10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission file number: 000-27667 METALLINE MINING COMPANY (Exact name of registrant as specified in its charter) Nevada 91-1766677 (State or other jurisdiction (IRS Employer Identification No.) of incorporation) 1330 E. Margaret Ave. Coeur d'Alene, ID 83815 (Address of principal executive offices) Registrant's telephone number, including area code: (208) 665-2002 Securities registered pursuant to Section 12 (b) of the Act: None Securities registered pursuant to Section 12 (g) of the Act: Common Stock The OTC-Bulletin Board Title of each class Name of each exchange on which registered. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period as 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 [ ] METALLINE MINING COMPANY ANNUAL REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2000 TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION Item 1: Financial Statements . . . . . . . . . . . . . . . . . . . . . 1 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operation . . . . . . . . . 1 PART II - OTHER INFORMATION Item 1: Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 4 Item 2: Changes in Securities . . . . . . . . . . . . . . . . . . . . 4 Item 3: Defaults upon Senior Securities . . . . . . . . . . . . . . . 4 Item 4: Submission of Matters to a Vote of Security Holders . . . . . 4 Item 5: Other Information . . . . . . . . . . . . . . . . . . . . . . 4 Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 5 Index to Financials . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . F/S-19 [The balance of this page has been intentionally left blank.] (i) PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. The reviewed financial statements of the Company for the period covered by this report are included elsewhere in this report, beginning at page F/S-1. The reviewed financial statements have been prepared in accordance with generally accepted accounting principles for the interim financial information with the instructions to Form 10-Q 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 six-month period ended April 30, 2000 are not necessarily indicative of the results that may be expected for the full year ending October 31, 2000. For further information refer to the financial statements and footnotes thereto in the Company's Annual Report on Form 10-K for the year ended October 31, 1999 incorporated by reference herein. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS FOR THE PERIOD ENDED APRIL 30, 2000. Six months ended April 30, 2000 compared to the six months ended April 30, 1999: During the six months ended April 30, 2000, the Company generated no revenue other than interest income of $3,209. General and administrative expenses decreased to $543,723 for the six-month period ended April 30, 2000 as compared to $747,338 for the six-month period ended April 30, 1999. The decrease is principally attributed to reduced expenses charged to it's Mexican properties. For the six months ended April 30, 2000, the Company experienced a loss of $463,786, or $0.06 per share, compared to a loss of $747,342, or $0.12 per share, during the comparable period in the previous year. LIQUIDITY AND CAPITAL RESOURCES. Metalline Mining Company (the "Company") is a development stage enterprise formed under the laws of the State of Nevada, on August 20, 1993, to engage in the business of mining. The Company has no operating history and is subject to all the risks inherent in a new business enterprise. The likelihood of success of the Company must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with a new business, and the competitive and regulatory environment in which the Company will operate. From inception until May 1996, the Company was essentially dormant having as its only asset unpatented mining claims located in the State of Montana ("Kadex Property"). Since May 1996, the focus of the Company has been the Sierra Mojada Project in Mexico, and the Company has dropped the Kadex Property claims. The Company has insufficient funds to carry on operations during the next twelve months. In order to maintain operations, the Company will have to raise additional capital through loans or through the sale Page 1 of securities. If the Company is unable to raise additional capital, it may have to cease operations. The Company's plan of operation, subject to maintaining sufficient funds, calls for continued geologic mapping of the surface and underground workings, sampling, and drilling to explore for additional mineralization and to develop an ore reserve and compilation of the data into a computer data base for reserve calculation. Currently the Company is spending approximately $20,000 per month in general overhead. Over the next six months the Company has budgeted $100,000 for Sierra Mojada programs, $3,320,769 for property payments and $220,000 for working capital and costs of future financing. Due to the Company's lack of revenues, the Company's independent certified public accountants included a paragraph in the Company's 1999 financial statements relative to a going concern uncertainty. The Company has financed its obligations during the 1998-99 fiscal year by its sale of 1,068,800 shares at prices ranging between $0.90 and $1.75 per share. During the current period, the Company realized $849,750 from the sale of 1,000,000 shares. The Company is engaged in the business of mining. The Company currently owns one mining property located in Mexico known as the Sierra Mojada Property. The Company conducts its operations in Mexico through its wholly owned subsidiary corporation, Minera Metalin S.A. de C.V. ("Minera Metalin"). The Sierra Mojada Property is comprised of eight concessions totaling 7,060 hectares (17,446 acres). The concessions were acquired by purchase agreements from the titled owners. The Company controls 100% of the concessions. The Company is current on its annual payments. The Sierra Mojada Mining District is located in the west central part of the state of Coahuila, Mexico, near the Coahuila-Chihuahua state border some 200 kilometers south of the Big Bend of the Rio Grande River. 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. Vehicle access from Torreon is by 200 kilometers on paved road to the Penoles chemical plant at Laguna del Rey and then another 50 kilometers of gravel road to Sierra Mojada. There is a well maintained, 1200 meter, gravel airstrip. The District has high voltage electric power and is served by a rail line, which was constructed from Escalon to the district in 1891 and later connected to Monclova. The initial discovery of silver ore in the Sierra Mojada Property was made in 1879. Over the next 12 years numerous small mines developed along an oxidized silver lead ore body known as the "lead manto" (a bed, layer or strata). The lead manto was mined continuously for 3 kilometers and discontinuously for another 2 kilometers. Ore was selectively mined and hauled by wagon to Escalon on the railroad main line from El Paso to Mexico City; from there it went to smelters in Mexico and the United States. In September of 1891 the Mexican Northern Railroad completed its spur line from Escalon to the district. Rail access stimulated development and the period from 1891 to the late 1920's was the peak of productivity of the district. The main lead manto was nearly mined out by 1905, the same year that the discovery of the first silver-copper ore body was made. Additional discoveries of silver, silver-copper, and silver-copper-zinc- lead ores provided production through the 1930's. Between 1922 and 1931 additional lead manto silver-lead ore was discovered and mined to the southwest for some 1,400 meters under the Sierra Mojada range, this manto was eventually mined for more than 2 kilometers. Page 2 By the mid 1920's many of the mines were under control of Penoles Corporation ("Penoles") and ASARCO Incorporated ("ASARCO"). ASARCO ceased mining in the district in the late 1930's. Both companies still owned properties during the 1940's and Penoles mined until the late 1950's when the Mineros Nortenos Cooperative acquired the Penoles properties. The Mineros Nortenos Cooperative ("Mineros Nortenos") has operated the San Salvador, Encantada and Fronteriza mines since 1957 and direct shipped high-grade oxide zinc and lead-silver ore to smelters in Mexico. The lead manto produced 3 to 3.5 million tons prior to 1905 with another 1.5 million tons of similar ore coming from other ore bodies to the west and to the southwest. Mineros Nortenos has mined about 600,000 tons of predominantly oxide zinc ore with grades of 20 to 50% zinc. Some of this ore was oxide silver- lead and silver, copper, zinc and lead sulfide at grades of 1 to 4 kilogram silver per ton, 1 to 5% copper, 10 to 30% zinc and 30 to 70% lead. Production records from 1978 to 1981 for the San Salvador mine average 33.5% zinc. The Sierra Mojada Property has produced in excess of 10 million tons of high-grade ore that graded in excess of 30% lead, 20% zinc, 1% copper and 1 kg (31 ounces) silver per ton that was shipped directly to the smelter. The district has never had a mill to concentrate ore. All of the mining was done selectively for ore of sufficient grade to direct ship; mill grade ore was left unmined. More than 50 kilometers of underground workings are spread through the 5 kilometer by 2 kilometer area from which more than 45 mines have produced ore. The deepest workings have ore grade mineralization and provide some of the best targets for reserve development. In spite of the amount of historic work, when a map of all of the historic workings is viewed there is much more unexplored area in the 5 by 2 kilometer area than has been explored and the vertical extent greater than 100 meters is totally unexplored. The sediments are predominantly carbonate with some sandstone and shale and the attitudes are near horizontal. The mines are dry and the rocks are competent, there is very little unstable ground and the ore thickness is amenable to high volume mechanized mining methods. Sierra Mojada has ideal mining conditions and grades for low cost production. Based upon the foregoing, the Company is of the opinion that the magnitude of the Sierra Mojada mineral system and its exploration potential is capable of providing new reserves for many more years of mining. Because, however, the reserves are located below the surface of the earth, there is no assurance as to the quantity or quality of the undeveloped reserves. No commercially mineable ore body has been delineated on the properties, nor have any reserves been identified. There is potential for long-term reserve expansion within the known extent of the mineral systems. There is potential to discover ore deposits in unexplored portions of the land position and at depth in unexplored stratigraphy. There is however, no assurance that the Company will have the monetary resources to continue to explore for, develop, or retrieve any of the minerals located in the Sierra Mojada Property. Minera Metalin has signed a Joint Venture Letter Agreement with Minera North S. de R.L. de C.V. a wholly owned subsidiary of North Limited of Melbourne Australia, a major international mining company. The letter agreement is to be followed with a formal Joint Venture Agreement. The agreement allows North to acquire a 60% participating interest in Sierra Mojada by exploring and completing a feasibility study (which shall be of a standard acceptable to international banks as enabling them to lend funds to the project) over a "Earn In Period" of not more than 5 years. Page 3 In March 1995, the Financial Accounting Standards Board issued a statement titled "Accounting for Impairment of Long-Lived Assets." This standard became effective for years beginning after December 15, 1995. In complying with this standard, the Company has reviewed its long-lived assets quarterly to determine if any events or changes in circumstances have transpired which indicate that the carrying value of its assets may not be recoverable. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by its assets to their respective carrying amounts. The Company does not believe any adjustments are needed to the carrying value of its assets October 31, 1999 and 1998. In October 1995, the Financial Accounting Standards Board issued a statement titled "Accounting for Stock-Based Compensation" (FAS 123). This statement encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options, and other equity instruments to employees based on fair value. Transactions in equity instruments with non-employees for goods or services must be accounted for on the fair value method. The Company has adopted the fair value accounting prescribed by FAS 123. CASH FLOWS FOR THE SIX MONTHS ENDED APRIL 30, 2000 WERE AS FOLLOWS: During the six-month period ended April 30, 2000, the Company's cash position increased $366,296, to $606,958. During the six-month period, the Company used $393,840 in operating activities, which were less than the reported $463,786 net loss due to changes in operating assets and liabilities. Investing activities used $89,614 for mining property acquisitions and equipment purchases, and financing activities realized $849,750 from the sale of 1,000,000 common shares. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. ITEM 2. CHANGES IN SECURITIES. Neither the constituent instruments defining the rights of the registrant's securities holders nor the rights evidenced by the registrant's outstanding common stock have been modified, limited, or qualified. The Company sold 950,000 shares of its common stock for $0.855 per share in November 1999 and 50,000 shares of its common stock for $0.75 per share in December 1999. In April 2000 the Company issued 36,000 shares for services rendered. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. The registrant has no outstanding senior securities. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. Page 4 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. EXHIBITS. The following exhibit is filed as part of this report: Exhibit 27.0 Financial Data Schedule. REPORTS ON FORM 8-K. No reports on Form 8-K were filed by the registrant during the period covered by this report. [The balance of this page has been intentionally left blank.] Page 5 METALLINE MINING COMPANY INDEX TO FINANCIAL STATEMENTS PAGE Financial Statements: Accountant's Review Report . . . . . . . . . . . . . . . . . . . . F/S-1 Balance Sheets as of April 30, 2000 and October 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . F/S-2 Statements of Operations for the three and six month periods ended April 30, 2000 and April 30, 1999, and for the period from inception (November 8, 1993) to April 30, 2000 . . . . . . . . . . . . . . . . . . . . . . . . F/S-3 Statements of Changes in Stockholder's Equity for the period from inception (November 8, 1993) to April 30, 2000 . . . . . . . . . . . . . . . . . . . . . . . . F/S-5 Statements of Cash Flow for the three and six month periods ended April 30, 2000 and April 30, 1999, and for the period from inception (November 8, 1993) to April 30, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . F/S-11 Notes to Financial Statements . . . . . . . . . . . . . . . . . . F/S-12 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . F/S-19 [The balance of this page has been intentionally left blank.] Page 6 METALLINE MINING COMPANY (AN EXPLORATION STAGE COMPANY) ACCOUNTANT'S REVIEW REPORT The Board of Directors Metalline Mining Company (An Exploration Stage Company) Coeur d'Alene, ID We have reviewed the accompanying balance sheet of Metalline Mining Company (an exploration stage company) as of April 30, 2000, and the related statements of operations, stockholders' equity, and cash flows for the six months and three months ended April 30, 2000, and for the period from November 8, 1993 (inception) through April 30, 2000. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles. The financial statements for the year ended October 31, 1999 were audited by us and we expressed an unqualified opinion on it in our report dated January 27, 2000. We have not performed any auditing procedures since that date. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 7, the Company has been in the exploration stage since inception and has generated no revenues. Realization of a major portion of the assets is dependent upon the Company's ability to meet its future financing requirements, and the success of future operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding those matters also are described in Note 7. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Williams & Webster, P.S. CERTIFIED PUBLIC ACCOUNTANTS Spokane, Washington June 6, 2000 F/S-1 METALLINE MINING COMPANY (An Exploration Stage Company) BALANCE SHEETS
April 30, October 31, 2000 1999 (Unaudited) ----------- ----------- ASSETS CURRENT ASSETS Cash $ 606,958 $ 240,662 Prepaid expenses 3,761 3,127 Employee advances 5,208 5,208 ---------- --------- Total Current Assets 615,927 248,997 ---------- --------- MINERAL PROPERTIES 1,182,905 1,103,671 ---------- --------- PROPERTY AND EQUIPMENT Office equipment 81,499 71,119 Mining equipment and vehicles 61,047 61,047 Less: Accumulated depreciation (73,993) (62,328) ---------- --------- Total Property and Equipment 64,553 69,838 ---------- --------- TOTAL ASSETS $ 1,867,385 $ 1,422,506 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 9,304 $ 3,739 Deposits payable - 37,500 Accrued liabilities 13,877 13,027 --------- --------- Total Current Liabilities 23,181 54,266 --------- --------- COMMITMENTS AND CONTINGENCIES - - --------- --------- STOCKHOLDERS' EQUITY Common stock, $0.01 par value; 50,000,000 shares authorized, 8,251,095 and 7,215,095 shares issued and outstanding respectively. 82,512 72,152 Additional paid-in capital 4,907,100 3,977,350 Stock options and warrants 288,000 288,000 Deficit accumulated during development stage (3,433,048) (2,969,262) ---------- --------- Total Stockholders' Equity 1,844,204 1,368,240 ---------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,867,385 $1,422,506 ========== ========= See accountant's review report and accompanying notes.
F/S-2 METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF OPERATIONS
Period from Three Monts Ended Six Months Ended November 8, 1993 ---------------- --------------- (Inception) April 30, April 30, April 30, April 30, through 2000 1999 2000 1999 April 30, (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) ----------- ----------- ---------- --------- ------------- REVENUES $ - $ - $ - $ - $ - ------- ------- ------- ------- -------- GENERAL AND ADMINISTRATIVE EXPENSES Salaries 54,000 54,000 108,000 108,000 539,778 Administrative expenses 42,738 12,493 54,403 25,199 143,421 Professional services 70,363 5,069 98,274 27,851 1,098,503 Property expenses 13,430 353,940 104,734 481,754 1,128,348 Consulting 90,219 10,377 90,219 10,337 90,219 Travel 25,020 14,325 32,937 14,325 32,937 Marketing and research 31,089 47,312 43,491 67,452 122,984 Financing Costs - - - - 276,000 Depreciation 6,092 6,123 11,665 12,420 74,410 --------- -------- ------- ------- -------- Total Expenses 332,951 503,639 543,723 747,338 3,506,600 -------- -------- ------- ------- ------ OPERATING LOSS (332,951) (503,639) (543,723) (747,338) (3,506,600) --------- --------- --------- --------- -------- OTHER INCOME (EXPENSES) Interest income 1,576 - 3,209 - 6,423 Interest expense - (4) - (4) (9,599) Refund of Mexican taxes paid 76,728 - 76,728 - 76,728 --------- --------- -------- -------- --------- Total other income (expense) 78,304 (4) 79,937 (4) 73,552 --------- --------- -------- -------- -------- LOSS BEFORE INCOME TAXES (carried forward) $(254,647) $(503,643) $(463,786) $(747,342) $(3,433,048) ======== ======== ======== ======== =========
F/S-3 METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF OPERATIONS
Period from Three Monts Ended Six Months Ended November 8, 1993 ----------------- --------------- (Inception) April 30, April 30, April 30, April 30, through 2000 1999 2000 1999 April 30, (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) ----------- ----------- ----------- ----------- ------------- LOSS BEFORE INCOME TAXES (carried forward) $(254,647) $(503,643) $(463,786) $(747,342) $(3,433,048) INCOME TAXES - - - - - ---------- ----------- ---------- ---------- ----------- NET LOSS $(254,647) $(503,643) $(463,786) $(747,342) $(3,433,048) ======== ======== ======== ======== ========= NET LOSS PER COMMON SHARE BASIC AND DILUTED $ (0.03) $ (0.08) $ (0.06) $ (0.12) $ (0.71) ======== ======== ======== ======== ========= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED 8,221,095 6,095,739 7,943,095 6,130,739 4,860,443 ======= ======= ======= ======= ======= --------------------- See accountant's review report and accompanying notes.
F/S-4 METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated Common Stock Stock Stock Deficit ------------------ Additional Sub- Options During Ex- Number of Paid-in scriptions and ploration Shares Amount Capital Receivable Warrants Stage Total -------- ------ ------- ---------- -------- -------- ----- Issuance in August 1993 (prior to inception) common stock without value 960,800 $ 9,608 $(9,608) $ - $ - $ - $ - Reverse stock split of 5:1, reducing common stock to 192,160 shares (768,640) (7,686) 7,686 - - - - Net loss for the year ending October 31, 1994 - - - - - (8,831) (8,831) ------- ------- ------- ------- ------- ------- ------- Balances at October 31, 1994 192,160 1,922 (1,922) - - (8,831) (8,831) Stock split 3:1, in- creasing common stock to 576,480 shares 384,320 3,843 (3,843) - - - - Net loss for the year ending October 31, 1995 - - - - - (7,861) (7,761) ------- ------ ------- ------- ------- ------- ------- Balance at October 31, 1995 576,480 $ 5,765 $(5,765) $ - $ - $(16,592) $(16,592) ------- ------- ------- ------- ------- ------- ------- ------------------------------------- Table continued on next page. See accountant's review report and accompanying notes.
F/S-5 METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
Accumulated Common Stock Stock Stock Deficit -------------- Additional Sub- Options During Ex- Number of Paid-in scriptions and ploration Shares Amount Capital Receivable Warrants Stage Total -------- ------ ------- ---------- -------- -------- ----- Balance brought forward 576,480 $ 5,765 $(5,765) $ - $ - $(16,592) $(16,592) Issuance in November 1995 of shares for cash at $0.01 /share 45,000 450 - - - - - Issuance in November 1995 of shares for cash at $1.00 /share 15,859 159 15,700 - - - 15,859 Issuance in June 1996 of shares for cash at $0.10 /share 1,305,000 13,050 117,450 - - - 130,500 Issuance in June 1996 of shares at $0.01 per share in exchange for assignment of mineral property rights valued at $9,000 900,000 9,000 - - - - 9,000 Issuance in October 1996 of shares for CAD computer equipment at $0.10 /share 150,000 1,500 13,500 - - - 15,000 Issuance in October 1996 of shares for services at $0.10 /share 140,000 1,400 12,600 - - - 14,000 Net loss for the year ending October 31, 1996 - - - - - (40,670) (40,670) ------- ------- ------- ------- ------- Balance October 31, 1996 3,132,339 $31,324 $153,485 $ - $ - $(57,262) $127,547 ------- ------- ------- ------- ------- ------- ------- -------------------------------------- Table continued on next page. See accountant's review report and accompanying notes.
F/S-6 METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
Accumulated Common Stock Stock Stock Deficit -------------- Additional Sub- Options During Ex- Number of Paid-in scriptions and ploration Shares Amount Capital Receivable Warrants Stage Total -------- ------ ------- ---------- -------- -------- ----- Balance forward 3,132,339 $ 31,324 $ 153,485 $ - $ - $(57,262) $127,547 Issuance in February 1997 of shares for services at $0.30 and $0.35 /share 133,800 1,338 44,245 - - - - Issuance in March and April of shares for cash at $0.35 /share 250,000 2,500 85,000 - - - 87,500 Issuance in May and June 1997 of shares for cash at $0.35 /share 181,600 1,816 61,744 - - - 63,560 Issuance in May and June 1997 of shares for services at $0.35/share 62,500 625 21,250 - - - 21,875 Issuance in August 1997 of shares for payment of loan at $0.315 /share 100,200 1,002 30,528 - - - 31,530 Issuance in August 1997 of shares for cash at $0.90 /share 420,000 4,200 373,800 - - - 378,000 Issuance in August 1997 of shares for services at $1.00 /share 95,000 950 94,050 - - - 95,000 Issuance in October 1997 of shares for cash at $1.00 /share 75,000 750 74,250 - - - 75,000 Issuance of option (for 300,000 shares at $2.25 per share) for cash - - 3,000 - - - 3,000 Net loss for year ending October 31, 1997 - - - - - (582,919) (582,919) ------- ------- ------- ------- ------- ------- ------- Balances at October 31, 1997 4,450,439 $44,505 $941,352 $ - $ - $(640,181) $345,676 ------------------ ------- ------- ------- ------- ------- ------- ------- Table continued on next page. See accountant's review report and accompanying notes.
F/S-7 METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
Accumulated Common Stock Stock Stock Deficit ------------ Additional Sub- Options During Ex- Number of Paid-in scriptions and ploration Shares Amount Capital Receivable Warrants Stage Total -------- ------ ------- ---------- -------- -------- ----- Balance brought forward 4,450,439 $44,505 $941,352 $ - $ - $(640,181) $345,676 Issuance in November and December 1997 of shares for cash at $1.00/share 403,500 $4,035 $399,465 - - - 403,500 Issuance of options (for 1,200,000 shares at $0.90 /share) for cash - - 120,000 - - - 120,000 Issuance of options for financing fees - - - - 60,000 - 60,000 Issuance of warrants for consulting fees - - - - 117,000 - 117,000 Issuance in November and December 1997 of shares for services at $0.35 and $1.00 /share 41,800 418 21,882 - - - 22,300 Issuance in February 1998 of shares for mine data base at $1.625 /share 200,000 2,000 323,000 - - - 325,000 Issuance in February and March 1998 of shares for cash at $1.00 and $0.87 per share 345,000 3,450 338,495 - - - 341,945 Issuance in June and July 1998 of shares for cash at $1.00 /share 95,000 950 94,050 - - - 95,000 Issuance in September and October 1998 of shares for cash and receivables at $1.00 /share 555,000 5,550 519,450 (300,000) - - 225,000 Net loss for year ending October 31, 1998 - - - - - (906,036) (906,036) ------- ------- ------- ------- ------- ------- ------- Balance at October 31, 1998 6,090,739 $60,908 $2,757,694 $(300,000) $177,000 $(1,546,217) $1,149,385 -------------------- ------- ------- ------- ------- ------- ------- ------- Table continued on next page. See accountant's review report and accompanying notes.
F/S-8 METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
Accumulated Common Stock Stock Stock Deficit ----------------- Additional Sub- Options During Ex- Number of Paid-in scriptions and ploration Shares Amount Capital Receivable Warrants Stage Total -------- ------- ------- ---------- -------- -------- ----- Balance brought forward 6,090,739 $60,908 $2,757,694 $(300,000) $177,000 $(1,546,217) $1,149,385 Stock subscription received - - - 300,000 - - 300,000 Expiration of stock options - - 60,000 - (60,000) - - Issuance of stock options for financing fees - - - - 216,000 - 216,000 Exercise of stock warrants at $0.90 per share 250,000 2,500 267,500 - (45,000) - 225,000 Issuance in November 1998 and March - August, 1999 shares for cash at $1.00 /share 776,000 7,760 768,240 - - - 776,000 Issuance in August 1999 of shares for drilling fees at $0.90 /share 55,556 556 49,444 - - - 50,000 Issuance in August 1999 Shares for cash at $1.75 /share 42,800 428 74,472 - - - 74,900 Net loss for year ending October 31, 1999 - - - - - (1,423,045) (1,423,045) ------- ------- ------- ------- ------- ------- ------- Balance at October 31, 1999 7,215,095 $72,152 $3,977,350 $ - $288,000 $(2,969,262) $1,368,240 ------- ------- ------- ------- ------- ------- ------- Table continued on next page. See accountant's review report and accompanying notes.
F/S - 9 METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF STOCKHOLDERS' EQUITY (continued)
Accumulated Common Stock Stock Stock Deficit ---------------- Additional Sub- Options During Ex- Number of Paid-in scriptions and ploration Shares Amount Capital Receivable Warrants Stage Total -------- ------- ------- ---------- -------- -------- ----- Balance brought forward 7,215,095 $72,152 $3,977,350 $ - $288,000 $(2,969,262) $1,368,240 ------- ------- ------- ------- ------- ------- ------- Issuance in November 1999 shares for cash at $0.855/share 950,000 9,500 802,750 - - - 812,250 Issuance in December 1999 shares for cash at $0.75 /share 50,000 500 37,000 - - - 37,500 Issuance in April 2000 for consulting services and receivables at $2.51 /share 36,000 360 90,000 (360) - - 90,000 Net loss for the six months ending April 30, 2000 (unaudited) - - - - - (463,786) (463,786) ---------- ------- ------- ------ --------- --------- -------- 8,215,095 $ 82,152 $4,817,100 $ - $ 288,000 $(3,178,401) $2,008,851 --------- ------- -------- ----- ------- -------- ------- ------------------------------- See accountant's review report and accompanying notes.
F/S - 10 METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF CASH FLOWS
Period from Six Months Ended November 8, 1993 ------------------------ (Inception) April 30, April 30, through 2000 1999 April 30, 2000 (Unaudited) (Unaudited) (Unaudited) ----------- ----------- -------------- Cash flows from operating activities: Net loss $(463,786) $(747,342) $(3,433,048) Adjustments to reconcile net loss to cash used by operating activities: Depreciation 11,665 12,420 74,410 Stock given in exchange for services 90,000 - 338,758 Stock options for operating expenses - - 393,000 Changes in operating assets and liabilities: Prepaid expenses (634) 2,049 (3,761) Employee advances - - (5,208) Accounts payable 5,565 (37,816) 9,304 Deposits payable (37,500) - - Accrued liabilities 850 600 13,877 ---------- ---------- ---------- Net cash used by operating activities (393,840) (770,089) (2,612,668) ----------- ----------- ------------ Curchase of property and equipment (10,380) - (127,545) Acquisition of mineral properties (79,234) (100) (834,905) ---------- -------- ------------ Net cash used by investing activities (89,614) (100) (962,450) ----------- -------- ------------ Cash flows from financing activities: Stock given in exchange for loan - - 31,530 Proceeds from sales of common stock 849,750 780,000 3,991,964 Proceeds from sales of options - - 123,000 Deposits for sale of stock - - 50,000 Re-payments on shareholders' loans - - (14,418) ---------- --------- ------------ Net cash provided by financing activities: 849,750 780,000 4,182,076 ---------- --------- ----------- Net increase in cash 366,296 9,811 606,958 Cash beginning of period 240,662 313,322 - ---------- ---------- ---------- Cash at end of period $606,958 $323,133 $606,958 ======= ======= ======= Supplemental cash flow disclosures: Income taxes paid in cash $ - $ 4 $ 9,599 Interest paid in cash $ - $ - $ - Non-cash financing activities: Common stock issued for services $ 90,000 $ - $338,758 Common stock issued for mineral properties $ - $ - $348,000 Common stock issued for equipment $ - $ - $ 15,000 Common stock issued for payment of debt $ - $ - $ 80,000 Common stock issued for subscription receivable $ - $ - $ 30,000 Common stock options issued for services $ - $ - $117,000 Common stock options issued for financing fees $ - $ - $276,000 See accountant's review report and accompanying notes.
F/S-11 METALLINE MINING COMPANY An Exploration Stage Company Notes to the Financial Statements April 30, 2000 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 properties. The Cadgie Company was a spin-off from its predecessor Precious Metal Mines, Inc. The Articles of Incorporation of Cadgie Company were executed on August 20, 1993. 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's efforts have been concentrated in expenditures related to exploration properties, principally in the Sierra Mojada Project, located in Coahuila, Mexico. The Company has not determined whether the exploration properties contain ore reserves that are economically recoverable. The ultimate realization of the Company's investment in exploration properties is dependent upon the success of future property sales, the existence of economically recoverable reserves, the ability of the Company to obtain financing or make other arrangements for development, and upon future profitable production. The ultimate realization of the Company's investment in exploration properties cannot be determined at this time, and accordingly, no provision for any asset impairment that may result, in the event the Company is not successful in developing or selling these properties, has been made in the accompanying financial statements. The Company is actively seeking additional capital and management believes its properties can ultimately be sold or developed to enable the Company to continue its operations. However, there are inherent uncertainties in mining operations and management cannot provide assurances that it will be successful in this endeavor. Furthermore, the Company is in the development stage, as it has not realized any revenues from its planned operations. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of Metalline Mining Company is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. ACCOUNTING METHOD The Company's financial statements are prepared using the accrual method of accounting. LOSS PER SHARE Basic earnings per share is computed using the weighted average number of common shares outstanding. Diluted net loss per share is the same as basic net loss per share as the inclusion of common stock equivalents would be antidilutive. As of April 30, 2000 and October 31, 1999, common stock options of 1,250,000 were not included in computing diluted loss per share because their effects were antidilutive. EXPLORATION STAGE The Company has been in the exploration stage since its formation in 1993 and has not realized any significant revenues from its planned operations. It is primarily engaged in the acquisition, exploration and development of mining properties. Upon location of a commercial mineable reserve, the Company will actively prepare the site for its extraction and enter a development stage. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F/S - 12 METALLINE MINING COMPANY An Exploration Stage Company Notes to the Financial Statements April 30, 2000 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. MINERAL PROPERTIES Costs of acquiring, exploring and developing mineral properties are capitalized by project area. Costs to maintain the mineral rights and leases are expensed as incurred. When a property reaches the production stage, the related capitalized costs will be amortized, using the units of production method on the basis of periodic estimates of ore reserves. Mineral properties are periodically assessed for impairment of value and any losses are charged to operations at the time of impairment. PROVISIONS FOR TAXES At April 30, 2000 and October 31, 1999, the Company had accumulated net operating losses of approximately $3,433,000 and $2,969,000, respectively. No provision for taxes or tax benefit has been reported in the financial statements, as there is not a measurable means of assessing future profits or losses. CONCENTRATION OF RISK The Company maintains its cash and cash equivalents in primarily one commercial bank in Coeur d'Alene, Idaho. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. As of April 30, 2000, the Company exceeded the insured amount by $366,762. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts for cash, marketable securities, accounts receivable, accounts payable, notes payable and accrued liabilities approximate their fair value. FINANCIAL ACCOUNTING STANDARDS In March 1995, the Financial Accounting Standards Board issued a statement titled "Accounting for Impairment of Long-lived Assets." In complying with this standard, the Company reviews its long-lived assets quarterly to determine if any events or changes in circumstances have transpired which indicate that the carrying value of its assets may not be recoverable. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by its assets to their respective carrying amounts. The Company does not believe any adjustments are needed to the carrying value of its assets at April 30, 2000 and October 31, 1999. In October 1995, the Financial Accounting Standards Board issued a statement titled "Accounting for Stock-Based Compensation" (FAS 123). This statement encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options, and other equity instruments to employees based on fair value. Transactions in equity instruments with non-employees for goods or services must be accounted for on the fair value method. The Company has adopted the fair value accounting prescribed by FAS 123. REVENUE RECOGNITION POLICY Revenues from sales of product are recognized when the product is shipped. DERIVATIVE INSTRUMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No.133, "Accounting for Derivative Instruments and Hedging Activities." This new standard establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. At April 30, 2000, the Company has not engaged in any transaction that would be considered derivative instruments or hedging activities. F/S - 13 METALLINE MINING COMPANY An Exploration Stage Company Notes to the Financial Statements April 30, 2000 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) INTERIM FINANCIAL STATEMENTS The interim financial statements as of and for the quarter and six months included herein have been prepared for the Company, without audit. They reflect all adjustments which are, in the opinion of management, necessary to present fairly the results of operations for these periods. All such adjustments are normal recurring adjustments. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full fiscal year. NOTE 3 - MINERAL PROPERTIES SIERRA MOJADA MINING CONCESSION In June of 1996, USMX (now named Dakota) and the Company entered into a joint venture agreement, whereby the Company could acquire a 65% interest in a mining concession named the Sierra Mojada Project, located in Coahuila, Mexico. Under the terms of the agreement, the Company was to contribute two million dollars ($2,000,000) in work commitments over the following seven years. After the execution of the USMX agreement, Dakota's interest (35%) in the joint venture was sold to an entity, which subsequently defaulted on its joint venture obligations. This action in 1998 triggered the elimination of the joint venture and resulted in the Company assuming 100% control of the Sierra Mojada concession without the need to spend $2,000,000 to vest its interest. SIERRA MOJADA EXPLORATION CONCESSIONS In the twelve-month period of August 23, 1996 to September 2, 1997, the Company executed five separate agreements for the acquisition of exploration concessions in the same mining region as the Sierra Mojada Project in Mexico. Each agreement enables the Company to explore the underlying property by paying stipulated annual payments, which shall be applied in full toward the contracted purchase price of the related concession. Under the terms of the agreements, the Company is obligated to pay the following amounts over the following two years: Year 1 3,355,384 Year 2 103,076 On October 7, 1999 the Company announced the acceptance of a joint venture with North Limited. The agreement gives North Limited the right to earn into 60% of the Sierra Mojada by providing all funds necessary to complete a feasibility study that is acceptable to international banking institutions for lending development capital. North Limited is a large Australian mining company based in Melbourne, Australia and was known as North Broken Hill Peko before a name change in 1994. North Limited is dedicated to natural resource development that produces iron, uranium, base and precious metals, and forestry products. NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Major additions and improvements are capitalized. Minor replacements, maintenance and repairs that do not increase the useful life of the assets are expensed as incurred. Depreciation of property and equipment is determined using the straight-line and accelerated methods over the expected useful lives of the assets of five years. NOTE 5 - RELATED PARTY TRANSACTIONS In connection with the September 1999 dismissal of a lawsuit against the Company and others, Company shareholders individually paid all of the litigation settlement from their personal assets without any cost or continuing obligation to the Company. F/S-14 METALLINE MINING COMPANY An Exploration Stage Company Notes to the Financial Statements April 30, 2000 NOTE 5 - RELATED PARTY TRANSACTIONS (Continued) The Company receives rent-free office space in Coeur d'Alene from its president. The value of the space is not considered materially significant for financial reporting purposes. NOTE 6 - COMMON STOCK The Company (Cadgie Co.) was formed in August of 1993 and incorporated in November 1993 by Mr. Carman Ridland of Las Vegas, Nevada as a spin- off from its predecessor firm Precious Metal Mines, Inc. The Company issued 960,800 of its $0.01 par value shares to Precious Metal Mines, Inc. for 16 unpatented mining claims located near Philipsburg, Montana comprising the Kadex property group. Precious Metal Mines, Inc. distributed the 960,800 shares of Cadgie Company to its shareholders. One share of Cadgie Co. was exchanged for each share of Precious Metal Mines, Inc. held by holders of record as of August 31, 1993. On August 31, 1994, the directors of Cadgie Co. declared a 1:5 reverse stock split of the outstanding Cadgie Co. shares, thus reducing the number of outstanding shares from 960,800 to 192,160 shares. On August 4, 1995 the directors of Cadgie Co. declared a 3:1 forward stock split of the outstanding Cadgie Co. shares, thus increasing the number of outstanding shares from 192,160 to 576,480. In January 1996, Mr. Carmen Ridland, in a private sale, sold a controlling interest in the corporation to Mr. Howard Crosby. On January 12, 1996, Mr. Ridland transferred control of Cadgie Co. to Mr. Crosby and Mr. Robert Jorgensen. In June 1996, the Company completed a private placement of common stock resulting in net proceeds of $25,000. The Company also issued 900,000 shares to Messrs. Ryan, Bingham, and Gorski, who had formed a partnership to advance development of the mining concession located in Coahuila, Mexico. The partnership had an informal joint venture agreement with USMX, Inc. covering the mining concessions. By acquiring the partnership interest, the Company was able to negotiate and sign a formal joint venture agreement with USMX in July 1996. (See Note 3) In August 1996, the Company changed its name to Metalline Mining Company. In March 1997, the Company completed an issuance of common stock resulting in net proceeds of $17,500. In April 1997, the Company issued to Royal Silver Mines, Inc., 200,000 shares of common stock resulting in proceeds of $70,000. During the six months ended October 31, 1997, the Company sold 676,600 shares of common stock for cash, raising $516,500. In November and December 1997, the Company sold 403,500 shares of common stock for cash thereby raising $403,500. An additional $881,945 was raised between February and October 1998 as the Company sold 915,000 more shares of its common stock. During the year ended October 31, 1999, the Company sold 1,068,800 shares of common stock for cash, raising $1,375,900. During October, 1999, the Company received $37,500 as a deposit toward the purchase of 50,000 shares. This stock was issued in December 1999. During November and December 1999, the Company sold 1,000,000 shares of its common stock for $812,250. NON-CASH STOCK TRANSACTIONS During November 1995, Metalline Mining Company's directors approved the issuance of 45,000 shares of common stock for services rendered at $0.01 per share. During June 1996, Metalline Mining Company issued 900,000 shares of common stock for the assignment of mineral rights in the Sierra Mojada Project in Coahuila, Mexico valued at $0.01 per share. F/S - 15 METALLINE MINING COMPANY An Exploration Stage Company Notes to the Financial Statements April 30, 2000 NOTE 6 - COMMON STOCK (Continued) NON-CASH STOCK TRANSACTIONS (Continued) During October 1996, Metalline Mining Company issued 150,000 shares of common stock for computer equipment. Also during October 1996, Metalline Mining Company issued 120,000 shares of common stock to Mr. Dan Gorski and an additional 20,000 shares to Mr. John Ryan for services rendered. During February 1997, the Company borrowed $30,000 from shareholders and issued 24,900 shares of common stock as a loan incentive. During April 1997, 133,800 shares of common stock were issued for services and expenses. A total of 24,900 shares of common stock were issued as loan incentives (interest) for $30,000 in loans from shareholders. These shares were issued at $0.30 per share. A total of 77,600 shares of common stock were issued in exchange for wages during the months of January, February, and March of 1997 at $0.35 per share. A total of 31,300 shares of common stock were issued to cover expenses incurred by shareholders at $0.35 per share. In August 1997, 95,000 shares of common stock were issued for services at a deemed value of $1.00 per share. Also in August 1997, 100,200 shares of common stock were issued to discharge shareholder debt. In February 1998, 200,000 shares of common stock were issued for a mine database. The shares were valued at $1.625 per share, resulting in a transaction valued at $325,000. In September 1998, 80,000 shares of common stock were issued for payment of shareholder debt. The shares were valued at $1.00 per share, resulting in a transaction valued at $80,000. In August 1999, 55,556 shares of common stock were issued for drilling services. The shares were valued at $0.90 per share, resulting in a transaction valued at $50,000. In April 2000, 36,000 shares of common stock were issued for consulting services and subscription receivable. The shares were valued at $2.51 per share, resulting in a transaction valued at $90,360. NOTE 7 - GOING CONCERN As shown in the financial statements, the Company incurred a net loss of $463,786 for the six months ended April 30, 2000 and an accumulated deficit of $3,433,048 since inception (November 8, 1993). These factors indicate that the Company may be unable to continue in existence. The financial statements do not include any adjustments relating 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 existence. The Company's management believes that significant and imminent private placements will generate sufficient cash for the Company to operate for the next few years. NOTE 8 - STOCK OPTIONS Following is a summary of the stock options during the year ending October 31, 1999 and the six months ending April 30, 2000. F/S - 16 METALLINE MINING COMPANY An Exploration Stage Company Notes to the Financial Statements April 30, 2000
NOTE 8 - STOCK OPTIONS (Continued) Weighted Average Number of Shares Exercise Price ----------------- ---------------- Outstanding at 11/1/98 1,500,000 $ 1.14 Granted 1,200,000 1.00 Exercised ( 250,000) 0.90 Forfeited - - Expired (1,200,000) 1.00 ----------- -------- Outstanding at 10/31/99 1,250,000 $ 1.14 ========== ========= Options exercisable at 10/30/99 1,250,000 $ 1.14 ========== ======== Weighted average fair value of options granted during 1999 $ 1.00 ===== Outstanding at 11/1/99 1,250,000 $ 1.14 Granted - - Exercised - - Forfeited - - Expired - - ----------- --------- Outstanding at 4/30/2000 1,250,000 $ 1.14 ======= ======== Options exercisable at 4/30/2000 1,250,000 $ 1.14 ======= ========
During the year ended October 31, 1999, options were exercised amounting to 250,000 shares. During the six months ended April 30, 2000, no options have been exercised. NOTE 9 - WARRANTS At April 30, 2000 and October 31, 1999, there were outstanding warrants to purchase 746,500 shares of the Company's Common stock, at prices ranging from $0.35 to $2,13 per share. The warrants became exercisable in 1999 and expire at various dates through 2005. The Company has reserved 746,500 shares for that purpose. NOTE 10 - COMMITMENTS AND CONTINGENCIES The Company receives rent-free office space in Coeur d'Alene from its president. The value of the space is not considered materially significant for financial reporting purposes. The Company is required to make land payments amounting to $3,458,460 over the next two years. See Note 3. During the year ended October 31, 1999 the Company settled a lawsuit filed by some of Royal Silver Mines, Inc. shareholders for alleged violations of securities laws. The terms of the settlement required Metalline Mining Company to distribute common stock valued at $80,000 at September 2, 1999 to their stock transfer agent for subsequent distribution to the plaintiffs. The plaintiffs are limited in their ability to sell the shares of stock. NOTE 11 - YEAR 2000 ISSUES The Company has modified its business technologies to be ready for the year 2000. Critical data processing systems have been reviewed and the Company does not expect a significant effect on internal operations. However, like other companies, Metalline Mining Company could be adversely affected if the computer systems its suppliers or customers use do not properly process and calculate date-related information and data for the period surrounding and including January 1, 2000. This is commonly known as the "Year 2000" issue. Additionally, this issue could impact non-computer systems and devices such as production equipment, elevators, etc. At this time, there have been no known effects to the Company in regards to the Year 2000 issue. F/S - 17 METALLINE MINING COMPANY An Exploration Stage Company Notes to the Financial Statements April 30, 2000 NOTE 12 - JOINT VENTURE On October 7, 1999, the Company announced the acceptance of a joint venture with North Limited. The agreement gives North Limited the right to earn into 60% of the Sierra Mojada by providing all funds necessary to complete a feasibility study that is acceptable to international banking institutions for lending development capital. North Limited is a large Australian mining company based in Melbourne, Australia and was known as North Broken Hill Peko before a name change in 1994. North Limited is dedicated to natural resource development that produces iron, uranium, base and precious metals and forestry products. [The balance of this page was intentionally left blank.] F/S - 18 METALLINE MINING COMPANY An Exploration Stage Company Notes to the Financial Statements April 30, 2000 SIGNATURES 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 BY: /s/ Merlin Bingham --------------------- Merlin Bingham, its President Date: June 14, 2000 By: /s/ Wayne L. Schoonmaker ------------------------- Wayne Schoonmaker, its Principal Accounting Officer Date: June 14, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: By: /s/ Merlin Bingham By: /s/ Jim Czirr ---------------------- ---------------- Merlin Bingham Jim Czirr Director Director Date: June 14, 2000 Date: June 14, 2000 By: /s/ Daniel Garski By: /s/ Wayne L. Schoonmaker --------------------- ------------------------- Daniel Gorski Wayne Schoonmaker Vice President/Director Secretary/Treasurer, Director Date: June 14, 2000 Date: June 14, 2000 By: /s/ Mario Ayub Touche ---------------------- Mario Ayub Touche Director Date: June 14, 2000 F/S - 19