Two law firms have filed class action lawsuits against Atlas Mining Co., after the company’s stock price dropped by more than 50 percent following news that Atlas was correcting three year’s worth of financial statements.
On Oct. 9, officials at the Osburn, Idaho, company issued a news release, saying that Atlas’ losses in 2004, 2005 and 2006 were greater than previously reported. Atlas’ stock, which had closed at $1.64 per share on Oct. 8, dropped to 80 cents per share the next day in heavy trading on the Over-the-Counter Bulletin Board.
The lawsuits allege that Atlas officials artificially inflated stock prices by issuing false financial statements.
The Dragon Mine in Utah is one of the junior mining firm’s primary assets. According to the company’s news release, Atlas officials erred in recording two payments of $125,000 each as revenues. Because the money was a deposit for future deliveries of halloysite clay from the Dragon Mine, it should have been recorded as a liability on the company’s balance sheet, the release said.
Halloysite clay is used for fine china, porcelain filters, inkjets and special paints for ship hulls that inhibit the growth of barnacles. In previous statements, Atlas said that it controlled the only known commercial source of halloysite clay outside of New Zealand.
However, Atlas doesn’t have any contracts to deliver clay, and it won’t be able to sign any in the near future, the release said. The company’s ability to enter into contracts has been hampered by lack of processing facilities and lack of a detailed, independent geologic evaluation of size of the clay deposit, according to the release. The geologic evaluation is a priority for Atlas’ new senior management, the release said.
The firm’s senior management changed in July, when Robert Dumont assumed the position of president and CEO, replacing Bill Jacobson. Jacobson retained his role as chairman of the board of directors.
Atlas officials could not be reached for comment Friday.