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 July 31, 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 of incorporation) No.) 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 JULY 31, 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 . . . . . . . . . . . . . . . 4 Index to Financials . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . F/S-12 [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 nine-month period ended July 31, 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 JULY 31, 2000. Nine months ended July 31, 2000 compared to the nine months ended July 31, 1999: During the nine months ended July 31, 2000, the Company generated no revenue other than interest income of $5,084. General and administrative expenses decreased to $670,884 for the nine-month period ended July 31, 2000 as compared to $948,774 for the nine- month period ended July 31, 1999. The decrease is principally attributed to reduced expenses charged to it's Mexican properties. For the nine months ended July 31, 2000, the Company experienced a loss of $589,072, or $0.07 per share, compared to a loss of $947,014, or $0.13 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's plan of operation, subject to maintaining sufficient funds, calls for continued geologic mapping of the underground workings, sampling, and drilling to explore for additional mineralization and to continue to develop an ore reserve. Page 1 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 has realized $1,199,485 from the sale of 1,107,500 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. 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. Page 2 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 high grades, to enable it to be a low-cost producer. 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. However, 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. 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. Page 3 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 NINE MONTHS ENDED JULY 31, 2000 WERE AS FOLLOWS: During the nine-month period ended July 31, 2000, the Company's cash position increased $526,412, to $767,074. During the nine- month period, the Company used $517,882 in operating activities, which were less than the reported $589,072 net loss due to changes in operating assets and liabilities. Investing activities used $155,191 for mining property acquisitions and equipment purchases, and financing activities realized $1,199,485 from the sale of 1,107,500 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. In June and July 2000 the Company sold 107,500 shares of its common stock for $3.25 per share. 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. 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. Page 4 METALLINE MINING COMPANY INDEX TO FINANCIAL STATEMENTS PAGE Financial Statements: Balance Sheets as of July 31, 2000 and October 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . F/S-1 Statements of Operations for the three and nine month periods ended July 31, 2000 and July 31, 1999, and for the period from inception (November 8, 1993) to July 31, 2000 . . . . . . . . . . . . . . . . F/S-2 Statements of Changes in Stockholder's Equity for the period from inception (November 8, 1993) to July 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . F/S-3 Statements of Cash Flow for the three and nine month periods ended July 31, 2000 and July 31, 1999, and for the period from inception (November 8, 1993) to July 31, 2000 . . . . . . . . . . . . . . . . F/S-9 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . F/S-10 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F/S-12 [The balance of this page has been intentionally left blank.] Page 5 METALLINE MINING COMPANY (An Exploration Stage Company) BALANCE SHEETS

July 31, October 31, 2000 1999 (Unaudited) ---------- ----------- ASSETS CURRENT ASSETS Cash $ 767,074 $ 240,662 Prepaid expenses 5,706 3,127 Employee advances 9,119 5,208 ---------- --------- Total Current Assets 781,899 248,997 ---------- --------- MINERAL PROPERTIES 1,248,482 1,103,671 ---------- --------- PROPERTY AND EQUIPMENT Office equipment 81,499 71,119 Mining equipment and vehicles 61,047 61,047 Less: Accumulated depreciation (79,826) (62,328) ---------- --------- Total Property and Equipment 62,720 69,838 ---------- --------- TOTAL ASSETS $ 2,093,101 $ 1,422,506 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 10,723 $ 3,739 Deposits payable - 37,500 Accrued liabilities 13,725 13,027 --------- --------- Total Current Liabilities 24,448 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. 83,587 72,152 Additional paid-in capital 5,255,400 3,977,350 Stock options and warrants 288,000 288,000 Deficit accumulated during exploration stage (3,558,334) (2,969,262) ---------- --------- Total Stockholders' Equity 2,068,653 1,368,240 ---------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,093,101 $1,422,506 ========== ========= The accompanying notes are an integral part of these financial statements.

F/S-1 METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF OPERATIONS

Period from Three Monts Ended Nine months Ended November 8, 1993 ----------------- ----------------- (Inception) July 31, July 31, July 31, July 31, through 2000 1999 2000 1999 July 31, (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------ ----------- ----------- --------- ------------- REVENUES $ - $ - $ - $ - $ - ------- ------- ------- ------ ------- GENERAL AND ADMINISTRATIVE EXPENSES Salaries 54,000 54,000 162,000 162,000 539,778 Administrative expenses 19,741 13,155 74,144 38,354 163,162 Professional services 25,326 48,855 123,600 76,706 1,123,829 Property expenses (21,649) 33,373 83,085 515,127 1,106,699 Consulting - - 90,219 10,337 90,219 Travel 16,203 7,003 49,140 21,328 49,140 Marketing and research 27,708 38,840 71,199 108,292 150,692 Financing Costs - - - - 276,000 Depreciation 5,832 6,210 17,497 18,630 80,242 ------- ------- ------- ------- -------- Total Expenses 127,161 201,436 670,884 948,774 3,633,761 ------- ------- ------- ------- --------- OPERATING LOSS (127,161) (201,436) (670,884) (948,774) (3,633,761) ------- ------- ------- ------- --------- OTHER INCOME (EXPENSES) Interest income 1,875 1,764 5,084 1,764 8,298 Interest expense - - - (4) (9,599) Refund of Mexican taxes paid - - 76,728 - 76,728 ------- ------- ------- ------ --------- Total other income (expense) 1,875 1,764 81,812 1,760 75,427 ------- ------- ------- ------ --------- LOSS BEFORE INCOME TAXES $(125,286) $(199,672) $(589,072) $(947,014)$(3,558,334) ======== ======== ======== ======= ========= NET LOSS PER COMMON SHARE $ (0.01) $ (0.03) $ (0.07) $ (0.13) $ (0.97) ======== ======== ======== ======== ========= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,320,262 6,844,239 8,248,595 7,073,739 3,659,941 ======= ======= ======= ======= ======= --------------------- The accompanying notes are an integral part of these financial statements.

F/S-2 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 Warrant 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.

The accompanying notes are an integral part of these financial statements. F/S-3 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 per share 45,000 450 - - - - - Issuance in November 1995 of shares for cash at $1.00 per share 15,859 159 15,700 - - - 15,859 Issuance in June 1996 of shares for cash at $0.10 per 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 shares for CAD computer equipment at $0.10 per share 150,000 1,500 13,500 - - - 15,000 Issuance in October 1996 of shares for services at $0.10 per share 140,000 1,400 12,600 - - - 14,000 Net loss for the year ending October 31, 1996 - - - - - (40,670) (40,670) ------- ------- ------- ------- ------- ------- ------- Balances at October 31, 1996 3,132,339 $31,324 $153,485 $ - $ - $(57,262) $127,547 ------- ------- ------- ------- ------- ------- ------- ------------------------ Table continued on next page. The accompanying notes are an integral part of these financial statements.

F/S-4 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 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 per share 133,800 1,338 44,245 - - - - Issuance in March and April of shares for cash at $0.35 per share 250,000 2,500 85,000 - - - 87,500 Issuance in May and June 1997 of shares for cash at $0.35 per share 181,600 1,816 61,744 - - - 63,560 Issuance in May and June 1997 of shares for services at $0.35 per share 62,500 625 21,250 - - - 21,875 Issuance in August 1997 of shares for payment of loan at $0.315 per share 100,200 1,002 30,528 - - - 31,530 Issuance in August 1997 of shares for cash at $0.90 per share 420,000 4,200 373,800 - - - 378,000 Issuance in August 1997 of shares for services at $1.00 per share 95,000 950 94,050 - - - 95,000 Issuance in October 1997 of shares for cash at $1.00 per 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. The accompanying notes are an integral part of these financial statements.

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 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 per 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 per share 41,800 418 21,882 - - - 22,300 Issuance in February 1998 of shares for mine data base at $1.625 per 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 per share 95,000 950 94,050 - - - 95,000 Issuance in September and October 1998 of shares for cash and receivables at $1.00 per 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. The accompanying notes are an integral part of these financial statements.

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 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 per share 776,000 7,760 768,240 - - - 776,000 Issuance in August 1999 of shares for drilling fees at $0.90 per share 55,556 556 49,444 - - - 50,000 Issuance in August 1999 shares for cash at $1.75 per 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. The accompanying notes are an integral part of these financial statements.

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 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 per share 950,000 9,500 802,750 - - - 812,250 Issuance in December 1999 shares for cash at $0.75 per share 50,000 500 37,000 - - - 37,500 Issuance in April 2000 shares for consulting services and receivables at $2.51 per share 36,000 360 90,000 (360) - - 90,000 Stock subscription received - - - 360 - - 360 Issuance in June 2000 shares for cash at $3.25 per share 100,000 1,000 324,000 - - - 325,000 Issuance in July 2000 shares for cash at $3.25 per share 7,500 75 24,300 - - - 24,375 Net loss for the nine months ending July 31, 2000 (unaudited) - - - - - (589,072) (589,072) ---------- --------- ----------- ------ --------- ------ --------- Balances at July 31, 2000 (unaudited) 8,358,595 $ 83,587 $5,255,400 $ - $ 288,000 $(3,558,334) $2,068,653 ---------- -------- ----------- ----- ------- ---------- ---------- ------------------------ The accompanying notes are an integral part of these financial statements.

F/S - 8 METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF CASH FLOWS

Period from Nine months Ended November 8, 1993 ------------------- (Inception) July 31, July 31, through 2000 1999 July 31, 2000 (Unaudited) (Unaudited) (Unaudited) ------- --------- ---------- Cash flows from operating activities: Net loss $(589,072) $(947,014) $(3,558,334) Adjustments to reconcile net loss to cash used by operating activities: Depreciation 17,497 18,630 80,242 Stock given in exchange for services 90,000 - 338,758 Stock options for operating expenses - - 393,000 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable - - 2,849 (Increase) decrease in prepaid expenses (2,579) 1,331 17,906 (Increase) decrease in employee advances (3,911) - (35,579) Increase (decrease) in accounts payable (30,515) (12,198) (26,777) Increase (decrease) in accrued liabilities 698 (1,128) 13,726 --------- -------- -------- Net cash used by operating activities (517,882) (940,379) (2,774,209) --------- -------- ---------- Cash flows from investing activities: Purchase of equipment (10,380) - (127,543) Acquisition of mining properties (144,811) (192,600) (900,485) --------- -------- -------- Net cash used by investing activities (155,191) (192,600) (1,028,028) -------- --------- --------- Cash flows from financing activities: Stock given in exchange for loan - - 31,530 Proceeds from sales of common stock 1,199,485 968,000 4,341,699 Proceeds from sales of options - - 123,000 Deposits for sale of stock - - 87,500 Payment of subscriptions receivable - 300,000 - Re-payments on shareholders' loans - - (14,418) ------ ------- -------- Net cash provided by financing activities: 1,119,485 1,268,000 4,569,311 -------- --------- --------- Net increase (decrease) in cash 526,412 135,021 767,074 Cash beginning of period 240,662 313,322 - -------- -------- ------- Cash at end of period $767,074 $448,343 $767,074 ======== ======== ======== 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 $ - $ - $300,000 Common stock options issued for services $ - $ - $117,000 Common stock options issued for financing fees $ - $ - $276,000 The accompanying notes are an integral part of these financial statements.

F/S-9 METALLINE MINING COMPANY An Exploration Stage Company Notes to the Financial Statements July 31, 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. The costs of acquiring, exploring, and developing mineral properties are capitalized by project area. Costs to maintain the mineral rights and leases are expensed are 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. NOTE 2 - 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. F/S - 10 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 3 - FINANCIAL STATEMENTS The financial statements of Metalline Mining Company, including herein, have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual report on Form 10-K for the fiscal year ended October 31, 1999. The financial statements included herein reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation. The results for interim periods are not necessarily indicative of trends or of results to expected for a full year. [The balance of this page was intentionally left blank.] F/S - 11 METALLINE MINING COMPANY An Exploration Stage Company Notes to the Financial Statements July 31, 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: September 14, 2000 By: /s/ Wayne L. Schoonmaker ------------------ Wayne Schoonmaker, its Principal Accounting Officer Date: September 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: September 14, 2000 Date: September 14, 2000 By: /s/ Daniel Garski By: /s/ Wayne L. Schoonmaker ----------------- --------------- Daniel Gorski Wayne Schoonmaker Vice President/Director Secretary/Treasurer, Director Date: September 14, 2000 Date: September 14, 2000 By: /s/ Mario Ayub Touche ----------------- Mario Ayub Touche Director Date: September 14, 2000 F/S - 12