Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
x QUARTERLY
REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the
quarterly period ended January 31, 2006
o TRANSITION
REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT
For
the
transition period from _____________ to _____________
Commission
file number: 000-27667
(Exact
name of small business issuer as specified in its charter)
|
Nevada
|
91-1766677
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
1330
E.
Margaret Ave.
(Address
of principal executive offices)
Issuer's
telephone number, including area code: (208) 665-2002
Check
whether the issuer (1) filed all reports required to be filed by Section 13
or
15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for
such shorter period that the registrant was required to file such reports),
and
(2) has been subject to such filing requirements for the past 90 days.
Yes x No
o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No
x
There
were 27,481,085 shares of the issuer's common stock, par value $0.01,
outstanding as of February 1, 2006.
Transitional
Small Business Disclosure Format (check one): Yes o No
x
METALLINE
MINING COMPANY QUARTERLY REPORT
ON
FORM 10-QSB FOR THE QUARTERLY PERIOD
ENDED
JANUARY 31, 2006
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The
reviewed consolidated financial statements of Metalline Mining Company (the
"Company"), for the period covered by this report, are included elsewhere in
this report, beginning at page F/S-1.
The
reviewed consolidated financial statements have been prepared in accordance
with
generally accepted accounting principles for the interim financial information
with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the Company's management, all adjustments (consisting of
only
normal accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended January 31, 2006
are not necessarily indicative of the results that may be expected for the
full
year ending October 31, 2006.
For
further information refer to the financial statements and footnotes thereto
in
the Company's Annual Report on Form 10-KSB for the year ended October 31, 2005
incorporated by reference herein.
Forward-Looking
Statements
This
Quarterly Report on Form 10-QSB, including Management's Discussion and Analysis
of Financial Condition and Results of Operations, contains forward-looking
statements regarding future events and the Company's future results that are
subject to the safe harbors created under the Securities Act of 1933 (the
"Securities Act") and the Securities Exchange Act of 1934 (the "Exchange Act").
These statements are based on current expectations, estimates, forecasts, and
projections about the industry in which the Company operates and the beliefs
and
assumptions of the Company's management. Words such as "expects," "anticipates,"
"targets," "goals," "projects," "intends," "plans," "believes," "seeks,"
"estimates," "continues," "may," variations of such words, and similar
expressions are intended to identify such forward-looking statements. In
addition, any statements that refer to projections of the Company's future
financial performance, the Company's anticipated growth and potentials in its
business, and other characterizations of future events or circumstances are
forward-looking statements. Readers are cautioned that these forward-looking
statements are only predictions and are subject to risks, uncertainties, and
assumptions that are difficult to predict, including those identified elsewhere
herein and in the Company's Annual Report on Form 10-KSB for the fiscal year
ended October 31, 2005 under "Risk Factors." Therefore, actual results may
differ materially and adversely from those expressed in any forward-looking
statements. The Company undertakes no obligation to revise or update any
forward-looking statements for any reason.
Overview
The
Company is an exploration stage enterprise formed under the laws of the state
of
Nevada on August 20, 1993, to engage in the business of mining. The Company
currently owns eight concessions that are located in the municipality of Sierra
Mojada, Coahuila, Mexico. The Company's objective is to define sufficient
mineral reserves on these concessions to justify the development of a mechanized
mining operation (the "Project"). The Company conducts its operations in Mexico
through its wholly owned Mexican subsidiary, Minera Metalin S.A. de C.V.
The Company
currently has a total of five employees, including four full-time
employees.
The
eight
concessions total 7,108 hectares (17,563 acres). The Company owns 100% of the
eight concessions pursuant to purchase agreements with the previous owners.
A
number of prior established concessions that are not owned by the Company are
located within the largest concession, the Sierra Mojada concession. The Company
holds title to the concessions that it owns subject to its obligation to
maintain the concessions by conducting work on the concessions, recording
evidence of the work with the Mexican Ministry of Mines and paying a semi-annual
fee to the Mexican government.
Ownership
of a concession provides the owner with exclusive exploration and exploitation
rights of all minerals located on the concessions, but does not include the
surface rights to the real property. Therefore, the Company will need to
negotiate the necessary agreements, as needed, with the appropriate surface
landowners if the Company determines that a mining operation is feasible for
the
concessions. The Company currently anticipates that it will build mining
infrastructure needed on land owned by the local municipality. Initial
communications with the municipality officials indicate that they will be
willing to negotiate the necessary agreements.
The
concessions are located within a mining district known as the Sierra Mojada
District (the "District"). The District is located in the west central part
of
the state of Coahuila, Mexico, near the Coahuila-Chihuahua state border
approximately 200 kilometers south of the Big Bend of the Rio Grande River.
See
Exhibit 99.1 attached hereto and incorporated herein by reference for a map
showing the location of the mine. The principal mining area extends for some
5
kilometers in an east-west direction along the base of the precipitous, 1,000
meter high, Sierra Mojada Range. The District has high voltage electric power
supplied by the national power company, Comision Federal de Electricidad, C.F.E.
and is supplied water by the municipality of Sierra Mojada. The District is
accessible from Torreon by vehicle via 250 kilometers of paved road. There
is a
well maintained, 1100 meter, gravel airstrip in the District as well as a
railroad connecting with the National Railway at Escalon and Monclova.
Over
45
mines have produced ore from underground workings throughout the approximately
five kilometer by two kilometer area that comprises the District. The Company
estimates that since its discovery in 1879, the District has produced about
10
million tons of high grade ore that was shipped directly to smelters. The
District has never had a mill to concentrate ore and all mining conducted thus
far has been limited to selectively mined ore of sufficient grade to direct
ship
to smelters. The Company believes that mill grade mineralization that was not
mined remains available for extraction. The Company anticipates exploring and
potentially developing the mill grade mineralization and the unexplored portions
of the concessions.
The
concessions contain two distinct mineral systems separated by the Sierra Mojada
fault which trends east-west along the base of the range. North of the fault
mineralization is composed of silver, copper, zinc, lead sulfide and oxide
minerals. South of the fault the mineralization is oxide zinc and oxide lead
minerals.
The
sediments in the District are predominantly limestone and dolomite with some
conglomerate, sandstone and shale and the bedding attitudes are near horizontal.
The mines are dry and the rocks are competent. The thickness and attitude of
the
mineralized material is amenable to high volume mechanized mining methods and
low cost production.
Mining
operations are typically developed in phases. These phases include: 1) exploring
to identify available mineral deposits and define a resource; 2) conducting
a
feasibility study to determine whether deposits may be profitably extracted;
and
3) eventually developing mining operations. The Company has already conducted
extensive exploration and identification of the mineralization located on the
concessions. The Company has also initiated a feasibility study. If the results
of the feasibility study are positive and the Company is able to secure
sufficient financing, then the Company would proceed to the development stage,
leading eventually to the operation of a mine on the concessions.
Thus
far,
the Company has spent a total of approximately $13.2 million during the
exploration phase and continues to maintain a sampling and drilling program
that
is budgeted at approximately $50,000 per month, not including analytical costs
which can vary from $20,000 to $40,000 per month. The Company estimates that
completion of a feasibility study will cost approximately $5 million and the
Company expects that it will take approximately 12 months to complete. Following
the completion of a successful feasibility study, the Company would then proceed
to the construction phase, which would entail construction of a mine and related
infrastructure pursuant to a mine plan developed specifically for the Company's
concessions, and construction of an extraction plant to extract metal from
the
ore that would be mined.
Much
of
the infrastructure required for a mine, including access to roads, electricity
and rail lines, is already in place due to the historical mining operations
conducted in the District. Results from mapping, sampling, drilling and
inspection of existing workings indicate that large mineralized resources can
be
developed within and adjacent to the existing workings and in unexplored
stratigraphic units outside of and below the existing mine workings. The Company
anticipates that it would also build additional infrastructure, including mine
access, a tailings pond and an extraction plant. The Company would also enter
into agreements with the landowners of the concessions' surface rights upon
completion of a feasibility study and finalization of a mine plan for the
Project. The Company estimates that construction of a mine and extraction plant
would cost approximately $400 million and take approximately 2 to 3 years to
complete. The Company intends to finance this cost with a combination of equity
and debt. In addition the Company may seek joint venture partners or other
alternative financing sources as necessary to complete development of the
Project.
A
description of work completed in the exploration phase and initiated in the
feasibility phase follows:
In
1997
the Company initiated exploration of the concessions by collecting and analyzing
historical data from previous mining operations, surveying the locations of
the
mines, geological mapping, and sampling of the surface and some of the existing
mines. Based on the information gained from this work, the Company has been
exploring the tabular, nearly horizontal bodies of mineralized material located
on the concessions that are known as mantos.
Exploration
from 1997 to 1999 concentrated on the polymetallic copper, silver, zinc, lead
mineralization north of the Sierra Mojada Fault. The Veta Rica, Once, San Jose
and other mines located in the western part of the district were mapped and
channel sampled. In the eastern part of the District in the Encantada and
Fronteriza mines, the copper, silver, zinc, lead mineralization, known as the
Polymetallic Manto, has been mapped, channel sampled and drilled.
Work
on
the polymetallic mineralization was put on standby in 1999 when the Company
recognized the potential of the oxide zinc mineralization as a result of a
positive feasibility study conducted on the Skorpion Mine located in Namibia,
Africa, that demonstrated that the use of the solvent extraction electrowinning
("SXEW") process could make it profitable to mine oxide zinc deposits that
would
otherwise be unfeasible. Now that the Company's work on the oxide zinc
mineralization is in the feasibility study stage, the Company anticipates
continued exploration of the polymetallic mineral system north of the Sierra
Mojada Fault. However, the Company has not yet allocated financial resources
nor
established a timeline for when it expects to initiate such additional
exploration.
The
Company initiated a diamond drill program in January 2004, and drilled over
30,000 meters in 2004 and 2005. In addition, over 9,000 meters of percussion
drill and over 12,000 meters of channel samples of the oxide zinc mineralization
in the San Salvador, Encantada and Fronteriza Mines has been completed by the
Company and its joint venture partners. This work has defined a body of oxide
zinc mineralization extending 1,500 meters in an east-west direction, 100 to
200
meters in a north-south direction, and 20 to 100 meters vertically. The Company
intends to continue the drill program into the Esmeralda Mine, the next mine
to
the west of the San Salvador Mine, to further define the extent of the Iron
Oxide Manto and the Smithsonite Manto.
Prior
mining of oxide zinc mineralization has occurred intermittently over a distance
in excess of 5 kilometers from the Oriental Mine located in the east end of
the
District to the Vasquez Tres Mine located in the west end of the District.
Holes
drilled 2,000 meters west of the San Salvador Mine intersected oxide zinc
mineralization that is up to 140 meters (460 feet) thick and 10 meters (33
feet)
below the surface. Drilling has also intersected oxide zinc mineralization
intermittently over the 2,000 meters between the Fronteriza Mine and the
Oriental Mine.
In
2004,
the Company retained Reserva International, LLC, an independent contractor
specializing in resource evaluation, to generate a block model evaluation based
upon the data compiled from the Company's and its joint venture partner's
accumulated database to determine the size and grade of the mineralization
of
the Iron Oxide Manto and the Smithsonite Manto. Based on the estimates generated
from the block model evaluation, the Company has determined that the estimated
mineralization justifies a feasibility study of the Iron Oxide
Manto.
Although
the Company is of the opinion that sufficient mineralized material has been
defined to justify construction of a mine, extraction plant and refinery, the
Company still must complete a feasibility study to determine whether a mining
operation may be profitably conducted. This study will consist of a detailed
engineering and economic valuation of the Iron Oxide Manto mineralized material
to determine the viability and profitability of the potential operation.
The
Company initiated the feasibility study in 2004, retaining Green Team
Consultants International cc ("GTI"), of Johannesburg, South Africa. GTI was
selected, in part, due to GTI's experience conducting the feasibility study
for
the Skorpion Mine in Namibia, Africa. GTI supervised the design, construction,
and training of the Skorpion Zinc personnel and operated the mine and extraction
plant through initial production and until the mine and plant were at 90% of
capacity, at which point operation of the mine and plant was turned over to
Skorpion Zinc, a subsidiary of Anglo American Corporation PLC.
The
Skorpion Mine is the first, and to date only, mine in the world using the SXEW
process for extracting zinc from oxide zinc ore and produces a refined product,
Super High Grade ("SHG") zinc which is 99.995% zinc. SXEW is a
hydrometallurgical process that has about a 30% lower cost for extracting zinc
than the pyrometallurgical process used at smelters by essentially all other
mining operations around the world. The Company anticipates that using the
SXEW
process will enable the Company to extract zinc more efficiently and
economically than its competitors.
GTI,
as
general contractor for the feasibility study, has retained TWP Consulting (pty)
Ltd. ("TWP") to prepare the mine plan as part of the feasibility study for
the
Project. TWP is a large South African mining consulting company that has worked
on large mining projects in South Africa and internationally, including the
mine
plan at the Skorpion Mine.
GTI
has
also retained SRK Consulting ("SRK") as the auditing engineering firm for the
feasibility study. SRK is a world-wide engineering consulting company that
was
the auditing engineering firm for the feasibility study of the Skorpion Mine.
Principals
of GTI, TWP and SRK have completed a tour and examination of the Sierra Mojada
property, reviewed the project data, conducted underground examination of the
Iron Oxide, Smithsonite and Polymetallic Mantos, and selected surface locations
for the mine and extraction plant facilities.
GTI
has
also retained Min-Tek, a South African consulting company specializing in
mineral and metallurgical research and development, to complete the
metallurgical work for the Project. Min-Tek was chosen, in part, because it
performed the metallurgical work for the Skorpion feasibility
studies.
On
July
12, 2005, the Company released the results of Mint-Tek's metallurgical test
work. The test work focused on demonstrating the viability of using a
combination of dense media separation ("DMS") and flotation processes to
successfully produce a zinc oxide concentrate from a variety of samples taken
from the Sierra Mojada mineralization. The report included a conceptual block
flow diagram showing the key DMS and flotation steps followed by conventional
zinc refining using leach, solvent extraction and electrowinning. The Company
believes that the ability to produce a concentrate which can be shipped
economically would be a major contributing factor to the potential success
of
the Project because it would allow the Company to choose the best site for
a
refinery based upon the tax regime, cost of power and other capital and
operating cost inputs available at various locations. In addition, the report
noted that acid-consuming mineral such as limestone and dolomite would be
discarded in the concentration process, which would reduce sulphuric acid
consumption in the refinery process.
Min-Tek's
test work of the Sierra Mojada samples indicated that a zinc oxide concentrate
with a zinc content of 30% can be produced at an overall concentrator zinc
recovery of 75%-80%. The concentrate produced responded well to atmospheric
leaching with dilute sulphuric acid, and refinery leach extraction efficiency
was above 98%. The concentrator operating cost is expected to be approximately
$5-$8 per ton of ore treated, which is offset by the expectation that the
sulphuric acid consumption in the refinery leach step will be 70% less than
that
achievable with direct leaching of the ore.
The
Company expects to continue to optimize the concentrating process route by
conducting further test work to confirm key aspects of the flowsheet and to
enhance overall recovery and concentrate grade. In particular, the incorporation
of cleaner and scavenger steps in the flotation circuit and the potential to
recover zinc from slimes produced in the process (currently considered to be
discarded) provides further upside potential.
Feasibility
study work continues to determine the mining method and its related costs and
to
determine the production rate. Drilling continues to explore the Iron Oxide
Manto mineralization to the west in the San Salvador and La Esmeralda mines.
In
addition, surveying, mapping and channel sampling is being conducted in the
La
Esmeralda mine to determine the location of historic workings. No historic
data
is available for the La Esmeralda mine, which produced ore from the Lead Manto
south of the Sierra Mojada Fault and the copper, silver, polymetallic
mineralization north of the Sierra Mojada Fault. The Company expects that the
decline to access the Iron Oxide Manto mineralization will enter through ground
upon which La Esmeralda is located, and the location of the existing workings
must be determined as part of the mine plan for the feasibility study. Channel
samples in these workings have been collected and have produced a few thousand
samples of mineralized material, which consist of north side copper-silver
mineralization and south side oxide zinc mineralization. Lead Manto stopes,
which overlie the Iron Oxide Manto, have been located and are also being
surveyed and sampled. These samples have been prepared for assay and results
will be announced when available.
On
March
6, 2006, Metalline closed its private placement as announced in its news release
of March 6, 2006 and Form 8-K filed March 6, 2006. Placement funds totaled
$11,156,509 and 13,945,638 shares were issued and 13,945,638 warrants were
issued with a price of $1.25 and a term of five years.
The
Company has had a mining operation in the Smithsonite Manto that has been
shipping zinc carbonate ore to Cameron Chemical Company, for use as a
micronutrient for the fertilizer industry. During the period ended January
31,
2006, the Company realized other income from the sale of zinc carbonate ore.
The
Company has ceased mining zinc carbonate ore, but anticipates continued sales
from the existing inventory of mined ore until the inventory is
depleted.
The
Company's corporate offices are located at 1330 East Margaret Avenue, Coeur
d'Alene, Idaho 83815, and its telephone number is (208) 665-2002 and FAX is
(208) 665-0041. The Company's facilities in Mexico include offices, residences,
shops, warehouse buildings and mining equipment located at Calle Maria #1,
La
Esmeralda, Coahuila, Mexico. The Company's telephone and FAX number in Mexico
is
52 872 761 5129. Electric power has been upgraded to 13,200 volts and lines
run
to the compound, the shops and the San Salvador and Encantada mines. The San
Salvador and the Encantada mines have been electrified and the main levels
are
wired. San Salvador and Encantada head frames and hoists have been rebuilt
and
upgraded. In management's opinion, the Company's properties may not be
adequately covered by insurance. The Company has chosen not to obtain such
insurance for the Company's properties in Mexico because it would be difficult
to obtain and the cost of such insurance would outweigh its value. In
management's opinion, the Company's plant and equipment are in good condition
and well maintained.
Cautionary
Note to Investors
The
Company is an exploration stage company and does not currently have any known
reserves and cannot be expected to have reserves unless and until a feasibility
study is completed for the Sierra Mojada concessions that shows proven and
probable reserves. There can be no assurance that the Company's concessions
contain proven and probable reserves and investors may lose their entire
investment in the Company.
Set
forth
in the Company's Annual Report on Form 10-KSB and in other documents we
file with the Securities and Exchange Commission are risks and uncertainties
that could cause actual results to differ materially from the results
contemplated by the forward-looking statements contained in this Quarterly
Report on Form 10-QSB.
Results
of Operations for the Period Ended January 31, 2006.
Three
months ended January 31, 2006 compared to the three months ended January 31,
2005:
During
the three months ended January 31, 2006, the Company realized other income
of
$52,038 from the sale of zinc carbonate ore from the Company's San Salvadore
mine, in accordance with a contract with Cameron Chemicals Inc., Norfolk,
Virginia. Costs associated with the sale of the ore totaled $93,575 the
three-month period ended January 31, 2006. There were ore sales of $130,771
in
the three-month period ended January 31, 2005. General and administrative
expenses decreased to $456,149 for the three-month period ended January 31,
2006
as compared to $1,309,186 for the three-month period ended January 31, 2005.
The
decrease is primarily due to a cessation of drilling activity on the Company's
property, resulting in a decrease in exploration expenditures of $446,633 and
a
decrease in consulting and professional services of $181,966, partially offset
by an increase in taxes and fees of $99,459. Salaries and payroll expenses
also
decreased by $261,715 from the three-month period ended January 31, 2005 to
the
three-month period ended January 31, 2006. For the three months ended January
31, 2006, the Company experienced a loss of $467,250, or $0.02 per
share, compared to a loss of $1,261,409, or $0.06 per share, during the
comparable period in the previous year.
Three
months ended January 31, 2005 compared to the three months ended January 31,
2004:
During
the three months ended January 31, 2005, the Company realized other income
of
$130,771 from the sale of zinc carbonate ore from the Company's San Salvadore
Mine
located
on the property, in accordance with a contract with Cameron Chemicals Inc.,
Norfolk, Virginia. Costs associated with the sale of the ore totaled $97,962
for
the three-month period ended January 31, 2005. There were ore sales of $161,006
in the three-month period ended January 31, 2004. General and administrative
expenses increased to $1,309,186 for the three-month period ended January 31,
2005 as compared to $377,701 for the three-month period ended January 31, 2004.
The increase is primarily due to an increase in exploration expenditures of
$454,268, an increase in consulting and professional services of $179,885,
and
an increase of $232,355 in payroll and related expenses. For the three months
ended January 31, 2005, the Company experienced a loss of $1,261,409, or $0.06
per share, compared to a loss of $268,493, or $0.02 per share during the
comparable period in the previous year.
Liquidity
and Capital Resources.
The
Company financed its obligations during the fiscal year ended October 31, 2005
by the sale of 7,580,150 shares of its common stock during the previous fiscal
year at an average price of $1.00 per share, less issuance costs of $698,863,
and the sale of 476,404 shares of common stock during the year ended October
31,
2005 at an average price of $0.98 per share. During the three months ended
January 31, 2006 the Company sold 7,076,500 shares in private placement
transactions at a price of $0.80 per share. Due to the Company's substantial
losses and mineral revenues, the Company's independent certified public
accountants included a paragraph in the Company's 2005 financial statements
relative to a going concerning uncertainty.
The
Company's management believes that private placements of its shares have
provided sufficient cash for the Company to continue to operate based on current
expense projections.
Cash
flows for the three months ended January 31, 2006 were as
follows:
During
the three-month period ended January 31, 2006, the Company's cash position
increased by $5,240,350, due to the sale of 7,076,500 shares of the Company's
common stock at a price of $0.80 per share. Also during this period, the Company
used $419,798 in operating activities, principally in connection with
maintaining the property.
Effect
of Recently Issued Accounting Pronouncements.
In
May
2005, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 154 ("SFAS No. 154"), "Accounting Changes and Error
Corrections." This statement requires entities that voluntarily make a change
in
an accounting principle to apply that change retrospectively to prior periods'
financial statements, unless this would be impracticable. SFAS No. 154
supersedes APB Opinion No. 20, "Accounting Changes," which previously required
that most voluntary changes in an accounting principle be recognized by
including in the current period's net income the cumulative effect of changing
to the new accounting principle. SFAS No. 154 also makes a distinction between
"retrospective application" of an accounting principle and the "restatement"
of
financial statements to reflect the correction of an error. SFAS No. 154 applies
to accounting changes and error corrections that are made in fiscal years
beginning after December 15, 2005. Management believes the adoption of this
statement will not have an immediate material impact on the financial statements
of the Company.
In
March
2005, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
No. 47 ("FIN 47"), "Accounting for Conditional Asset Retirement Obligations."
FIN 47 clarifies that the term "conditional asset retirement obligation," which
as used in SFAS No. 143, "Accounting for Asset Retirement Obligations," refers
to a legal obligation to perform an asset retirement activity in which the
timing and (or) method of settlement are conditional on a future event that
may
or may not be within the control of the entity. The entity must record a
liability for a "conditional" asset retirement obligation of the fair value
of
the obligation can be reasonably estimated. FIN 47 also clarifies when an entity
would have sufficient information to reasonably estimate the fair value of
an
asset retirement obligation. FIN 47 is effective no later than the end of fiscal
years ending after December 15, 2005. Management believes the adoption of this
statement will not have an immediate material impact on the financial statements
of the Company.
Disclosure
Controls and Procedures.
The
Company's principal executive officer and principal financial officer have
evaluated the effectiveness of the Company's disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act) as of the end of the period covered by this report. Based on such
evaluation, the Company's principal executive officer and principal financial
officer have concluded that, as of the end of such period, the Company's
disclosure control and procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act.
Changes
in Internal Control Over Financial Reporting.
There
was
no change in the Company's internal control over financial reporting that
occurred during the fiscal quarter to which this report relates that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
The
Company is not currently a party to any legal proceedings.
During
the three months ended January 31, 2006, the Company sold 7,076,500 shares
of
the Company's common stock at a price of $0.80 per share. These shares were
issued in private placement transactions without registration under the
Securities Act in reliance upon the exemptions from the registration
requirements provided by Section 4(2) of the Securities Act, and Rule 506 of
Regulation D promulgated under the Securities Act.
None.
None.
None.
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(a) |
Documents
which are filed as a part of this report:
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1. |
Financial
Statements:
The required financial statements are contained in pages F/S-1
through F/S-11 of this Form 10-QSB.
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2. |
Financial
Statement Schedules:
Financial statement schedules have been omitted as they are not applicable
or the information is included in the Consolidated Financial Statements.
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3. |
Exhibits:
The exhibits filed as part of this report and the exhibits incorporated
herein by reference are listed in the Exhibit Index at page
E-1.
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(b)
|
See
(a)(3) above for all exhibits filed
herewith.
|
| |
(c)
|
All
schedules are omitted as the required information is not applicable
or the
information is presented in the Consolidated Financial Statements
or
related notes.
|
METALLINE
MINING COMPANY
An
Exploration Stage Company
January
31, 2006
In
accordance with Section 12, 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
| |
|
|
| |
METALLINE
MINING COMPANY |
|
|
|
| Date: March
17, 2006 |
By: |
/s/ MERLIN
D.
BINGHAM |
| |
|
| |
Merlin
D. Bingham, its President |
| |
|
|
| Date: March
17, 2006 |
By: |
/s/ WAYNE
L.
SCHOONMAKER |
| |
|
| |
Wayne
L.
Schoonmaker, its Principal Financial
Officer |
EXHIBIT
INDEX
|
3.1
|
Articles
of Incorporation of the registrant. Filed as an exhibit to the
registrant's registration statement on Form 10-SB (Commission File
No.
000-27667) and incorporated by reference
herein.
|
|
3.2
|
Bylaws
of registrant. Filed as an exhibit to the registrant's current report
on
Form 8-K on September 14, 2005 and incorporated by reference
herein.
|
|
3.3
|
Articles
of Amendment to the Articles of Incorporation. Filed as an exhibit
to the
registrant's registration statement on Form 10-SB and incorporated
by
reference herein.
|
| 4.1 |
Reference
is made to Exhibits 3.1, 3.2 and
3.3.
|
|
|
Certification
of Principal Executive Officer pursuant to Rule 13a-14(a) of the
Exchange
Act. Filed herewith.
|
|
|
Certification
of Principal Financial Officer pursuant to Rule 13a-14(a) of the
Exchange
Act. Filed herewith.
|
|
|
Certification
of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.
Furnished herewith.
|
|
|
Certification
of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.
Furnished herewith.
|
|
|
Sierra
Mojada location map. Filed
herewith.
|
METALLINE
MINING COMPANY
| |
PAGE
|
| |
|
|
Consolidated
Financial Statements:
|
|
|
|
F/S-2
|
|
|
F/S-3
|
|
|
F/S-4
|
|
|
F/S-5
|
[The
balance of this page has been intentionally left blank.]
(AN
EXPLORATION STAGE COMPANY)
CONSOLIDATED
BALANCE SHEETS
| |
|
|
|
|
|
| |
|
January
31,
|
|
October
31,
2005
|
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
5,453,719
|
|
$
|
213,369
|
|
|
Accounts
receivable
|
|
|
44,793
|
|
|
23,620
|
|
|
Prepaid
expenses
|
|
|
57,107
|
|
|
13,242
|
|
|
Employee
advances
|
|
|
11,560
|
|
|
9,560
|
|
|
Total
Current Assets
|
|
|
5,567,179
|
|
|
259,791
|
|
| |
|
|
|
|
|
|
|
|
PROPERTY
CONCESSIONS
|
|
|
|
|
|
|
|
|
Sierra
Mojada, Mojada 3
|
|
|
15,875
|
|
|
15,875
|
|
|
Fortuna
|
|
|
76,725
|
|
|
76,725
|
|
|
Esmeralda
|
|
|
255,647
|
|
|
255,647
|
|
|
Esmeralda
I
|
|
|
180,988
|
|
|
180,988
|
|
|
U.M.
Nortenos, Vulcano
|
|
|
3,682,772
|
|
|
3,682,772
|
|
|
La
Blanca
|
|
|
122,760
|
|
|
122,760
|
|
|
Total
Property Concessions
|
|
|
4,334,767
|
|
|
4,334,767
|
|
| |
|
|
|
|
|
|
|
|
EQUIPMENT
|
|
|
|
|
|
|
|
|
Office
and mining equipment, net
|
|
|
470,284
|
|
|
490,884
|
|
|
Total
Equipment
|
|
|
470,284
|
|
|
490,884
|
|
|
TOTAL
ASSETS
|
|
$
|
10,372,230
|
|
$
|
5,085,442
|
|
| |
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
84,161
|
|
$
|
86,189
|
|
|
Accrued
liabilities and expenses
|
|
|
290,837
|
|
|
189,046
|
|
|
Other
liabilities
|
|
|
10,000
|
|
|
15,873
|
|
|
Note
payable, current portion
|
|
|
4,209
|
|
|
4,209
|
|
|
Total
Current Liabilities
|
|
|
389,207
|
|
|
295,317
|
|
| |
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES
|
|
|
|
|
|
|
|
|
Note
payable, net of current portion
|
|
|
6,313
|
|
|
7,365
|
|
| |
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.01 par value; 1,000,000 shares authorized,no
shares outstanding
|
|
|
|
|
|
—
|
|
|
Common
stock, $0.01 par value; 50,000,000 shares authorized, 27,481,085
and 20,404,585 shares issued and outstanding, respectively
|
|
|
274,812
|
|
|
204,047
|
|
|
Additional
paid-in capital
|
|
|
23,367,276
|
|
|
19,852,673
|
|
|
Stock
options and warrants
|
|
|
3,423,671
|
|
|
1,347,839
|
|
|
Deficit
accumulated during exploration stage
|
|
|
(17,089,049
|
)
|
|
(16,621,799
|
)
|
|
Total
Stockholders' Equity
|
|
|
9,976,710
|
|
|
4,782,760
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
10,372,230
|
|
$
|
5,085,442
|
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
The
accompanying condensed notes are an integral part of these consolidated
financial statements.
(AN
EXPLORATION STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
November
8,
|
|
| |
|
|
|
|
|
1993
|
|
| |
|
|
|
|
|
(Inception)
|
|
| |
|
Three
Months Ended
|
|
to
|
|
| |
|
January
31,
|
|
January
31,
|
|
January
31,
|
|
| |
|
2006
|
|
2005
|
|
2006
|
|
| |
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
REVENUES
|
|
$
|
—
|
|
$
|
|
|
$
|
—
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
GENERAL
AND ADMINISTRATIVE EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and payroll expenses
|
|
|
130,696
|
|
|
392,411
|
|
|
3,368,313
|
|
|
Office
and administrative expenses
|
|
|
50,873
|
|
|
65,561
|
|
|
1,039,819
|
|
|
Taxes
and fees
|
|
|
119,542
|
|
|
20,083
|
|
|
608,983
|
|
|
Professional
services
|
|
|
106,351
|
|
|
288,317
|
|
|
4,474,023
|
|
|
Property
expenses
|
|
|
9,935
|
|
|
56,880
|
|
|
1,954,038
|
|
|
Depreciation
|
|
|
20,600
|
|
|
21,149
|
|
|
362,490
|
|
|
Exploration
and research
|
|
|
18,152
|
|
|
464,785
|
|
|
5,352,238
|
|
|
TOTAL
GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
456,149
|
|
|
1,309,186
|
|
|
17,159,903
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(456,149
|
)
|
|
(1,309,186
|
)
|
|
(17,159,903
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous
ore sales, net of expenses
|
|
|
(41,537
|
)
|
|
32,808
|
|
|
123,601
|
|
|
VAT
tax refunds
|
|
|
13,045
|
|
|
|
|
|
132,660
|
|
|
Miscellaneous
income
|
|
|
|
|
|
|
|
|
8,500
|
|
|
Interest
and investment income
|
|
|
17,726
|
|
|
15,121
|
|
|
93,199
|
|
|
Interest
and financing expense
|
|
|
(335
|
)
|
|
(152
|
)
|
|
(287,106
|
)
|
|
TOTAL
OTHER INCOME
|
|
|
(11,101
|
)
|
|
47,777
|
|
|
70,854
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE INCOME TAXES
|
|
|
(467,250
|
)
|
|
(1,261,409
|
)
|
|
(17,089,049
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAXES
|
|
|
— |
|
|
— |
|
|
—
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(467,250
|
)
|
$
|
(1,261,409
|
)
|
$
|
(17,089,049
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED NET LOSS PER COMMON SHARE
|
|
$
|
(0.02
|
)
|
$
|
(0.06
|
)
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED
WEIGHTED
AVERAGE NUMBER
OF
COMMON SHARES OUTSTANDING
|
|
|
21,810,960
|
|
|
19,829,081
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
See
condensed notes to the consolidated financial statements
(AN
EXPLORATION STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
Period
from
|
|
| |
|
|
|
|
|
November
8, 1993
|
|
| |
|
|
|
|
|
(Inception)
|
|
| |
|
Years
Ended
|
|
to
|
|
| |
|
January
31,
|
|
January
31,
|
|
January
31,
|
|
| |
|
2006
|
|
2005
|
|
2006
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(467,250
|
)
|
$
|
(1,261,409
|
)
|
$
|
(17,089,049
|
)
|
|
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
20,600
|
|
|
21,149
|
|
|
362,520
|
|
|
Noncash
expenses
|
|
|
—
|
|
|
|
|
|
126,864
|
|
|
Common
stock issued for services
|
|
|
|
|
|
|
|
|
966,538
|
|
|
Common
stock issued for compensation
|
|
|
|
|
|
176,772
|
|
|
820,231
|
|
|
Stock
options issued for services
|
|
|
|
|
|
|
|
|
801,892
|
|
|
Stock
options issued for financing fees
|
|
|
|
|
|
|
|
|
276,000
|
|
|
Common
stock issued for payment of expenses
|
|
|
|
|
|
|
|
|
326,527
|
|
|
Stock
warrants issued for services
|
|
|
|
|
|
|
|
|
688,771
|
|
|
(Increase)
decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities
|
|
|
|
|
|
250,000
|
|
|
|
|
|
Accounts
receivable
|
|
|
(21,173
|
)
|
|
(60,402
|
)
|
|
(44,793
|
)
|
|
Prepaid
expenses
|
|
|
(43,865
|
)
|
|
(48,318
|
)
|
|
(57,107
|
)
|
|
Employee
advances
|
|
|
(2,000
|
)
|
|
(5,000
|
)
|
|
(11,560
|
)
|
|
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(2,028
|
)
|
|
(52,292
|
)
|
|
84,160
|
|
|
Contracts
payable
|
|
|
|
|
|
34,765
|
|
|
4,209
|
|
|
Accrued
liabilities and expenses
|
|
|
95,918
|
|
|
(51,578
|
)
|
|
316,621
|
|
|
Net
cash used by operating activities
|
|
|
(419,798
|
)
|
|
(996,313
|
)
|
|
(12,428,176
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of investments
|
|
|
—
|
|
|
|
|
|
(484,447
|
)
|
|
Proceeds
from investments
|
|
|
—
|
|
|
|
|
|
484,447
|
|
|
Equipment
purchases
|
|
|
—
|
|
|
(7,598
|
)
|
|
(792,781
|
)
|
|
Mining
property acquisitions
|
|
|
—
|
|
|
|
|
|
(4,452,631
|
)
|
|
Net
cash used by investing activities
|
|
|
—
|
|
|
(7,598
|
)
|
|
(5,245,412
|
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sales of common stock
|
|
|
5,661,200
|
|
|
|
|
|
22,031,387
|
|
|
Proceeds
from sales of options and warrants
|
|
|
|
|
|
|
|
|
949,890
|
|
|
Deposits
for sale of stock
|
|
|
|
|
|
|
|
|
125,500
|
|
|
Proceeds
from shareholder loans
|
|
|
|
|
|
|
|
|
30,000
|
|
|
Payment
of note payable
|
|
|
(1,052
|
)
|
|
(1,052
|
)
|
|
(9,470
|
)
|
|
Net
cash provided by financing activities:
|
|
|
5,660,148
|
|
|
(1,052
|
)
|
|
23,127,307
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash
equivalents
|
|
|
5,240,350
|
|
|
(1,004,963
|
)
|
|
5,453,719
|
|
|
Cash
and cash equivalents beginning of period
|
|
|
213,369
|
|
|
1,384,030
|
|
|
—
|
|
|
Cash
and cash equivalents end of period
|
|
$
|
5,453,719
|
|
$
|
379,067
|
|
$
|
5,453,719
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes paid
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
Interest
paid
|
|
$
|
335
|
|
$
|
152
|
|
$
|
287,106
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
$
|
—
|
|
$
|
|
|
$
|
966,538
|
|
|
Common
stock issued for compensation
|
|
$
|
|
|
$
|
176,772
|
|
$
|
820,231
|
|
|
Common
stock issued for payment of expenses
|
|
$
|
|
|
$
|
|
|
$
|
326,527
|
|
|
Common
stock issued for equipment
|
|
$
|
|
|
$
|
|
|
$
|
25,000
|
|
|
Common
stock options issued for financing fees
|
|
$
|
|
|
$
|
|
|
$
|
276,000
|
|
|
Options
issued for services
|
|
$
|
|
|
$
|
|
|
$
|
801,892
|
|
|
Warrants
issued for services
|
|
$
|
|
|
$
|
|
|
$
|
688,771
|
|
|
Noncash
expenses
|
|
$
|
|
|
$
|
|
|
$
|
126,864
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
The
accompanying condensed notes are an integral part of these consolidated
financial statements.
(AN
EXPLORATION STAGE COMPANY)
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Metalline
Mining Company ("the Company") was incorporated in the State of Nevada on
November 8, 1993 as the Cadgie Company for the purpose of acquiring and
developing mineral concessions. The Cadgie Company was a spin-off from its
predecessor, Precious Metal Mines, Inc. On June 28, 1996, at a special directors
meeting, the Company's name was changed to Metalline Mining Company. The
Company's fiscal year-end is October 31.
The
Company expects to engage in the business of mining. The Company currently
owns
concessions located in a mining region known as the Sierra Mojada District
that
is located in the municipality of Sierra Mojada, Coahuila, Mexico. The Company
conducts its operations in Mexico through its wholly owned subsidiary
corporation, Minera Metalin S.A. de C.V. ("Minera Metalin").
NOTE
2 - BASIS OF PRESENTATION
The
foregoing unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Regulation S-B as
promulgated by the Securities and Exchange Commission ("SEC"). Accordingly,
these financial statements do not include all of the disclosures required by
generally accepted accounting principles in the United States of America for
complete financial statements. These unaudited interim financial statements
should be read in conjunction with the audited financial statements for the
year
ended October 31, 2005. In the opinion of management, the unaudited interim
financial statements furnished herein include all adjustments, all of which
are
of a normal recurring nature, necessary for a fair statement of the results
for
the interim period presented.
The
preparation of financial statements in accordance with generally accepted
accounting principles in the United States of America requires the use of
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities known to exist
as
of the date the financial statements are published, and the reported amounts
of
revenues and expenses during the reporting period. Uncertainties with respect
to
such estimates and assumptions are inherent in the preparation of the Company's
financial statements; accordingly, it is possible that the actual results could
differ from these estimates and assumptions and could have a material effect
on
the reported amounts of the Company's financial position and results of
operations.
Operating
results for the three-month period ended January 31, 2006 are not necessarily
indicative of the results that may be expected for the year ending October
31,
2006.
METALLINE
MINING COMPANY
(AN
EXPLORATION STAGE COMPANY)
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Going
Concern
As
shown
in the accompanying financial statements, the Company has no revenues, has
incurred a net loss of $467,250 for the three months ended January 31, 2006
and
has an accumulated deficit of $17,089,049. These factors indicate that the
Company may be unable to continue in existence. The financial statements do
not
include any adjustments related to the recoverability and classification of
recorded assets, or the amounts and classification of liabilities that might
be
necessary in the event the Company cannot continue in existence.
The
Company's management believes that private placements of its shares have
provided sufficient cash for the Company to continue to operate based on current
expense projections.
NOTE
3 - RECENT ACCOUNTING PRONOUNCEMENTS
In
May
2005, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 154 ("SFAS No. 154"), "Accounting Changes and Error
Corrections." This statement requires entities that voluntarily make a change
in
an accounting principle to apply that change retrospectively to prior periods'
financial statements, unless this would be impracticable. SFAS No. 154
supersedes APB Opinion No. 20, "Accounting Changes," which previously required
that most voluntary changes in an accounting principle be recognized by
including in the current period's net income the cumulative effect of changing
to the new accounting principle. SFAS No. 154 also makes a distinction between
"retrospective application" of an accounting principle and the "restatement"
of
financial statements to reflect the correction of an error. SFAS No. 154 applies
to accounting changes and error corrections that are made in fiscal years
beginning after December 15, 2005. Management believes the adoption of this
statement will not have an immediate material impact on the financial statements
of the Company.
In
March
2005, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 47 ("FIN 47"), "Accounting for Conditional Asset Retirement
Obligations." FIN 47 clarifies that the term "conditional asset retirement
obligation," which as used in SFAS No. 143, "Accounting for Asset Retirement
Obligations," refers to a legal obligation to perform an asset retirement
activity in which the timing and (or) method of settlement are conditional
on a
future event that may or may not be within the control of the entity. The entity
must record a liability for a "conditional" asset retirement obligation if
the
fair value of the obligation can be reasonably estimated. FIN 47 also clarifies
when an entity would have sufficient information to reasonably estimate the
fair
value of an asset retirement obligation. FIN 47 is effective no later than
the
end of fiscal years ending after December 15, 2005. Management believes the
adoption of this statement will not have an immediate material impact on the
financial statements of the Company.
METALLINE
MINING COMPANY
(AN
EXPLORATION STAGE COMPANY)
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
4 - CONCESSIONS IN THE SIERRA MOJADA DISTRICT
Sierra
Mojada Mining Concessions
During
the period of August 23, 1996 to July 18, 2000, the Company executed six
separate agreements for the acquisition of eight concessions in the mining
region known as the Sierra Mojada District located in Sierra Mojada, Coahuila,
Mexico. Each agreement enabled the Company to explore the underlying concession
in consideration for the payment of stipulated annual payments. Each of the
concession agreements included an option to purchase the concession and the
annual payments, which were applied in full toward the contracted purchase
price
of the related concession.
The
Company subsequently completed the purchase of the eight concessions, as
follows: Esmeralda, consisting of approximately 118 hectares, on March 20,
1997;
Fortuna, consisting of approximately 14 hectares, on December 8, 1999; Sierra
Mojada and Mojada 3, consisting of approximately 4,767 and 1,689 hectares,
respectively, on May 30, 2000; Unificacion Mineros Nortenos and Vulcano,
consisting of approximately 337 and 4 hectares, respectively, on August 30,
2000; Esmeralda I, consisting of approximately 98 hectares, on August 20, 2001;
and La Blanca, consisting of approximately 34 hectares, on August 20, 2001.
The
Company has recorded the concessions at acquisition cost.
All
of
the concessions were acquired by purchase agreements with Mexican entities
and/or Mexican individuals and all of the concessions were paid for in cash.
In
the acquisition of Sierra Mojada and Mojada 3 there was one purchase agreement
for both concessions. Also, in the acquisition of Unificacion Mineros Nortenos
and Vulcano, there was one purchase agreement for both concessions.
Because
all eight concessions are located in the same mining region and in close
proximity to one another, the concessions are routinely treated as one major
prospect area and are collectively referred to as the Sierra Mojada Project.
The
primary work performed on the Company's concessions has consisted of geologic
mapping, sampling, and drilling. This work has resulted in establishing the
presence of mineralized material (zinc) of sufficient quantity and grade to
justify in the Company's opinion a feasibility study which commenced in
2005.
METALLINE
MINING COMPANY
(AN
EXPLORATION STAGE COMPANY)
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
5 - PROPERTY AND EQUIPMENT
The
following is a summary of the Company's property and equipment at January 31,
2006 and October 31, 2005, respectively:
| |
|
January
31,
|
|
October
31,
|
|
| |
|
2006
|
|
2005
|
|
|
Mining
equipment
|
|
$
|
514,855
|
|
$
|
514,855
|
|
|
Buildings
and structures
|
|
|
141,061
|
|
|
141,061
|
|
|
Land
- non mineral
|
|
|
15,839
|
|
|
15,839
|
|
|
Vehicles
|
|
|
42,068
|
|
|
42,068
|
|
|
Computer
equipment
|
|
|
88,787
|
|
|
88,787
|
|
|
Office
equipment
|
|
|
4,183
|
|
|
4,183
|
|
|
Furniture
and fixtures
|
|
|
8,185
|
|
|
8,185
|
|
| |
|
|
814,978
|
|
|
814,978
|
|
|
Less:
Accumulated depreciation
|
|
|
(344,694
|
)
|
|
(324,094
|
)
|
|
|
|
$
|
470,284
|
|
$
|
490,884
|
|
NOTE
6 - CAPITAL STOCK
Preferred
Stock
At
its
March 1, 2001 annual shareholders meeting, the Company approved a change to
its
articles of incorporation whereby the Company is authorized to issue 1,000,000
shares of $0.01 par value preferred stock. The specific features of the
preferred stock are to be determined by the Company's board of directors. At
January 31, 2006, there were no shares of preferred stock issued or
outstanding.
Common
Stock
In
March
2005, the Company's board of directors authorized a private placement of up
to
5,333,334 shares of the Company's restricted common stock at a price of $1.125
per share for total proceeds of $6,000,000. Purchasers of these shares also
received a warrant to purchase one share of the Company's common stock at an
exercise price of $2.00 per share with an exercise period of five years. In
September 2005, a modification of the private placement terms was authorized.
The modified terms allow for the issuance of 7,500,000 shares of common stock
at
a price of $0.80 per share, a warrant exercise price of $1.25 per share and
an
exercise period of five years. During the three months ended January 31, 2006,
the Company issued 7,076,500 shares of common stock under the aforementioned
private placement, for cash consideration at $0.80 per share with attached
warrants valued at an average of $0.29 per share.
METALLINE
MINING COMPANY
(AN
EXPLORATION STAGE COMPANY)
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During
the year ended October, 2005 the Company issued 476,404 shares of common stock
as part of the private placement offering, for cash consideration of an average
of $0.98 per share with attached warrants valued at an average of $0.28 per
share.
Stock
Options
On
March
1, 2001, the Company's shareholders approved a qualified stock option plan.
The
number of shares eligible for issuance under the qualified plan is to be
determined by the Company's board of directors. As of January 31, 2006, there
were 670,000 options outstanding and exercisable. Of this amount, 250,000 were
granted to officers and directors of the Company.
Summarized
information regarding stock options outstanding and exercisable at January
31,
2006 is as follows:
|
Options
Outstanding
|
|
Options
Exercisable
|
|
|
Exercise
Price
|
|
Number
Outstanding
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
Weighted
Average Exercise Price
|
|
Number
Exercisable
|
|
Weighted
Average Exercise Price
|
|
|
$1.25
|
|
|
100,000
|
|
|
3.52
|
|
$
|
1.25
|
|
|
100,000
|
|
$
|
1.25
|
|
|
1.32
|
|
|
370,000
|
|
|
0.67
|
|
|
1.32
|
|
|
370,000
|
|
|
1.32
|
|
|
2.15
|
|
|
200,000
|
|
|
4.08
|
|
|
2.15
|
|
|
200,000
|
|
|
2.15
|
|
|
$1.25-2.15
|
|
|
670,000
|
|
|
2.12
|
|
$
|
1.60
|
|
|
670,000
|
|
$
|
1.56
|
|
Warrants
During
the three months ended January 31, 2006, the Company issued 7,076,500 common
stock warrants, exercisable at $1.25 per share. The value allocated to these
warrants was $2,075,832.
NOTE
7 - INCOME TAXES
At
January 31, 2006, the Company had net deferred tax assets calculated at an
expected rate of 34% of approximately $4,773,000, principally arising from
net
operating loss carryforwards for income tax purposes. As management of the
Company cannot determine that it is more likely than not that the Company will
realize the benefit of the net deferred tax asset, there is a valuation
allowance equal to the net deferred tax asset.
METALLINE
MINING COMPANY
(AN
EXPLORATION STAGE COMPANY)
CONDENSED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The
significant components of the deferred tax assets at January 31, 2006 and
October 31, 2005 are as follows:
| |
|
January
31,
|
|
October
31,
|
|
| |
|
2006
|
|
2005
|
|
|
Net
operating loss carryforward
|
|
$
|
14,039,000
|
|
$
|
13,572,000
|
|
| |
|
|
|
|
|
|
|
|
Deferred
tax asset
|
|
$
|
4,773,000
|
|
$
|
4,614,000
|
|
|
Deferred
tax asset valuation allowance
|
|
$
|
(4,773,000
|
)
|
$
|
(4,614,000
|
)
|
As
of
January 31, 2006, the Company had net operating loss carryforwards of
approximately $14,039,000, which expire in the years 2008 through 2026. The
Company has recognized approximately $1,491,000 of losses from the issuance
of
stock options and warrants for services through fiscal 2005, which were not
deductible for tax purposes. The change in the allowance account from October
31, 2005 to January 31, 2006 was $159,000. The Company has immaterial temporary
differences resulting from differences in tax depreciation of
equipment.