   |   |   |   |
| Net Loss                                                                                |   | $ | (5,420,395 | ) |   | $ | (1,681,716 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Comprehensive Gain:                                                                     |   |   |   |   |   |   |   |   |
| Change in Market Value of Investments                                                   |   |   | 540 |   |   |   | 2,792 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Net Comprehensive Loss                                                                  |   | $ | (5,419,855 | ) |   | $ | (1,678,924 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |   |

----

| ATLAS MINING COMPANY AND SUBSIDIARIES                                                         |
|-----------------------------------------------------------------------------------------------|
| Consolidated Statements of Shareholders' Equity                                               |
| For the years ended December 31, 2008 and 2007                                                |
|                                                                                          |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |
|                                                                                          |   |   |   |   |   |   |   |   |   |   | Other |   | Total |
|                                                                                          |   |   |   |   |   |   |   |   | Accumu- |   | Comprehensive |   | Stock- |
|                                                                                          | Preferred Stock |   | Common Stock |   | lated |   | Income |   | holders' |
|                                                                                          | Shares |   | Amount |   | Shares |   | Amount |   | Deficit |   | (Loss) |   | Equity |
| Beginning Balance,                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| January 1, 2007                                                                               | - 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 - |   | - 0 - |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 cashless 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 |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Employee stock-based                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  compensation                                                                            | - 0 - |   | - 0 - |   | - 0 - |   | 666,002 |   | - 0 - |   | - 0 - |   | 666,002 |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                      | - 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 |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for cash between                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.50 and $0.60                                                                               | - 0 - |   | - 0 - |   | 4,833,333 |   | 2,500,000 |   | - 0 - |   | - 0 - |   | 2,500,000 |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for directors fees                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| between $0.49 and $0.71                                                                       | - 0 - |   | - 0 - |   | 208,701 |   | 120,000 |   | - 0 - |   | - 0 - |   | 120,000 |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Employee stock based                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| compensation                                                                                  | - 0 - |   | - 0 - |   | - 0 - |   | 427,432 |   | - 0 - |   | - 0 - |   | 427,432 |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net change in unrealized gain (loss) on available for sale securities                         | - 0 - |   | - 0 - |   | - 0 - |   | - 0 - |   | - 0 - |   | 540 |   | 540 |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                      | - 0 - |   | - 0 - |   | - 0 - |   | - 0 - |   | (5,420,395) |   | - 0 - |   | (5,420,395) |
|                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2008                                                                    | - 0 - |   | $ - 0 - |   | 59,215,628 |   | $ 22,155,543 |   | $ (20,009,496) |   | $ (1,466) |   | $ 2,144,581 |
|  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, |   |
|                                                   |   | 2008 |   |   | 2007 |   |
|                                                   |   |   |   |   | Restated |   |
| Cash flows from operating activities:                  |   |   |   |   |   |   |
| Net loss                                               |   | $ | (5,420,395 | ) |   | $ | (1,681,716 | ) |
| Adjustments to reconcile net loss to                   |   |   |   |   |   |   |   |   |
| net cash used in operations:                           |   |   |   |   |   |   |   |   |
| Depreciation                                           |   |   | 435,622 |   |   |   | 376,228 |   |
| Non-cash exercise of warrants for bonus                |   |   | - 0 - |   |   |   | 35,000 |   |
| Non-cash exercise of options for compensation          |   |   | - 0 - |   |   |   | 45,257 |   |
| Stock issued for directors services                    |   |   | 120,000 |   |   |   | - 0 - |   |
| Employee stock-based compensation                      |   |   | 427,432 |   |   |   | 666,002 |   |
| Other non-cash compensation expense                    |   |   | - 0 - |   |   |   | 926,000 |   |
| Gain on revaluation of stock awards                    |   |   | (227,500 | ) |   |   | (646,000 | ) |
| Realized loss on securities available for sale         |   |   | - 0 - |   |   |   | 414 |   |
| (Gain) loss on disposition of equipment                |   |   | 232,392 |   |   |   | (115,497 | ) |
| Loss on abandonment of equipment                       |   |   | - 0 - |   |   |   | 44,406 |   |
| Change in operating assets and liabilities:            |   |   |   |   |   |   |   |   |
| (Increase) Decrease in:                                |   |   |   |   |   |   |   |   |
| Accounts receivable                                    |   |   | (44 | ) |   |   | 876,355 |   |
| Accounts receivable – related party              |   |   | 1,618 |   |   |   | - 0 - |   |
| Mining supplies                                        |   |   | - 0 - |   |   |   | 2,000 |   |
| Deposits and prepaids                                  |   |   | 49,319 |   |   |   | (162,002 | ) |
| Advances                                               |   |   | - 0 - |   |   |   | 618 |   |
| Increase (Decrease) in:                                |   |   |   |   |   |   |   |   |
| Accounts payable and accrued expenses                  |   |   | 146,333 |   |   |   | 108,579 |   |
| Stock award payable                                    |   |   | - 0 - |   |   |   | 280,000 |   |
| Net cash  used in operating activities       |   |   | (4,235,223 | ) |   |   | 755,644 |   |
|                                                   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                  |   |   |   |   |   |   |   |   |
| Purchases of land and land improvements                |   |   | - 0 - |   |   |   | (28,048 | ) |
| Purchases of equipment                                 |   |   | - 0 - |   |   |   | (1,158,958 | ) |
| Disposal of land and equipment                         |   |   | - 0 - |   |   |   | 195,202 |   |
| Net cash provided by used in investing activities      |   |   | - 0 - |   |   |   | (991,804 | ) |
|                                                   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                  |   |   |   |   |   |   |   |   |
| Payments on notes payable                              |   |   | (131,040 | ) |   |   | (118,516 | ) |
| Payments on leases payable                             |   |   | (35,555 | ) |   |   | (14,652 | ) |
| Proceeds from notes payable                            |   |   | 161,989 |   |   |   | 125,948 |   |
| Proceeds from PIK notes payable                        |   |   | 1,000,000 |   |   |   | - 0 - |   |
| Proceeds from issuance of common stock                 |   |   | 2,500,000 |   |   |   | 2,265,859 |   |
| Net cash provided by financing activities              |   |   | 3,495,397 |   |   |   | 2,258,639 |   |
|                                                   |   |   |   |   |   |   |   |   |
| Net cash provided by (used in) discontinued operations |   |   | 432,206 |   |   |   | (1,028,960 | ) |
|                                                   |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash                        |   |   | (307,620 | ) |   |   | 993,519 |   |
|                                                   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at beginning of period       |   |   | 1,210,621 |   |   |   | 217,102 |   |
|                                                   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at end of period             |   | $ | 903,001 |   |   | $ | 1,210,621 |   |

----

| ATLAS MINING COMPANY AND SUBSIDIARIES                                                   |   |
|-----------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Cash Flows                                                   |   |
| (continued)                                                                             |   |
|                                                                                    |   | For the year ended |   |
|                                                                                    |   | December 31, |   |
|                                                                                    |   | 2008 |   |   | 2007 |   |
|                                                                                    |   |   |   |   | Restated |   |
|                                                                                    |   |   |   |   |   |   |
| Cash Paid For:                                                                          |   |   |   |   |   |   |
| Interest                                                                                |   | $ | 63,743 |   |   | $ | 20,744 |   |
| Income Taxes                                                                            |   | $ | - 0 - |   |   | $ | - 0 - |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Supplemental Disclosure of Non-Cash                                                     |   |   |   |   |   |   |   |   |
| Investing and Financing Activities:                                                     |   |   |   |   |   |   |   |   |
| Equipment financed though leasing                                                       |   | $ | - 0 - |   |   | $ | 468,219 |   |
| Shares issued for settlement of debt                                                    |   | $ | - 0 - |   |   | $ | 8,633 |   |
|                                                                                    |   |
| The accompanying notes are an integral part of these consolidated financial statements. |   |

----

----

----

|   |           | % of     | % of        |   |
|--------|----------------|----------|-------------|--------|
|   | 2008 Customers | Revenues | Receivables |   |
|   | Customer A     | 35%      | 50%         |   |
|   | Customer B     | 46%      | 0%          |   |
|   |           |     |        |   |
|   |           | % of     | % of        |   |
|   | 2007 Customers | Revenues | Receivables |   |
|   | Customer A     | 38%      | 6%          |   |
|   | Customer B     | 41%      | 56%         |   |

|                                  |   | Net Loss      |   | Shares        |   | Per-Share |
|---------------------------------------|--------|---------------|--------|---------------|--------|-----------|
|                                  |   | (Numerator)   |   | (Denominator) |   | Amount    |
|                                  |   |          |   |          |   |      |
| For the year ended December 31, 2008: |   |          |   |          |   |      |
| Basic EPS                             |   |          |   |          |   |      |
| Net loss to common shareholders       |   | $ (5,420,395) |   | 56,40,783     |   | $ (0.10)  |
|                                  |   |          |   |          |   |      |
| For the year ended December 31, 2007: |   |          |   |          |   |      |
| Basic EPS                             |   |          |   |          |   |      |
| Net loss to common shareholders       |   | $ (1,681,716) |   | 53,504,206    |   | $ (0.03)  |

----

| ·   | Level 1 – Valuations based on quoted prices in active markets for identical assets.  Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, directly or indirectly.  Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or other inputs that are observable or can becorroborated by observable market data for substantially the full term of the assets or liabilities. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------|

|                                    | Level 1 |   | Level 2 |   | Level 3 |   | Total   |
|-----------------------------------------|---------|--------|---------|--------|---------|--------|---------|
|                                    |    |   |    |   |    |   |    |
| Investment security, available for sale | $ 5,426 |   | $ - 0 - |   | $ - 0 - |   | $ 5,426 |
|                                    |    |   |    |   |    |   |    |
| Total                                   | $ 5,426 |   | $ - 0 - |   | $ - 0 - |   | $ 5,426 |

----

|                                      | Years Ended December 31, |
|-------------------------------------------|--------------------------|
|                                      | 2008                     |   | 2007 |
| Unrealized Losses                         |                     |   |   |
| Gross accumulated unrealized losses       | $ (1,466)                |   | $ (2,006) |
| Adjustment from deferred tax assets       | - 0 -                    |   | - 0 - |
| Net accumulated unrealized gains (losses) | $ (1,466)                |   | $ (2,006) |

----

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

----

----

----

----

|                                      |   | December 31, |      |
|-------------------------------------------|--------|--------------|-----------|
|                                      |   | 2008         |      |   | 2007 |   |
| Accounts receivable                       |   | $            | 336,237   |   |   | $ | 911,710 |   |
| Mining supplies                           |   |         | 40,544    |   |   |   | 40,544 |   |
| Property and equipment                    |   |         | 1,495,796 |   |   |   | 1,739,734 |   |
| Total assets from discontinued operations |   | $            | 1,872,577 |   |   | $ | 2,691,988 |   |

|                                      |   | December 31, |    |
|-------------------------------------------|--------|--------------|---------|
|                                      |   | 2008         |    |   | 2007 |   |
| Accounts Payable and Accrued Liabilities  |   | $            | 105,468 |   |   | $ | 208,200 |   |
| Leases Payable                            |   |         | 133,660 |   |   |   | 338,259 |   |
| Total assets from discontinued operations |   | $            | 239,128 |   |   | $ | 546,459 |   |

----

|                                    |   | Year ended December 31, |    |
|-----------------------------------------|--------|-------------------------|---------|
|                                    |   | 2008                    |    |   | 2007 |   |
| Income from discontinued operations     |   | $                       | 795,350 |   |   | $ | 3,018,419 |   |
| Income tax liability                    |   |                    | - 0 -   |   |   |   | - 0 - |   |
| Net income from discontinued operations |   | $                       | 795,350 |   |   | $ | 3,018,419 |   |

----

|                                                                                                                                                                         |   | December 31, |     |   | December 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|----------|--------|--------------|--------|
|                                                                                                                                                                         |   | 2008         |     |   | 2007         |   |
|                                                                                                                                                                         |   |         |     |   |         |   |
| Note payable to an insurance company due in monthly installments of $2,875, including interest at 5.75%.  The note matures in April 2008                           |   | $            | - 0 -    |   |         | $      | 8,474 |   |
|                                                                                                                                                                         |   |         |     |   |         |   |   |   |
| 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. |   |         | - 0 -    |   |         |   | 27,691 |   |
|                                                                                                                                                                         |   |         |     |   |         |   |   |   |
| Note payable to two insurance companies due in monthly installments, including interest at 8.60%.  The notes mature in July and May 2009 and 2008.                 |   |         | 115,836  |   |         |   | 84,887 |   |
|                                                                                                                                                                         |   |         |     |   |         |   |   |   |
| Total Notes Payable                                                                                                                                                          |   |         | 115,836  |   |         |   | 121,052 |   |
| Less:  Current Portion                                                                                                                                             |   |         | (115,836 | )      |         |   | (111,571 | ) |
|                                                                                                                                                                         |   |         |     |   |         |   |   |   |
| Total Long-Term Liabilities                                                                                                                                                  |   | $            | - 0 -    |   |         | $      | 9,481 |   |

|   | 2009  | $ 115,836 |   |
|--------|-------|-----------|--------|
|   | Total | $ 115,836 |   |

----

| 2009                                                 |   | $      | 61,800  |   |
|------------------------------------------------------|--------|--------|---------|--------|
| 2010                                                 |   |   | 61,800  |   |
| 2011                                                 |   |   | 61,800  |   |
| 2012                                                 |   |   | 11,591  |   |
| Total Minimum Lease Payments                         |   |   | 186,551 |   |
| Less:   Less: Amount Representing Interest |   |   | (26,782 | )      |
| Preset Present Value of Net Minimum Lease Payments   |   |   | 159,769 |   |
| CurrenCurrent Net Minimum Lease Payments             |   |   | (41,004 | )      |
| Long-LLong-Term Net Minimum Lease Payments           |   | $      | 118,765 |   |

|                                      |   | December 31, |    |
|-------------------------------------------|--------|--------------|---------|
| Classes of Property                       |   | 2008         |    |   | 2007 |   |
|                                      |   |         |    |   |   |   |
| Mining Equipment                          |   | $            | - 0 -   |   |   | $ | 651,161 |   |
| Vehicles                                  |   |         | - 0 -   |   |   |   | 78,373 |   |
| Other                                     |   |         | 286,088 |   |   |   | 286,088 |   |
| Less:  Accumulated Depreciation |   |         | (78,333 | ) |   |   | (164,114 | ) |
| Total assets under capital lease          |   | $            | 207,755 |   |   | $ | 851,508 |   |

----

----

----

----

|   |                    | 2008            | 2007            |
|--------|-------------------------|-----------------|-----------------|
|   | Dividend Yield          | 0%              | 0%              |
|   | Expected Life           | 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, 2008 |       |   | December 31, 2007 |   |
|------------------------------------|--------|-------------------|------------|--------|-------------------|--------|
|                               |   |              |       |   | Weighted          |   |   |   |   |   | Weighted |   |
|                               |   |              |       |   | Average           |   |   |   |   |   | Average |   |
|                               |   | Shares            |       |   | Exercise Price    |   |   | Shares |   |   | Exercise Price |   |
|                               |   |              |       |   |              |   |   |   |   |   |   |   |
| Outstanding at beginning of period |   |              | 2,688,577  |   |              | $      | 0.70 |   |   |   | 3,773,333 |   |   | $ | 0.52 |   |
| Granted                            |   |              | 625,000    |   |              |   | 2.61 |   |   |   | 4,000,000 |   |   |   | 2.61 |   |
| Exercised                          |   |              | - 0 -      |   |              |   | - 0 - |   |   |   | (1,084,756 | ) |   |   | 0.18 |   |
| Forfeited                          |   |              | (2,688,577 | )      |              |   | 0.66 |   |   |   | (4,000,000 | ) |   |   | 2.61 |   |
| Expired                            |   |              | - 0 -      |   |              |   | - 0 - |   |   |   | - 0 - |   |   |   | - 0 - |   |
| Outstanding at end of period       |   |              | 625,000    |   |              | $      | 0.70 |   |   |   | 2,688,577 |   |   | $ | 0.66 |   |
| Exercisable at end of period       |   |              | 258,334    |   |              | $      | 0.70 |   |   |   | 1,438,577 |   |   | $ | 1.01 |   |

|           |         |   | 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 |   |
| $              | 0.65 - $0.71 |   |                |   | 75,000      |                | 4.5 years  |   | $ | 0.69 |   |   |   | 75,000 |   |   | $ | 0.69 |   |
| $              | 0.70         |   |                |   | 550,000     |                | 4.83 years |   | $ | 0.70 |   |   |   | 183,334 |   |   | $ | 0.70 |   |
|           |         |   |                |   | 625,000     |                |       |   |   |   |   |   |   | 258,334 |   |   |   |   |   |

----

|                                      | 2008     |   | 2007     |
|-------------------------------------------|----------|--------|----------|
|                                      |     |   |     |
| 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. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

|   |   | 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 28, 2009 |
| John F. Levy        |     |          |
|                |     |          |
| /s/ DAVID TAFT      | Director | July 28, 2009 |
| David Taft          |     |          |
|                |     |          |
| /s/ MORRIS D. WEISS | Director | July 28, 2009 |
| Morris D. Weiss     |     |          |
|                |     |          |
| /s/ ANDRE ZEITOUN   | Director | July 28, 2009 |
| Andre Zeitoun       |     |          |

----