10-Q 1 r10q7m.txt METALLINE MINING COMPANY 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, 2001 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 QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JULY 31, 2001 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 5 Item 3: Defaults upon Senior Securities 5 Item 4: Submission of Matters to a Vote of Security Holders 5 Item 5: Other Information 5 Item 6: Exhibits and Reports on Form 8-K 5 Index to Financials 6 Signatures F/S-13 [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, 2001 are not necessarily indicative of the results that may be expected for the full year ending October 31, 2001. 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, 2000 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, 2001. Nine months ended July 31, 2001 compared to the nine months ended July 31, 2000: During the nine months ended July 31, 2001, the Company realized other income of $66,033 as the initial proceeds from the sale of zinc carbonate ore from the Company's San Salvadore mine, in accordance with a contract announced in May 2001 with Fireborn, Inc. of Atlanta, Georgia. General and administrative expenses increased to $1,965,557 for the nine-month period ended July 31, 2001 as compared to $670,885 for the nine-month period ended July 31, 2000. The increase is primarily due to the issuance of options for services and charged to expense, and to increased expenses of maintaining the property. For the nine months ended July 31, 2001, the Company experienced a loss of $1,893,763, or $0.19 per share, compared to a loss of $589,072, or $0.07 per share, during the comparable period in the previous year. LIQUIDITY AND CAPITAL RESOURCES. Metalline Mining Company (the "Company") is an exploration stage enterprise formed under the laws of the State of Nevada, on August 20, 1993, to engage in the business of mining. The Company 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. Page 1 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 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. Due to the Company's lack of revenues, the Company's independent certified public accountants included a paragraph in the Company's 2000 financial statements relative to a going concern uncertainty. The Company has financed its obligations during the 1999-2000 fiscal year by its sale of 2,525,500 shares at prices ranging between $0.86 and $2.77 per share. During the current period, the Company has realized $515,390 from the sale of 309,000 shares and has received a refund of $490,500 for Mexican taxes previously paid. 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 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. 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. In October, 1999 Minera Metalin 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 agreement allowed North to acquire a 60% participating interest in Sierra Mojada by exploring and completing a feasibility study over a "Earn In Period" of not more than 5 years. Page 3 In August, 2000 Rio Tinto Ltd. purchased North Limited for its iron ore holding and has subsequently terminated the agreement with Minera Metalin. Metalline has shown the project to a number of major mining companies who are interested in a Joint Venture. Metalline is currently in negotiations for a Joint Venture on Sierra Mojada. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"), Disclosures about Segments of an Enterprise and Related Information, which supersedes SFAS No. 14, Financial Reporting for Segments of a Business Enterprise, establishes standards for the new way that public enterprises report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. SFAS No. 131 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. As the Company operates within one segment, the adoption of SFAS No. 131 by the Company in 1998, did not have a significant impact on the Company's financial position. In February 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 132 ("FAS No. 132"), Employer's Disclosures about Pensions and other Post-retirement Benefits, which standardizes the disclosure requirements for pension and other post-retirement benefits. The adoption of SFAS No. 132 did not materially impact the Company's current disclosures. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 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, 2001, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities. CASH FLOWS FOR THE NINE MONTHS ENDED JULY 31, 2001 WERE AS FOLLOWS: During the nine-month period ended July 31, 2001, the Company's cash position increased by $183,793, to $734,350. During the nine-month period, the Company used $313,514 in operating activities, which was less than the reported $1,715,425 net loss, due primarily to the issuance of stock and options for $886,060 in services and charged to expense, and the receipt of a refund of Mexican taxes paid of $490,500. In addition, the Company realized $515,390 from the sale of Company stock. The only use of cash other than for operating activities was the purchase of property for $18,083. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. Page 4 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 268,000 shares of its common stock for an average price of $1.87 per share in the three month period ended July 31, 2001, and issued 6,000 shares for consulting services received for which the Company recognized an expense of $14,700. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. The registrant has no outstanding senior securities. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. In February 2001 a notice of annual meeting and proxy statement were mailed to shareholders of record January 5, 2001 regarding matters to be considered at the annual shareholders meeting scheduled for March 1, 2001. Matters considered were (1) election of directors, (2) consideration and approval of the Company's 2001 Stock Option Plan, (3) consideration and approval of a proposed amendment to the Company's Articles of Incorporation to authorize a class of Preferred Shares, (4) election of outside auditors. 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. [The balance of this page has been intentionally left blank.] Page 5 METALLINE MINING COMPANY INDEX TO FINANCIAL STATEMENTS PAGE Financial Statements: Balance Sheets as of July 31, 2001 and October 31, 2000 F/S-1 Statements of Operations for the three and nine month periods ended July 31, 2001 and July 31, 2000, and for the period from inception (November 8, 1993)to July 31, 2001 F/S-2 Statements of Changes in Stockholder's Equity for the period from inception (November 8, 1993) to July 31, 2001 F/S-4 Statements of Cash Flow for the nine month periods ended July 31, 2001 and July 31, 2000, and for the period from inception (November 8, 1993) to July 31, 2001 F/S-10 Notes to Financial Statements F/S-11 Signatures F/S-12 [The balance of this page has been intentionally left blank.] Page 6 METALLINE MINING COMPANY (An Exploration Stage Company) BALANCE SHEETS
July 31, 2001 October 31, 2000 (Unaudited) ----------- ---------- ASSETS CURRENT ASSETS Cash $ 734,350 $ 550,557 Accounts Receivable 59,288 547,237 Prepaid expenses 5,437 3,228 Employee advances 11,146 10,864 ---------- --------- Total Current Assets 810,221 1,111,886 ---------- --------- MINERAL PROPERTIES 4,360,285 4,348,785 PROPERTY AND EQUIPMENT ---------- --------- Office equipment 88,082 81,499 Mining equipment and vehicles 86,047 86,047 Less: Accumulated depreciation (109,531) (88,158) ---------- --------- Total Property and Equipment 64,598 79,388 ---------- --------- TOTAL ASSETS $ 5,235,104 $ 5,540,059 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $13,539 $ 5,625 Accrued liabilities 14,098 16,167 --------- --------- Total Current Liabilities 27,637 21,792 --------- --------- COMMITMENTS AND CONTINGENCIES - - --------- --------- STOCKHOLDERS' EQUITY Common stock, $0.01 par value; 50,000,000 shares authorized, 10,055,595 and 9,740,595 shares issued and outstanding at7/31/01 and 10/31/00 respectively. 100,557 97,407 Additional paid-in capital 9,831,586 9,217,330 Stock options and warrants 1,509,534 543,980 Deficit accumulated during exploration stage (6,234,210) (4,340,450) ---------- --------- Total Stockholders' Equity 5,207,467 5,518,267 TOTAL LIABILITIES AND ---------- --------- STOCKHOLDERS' EQUITY $5,235,104 $5,540,059 ========== ========= See accompanying notes to these financial statements. F/S-1
METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF OPERATIONS
Period from Three Months Ended Nine months Ended November 8, 1993 ------------------- ----------------- (Inception) through July 31,01 July 31,00 July 31,01 July 31,00 July 31, 2001 (Unaudited) (Unaudited) (Unaudited)(Unaudited)(Unaudited) ---------- -------- --------- ---------- -------- REVENUES $ - $ - $ - $ - $ - --------- -------- ------- ------- ----- ---- GENERAL AND ADMINISTRATIVE EXPENSES Salaries 54,000 54,000 162,000 162,000 818,394 Office and administrative 26,936 24,296 95,586 70,586 275,554 Taxes and fees 8,989 11,650 45,397 52,700 95,882 Professional services 290,112 25,325 1,308,545 213,818 3,198,232 Property expenses 62,183 (21,649) 272,805 83,085 1,345,634 Marketing and research 19,495 27,708 59,851 71,199 189,093 Financing Costs - - - - 276,000 Depreciation 7,124 5,832 21,373 17,497 109,561 -------- ------- -------- -------- ----- Total Expenses 468,839 127,162 1,965,557 670,885 6,308,353 -------- ------- --------- -------- ---- ----- OPERATING LOSS (468,839) (127,162)(1,965,557) (670,885)(6,308,353) -------- -------- --------- ------- ----- OTHER INCOME (EXPENSES) Interest income 1,508 1,876 5,761 5,085 17,686 Interest expense - - - - (9,599) Miscellaneous income 48,823 - 66,033 76,728 66,053 -------- -------- ------- ------ ------ Total other income (expense) 50,331 1,876 71,794 81,813 74,140 ------- -------- ------- ------ ---------- LOSS BEFORE INCOME TAXES $(418,508) $(125,286)$(1,893,763)$(589,072) $(6,234,213) ======== ======== ======== ======== ========= See accompanying notes to these financial statements. F/S-2
METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF OPERATIONS
Period from Three Months Ended Nine Months Ended November 8, 1993 --------------- -------------- (Inception) July 31, July 31, July 31, July 31, through 2001 2000 2001 2000 July 31, 2001 (Unaudited) (Unaudited) (Unaudited)(Unaudited)(Unaudited) ---------- ---------- --------- --------- ---------- LOSS BEFORE INCOME TAXES (carried forward) $(418,508) $(125,286) $(1,893,763) $(589,072)$(6,234,210) INCOME TAXES - - - - - --------- --------- ---------- -------- --------- NET LOSS $(418,508) $(125,286) $(1,893,763) $(589,072)$(6,234,210) ======== ======== ======== ======== ========== NET LOSS PER COMMON SHARE BASIC AND DILUTED $ (0.04) $ (0.01) $ (0.19) $ (0.07) $ (1.40) ======== ======== ======== ======== ========= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC AND DILUTED 9,854,595 8,320,262 9,773,387 8,248,595 4,448,312 ======== ======== ========= ========= ========== --------------------- See accompanying notes to these financial statements.
F/S-3 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) ------- ------- ------- ------- ------- ------- ------- ------------------------------------- Schedule continued on next page. See accompanying notes to 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 forward576,480 $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 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 ------- ------- ------- ------- ------- ------- ------- -------------------------------------- Schedule continued on next page. See accompanying notes to 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 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 ----------------- ------- ------- ------- ------- ------- ------- ------- Schedule continued on next page. See accompanying notes to 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 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 ----------------- ------- ------- ------- ------- ------- ------- ------- Schedule continued on next page. See accompanying notes to 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 6,090,739 $60,908 $2,757,694 $(300,000) $177,000 $(1,546,217)$1,149,385 Prior period adjustment for valuation of warrants issued for services 488,980 (488,980) --------- --------- -------- ----------- --------- ---------- ------ Balance, Oct. 31, 1998 restated 6,090,739 60,908 2,757,694 (300,000) 665,980 (2,035,197)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)(1423045) ------- ------- ------- ------- ------- ------- ------- Balance at October 31, 1999 7,215,095 $72,152 $3,977,350 $ - $776,980 $(3,458,242)$1,368,240 ------- ------- ------- ------- ------- ------- ------- Schedule continued on next page. See accompanying notes to these financial statements. 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 7,215,095 $72,152 $3,977,350 $ - $776,980$(3,458,242)$1,368,240 ------- ------------------- ------- ------- ------- ------- Exercise of options for cash at $0.86 per share 950,000 9,500 1,090,750 - (288,000) - 812,250 Issuance of common stock for cash at average of $2.77 per share 1,440,500 14,405 3,972,220 3,986,625 Issuance of common stock for services at $1.28 per share 120,000 1,200 152,160 (360) 153,000 Stock subscription received - - - 360 - - 360 Issuance of common stock for equipment at $1.67 per share 15,000 150 24,850 - - - 25,000 Warrants issued for services 55,000 55,000 Net loss for the year ended October 31, 2000 - - - - - (882,208)(882.208) ---------- --------- --------- ------ --------- ------- ------- Balance at October 31, 2000 9,740,595 $ 97,407 $9,217,330 $ - $43,980$(4,340,450)$5,518,267 ---------- -------- --------- ----- ------- ----- ------- ------------------------------- Schedule continued on next page. See accompanying note to these financial statements. 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 9,740,595 $ 97,407 $9,217,330 $ - $543,980$(4,340,450)$5,518,267 --------- ------ ---------- ------ ------ ---------- -------- Stock issued for cash and services at $0.01 per share 39,000 390 43,260 - - - 43,650 Exercise of warrants for cash at $0.75 per share 20,000 200 25,560 - (10,760) - 15,000 Options granted for consulting services 33,296 - - - 976,315 - 1,009,611 Stock issued for Services at $2.45 per share 6,000 60 14,640 - - - 14,700 Stock issued for cash at $2.00 per share 250,000 2,500 497,500 - - - 500,000 Loss for the nine months ended July 31, 2001 - - - - - (1,893,763)(1,893,763) ----- ------- ------- ------ --- ---------- ------- Balance at July 31, 2001 10,055,595 $100,557 $9,831,586 $ - $1,509,535$(6,234,213)$5,207,465 ----------- -------- --------- --- --------- -------- --------- See accompanying notes to these financial statements. F/S - 10
METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF CASH FLOWS Period from Nine Months Ended November 8, 1993 ---------------------- (Inception)through July 31,2001 July 31,2000 July 31, 2001 (Unaudited) (Unaudited) (Unaudited) ---------- ----------- ------------- Cash flows from operating activities: Net loss $(1,893,763) $(589,072) $(6,234,213) Adjustments to reconcile net loss to cash used by operating activities: Depreciation 21,373 17,497 109,531 Stock and options given in exchange for services 1,067,570 90,000 2,084,726 Stock and options for operating expenses - - 602,527 Changes in operating assets and liabilities: (Increase) decrease in refunds receivable 487,949 - ( 59,288) (Increase) decrease in prepaid expenses (2,208) (2,579) (5,433) (Increase) decrease in employee advances (282) (3,911) (11,146) Increase (decrease) in accounts payable 7,915 (30,515) 13,538 Increase (decrease) in accrued liabilities (2,068) (698) 14,098 ------ ------ ------ Net cash used by operating activities (313,514) (517,882) (3,485,660) Cash flows from investing activities: Purchase of property and equipment (6,583) (10,380) (134,127) Acquisition of mineral properties(11,500) (144,811) (4,351,285) ------ ------- ---------- Net cash used by investing activities (18,083) (89,614) (4,485,412) ------ ------- --------- Table continued on next page.
METALLINE MINING COMPANY (An Exploration Stage Company) STATEMENTS OF CASH FLOWS (continued) Period from Nine Months Ended November 8, 1993 ---------------------- (Inception)through July 31,2001 July 31,2000 July 31, 2001 (Unaudited) (Unaudited) (Unaudited) ---------- ----------- ------------- --------- -------- --------- Cash flows from financing activities: Proceeds from sales of common stock 515,390 1,199,485 7,652,672 Proceeds from sales of options - - 935,250 Deposits for sale of stock - - 87,500 Proceeds from shareholders' loans - - 30,000 Net cash provided by ------- -------- --------- financing activities: 515,390 1,199,485 8,705,422 ------- ---------- ---------- Net increase (decrease) in cash (183,793) 526,412 734,350 Cash beginning of period 550,557 240,662 - ------- -------- ------ Cash at end of period $734,350 $767,074 $734,350 ======== ========= ======== Supplemental cash flow disclosures: Income taxes paid in cash - - $ 9,599 Interest paid in cash - - - Non-cash financing activities: Common stock issued for services 14,700 $90,000 $487,875 Common stock issued for expenses - - $ 326,527 Common stock issued for equipment - - $ 40,000 Common stock issued for payment of debt - - $ 80,000 Common stock options issued for services $828,100 - $935,500 Common stock options issued for financing fees - - $276,000 See accompanying notes to these financial statements. F/S-11
METALLINE MINING COMPANY An Exploration Stage Company Notes to the Financial Statements July 31, 2001 The interim financial statements of Metalline Mining Company included herein have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange. 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 no misleading. The accompanying interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report on Form 10-K for the fiscal year ended October 31, 2000. The financial statements included herein reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the results for interim periods. The results for interim periods are not necessarily indicative of trends or of results to be expected for a full year. NOTE 1 PREFERRED STOCK At its March 1, 2001 annual shareholders meeting, the Company approved a change to its articles of incorporation whereby the Company is authorized to issue one million shares of $0.01 par value preferred stock. The specific features of the preferred stock will be determined by the Company's board of directors. STOCK OPTION PLAN On March 1, 2001, the Company's shareholders approved a qualified stock option plan. The number of shares eligible for issuance under the qualified plan is to be determined by the Company's board of directors. [The balance of this page was intentionally left blank.] F/S - 12 METALLINE MINING COMPANY An Exploration Stage Company July 31, 2001 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, 2001 By: /s/ Wayne L. Schoonmaker ----------------- Wayne Schoonmaker, its Principal Accounting Officer Date: September 14, 2001 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, 2001 Date: September 14, 2001 By: /s/ Daniel Gorski By: /s/ Wayne L. Schoonmaker ----------------- ------------------ Daniel Gorski Wayne Schoonmaker Vice President/Director Secretary/Treasurer Date: September 14, 2001 Date: Septemnber 14, 2001 F/S - 13