SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2004
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 ch
eck 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant at January 14, 2005 was $24,904,458. The number of shares of
common stock outstanding at such date was 19,751,409 shares. An additional
1,996,554 were deemed outstanding at such date pursuant to presently
exercisable options and warrants.
METALLINE MINING COMPANY ANNUAL REPORT
ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED OCTOBER 31, 2004
TABLE OF CONTENTS Page
SAFE HARBOR STATEMENT (ii)
PART I
Item 1: Description of Business . . . . . . . . . . . . 1
Item 2: Risk Factors . . . . . . . . . . . . . . . . . .2
Item 3: Description of Properties . . . . . . . . . . . 5
Item 4: Legal Proceedings . . . . . . . . . . . . . . . 5
Item 5: Indemnification of Directors and Officers . . . 5
Item 6: Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . 6
PART II
Item 7: Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . .6
Item 8: Recent Sale of Unregistered Securities . . . . .7
Item 9: Selected Financial Data . . . . . . . . . . . . 9
Item 10: Description of Securities . . . . . . . . . . 9
Item 11: Management's Discussion and Analysis of
Financial Condition and Plan of Operations . . 10
Item 12: Financial Statements and Supplementary Data . 12
Item 13: Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . 12
PART III
Item 14: Directors and Executive Officers
of the Registrant . . . . . . . . . . . . . . .12
Item 15: Executive Compensation . . . . . . . . . . . .15
Item 16: Security Ownership of Certain
Beneficial Owners and Management . . . . . . . 16
Item 17: Certain Relationships and
Related Transactions . . . . . . . . . . . . . 17
PART IV
Item 18: Exhibits, Financial Statement
Schedules, and Reports on Form 8-K . . . . . . 17
Index to Financials . . . . . . . . . . . . . . . . . . . 19
Signatures and Certifications. . . . . . . . . . . . F/S 21
(i)
METALLINE MINING COMPANY ANNUAL REPORT
ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED OCTOBER 31, 2004
SAFE HARBOR STATEMENT
This report contains both historical and prospective statements
concerning the Company and its operations. Historical statements are
based on events that have already happened; examples include the
reported financial and operating results, descriptions of pending and
completed transactions, and management and compensation matters.
Prospective statements, on the other hand, are based on events that
are reasonably expected to happen in the future; examples include the
timing of projected operations, the likely effect or resolution of
known contingencies or other foreseeable events, and projected
operating results.
Prospective statements (which are known as "forward-looking
statements" under the Private Securities Litigation Reform Act of
1995) may or may not prove true with the passage of time because of
future risks and uncertainties. The Company cannot predict what
factors might cause actual results to differ materially from those
indicated by prospective statements. The risks and uncertainties
associated with prospective statements contained in this report
include, among others, the following:
[The balance of this page has been intentionally left blank.]
(ii)
METALLINE MINING COMPANY ANNUAL REPORT
ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED OCTOBER 31, 2004
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Background
Metalline Mining 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.
Current Operations
The Company expects to engage 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
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
owns title to 100% of the concessions.
Location and Access
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 250 kilometers on paved 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 railroad that connects with the National Railway at Escalon and
Monclova.
History
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 not mined. 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 200 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, the ore thickness and attitude is amenable
to high volume mechanized mining methods and low cost production.
Based upon the foregoing, the Company is of the opinion that the
magnitude of the Sierra Mojada mineral system has exploration
potential for continued development of future reserves. However,
there is no assurance as to the quantity or quality of the
undeveloped reserves and there is 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.
Page 1
Exploration and Development.
On the 15th of November 2001, Metalline Mining Company and its
Mexican Subsidiary Minera Metalin, S.A. de C.V. signed an Agreement
with Minas Penoles, S.A. de C.V. and Compania Minera La Parrena,
S.A. de C.V. The Agreement allowed Minas Penoles to earn a 60%
interest in the Sierra Mojada project by completing a feasibility
study over an "Earn in Period" of not more than 5 years. Penoles and
Metalline, by mutual agreement of the parties, have terminated that
agreement as of November 15, 2003.
Since November 15, 2003 Metalline has been the operator of the
project. Metalline is conducting a reserve definition diamond drill
program at Sierra Mojada. The drill program was initiated in January
and through December 2004 25,143 meters were completed.
Reserva International, a company that specializes in ore reserve
evaluation, has been retained to conduct a block model evaluation of
the Sierra Mojada data with the objective of determining the size
and grade of the deposit.
In a news release dated September 13, 2004 Metalline released the
results of the first block model evaluation of the data for the Iron
Oxide (Red Zinc) Manto, 22.6 million metric tons grading 8.11% zinc
using a cut off grade of 5%.
All data generated after the above work and through November 9,
2004 has been added to the GEMCOM database and a second block model
evaluation is in progress. The results of which will be announced
when completed. The block model evaluation will be periodically
updated as additional results are received.
Green Team International (GTI), Johannesburg, S. Africa has been
retained to do a feasibility study on the project. The feasibility
study will address metallurgy, mine plan, extraction method and
economic evaluation studies.
GTI is the firm that conducted the feasibility studies on the
Skorpion Mine for Reunion Ltd. and Anglo American. GTI designed,
supervised the construction, and operated the Skorpion mine and
extraction plant through initial production and until turning
operation over to Skorpion Zinc an Anglo American company. The
Skorpion Mine is the first mine in the world to use the solvent
extraction electrowinning process for extracting SHG grade zinc from
oxide zinc ore.
Metalline's objectives are to complete the definition of a body of
mineralization containing sufficient zinc metal to justify a mine
and extraction plant. Based on this body of mineralization a
feasibility study will be completed for a mine and zinc solvent
extraction electrowinning plant at Sierra Mojada.
District Potential
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.
ITEM 2. RISK FACTORS
1. EXPLORATION STAGE MINING COMPANY WITH NO HISTORY OF OPERATION.
The Company is in its exploration stage, 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,
complication, and delays frequently encountered in connection with a
new business, and the competitive and regulatory environment in
which the Company will operate. See "Business".
2. NO COMMERCIALLY MINEABLE ORE BODY.
No commercially mineable ore body has been delineated on the
properties, nor have any reserves been identified. See "Business".
Page 2
3. RISKS INHERENT IN THE MINING INDUSTRY.
The Company is subject to all of the risks inherent in the mining
industry including, without limitation, the following: competition
from a large number of companies, many of which are significantly
larger than the Company, in the acquisition, exploration, and
development of mining properties; the concession holder must pay
fees and perform labor on the concessions to maintain the
concessions title; exploration for minerals is highly speculative
and involves substantial risks, even when conducted on properties
known to contain significant quantities of mineralization, and most
exploration projects do not result in the discovery of commercially
mineable deposits of ore; operations are subject to a variety of
existing laws and regulations relating to exploration and
development, permitting procedures, safety precautions, property
reclamation, employee health and safety, air quality standards,
pollution and other environmental protection controls; a large
number of factors beyond the control of the Company, including
fluctuations in metal prices, inflation, and other economic
conditions, will affect the economic feasibility of mining; mining
activities are subject to substantial operating hazards some of
which are not insurable or may not be insured due to economic
considerations; and, the availability of water, which is essential
to milling operations.
4. NATURE OF THE INDUSTRY.
Exploration, development, and mining of mineral properties is highly
speculative and involves unique and greater risks than are generally
associated with other businesses. The Company's operations will be
subject to all the operating hazards and risks normally incident to
the exploration, development, and mining of mineral properties,
including risks enumerated above and below.
5. FLUCTUATING PRICE FOR METALS.
The Company's operations will be greatly influenced by the prices of
silver, copper, lead, zinc, and other metals. These prices fluctuate
widely and are affected by numerous factors beyond the Company's
control, including expectations for inflation, the strength of the
United States dollar, global and regional demand and political and
economic conditions and production costs in major metal producing
regions of the world.
6. MINING CONCESSIONS.
The Company holds mining concessions in Mexico. Concessions require
work and financial expenditures to retain their validity.
7. ENVIRONMENTAL CONTROLS.
Compliance with statutory environmental quality requirements may
necessitate significant capital outlays, may materially affect the
earning power of the Company, or may cause material changes in the
Company's intended activities. No assurance can be given that
environmental standards imposed by either federal or state
governments will not be changed or become more stringent, thereby
possibly materially adversely affecting the proposed activities of
the Company.
8. GOVERNMENTAL REGULATION AND ENVIRONMENTAL CONTROLS.
The Company's activities are subject to extensive Mexican laws and
regulations controlling not only the exploration for and development
of mineral properties, but also the possible effect of such
activities upon the environment. In its mining operations, the
Company will use certain equipment, which will subject the Company
to Mexican safety and health regulations. While the Company intends
to act in compliance with all such regulations, any adverse ruling
under any regulations, any imposition of a fine, or any imposition
of more stringent regulations could require the Company to make
additional capital expenditures that could impair its operations.
9. AVAILABILITY OF WATER SHORTAGES OF SUPPLIES AND MATERIALS.
Water is essential in all phases of the exploration and development
of mineral properties. It is used in such processes as exploration,
drilling, leaching, placer mining, dredging, testing, and hydraulic
mining. Any water that may be found will be subject to acquisition
pursuant to appropriate governing laws. The Company has definitely
not determined the availability of water at Sierra Mojada, except to
note that adequate water supplies are generally developed by
drilling, but has not determined the cost of acquisition. Both the
lack of available water and the cost of acquisition may make an
otherwise viable project economically impossible to complete. The
mineral industry has experienced from time to time shortages of
certain supplies and materials necessary in the exploration for and
Page 3
evaluation of mineral deposits. The prices at which such supplies
and materials are available have also greatly increased. There is a
possibility that planned operations may be subject to delays due to
such shortages and that further price escalations will increase the
costs of the Company.
10. UNINSURED RISKS.
The Company may not be insured against all losses or liabilities,
which may arise from operations, either because such insurance is
unavailable or because the Company has elected not to purchase such
insurance due to high premium costs or other reasons.
11. NEED FOR SUBSEQUENT FUNDING.
The Company has an immediate need for additional funds in order to
finance its proposed business operations. The Company's continued
operations therefore will depend upon the availability of cash flow,
if any, from its operations or its ability to raise additional funds
through bank borrowings or equity or debt financing. There is no
assurance that the Company will be able to obtain additional funding
when needed, or that such funding, if available, can be obtained on
terms acceptable to the Company. If the Company cannot obtain needed
funds, it may be forced to curtail or cease its activities.
12. NEED FOR ADDITIONAL KEY PERSONNEL.
At the present, the Company employs five full-time and one part-time
employee. The success of the Company's proposed business will
depend, in part, upon the ability to attract and retain qualified
employees. The Company believes that it will be able to attract
competent employees, but no assurance can be given that the Company
will be successful in this regard. If the Company is unable to
engage and retain the necessary personnel, its business would be
materially and adversely affected.
13. RELIANCE UPON DIRECTORS AND OFFICERS.
The Company is wholly dependent, at the present, upon the personal
efforts and abilities of its Officers and Directors who will
exercise control over the day-to-day affairs of the Company. While
the Company may solicit business through its Officers, there can be
no assurance as to the volume of business, if any, which the Company
may succeed in obtaining, nor that its proposed operations will
prove to be profitable. As of the date hereof, the Company does not
have any commitments regarding its proposed operations and there can
be no assurance that any commitments will be forthcoming.
14. NON-ARMS' LENGTH TRANSACTION.
The number of shares of Common Stock issued to present shareholders
of the Company for cash was arbitrarily determined and may not be
considered the product of arm's length transactions. See "Principal
Shareholders".
15. INDEMNIFICATION OF OFFICERS AND DIRECTORS FOR SECURITIES
LIABILITIES.
The Bylaws of the Company provide that the Company may indemnify any
Director, Officer, agent, and/or employee as to those liabilities
and on those terms and conditions as are specified in the Nevada
Business Corporation Act. Further, the Company may purchase and
maintain insurance on behalf of any such persons whether or not the
corporation would have the power to indemnify such person against
the liability insured against. The foregoing could result in
substantial expenditures by the Company and prevent any recovery
from such Officers, Directors, agents, and employees for losses
incurred by the Company as a result of their actions. Further, the
Company has been advised that in the opinion of the Securities and
Exchange Commission, indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable.
16. COMPETITION.
The Company believes that it will have competitors and potential
competitors, many of whom may have considerably greater financial
and other resources than the Company.
17. PUBLIC MARKET FOR SECURITIES.
At present, the Company's common stock is traded under the symbol
MMGG on the OTC Bulletin Board operated by the National Association
of Securities Dealers, Inc. This market is a thinly traded market
and lacks the liquidity of other public markets with which some
investors may have more experience.
Page 4
18. CUMULATIVE VOTING, PREEMPTIVE RIGHTS AND CONTROL.
There are no preemptive rights in connection with the Company's
Common Stock. The shareholders purchasing in this offering may be
further diluted in their percentage ownership of the Company in the
event additional shares are issued by the Company in the future.
Cumulative voting in the election of Directors is not provided for.
Accordingly, the holders of a majority of the shares of Common
Stock, present in person or by proxy, will be able to elect all of
the Company's Board of Directors. See "Description of the
Securities".
19. NO DIVIDENDS ANTICIPATED.
At the present time the Company does not anticipate paying
dividends, cash or otherwise, on its Common Stock in the foreseeable
future. Future dividends will depend on earnings, if any, of the
Company, its financial requirements and other factors. Investors who
anticipate the need of an immediate income from their investment in
the Company's Common Stock should refrain from the purchase of the
securities being offered hereby. See "Dividend Policy".
ITEM 3. DESCRIPTION OF PROPERTIES.
The Company owns the following eight mining concessions, including
the buildings and equipment located thereon:
Concession Title No. Hectares
------ ----- -----
Sierra Mojada 198513 4767.3154
Mojada 3 199246 1689.2173
Esmeralda 188765 117.5025
Esmeralda 1 187776 97.6839
Unification Mineros Nortenos 169343 336.7905
La Blanca 188326 33.5044
Fortuna 160461 13.9582
Vulcano 83507 4.4904
-----
Total 7060.4626
=======
The Company's corporate offices are located at 1330 East Margaret
Avenue, Coeur d'Alene, Idaho 83815, and its telephone number is
(208) 665-2002 and FAX is (208) 665-0041. Minera Metalin has its
operations, consisting of mining equipment, offices, residences,
shops, and warehouse buildings, located at Calle Mina #1, La
Esmeralda, Coahuila, Mexico and its telephone and FAX number is 52
871 775 2100.
ITEM 4. LEGAL PROCEEDINGS.
Minera Metalin, the Company's Mexican subsidiary, has been named as
a co-defendant in a lawsuit filed in Mexico regarding the Company's
purchase of two mining concessions. During the nine months ended
July 31, 2003 the Company settled this suit for approximately
$36,000. The Company paid approximately $13,800 at the time of
settlement, with the balance payable in six equal installments of
approximately $3,700. The Company has met its obligation under the
settlement.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The laws of the state of Nevada under certain circumstances
provide for indemnification of the Company's Officers, Directors and
controlling persons against liabilities, which they may incur in
such capacities. A summary of the circumstances in which such
indemnification is provided for is contained herein, but this
description is qualified in its entirety by reference to the
Company's Articles of Incorporation and to the statutory provisions.
In general, any Officer, Director, employee or agent may be
indemnified against expenses, fines, settlements or judgments
arising in connection with a legal proceeding to which such person
is a party, if that person's actions were in good faith, were
believed to be in the Company's best interest, and were not
unlawful. Unless such person is successful upon the merits in such
an action, indemnification may be awarded only after a determination
by independent decision of the Board of Directors, by legal counsel,
or by a vote of the shareholders, that the applicable standard of
conduct was met by the person to be indemnified.
Page 5
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is
generally the same as those set forth above; however, with respect
to such actions, indemnification is granted only with respect to
expenses actually incurred in connection with the defense or
settlement of the action. In such actions, the person to be
indemnified must have acted in good faith and in a manner believed
to have been in the Company's best interest, and have not been
adjudged liable for negligence or misconduct.
The Company's Articles of Incorporation and Bylaws do not contain
any provisions for indemnification as described above.
ITEM 6. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of the shareholders of Metalline Mining Company
was held on March 1, 2001. The following items were presented for a
vote of the shareholders, all of which were approved:
1. Election of three directors.
2. Authorization of a Qualified Stock Option Plan.
3. Amendment of the Company's Articles of Incorporation to authorize
one million shares of Preferred Stock, $0.01 par value per share.
4. Ratification of the appointment of Williams & Webster, Certified
Public Accountants, to audit the financial statements of the
Company.
PART II
ITEM 7. MARKET PRICE FOR COMMON EQUITY AND OTHER SHAREHOLDER
MATTERS.
The Company's shares are traded on the Bulletin Board operated by
the National Association of Securities Dealers, Inc. (the "Bulletin
Board") under the trading symbol "MMGG". The Company's shares began
trading November 19, 1996. Summary trading by quarter for 2004,
2003, and 2002 are as follows:
Fiscal Quarter High Bid Low Bid
--------- --------- --------
2001
Fourth Quarter 2.10 1.57
Third Quarter 3.25 1.64
Second Quarter 2.45 1.75
First Quarter 3.21 1.60
2003
Fourth Quarter 2.00 1.18
Third Quarter 1.35 1.10
Second Quarter 1.40 1.01
First Quarter 1.45 1.20
2002
Fourth Quarter 1.60 0.90
Third Quarter 2.10 1.15
Second Quarter 1.94 0.75
First Quarter 2.75 0.80
These quotations reflect inter-dealer prices, without retail
mark-up, markdown, or commissions, and may not represent actual
transactions.
As of October 31, 2004, the Company has approximately 300 holders
of record of its Common Stock.
The Company has not paid any dividends since its inception and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future.
Page 6
ITEM 8. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has 19,751,409 shares of Common Stock issued and
outstanding as of October 31, 2004. Of the total shares of the
Company's Common Stock outstanding, 5,333,212 shares are freely
tradable and 14,418,197 shares can only be resold in compliance with
Reg. 144 adopted under the Securities Act of 1933 (the "Act").
In general, under Rule 144 as currently in effect, a person (or
persons whose Shares are aggregated) who has beneficially owned
Shares privately acquired directly or indirectly from the Company or
from an affiliate, for at least one year, or who is an affiliate, is
entitled to sell within any three month period a number of such
Shares that does not exceed the greater of 1% of the then
outstanding shares of the Company's Common Stock or the average
weekly trading volume in the Company's Common Stock during the four
calendar weeks, immediately preceding such sale. Sales under Rule
144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information
about the Company. A person (or persons whose Shares are aggregated)
who is not deemed to have been an affiliate at any time during the
90 day preceding a sale, and who has beneficially owned Restricted
Shares for at least two years, is entitled to sell all such Shares
under Rule 144 without regard to the volume limitations, current
public information requirements, manner of sale provisions or notice
requirements.
On August 24, 1993, the Company issued 960,800 of its $0.01 par
value shares to Precious Metal Mines, Inc. ("PMM"), for 16
unpatented mining claims located near Philipsburg, Montana
comprising the Kadex property group. The foregoing shares were
issued pursuant to Section 4(2) of the Securities Act of 1933 (the
"Act").
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.
During November 1995, Cadgie Co. directors approved an issue of
45,000 shares of Common Stock to Mr. Ryan for services rendered at
$0.01 per share. The foregoing shares were issued pursuant to
Section 4(2) of the Act.
In June 1996, the Company completed a private placement of common
stock resulting in net proceeds of $25,000. The Company issued
250,000 common shares in connection with this private placement. The
Company also issued 900,000 shares to Messrs. Bingham, Gorski and
Ryan 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 Dakota covering the mining
concessions. By acquiring the partnership interest, the Company was
able to negotiate and sign a formal joint venture agreement with
Dakota in July 1996. The foregoing shares were issued pursuant to
Section 4(2) of the Act.
During June 1996, the 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. The foregoing shares
were issued pursuant to Section 4(2) of the Act.
In October 1996, the Company completed a private placement of
common stock resulting in net proceeds of $125,500. The Company
issued 1,255,000 shares in connection with this placement. The
Company also issued 120,000 shares to Mr. Gorski in payment for his
services for the months of September and October. The Company issued
20,000 shares of Common Stock to Mr. Ryan as payment for services in
those same months. Further, the Company issued 150,000 shares of
common stock for computer equipment. The foregoing shares were
issued pursuant to Section 4(2) of the Act.
During February 1997, the Company borrowed $30,000 from
shareholders and issued 24,900 shares of Common Stock as a loan
incentive. The foregoing shares were issued pursuant to Section 4(2)
of the Act.
In March 1997, the Company completed an issuance of Common Stock
resulting in net proceeds of $17,500. The foregoing shares were
issued pursuant to Section 4(2) of the Act.
Page 7
In April 1997, the Company issued to Royal Silver Mines, Inc.,
200,000 shares of Common Stock resulting in proceeds of $70,000. The
Company issued 133,800 shares of Common Stock 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 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. The foregoing shares were issued pursuant to Section 4(2) of
the Act.
On June 5, 1997, the Company issued 50,000 shares of Common Stock
in consideration of services rendered. The foregoing shares were
issued pursuant to Section 4(2) of the Act.
In 1997 and 1998, the Company issued warrants to eight persons.
Each warrant entitles the holder to acquire one share of common
stock at exercise prices ranging from $0.35 to $2.25. A total of
1,046,500 warrants were issued and 996,500 are currently
outstanding; 50,000 of the warrants have been exercised. The
warrants were issued pursuant to Section 4(2) of the Act.
Between August 14, 1998 and November 23, 1998, the Company sold
565,000 shares of common stock to eight persons/entities in
consideration of $565,000. The foregoing shares were sold pursuant
to Section 4(2) of the Securities Act of 1933.
Between March 8, 1999 and June 11, 1999, the Company sold 662,500
shares of common stock to eight persons/entities in consideration of
$662,500. The foregoing shares were sold pursuant to Section 4(2) of
the Securities Act of 1933.
In July and November 1999, options for 1,200,000 shares of common
stock were exercised as a price of $0.90 per share, pursuant to
Section 4(2) of the Act.
In August 2000, the Company sold 1,440,500 shares for common stock
at a price of $2.77 per share. The foregoing shares were sold
pursuant to Section 4(2) of the Securities Act of 1933.
During the year ended October 31, 2000, the company issued 120,000
shares for services rendered and 15,000 shares for equipment. The
foregoing shares were issued pursuant to Section 4(2) of the
Securities Act of 1933.
During the year ended October 31, 2001, the Company issued 20,000
shares of common stock for the exercise of warrants valued at
$10,760 and cash of $15,000. Additionally, 57,000 shares of common
stock were issued for services valued at $112,420 and cash of $570
and 250,000 shares of common stock with 125,000 warrants attached
were issued for $500,000 in cash. The foregoing shares were issued
pursuant to Section 4(2) of the Securities Act of 1933.
On May 20, 2002, the Company authorized the offering of 1,000,000
common stock units, with each unit consisting of one share of common
stock and one warrant equal to 1/3 of a share of common stock.
During the year ended October 31, 2002, the Company issued 162,667
common stock units for a cash value of $229,360 for common stock,
and $14,640 for warrants. The Company also issued 50,000 shares of
common stock under the Penoles agreement for cash, at $2.00 a share.
Additionally, 86,078 shares of common stock were issued as
compensation to officers for a value of $104,875.
During the year ended October 31, 2003, the Company sold 7,000
common stock units with an ascribed cash value of $10,500. The
Company also sold 849,000 shares (without warrants) at an average
price of $0.98 per share. The Company also issued 100,000 shares of
common stock under the Penoles agreement for cash, at $2.00 per
share (see Note 11). Additionally, 373,925 shares of common stock
valued at $468,771 were issued as compensation for officers.
Page 8
During the year ended October 31, 2004, the Company issued a total
of 7,580,150 shares of common stock to accredited investors for cash
at $1.00 per share, realizing $6,881,287 after private placement
costs of $698,863. Additionally, 141,286 shares of common stock
valued at an aggregate of $155,214 were issued for services and
120,655 shares of common stock valued at an aggregate of $152,271
were issued as compensation to officers. These shares were issued in
private placement transactions without registration under the
Securities Act in reliance upon the exemptions from the registration
requirements provided by section 4(2) and Rule 506 of Regulation D
under the Securities Act.
ITEM 9. SELECTED FINANCIAL DATA.
The selected financial data set forth below has been derived from,
and should be read in conjunction with the Company's financial
statements and the notes thereto, and Item 11 of this report
entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations". The selected financial data
for the two years ended October 31, 2004 have been derived from the
Company's consolidated financial statements appearing elsewhere in
this report, which have been audited by Williams & Webster P.S.,
Spokane, Washington.
The selected financial data should be read in conjunction with and
is qualified by such financial statements and the notes thereto.
Selected Financial Data
2004 2003
---- ----
Summary of Balance Sheets:
Working capital $2,551,383 $615,544
Current assets 2,758,268 754,395
Total assets 7,659,878 5,390,304
Current liabilities 206,885 138,851
Long-term obligation 11,574 0
Total liabilities 218,459 138,851
Stockholder's equity 7,441,419 5,251,453
Summary of Statements of Operations:
Revenues 0 0
Net loss (5,036,805) (1,107,228)
Net loss per share (0.30) (0.10)
----
Cumulative losses for period from inception (Nov. 8, 1993)
through October 31, 2004 were $13,319,638.
ITEM 10. DESCRIPTION OF SECURITIES.
Common Stock
The authorized Common Stock of the Company consists of 50,000,000
shares of $0.01 par value Common Stock. As of October 31, 2004,
19,751,409 shares are issued and outstanding of which 5,333,212 are
freely tradable.
In general, under Reg.144, an affiliate of the Company (officers,
directors, and owners of more than ten percent (10%) of the
outstanding shares of Common Stock are affiliates of the Company)
may sell in ordinary market transactions through a broker or with a
market maker, within any three (3) month period a number of shares,
which does not exceed the greater of one percent (1%) of the number
of outstanding shares of Common Stock or the average of the weekly
trading volume of the Common Stock during the four calendar weeks
prior to such sale. Sales under Reg.144 require the filing of Form
144 with the Securities and Exchange Commission. If the shares of
Common Stock have been held for more than two (2) years by a person
who is not an affiliate, there is no limitation on the manner of
sale or the volume of shares that may be sold and no Form 144 is
required. Sales under Reg. 144 may have a depressive effect on the
market price of the Company's Common Stock.
Page 9
All shares have equal voting rights and are not assessable. Voting
rights are not cumulative and, therefore, the holders of more than
50% of the Common Stock could, if they chose to do so, elect all of
the directors of the Company.
Upon liquidation, dissolution, or winding up of the Company, the
assets of the Company, after the payment of liabilities, will be
distributed pro rata to the holders of the Common Stock. The holders
of the Common Stock do not have preemptive rights to subscribe for
any securities of the Company and have no right to require the
Company to redeem or purchase their shares. The shares of Common
Stock presently outstanding are fully paid and non-assessable.
Dividends
Holders of the Common Stock are entitled to share equally in
dividends when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefore. No dividend has
been paid on the Common Stock since inception, and none is
contemplated in the foreseeable future.
Options and Warrants
Currently, the Company has outstanding stock options and warrants
to acquire up to 1,996,554 shares of common stock at exercise prices
ranging from $0.75 to $5.00 per share. Each option or warrant
permits the holder thereof to acquire one share of common stock. The
options and warrant expiration periods range from November 1, 2004
to March 1, 2010.
Transfer Agent
The transfer agent for the Company's Common Stock is OTC Stock
Transfer Inc., 231 East 2100 South, Salt Lake City, Utah 84115.
ITEM 11. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Results of Operations - Inception (August 20, 1993) through October
31, 2004.
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. The Company is
currently involved in exploration and evaluation of its Mexican
property under agreement with Minas Penoles.
The Company will hire employees on an as needed basis, however,
the Company currently does not expect any significant changes in the
number of employees.
Liquidity and Capital Resources.
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.
Page 10
Due to the Company's lack of revenues, the Company's independent
certified public accountants included a paragraph in the Company's
2004 financial statements relative to a going concern uncertainty.
The Company has financed its obligations during the 2003-2004 fiscal
year by its sale of 7,580,150 shares at an average price of $1.00
per share.
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").
EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.
In May 2003, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.150, "Accounting for
Certain Financial Instruments with Characteristics of Both
Liabilities and Equity" (hereinafter "SFAS No,150"). SFAS No.150
establishes standards for classifying and measuring certain
financial instruments with characteristics of both liabilities and
equity and requires that those instruments be classified as
liabilities in statements of financial position. Previously, many of
those instruments were classified as equity. SFAS No.150 is
effective for financial instruments entered into or modified after
May 31, 2003 and otherwise is effective at the beginning of the
first interim period after June 15, 2003. The Company has not yet
determined the impact of the adoption of this statement.
In April 2003, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities"
(hereinafter "SFAS No.149"). SFAS No.149 amends and clarifies the
accounting of derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities
under SFAS No.133, "Accounting for Derivative Instruments and
Hedging Activities". This statement is effective for contracts
entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The adoption of SFAS
No.149 is not expected to have a material impact on the financial
position or results of operations of the Company.
In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" (hereinafter
"SFAS No.148"). SFAS 148 amends SFAS 123, "Accounting for Stock-
Based Compensation, " to provide alternative methods of transition
for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, the statement
amends the disclosure requirements of SFAS 123 to require prominent
disclosure in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The provisions of the
statement are effective for financial statements for fiscal years
ending after December 15, 2002. As the Company accounts for stock-
based compensation using the fair value method, the adoption of SFAS
148 has no material impact on the Company's financial condition or
results of operations.
In June 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities" (hereinafter
"SFAS No.146"). SFAS No. 146 addresses significant issues regarding
the recognition, measurement, and reporting of costs associated with
exit and disposal activities, including restructuring activities.
SFAS No.146 also addresses recognition of certain costs related to
terminating a contract that is not a capital lease, costs to
consolidate facilities or relocate employees, and termination
benefits provided to employees that are involuntarily terminated
under the terms of a one-time benefit arrangement that is not an
ongoing benefit arrangement or an individual deferred-compensation
contract. SFAS No. 146 was issued in June 2002, effective December
31, 2002. The Company's financial position and results of operations
have not been affected by adopting SFAS No.146.
In April 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 145, "Rescission of
FASB Statements No.4, 44, and 64, Amendment of FASB Statement No.13,
and Technical Corrections" (hereinafter "SFAS No.145") which
updates, clarifies, and simplifies existing accounting
pronouncements. FASB No.4, which required all gains and losses from
the extinguishment of debt to be aggregated and, if material,
classified as an extraordinary item, net of related tax effect was
rescinded. As a result, FASB No. 64, which amended FASB No.4, was
rescinded as it was no longer necessary. SFAS No.14 amended FASB
No.13
Page 11
to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain
lease modifications that have economic effects that are similar to
sale-leaseback transactions. Management's adoption of this statement
has not affected the financial position or results of operations at
October 31, 2004.
ITEM 12. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the Company for the years ended
October 31, 2004, and 2003 included elsewhere in this report have
been audited by Williams & Webster, P.S., Spokane, Washington. An
index to such financial statements appears at Page 21 of this
report.
ITEM 13. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures through the date of this 10-KSB.
PART III
ITEM 14. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS.
The officers and directors of the Company are as follows:
Name Age Position
Merlin Bingham 71 President and Chairman of the Board of
Directors
Roger Kolvoord 64 Vice President-Business and
Member of the Board of Directors
Wayne Schoonmaker 67 Secretary & Treasurer
All directors hold office until the next annual meeting of
shareholders or until their successors have been elected and
qualified. The Company's officers are elected by the Board of
Directors at the annual meeting and hold office until their death,
or until they resign, or have been removed from office. Mr. Daniel
Gorski resigned as a director and as vice president of operations in
September 2004.
Officer and Director Biographies:
Merlin Bingham, President, and Chairman of the Board of Directors
Since October 1996, Mr. Bingham has been the President and
Chairman of the Board of Directors of the Company. From 1963 to 1983
Mr. Bingham worked in exploration for mining and oil companies in
the western U.S. and Alaska, Zambia, the United Arab Emirates,
Ecuador and Mexico. Since 1983, Mr. Bingham has been a consulting
geologist. Mr. Bingham received a B.S. degree in Mineralogy from the
University of Utah in 1963.
Roger Kolvoord Vice President-Business and Director
Dr. Kolvoord has been a director of the Company since August 2002
and was appointed Vice President, Business in April 2003. Dr.
Kolvoord has a B.S. degree in geology from the University of
Michigan, a M.S. in Mineralogy form the University of Utah, and a
Ph.D. in geochemistry from the University of Texas at Austin. He
worked in exploration and exploration research for Kennecott Copper
Company, Ranchers Exploration and Development Corporation, and ARCO,
and operated a services company providing field services to oil and
gas and mining companies. He has extensive mining and energy
exploration experience. He was a manager with the Boeing Company for
14 years, working mainly in program management and new business
development capacities in information systems and in remote sensing
and geospatial information (mapping) ventures. An Associate
Page 12
Technical Fellow of the Boeing Company, he returned to private
consulting practice in 2000. An active member of the American
Association of Petroleum Geologists, he served two terms as the
Pacific Section Councilor of the Energy Minerals Division and is
currently Chair of the Geospatial Information Committee. He resides
in the Puget Sound region of Washington.
Wayne Schoonmaker Secretary & Treasurer
Mr. Schoonmaker was appointed Secretary & Treasurer of the Company
in August 1997 and has held that position since that time. He is
also currently Secretary & Treasurer of Hanover Gold Company, Inc.
of Spokane, Washington and Secretary & Treasurer and Director of
Independence Lead Mines Company of Wallace, Idaho. During the period
of 1979 through 1993 Mr. Schoonmaker was employed at Asarco
Incorporated as Chief Accountant at the Troy Mine and as Financial
Manager of Asarco's Northwest Mining Department. From July 1978 to
December 1978, Mr. Schoonmaker was Assistant Treasurer of the Bunker
Hill Mining Company, and from 1964 to 1978, he was Assistant
Secretary of Hecla Mining Company. Mr. Schoonmaker received a
Bachelor of Science degree in Accounting from the University of
Montana in 1962 and an MBA from the University of Idaho in 1987. Mr.
Schoonmaker is a Certified Public Accountant in the states of Idaho
and Montana.
CONTROLS AND PROCEDURES
ANNUAL EVALUATION OF THE COMPANY'S DISCLOSURE CONTROLS AND INTERNAL
CONTROLS.
Within the 90 days prior to the date of this Annual Report on Form
10-KSB, the Company evaluated the effectiveness of the design and
operation of its "disclosure controls and procedures" (Disclosure
Controls), and its "internal controls and procedures for financial
reporting" (Internal Controls). This evaluation (the Controls
Evaluation) was done under the supervision and with the
participation of management, including our Chief Executive Officer
(CEO) and Chief Financial Officer (CFO). Rules adopted by the SEC
require that in this section of the Annual Report we present the
conclusions of the CEO and the CFO about the effectiveness of our
Disclosure Controls and Internal Controls based on and as of the
date of the Controls Evaluation.
CEO AND CFO CERTIFICATIONS.
Appearing immediately following the Signatures section of this
Annual Report there are two separate forms of "Certifications" of
the CEO and the CFO. The second form of Certifications is required
in accord with Section 302 of the Sarbanes-Oxley Act of 2002 (the
Section 302 Certification). This section of the Annual, which you
are currently reading is the information concerning the Controls
Evaluation referred to in the Section 302 Certifications and this
information should be read in conjunction with the Section 302
Certifications for a more complete understanding of the topics
presented.
DISCLOSURE CONTROLS AND INTERNAL CONTROLS.
Disclosure Controls are procedures that are designed with the
objective of ensuring that information required to be disclosed in
our reports filed under the Securities Exchange Act of 1934
(Exchange Act), such as this Annual Report, is recorded, processed,
summarized, and reported within the time periods specified in the
Securities and Exchange Commission's (SEC) rules and forms.
Disclosure Controls are also designed with the objective of ensuring
that such information is accumulated and communicated to our
management, including the CEO and CFO, as appropriate to allow
timely decisions regarding required disclosure. Internal Controls
are procedures which are designed with the objective of providing
reasonable assurance that (1) our transactions are properly
authorized; (2) our assets are safeguarded against unauthorized or
improper use; and (3) our transactions are properly recorded and
reported, all to permit the preparation of our financial statements
in conformity with generally accepted accounting principles.
LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS.
The Company's management, including the CEO and CFO, does not expect
that our Disclosure Controls or our Internal Controls will prevent
all error and all fraud. A control system, no matter how well
conceived and operated,
Page 13
can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any,
within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people,
or by management override of the control. The design of any system
of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all
potential future conditions; over time, control may become
inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate. Because
of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.
SCOPE OF THE CONTROLS EVALUATION.
The CEO/CFO evaluation of our Disclosure Controls and our Internal
Controls included a review of the controls' objectives and design,
the control's implementation by the Company and the effect of the
controls on the information generated for use in this Annual Report.
In the course of the Controls Evaluation, we sought to identify data
errors, controls problems or acts of fraud and to confirm that
appropriate corrective action, including process improvements, were
being undertaken. This type of evaluation will be done on a
quarterly basis so that the conclusions concerning controls
effectiveness can be reported in our Quarterly Reports on Form 10-
QSB and Annual Report on Form 10-KSB. Our Internal Controls are also
evaluated on an ongoing basis by our independent auditors in
connection with their audit and review activities. The overall goals
of these various evaluation activities are to monitor our Disclosure
Controls and our Internal Controls and to make modifications as
necessary; our intent in this regard is that the Disclosure Controls
and the Internal Controls will be maintained as dynamic systems that
change (including with improvements and corrections) as conditions
warrant.
Among other matter, we sought in our evaluation to determine whether
there where any "significant deficiencies" or "material weaknesses"
in the Company's Internal Controls, or whether the Company had
identified any acts of fraud involving personnel who have a
significant role in the Company's Internal Controls. This
information was important both for the Controls Evaluation generally
and because items 5 and 6 in the Section 302 Certifications of the
CEO and CFO require that the CEO and CFO disclose that information
to our Board's Audit Committee and to our independent auditors and
to report on related matters in this section of the Annual Report.
In the professional auditing literature, "significant deficiencies"
are referred to as "reportable conditions"; these are control issues
that could have a significant adverse effect on the ability to
record, process, summarize, and report financial data in the
financial statements. A "material weakness" is defined in the
auditing literature as a particularly serious reportable condition
where the internal control does not reduce to a relatively low level
the risk that misstatements caused by error or fraud may occur in
amounts that would be material in relation to the financial
statements and not be detected within a timely period by employees
in the normal course of performing their assigned functions. We also
sought to deal with other controls matters in the Controls
Evaluation, and in each case if a problem was identified, we
considered what revision, improvement and/or correction to make in
accord with our on-going procedures.
In accord with SEC requirements, the CEO and CFO note that, since
the date of the Controls Evaluation to the date of this Annual
Report, there have been no significant changes in Internal Controls
or in other factors that could significantly affect Internal
Controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.
CONCLUSIONS.
Based upon the Controls Evaluation, our CEO and CFO have concluded
that, subject to the limitations noted above, our Disclosure
Controls are effective to ensure that material information relating
to Metalline Mining Company and its subsidiary is made known to
management, including the CEO and CFO, particularly during the
period when our periodic reports are being prepared, and that our
Internal Controls are effective to provide reasonable assurance that
our financial statements are fairly presented in conformity with
generally accepted accounting principles.
Page 14
ITEM 15. EXECUTIVE COMPENSATION.
Summary Compensation.
The following table sets forth the compensation paid by the
Company from January 1, 2000 through December 31, 2004, for each
officer and director of the Company. This information includes the
dollar value of base salaries, bonus awards and number of stock
options granted, and certain other compensation, if any.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards
Securities
Names Other Under Restricted
Executive Annual Options/ Shares or
Officer and Compen- SARs Restricted LTIP
Principal Year Salary Bonus sation Granted Share Payouts
Position Ended (US$) (US$) (US$) (#) Units(US$) (US$)
Merlin 2004 101,563 0 60,938 0 0 0
Bingham 2003 33,854 0 135,417 0 0 0
President 2002 48,000 0 40,625 0 0 0
2001 72,000 0 0 100,000 0 0
2000 72,000 0 0 0 0 0
Roger 2004 118,750 0 74,479 0 0 0
Kolvoord 2003 33,854 0 155,729 0 0 0
Vice 2002 0 0 0 100,000 0 0
President 2001 0 0 0 0 0 0
2000 0 0 0 0 0 0
Wayne 2004 20,250 0 18,563 0 0 0
Schoonmaker 2003 8,438 0 35,438 0 0 0
Secretary/ 2002 12,000 0 10,125 0 0 0
Treasurer 2001 18,000 0 0 50,000 0 0
2000 18,000 0 0 0 0 0
There are no other stock option plans, retirement, pension, or profit sharing
plans for the benefit of the Company's officers and directors.
[The balance of this page has been intentionally left blank.]
Page 15
Option/SAR Grants.
The following grants of stock options, whether or not in tandem
with stock appreciation rights ("SARs") and freestanding SARs have
been made to officers and/or directors:
Number of
Securities
Number of Underlying
Securities Options/SARs
Underlying Granted Exercise Number of
Options During Last or Base Options Expiration
Name SARs Granted 12 Months Price($/Sh) Exercised Date
---- ------- ------ ----- ----- -----
Merlin D.
Bingham 100,000 0 2.15 0 03/01/10
Roger
Kolvoord 100,000 0 1.25 0 08/06/09
Wayne L.
Schoonmaker 50,000 0 1.32 0 10/04/06
Long-Term Incentive Plan Awards.
The Company's shareholders approved a Qualified Stock Option Plan
at the annual meeting of shareholders held March 1, 2001. During the
year ended October 31, 2001 and October 31, 2002, options for
350,000 shares and 100,000 shares, respectively, were granted to
officers and directors of the Company. There were no options granted
during the year ended October 31, 2004. Options for 100,000 shares
granted to Daniel E. Gorski expired upon his resignation in
September 2004.
Compensation of Directors.
In general, the Directors do not receive any compensation for
serving as members of the Board of Directors. There are no
contractual arrangements with any member of the Board of Directors.
ITEM 16. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth the Common Stock ownership of each
person known by the Company to be the beneficial owner of five
percent or more of the Company's Common Stock, each director
individually, and all officers and directors of the Company as a
group. Each person has sole voting and investment power with respect
to the shares of Common Stock shown, unless otherwise noted, and all
ownership is of record and beneficial.
Name Number of % of Outstanding
of owner Shares Position Shares
---- ---- -------- --------
Merlin Bingham 1,233,139 President, CEO and Chairman 6.24%
of the Board of Directors
Roger Kolvoord 258,453 Vice President - Business 1.31%
and Member of the Board
of Directors
Wayne Schoonmaker 57,928 Secretary & Treasurer 0.29%
All officers and
directors as a 1,549,520 7.85%
group (3 persons)
Britannia Holdings 3,190,500 16.15%
King's House
The Grange St. Peter Port Guernsey
Channel Islands
Page 16
ITEM 17. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company was formed on November 8, 1993, by Mr. Carman Ridland
of Las Vegas, Nevada as a spin-off from its predecessor Precious
Metal Mines, Inc. ("PMM").
The Company issued 960,800 of its $0.01 par value shares to PMM,
for 16 unpatented mining claims located near Philipsburg, Montana
comprising the Kadex property group.
PMM distributed the 960,800 shares of Cadgie Co. to its
shareholders, one share of Cadgie Co. for each share of PMM 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.
During November 1995, Metalline Mining Company's directors
approved an issue of 45,000 shares of Common Stock to Mr. Ryan for
services rendered at $0.01 per share.
In January 1996, Carman Ridland in a private sale sold a
controlling interest in the corporation to Howard Crosby. On January
12, 1996, Mr. Ridland transferred control of Cadgie Co. to Mr.
Howard Crosby and Mr. Robert Jorgensen.
In May 1996, Messrs. Crosby and Jorgensen were made aware of
certain potentially valuable mining properties and concessions
located at Sierra Mojada, Coahuila, Mexico. Messrs. Crosby and
Jorgensen transferred control of Cadgie Co. to Messrs. Bingham,
Gorski and Ryan so that Cadgie Co. could focus on the opportunity
presented at Sierra Mojada.
In June 1996, the Company completed a private placement of common
stock resulting in net proceeds of $25,000. The Company issued
250,000 common shares in connection with this private placement. The
Company also issued 900,000 shares to Messrs. Bingham, Gorski and
Ryan 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 Dakota covering the mining
concessions. By acquiring the partnership interest, the Company was
able to negotiate and sign a formal joint venture agreement with
Dakota in July 1996.
During June 1996, the 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.
In August 1996, the Company changed its name to Metalline Mining
Company and increased the authorized capital to 50,000,000 shares.
In October 1996, the Company completed a private placement of
common stock resulting in net proceeds of $125,500. The Company
issued 1,255,000 shares in connection with this placement. The
Company also issued 120,000 shares to Mr. Gorski in payment for his
services for the months of September and October. The Company issued
20,000 shares of Common Stock to Mr. Ryan as payment for services in
those same months. Further, the Company issued 150,000 shares of
common stock for computer equipment.
During February 1997, the Company borrowed $30,000 from
shareholders and issued 24,900 shares of Common Stock as a loan
incentive.
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. The
Company issued 133,800 shares of Common Stock were issued for
services and
Page 17
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 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.
On June 5, 1997, the Company issued 50,000 shares of Common Stock
to Mario Ayub Touche in consideration of services rendered.
In August 2002, Roger Kolvoord was appointed to the Board of
Directors. Mr. Kolvoord replaces James Czirr, who previously
resigned from the Board. In April 2003 Mr. Kolvoord was appointed
Vice President, Business.
In August, September, and October 2002, the Company issued 86,078
shares to officers of the Company for services rendered.
During the year ended October 31, 2003, the Company issued 373,925
shares to officers of the company for services rendered.
During the year ended October 31, 2004, the Company issued 120,655
shares valued at $152,271 to officers of the company for services
rendered.
PART IV
ITEM 18. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBITS. The following exhibits are filed as part of this report.
Exhibits previously filed are incorporated by reference,
as noted.
EXHIBIT NO. EXHIBIT
3.1 Articles of Incorporation of the registrant. Filed as an
exhibit to the registrant's registration statement on Form 10-SB
(Commission File No.000-27667) and incorporated by reference herein.
3.2 Bylaws of registrant. Filed as an exhibit to the registrant's
registration statement on Form 10-SB and incorporated by reference
herein.
3.3 Articles of Amendment to the Articles of Incorporation. Filed
as an exhibit to the registrant's registration statement on Form 10-
SB and incorporated by reference herein.
4.1 Specimen stock certificate of the registrant. Filed as an
exhibit to the registrant's registration statement on Form 10-SB and
incorporated by reference herein.
10.1 Master agreement between the registrant and USMX, Inc.
relating to development and exploration of certain mineral
properties. Filed as an exhibit to the registrant's registration
statement on Form 10-SB and incorporated by reference herein.
10.2 Royal Silver letter regarding Joint Venture Agreement between
Royal Silver, Minera Metalin S.A. de C.V. and its registrant. Filed
as an exhibit to the registrant's registration statement on Form 10-
SB and incorporated by reference herein.
10.3 Consulting Agreement dated December 1, 1997 between the
registrant and James Czirr. Filed as Exhibit 99.1 on the
registrant's Form 10-SB and incorporated by reference herein.
10.4 Consulting addendum dated August 24, 1998 between the
registrant and James Czirr. Filed as Exhibit 99.2 on the
registrant's Form 10-SB and incorporated by reference herein.
REPORTS ON FORM 8-K. NONE.
Page 18
METALLINE MINING COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Certified
Public Accountants . . . . . . . . . . . . . . . . . . . F/S 1
Financial Statements:
Balance Sheets as of October 31, 2004
and October 31, 2003 . . . . . . . . . . . . . . . . . F/S 2
Statements of Operations for the Years Ended
October 31, 2004 and 2003, and for
the period from inception (November 8, 1993)
to October 31, 2004 . . . . . . . . . . . . . . . . . . F/S 3
Statements of Changes in Stockholder's Equity
for the period from inception (November 8, 1993)
to October 31, 2004 . . . . . . . . . . . . . . . . . . F/S 4
Statements of Cash Flow for the Years Ended
October 31, 2004 and 2003, and for the
period from inception (November 8, 1993) to
October 31, 2004 . . . . . . . . . . . . . . . . . . . F/S 9
Notes to Financial Statements . . . . . . . . . . . . . F/S 11
Summary of Accounting Policies . . . . . . . . . . . . . F/S 11
Signatures and Certifications. . . . . . . . . . . . . . F/S 21
[The balance of this page has been intentionally left blank.]
Page 21
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Metalline Mining Company
Coeur d'Alene, Idaho
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------
We have audited the accompanying consolidated balance sheets of
Metalline Mining Company (a Nevada corporation and an exploration
stage company) as of October 31, 2004 and 2003, and the related
consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended, and for the period from
November 8, 1993 (inception) to October 31, 2004. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Metalline Mining Company as of October 31, 2004 and
2003, the results of its operations, stockholders' equity and it's
cash flows for the years then ended and for the period from November
8, 1993 (inception) to October 31, 2004 in conformity with
accounting principles generally accepted in the United States of
America.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern.
As discussed in Note 2 to the financial statements, the Company's
significant operating losses raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding
those matters also are described in Note 2. 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
January 21, 2005
F/S 1
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
October 31, 2004 October 31, 2003
------- -------
ASSETS
CURRENT ASSETS
Cash $ 1,384,030 $ 733,369
Marketable securities 1,250,000 0
Accounts receivable 88,164 0
Prepaid expenses 2,052 126
Employee advances 34,022 20,900
------ ------
Total Current Assets 2,758,268 754,395
-------- -------
MINERAL PROPERTIES 4,334,767 4,334,767
--------- ---------
PROPERTY AND EQUIPMENT
Office and mining equipment,
net of accumulated depreciation 566,843 301,142
-------- ------
Total Property and Equipment 566,843 301,142
------- -------
TOTAL ASSETS $ 7,659,878 $ 5,390,304
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 57,231 $ 110,898
Accrued liabilities and expenses 145,445 7,961
Note payable, current portion 4,209 4,209
------- -------
Total Current Liabilities 206,885 123,068
------- ------
LONG-TERM LIABILITIES
Note payable, net of current portion 11,574 15,783
------- ------
COMMITMENTS AND CONTINGENCIES 0 0
------- ------
STOCKHOLDERS' EQUITY
Prefered stock, $0.01 par value;
1,000,000 shares authorized,
no shares outstanding 0 0
Common stock, $0.01 par value;
50,000,000 shares authorized,
19,751,409 shares issued and
11,845,055 shares issued and
outstanding, respectively 197,515 118,451
Stock subscriptions receivable 0 (38,000)
Additional paid-in capital 19,064,992 11,955,285
Stock options and warrants 1,498,550 1,498,550
Deficit accumulated
during exploration stage (13,319,638) (8,282,833)
--------- ----------
Total Stockholders' Equity 7,441,419 5,251,453
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 7,659,878 $ 5,390,304
======== =======
The accompanying notes are an integral part of these consolidated financial
statements. F/S 2
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended Period from
---------------- November 8, 1993
October 31, October 31, (Inception) to
2004 2003 October 31, 2004
-------- -------- ------------
REVENUES $ 0 $ 0 $ 0
------ ------ -------
GENERAL AND
ADMINISTRATIVE EXPENSES
Salaries and payroll expenses 633,019 575,912 2,440,513
Office and administrative expenses 299,172 24,651 679,463
Taxes and fees 108,220 141,533 394,088
Professional services 516,015 253,419 4,038,658
Property expenses 233,148 66,501 1,758,046
Depreciation 63,045 42,833 258,393
Exploration and research 3,374,049 74,553 3,667,202
------- ------- --------
Total General and
Administrative Expenses 5,226,667 1,179,402 13,236,362
------- ------- -------
LOSS FROM OPERATIONS (5,226,667) (1,179,402) (13,236,362)
======= ======== ========
OTHER INCOME (EXPENSES)
Miscellaneous ore sales,
net of expenses 170,217 72,091 157,174
Interest and investment income 20,251 83 45,715
Interest and financing expense (606) 0 (286,165)
------ ----- -------
Total Other Income 189,861 72,174 (83,277)
======= ====== =======
LOSS BEFORE INCOME TAXES (5,036,805) (1,107,228) (13,319,638)
INCOME TAXES 0 0 0
----- ---- -----
NET LOSS $(5,036,805) $(1,107,228) $(13,319,638)
======= ======== ========
BASIC AND DILUTED LOSS
PER COMMON SHARE $ (0.30) $ (0.10)
===== =====
BASIC AND DILUTED WEIGHTED
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 17,025,631 10,955,423
====== =====
The accompanying notes are an integral part of these consolidated financial statements.
F/S 3
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENT 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
---- ---- ---- ----- ---- ----- ---
Common stock issuance
prior to inception (no value) 960,800 $ 9,608 $(9,608) $ - $ - $ - $ -
1:5 reverse common stock split (768,640) (7,686) 7,686 - - - -
Net loss for the year ended
October 31, 1994 - - - - - (8,831) (8,831)
Balances, October 31, 1994 192,160 1,922 (1,922) - - (8,831) (8,831)
----- ---- ---- --- --- ---- ----
3:1 common stock split 384,320 3,843 (3,843) - - - -
Net loss for the year ended
October 31, 1995 - - - - - (7,761) (7,761)
----- --- --- --- --- ---- ----
Balance, October 31, 1995 576,480 $ 5,765 $(5,765) $ - $ - $(16,592) $(16,592)
----- ---- ---- --- --- ----- -----
Issuance of common stock as follows:
- for par value at transfer
of ownership 2,000 20 - - - - 20
- for cash at an average
of $0.11 per share 1,320,859 13,209 133,150 - - - 146,359
- for services at an average
of $0.08 per share 185,000 1,850 12,600 - - - 14,450
- for computer equipment
at $0.01 per share 150,000 1,500 13,500 - - - 15,000
- for mineral property
at $0.01 per share 900,000 9,000 - - - - 9,000
Net loss for the year ended
October 31, 1996 - - - - - (40,670) (40,670)
----- ---- ---- --- --- ---- ----
Balances, October 31, 1996 3,134,339 $31,344 $153,485 $ - $ - $(57,262) $127,567
-------
Table continued on next page.
The accompanying notes are an integral part of these consolidated financial statements.
F/S 4
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENT 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 3,134,339 $31,344 $153,485 $ - $ - $(57,262) $127,567
Issuance of common Stock
as follows:
- for cash at an average of
$0.61 per share 926,600 9,266 594,794 - - - 604,060
- for services at an average
of $0.74 per share 291,300 2,913 159,545 - - - 162,458
- for payment of a loan at
$0.32 per share 100,200 1,002 30,528 - - - 31,530
Options issued as follows:
- 300,000 options for cash - - 3,000 - - - 3,000
Net loss for year ended
October 31, 1997 - - - - - (582,919) (582,919)
----- --- ---- --- --- ----- -----
Balances at October 31, 1997 4,452,439 $44,525 $941,352 $ - $ - $(640,181) $345,696
Issuance of common stock
as follows:
- for cash at an average
of $1.00 per share 843,500 8,435 832,010 - - - 840,445
- for cash and receivables
at $1.00 per share 555,000 5,550 519,450 (300,000) - - 225,000
- for services at an average
of $0.53 per share 41,800 418 21,882 - - - 22,300
- for mine data base at
$1.63 per share 200,000 2,000 323,000 - - - 325,000
Options issued or
granted as follows:
- 1,200,000 options for cash - - 120,000 - - - 120,000
- for financing fees - - - - 60,000 - 60,000
- for consulting fees - - - - 117,000 - 117,000
Warrants issued for services - - - - 488,980 (488,980) -
Net loss for year
ended October 31, 1998 - - - - - (906,036) (906,036)
----- ---- ----- ---- ---- ------ ------
Balance, October 31, 1998 6,092,739 $60,928 $2,757,694 $(300,000) $665,980 $(2,035,197)$(1,149,405)
------ ---- ------ ----- ----- ------- ------
---------
Table continued on next page.
The accompanying notes are an integral part of these consolidated financial statements.
F/S 5
METALLINE MINING COMPANY
(An Exploration Stage Company)
CONSOLIDATED STATEMENT 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 6,092,739 $60,928 $2,757,694 $(300,000) $665,980 $(2,035,197) $(1,149,405)
Issuance of common stock as follows:
- for cash at an average
of $1.04 per share 818,800 8,188 842,712 - - - 850,900
- for drilling fees
at $0.90 per share 55,556 556 49,444 - - - 50,000
Stock options and warrant activity
as follows:
- exercise of options
at $0.90 per share 250,000 2,500 267,500 - (45,000) - 225,000
- issuance of options for
financing fees - - - - 216,000 - 216,000
- expiration of options - - 60,000 - (60,000) - -
Stock subscription received - - - 300,000 - - 300,000
Net loss for year
ended October 31, 1999 - - - - - (1,423,045) (1,423,045)
------ ----- ------ ---- ----- ------- ------
Balance, October 31, 1999 7,215,095 $72,152 $3,977,350 $ - $776,980 $(3,458,242) $1,368,260
Stock option and warrant activity
as follows:
Exercise of options at
$0.86 per share 950,000 9,500 1,090,750 - (288,000) - 812,250
Warrants issued for services - - - - 55,000 - 55,000
Issuance of common stock as follows:
- for cash at an average of $2.77
of $2.77 per share 1,440,500 14,405 3,972,220 - - - 3,986,625
- for services at $1.28 per share 120,000 1,200 152,160 - - - 153,360
- for equipment at $1.67 per share 15,000 150 24,850 - - - 25,000
Net loss for year
ended October 31, 2000 - - - - - (882,208) (882,208)
------ ---- ------ ---- ----- ------- ------
Balance, October 31, 2000 9,742,595 $ 97,427 $9,217,330 $ - $543,980 $(4,340,450) $5,518,287
------ ----- ------ ---- ----- ----- ------
-------
Table continued on next page.
The accompanying notes are an integral part of these consolidated financial statements.
F/S 6
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENT 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 9,742,595 $97,427 $9,217,330 $ - $543,980 $(4,340,450) $5,518,287
Stock option and warrant activity
as follows:
-Warrants exercised
at $0.75 per share 20,000 200 25,560 - (10,760) - 15,000
-Options issued for consulting fees - - - - 740,892 - 740,892
-Warrants issued for consulting fees - - - - 144,791 - 144,791
Issuance of common stock as follows:
- for cash at $2.00 per share 250,000 2,500 494,076 - 3,424 - 500,000
- for cash of $210 and services at
$2.07 per share 21,000 210 43,260 - - - 43,470
- for cash of $180 and services at
$2.05 per share 18,000 180 36,720 - - - 36,900
- for services at $2.45 per share 6,000 60 14,640 - - - 14,700
- for services at $1.50 per share 12,000 120 17,880 - - - 18,000
Net loss for year
ended October 31,2001 - - - - - (2,069,390) (2,069,390)
------ ----- ------- ---- ------ ------- -------
Balance, October 31, 2001 10,069,595 100,697 9,849,466 - 1,422,327 (6,409,840) 4,962,650
Issuance of common stock as follows:
- for cash at $2.00 per share 50,000 500 99,500 - - - 100,000
- for cash and warrants
at $1.50 per share 96,000 960 134,400 - 8,640 - 144,000
- for cash and warrants
at $1.50 per share 66,667 667 93,333 - 6,000 - 100,000
- for compensation at an average
of $1.23 per share 86,078 861 104,014 - - - 104,875
Stock option activity as follows:
- for compensation at $0.61 per share - - - - 61,000 - 61,000
Net loss for year ended October 31, 2002 - - - - - (765,765) (765,765)
----- ----- ------ ----- ----- ---- ------
Balance, October 31, 2002 10,368,340 $103,685 $10,280,713 $ - $1,497,967 $(7,175,605) $4,706,760
------ ---- ----- ---- ----- ---- -----
-------
Table continued on next page.
The accompanying notes are an integral part of these consolidated financial statements.
F/S 7
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENT 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 10,368,340 $103,685 $10,280,713 $ - $1,497,967 $(7,175,605) $4,706,760
Issuances of common stock
as follows:
- for cash at $2.00 per share 100,000 1,000 199,000 - - - 200,000
- for cash at an average of
$0.98 per share 849,000 8,489 821,510 - - - 829,999
- for cash and warrants at
$1.50 per share 7,000 70 9,847 - 583 - 10,500
- for compensation at an
average of $1.25 per share 391,332 3,913 487,275 - - - 491,188
- for services at an average
of $1.23 per share 91,383 941 119,320 - - - 120,234
- for subscriptions receivable
at $1.00 per share 38,000 380 37,620 (38,000) - - -
Net loss for the year ended
October 31, 2003 - - - - - (1,107,228) (1,107,228)
---- --- ---- --- --- ---- ----
Balance, October 31, 2003 11,845,055 118,451 11,955,285 (38,000) 1,498,550 (8,282,833) 5,251,453
Issuance of common stock
as follows:
- for cash at $1.00 per share,
less issuance costs
of $698,863 7,580,150 75,802 6,805,485 - - - 6,881,287
- for compensation at an
average of $1.26 per share 120,655 1,207 151,064 - - - 152,271
- for services at various
prices 141,286 1,413 153,801 - - - 155,214
Stock subscription received - - - 38,000 - - 38,000
Miscellaneous corrections
and adjustments 64,263 643 (643) - - - -
Net loss for the year ended
October 31, 2004 - - - - - (5,036,805) (5,036,805)
------ ---- ----- --- ----- ------ ------
Balance, October 31, 2004 19,751,409 $197,515 $19,064,992 $ - $1,498,550 $(13,319,638) $7,441,419
====== ==== ===== === ===== ===== =====
The accompanying notes are an integral part of these consolidated financial statements.
F/S 8
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended Period from
------------------- November 8, 1993
October 31, October 31, (Inception) to
2004 2003 October 31, 2004
----- ----- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,036,805) $(1,107,228) $(13,319,638)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation 63,045 25,008 240,538
Noncash expenses - - 126,864
Payment of services from issuance of stock 155,214 120,234 966,538
Issuance of stock for compensation 152,271 491,188 643,459
Payment of services from issuance of options - - 801,892
Payment of financing fees from the issuance
of stock options - - 276,000
Payment of expenses with issuance of stock - - 326,527
Warrants issued for services - - 688,771
(Increases) decreases in:
Foreign property tax refund receivable - 59,287 -
Marketable securities (1,250,000) - (1,250,000)
Accounts receivable (88,164) 62,501 (88,164)
Prepaid expenses (1,926) 1,794 (2,052)
Employee advances (13,122) (7,479) (34,022)
Increases (decreases) in:
Accounts payable (53,667) (325) 57,231
Contracts payable - 4,209 4,209
Accrued liabilities and expenses 137,484 (169,562) 161,228
----- ----- -----
Net cash used by operating activities (5,935,671) (520,373) (10,382,795)
---- ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Investments - - (484,447)
Proceeds from Investments - - 484,447
Equipment purchases (328,746) (3,120) (767,358)
Mining property acquisitions - - (4,452,631)
----- ------ ------
Net cash used by investing activities (328,746) (3,120) (5,219,989)
----- ----- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock 6,881,287 1,040,499 15,903,458
Proceeds from sales of options and warrants - - 949,890
Deposits for sale of stock 38,000 - 125,500
Proceeds from shareholder loans - - 30,000
Payment of note payable (4,209) - (4,209)
----- ----- -------
Net cash provided by financing activities: 6,915,078 1,040,499 17,004,639
----- ----- ------
Net increase (decrease)
in cash and cash equivalents 650,661 517,006 1,384,030
Cash and cash equivalents
beginning of period 733,369 216,363 -
------ ----- ------
Cash and cash equivalents end of period $1,384,030 $733,369 $1,384,030
===== ==== ====
Table continued on next page.
The accompanying notes are an integral part of these consolidated financial statements.
F/S 9
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Years Ended Period from
------------------- November 8, 1993
October 31, October 31, (Inception) to
2004 2003 October 31, 2004
----- ----- -------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income taxes paid $ - $ - $ -
Interest paid $ 606 $ - $ 606
NON-CASH FINANCING ACTIVITIES:
Common stock issued for services $155,214 $611,422 $966,538
Common stock issued for compensation $152,271 $491,188 $643,459
Common stock issued for payment of expenses $ - $ - $326,527
Common stock issued for equipment $ - $ - $25,000
Common stock options
issued for financing fees $ - $ - $276,000
Options issued for services $ - $ - $801,892
Warrants issued for services $ - $ - $688,771
Non cash expenses $ - $ - $126,864
The accompanying notes are an integral part of these consolidated financial statements.
F/S 10
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
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. On June 28,
1996, at a special directors meeting, the Company's name was changed to
Metalline Mining Company. The Company's fiscal year-end is October 31.
The Company expects to engage in the business of mining. The Company
currently owns 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 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 exploration 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 is presented to assist
in understanding the 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 accounting principles generally accepted in the
U.S. 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.
Accounts Receivable
-------
The Company carries its accounts receivable at cost. On a periodic
basis, the Company evaluates its accounts receivable and determine if
an allowance for doubtful accounts becomes necessary, based on a
history of past write-offs and collections and current credit
conditions.
The Company has not yet established a policy regarding accruing
interest on trade receivables. Accounts will be written off as un-
collectible when it is determined that collection will be unlikely.
Cash and Cash Equivalents
-------
For purposes of the statement of cash flows, the Company considers all
bank accounts, certificates of deposit, money market accounts, and
short-term debt securities purchased with a maturity of three months or
less to be cash equivalents.
F/S 11
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
(CONTINUED)
Compensated Absences
-------
The Company's policy is to recognize the cost of compensated absences
when actually paid to employees. If the amount were estimatible, it
would not be currently recognized as the amount would be deemed
immaterial.
Concentration of Risk
------
The Company maintains its domestic cash in two commercial depository
accounts. One of these accounts is insured by the Federal Deposit
Insurance Corporation (FDIC) for up to $100,000. The other account
consists of money market funds, certificates of deposit and preferred
securities, all of which are not insured. The Company also maintains
cash in banks in Mexico. These accounts, which had U.S. dollar balances
of $60,616 and $40,968 at October 31, 2004 and 2003 respectively, are
denominated in pesos and are considered uninsured. Additionally, the
Company maintained Mexican petty cash balances of $4,864 and $29,862 at
October 31, 2004 and 2003, respectively. At October 31, 2004, the
Company's cash balances exceeded the federally insured amount by
$1,357,926.
Derivative Instruments
------
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," (hereinafter "SFAS No. 133") as amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB No. 133", and SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities" and SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". These statements
establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. They require that an entity
recognize all derivatives as either assets or liabilities in the
consolidated balance sheet and measure those instruments at fair value.
If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of
gain or loss recognition on the hedging derivative with the recognition
of (i) the changes in the fair value of the hedged asset or liability
that are attributable to the hedged risk or (ii) the earnings effect of
the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the
period of change.
Historically, the Company has not entered into derivatives contracts to
hedge existing risks or for speculative purposes.
During the years ended October 31, 2004 and 2003, the Company has not
engaged in any transactions that would be considered derivative
instruments or hedging activities.
Earnings per Share
-----
The Company has adopted Statement of Financial Accounting Standards No.
128, which provides for calculation of "basic" and "diluted" earnings
per share. Basic earnings per share includes no dilution and is
computed by dividing net income available to common shareholders by the
weighted average common shares outstanding for the period. Diluted
earnings per share reflect the potential dilution of securities that
could share in the earnings of an entity similar to fully diluted
earnings per share. Although there were common stock equivalents
outstanding October 31, 2004 and 2003, they were not included in the
calculation of earnings per share because they would have been
considered anti-dilutive. Common stock equivalents outstanding were
1,096,554 and 2,058,055 at October 31, 2004 and 2003, respectively.
F/S 12
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
(CONTINUED)
Estimates
-----
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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.
Exploration Costs
------
In accordance with accounting principles generally accepted in the
United States of America, the Company expenses exploration costs as
incurred. Exploration costs expensed during the year ended October 31,
2004 and 2003 were $3,374,049 and $74,553, respectively. The
exploration costs expensed during the Company's exploration stage
amount to $3,667,202.
Exploration Stage Activities
-----
The Company has been in the exploration stage since November 8, 1993
and has no revenues from operations. The Company is primarily engaged
in the acquisition and exploration of mineral properties. Should the
Company locate a commercially minable reserve, the Company would expect
to actively prepare the site for extraction.
Fair Value of Financial Instruments
-----
The Company's financial instruments as defined by Statements of
Financial Accounting Standards No. 107, "Disclosures about Fair Value
of Financial Instruments," include cash and cash equivalents,
marketable securities, receivables, advances to employees, accounts
payable and accrued expenses. All instruments are accounted for on a
historical cost basis, which, due to the short maturity of these
financial instruments, approximates fair value at October 31, 2004 and
2003.
Foreign Currency Translation
-----
Assets and liabilities of the Company's foreign operations are
translated into U.S. dollars at the year-end exchange rates, and
revenue and expenses are translated at the average exchange rates
during the period. Exchange differences arising on translation are
disclosed as a separate component of shareholders' equity. Realized
gains and losses from foreign currency transactions are reflected in
the results of operations.
Foreign Operations
-----
The accompanying balance sheet at October 31, 2004 contains Company
assets in Mexico, including: $4,334,767 in mineral properties;
$507,257 (before accumulated depreciation) of mining equipment; and
$66,480 in cash. Although this country is considered economically
stable, it is always possible that unanticipated events in foreign
countries could disrupt the Company's operations. The Mexican
government does not require foreign entities to maintain cash reserves
in Mexico.
Going Concern
-----
As shown in the accompanying financial statements, the Company has no
revenues, has incurred a net loss of $5,036,805 for the year ended
October 31, 2004 and has an accumulated deficit of $13,319,638. These
factors indicate that the Company may be unable to continue in
existence. The financial statements do not include any adjustments
related to the recoverability and classification of recorded assets, or
the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.
The Company's management believes that significant and imminent private
placements of stock and continuing contracted agreements will generate
sufficient cash for the Company to continue to operate based on current
expense projections. The Company is currently operating on the cash
proceeds of a private placement offering completed in the second
quarter of the year ended October 31, 2004.
F/S 13
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
(CONTINUED)
Marketable Securities
-----
Pursuant to Statement of Financial Accounting Standards No. 115, the
Company classifies marketable securities as trading, available-for-
sale, or held-to-maturity. During the year ended October 31, 2004, the
Company purchased $1,250,000 in various preferred equity securities and
has classified them as available-for-sale. The Company did not incur
unrealized gains or losses related to its available-for-sale securities
during the year ended October 31, 2004.
Mineral Properties
-----
Costs of acquiring mineral properties are capitalized by project area
upon purchase or staking of the associated claims. 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 diminution in value is charged to operations at the time of
impairment. Should a property be abandoned, its capitalized costs are
charged to operations. The Company charges to operations the allocable
portion of capitalized costs attributable to properties sold.
Capitalized costs are allocated to properties abandoned or sold based
on the proportion of claims abandoned or sold to the claims remaining
within the project area.
Principles of Consolidation
-----
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, after elimination of the
inter-company accounts and transactions. The wholly owned subsidiary of
the Company is listed in Note 1.
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 or accelerated methods over the expected useful lives
of the assets. See Note 3.
Provision for Taxes
-----
Income taxes are provided based upon the liability method of accounting
pursuant to Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" (hereinafter "SFAS No.19"). Under this
approach, deferred income taxes are recorded to reflect the tax
consequences in future years of differences between the tax basis of
assets and liabilities and their financial reporting amounts at each
year-end. A valuation allowance is recorded against deferred tax assets
if management does not believe the Company has met the "more likely
than not" standard imposed by SFAS No. 109 to allow recognition of such
an asset.
At October 31, 2004, the Company had net deferred tax assets calculated
at an expected rate of 34% of approximately $4,000,000, principally
arising from net operating loss carryforwards for income tax purposes.
As management of the Company cannot determine that it is more likely
than not that the Company will realize the benefit of the net deferred
tax asset, there is a valuation allowance equal to the net deferred tax
asset.
The significant components of the deferred tax assets at October 31,
2004 and 2003 were as follows:
October 31, 2004 October 31, 2003
---------- ----------
Net operating loss carryforward $11,800,000 $6,800,000
========== =========
Deferred tax asset 4,000,000 2,300,000
Deferred tax asset
valuation allowance (4,000,000) (2,300,000)
F/S 14
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
(CONTINUED)
At October 31, 2004, the Company has net operating loss carryforwards
of approximately $11,800,000, which expire in the years 2008 through
2024. The Company recognized approximately $1,483,000 of losses from
the issuance of stock options for services in fiscal 2004, which were
not deductible for tax purposes. The change in the allowance account
from October 31, 2003 to 2004 was $1,700,000. The Company has
immaterial temporary differences resulting from differences in tax
depreciation of equipment.
Recent Accounting Pronouncements
-----
In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 153. This Statement
addresses the measurement of exchanges of nonmonetary assets. The
guidance in APB Opinion No. 29, "Accounting for Nonmonetary
Transactions," is based on the principle that exchanges of nonmonetary
assets should be measured based on the fair value of the assets
exchanged. The guidance in that Opinion, however, included certain
exceptions to that principle. This statement amends Opinion 29 to
eliminate the exception for nonmonetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary
exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the
exchange. This statement is effective for financial statements for
fiscal years beginning after June 15, 2005. Earlier application is
permitted for nonmonetary asset exchanges incurred during fiscal years
beginning after the date of this statement is issued. Management
believes the adoption of this statement will not impact the financial
statements of the Company.
In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 152, which amends SFAS
Statement No. 66, "Accounting for Sales of Real Estate," to reference
the financial accounting and reporting guidance for real estate time-
sharing transactions that is provided in AICPA Statement of Position
(SOP) 04-2, "Accounting for Real Estate Time-Sharing Transactions."
This statement also amends SFAS No. 67, "Accounting for Costs and
Initial Rental Operations of Real Estate Projects," to state that the
guidance for (a) incidental operations and (b) costs incurred to sell
real estate projects, does not apply to real estate time-sharing
transactions. The accounting for those operations and costs is subject
to the guidance in SOP 04-2. This statement is effective for financial
statements for fiscal years beginning after June 15, 2005. Management
believes the adoption of this Statement will not impact the financial
statements of the Company.
In November 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 151, "Inventory Costs -
an amendment of ARB No. 43, Chapter 4" (hereinafter "SFAS No. 151").
This statement amends the guidance in ARB No. 43, Chapter 4, "Inventory
Pricing," to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material
(spoilage). Under some circumstances, SFAS No. 151 mandates that items
such as idle facility expense, excessive spoilage, double freight, and
re-handling costs be recognized as current-period charges. In addition,
this statement requires that allocation of fixed production overheads
to the costs of conversion be based on the normal capacity of the
production facilities. This statement is effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. Management
believes the adoption of this statement will not have immediate
material impact on the financial statements of the Company, as the
Company maintains no inventory.
In May 2003, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and
Equity" (hereinafter "SFAS No.150"). SFAS No.150 establishes standards
for classifying and measuring certain financial instruments with
characteristics of both liabilities and equity and requires that those
instruments be classified as liabilities in statements of financial
position. Previously, many of those instruments were classified as
equity. SFAS No.150 is effective for financial instruments entered into
or modified after May 31, 2003 and otherwise is effective at the
F/S 15
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
(CONTINUED)
beginning of the first interim period beginning after June 15, 2003.
Management believes the adoption of this Statement will not impact the
financial statements of the Company.
In April 2003, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities"
(hereinafter "SFAS No. 149"). SFAS No. 149 amends and clarifies the
accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities
under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This statement is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated
after June 30, 2003. The adoption of SFAS No. 149 is not expected to
have a material impact on the financial position or results of
operations of the Company.
Revenue Recognition Policy
-----
The Company recognizes revenue when there is a mutually executed
contract, the contract price is fixed and determinable, delivery of the
product has occurred, and collectibility of the contract price is
considered probable. As of October 31, 2004, the Company has not
recognized revenues.
Stock-Based Compensation
-----
Statement of Financial Accounting Standards No.123, "Accounting for
Stock-Based Compensation" (hereinafter "SFAS No.123"), defines a fair
value-based method of accounting for stock options and other equity
instruments. The Company has adopted this method, which measures
compensation costs based on the estimated fair value of the award and
recognizes that cost over the service period.
NOTE 3 PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided
using the straight-line or accelerated methods over the estimated
useful lives of the assets. The useful lives of property, plant and
equipment for purposes of computing depreciation are five to seven
years for equipment, and 39 years for buildings. The following is a
summary of property, equipment, and accumulated depreciation at October
31, 2004 and 2003:
October 31, 2004 October 31, 2003
-------- --------
Mining equipment $ 507,257 $ 202,144
Building and structures 141,061 141,061
Land non mineral 15,839 15,839
Vehicles 42,068 25,301
Computer equipment 88,787 81,922
Office Equipment 4,183 4,183
Furniture fixtures 8,185 8,185
---- ----
807,380 478,635
Less: accumulated depreciation (240,537) (177,493)
---- ----
$ 566,843 $ 301,142
==== ====
Depreciation expense for the years ended October 31, 2003 and 2002 was
$42,833 and $35,829, respectively. The Company evaluates the
recoverability of property and equipment when events and circumstances
indicate that such assets might be impaired. The Company determines
impairment by comparing the undiscounted future cash flows estimated to
be generated by these assets to their respective carrying amounts.
Maintenance and repairs are expensed as incurred. Replacements and
betterments are capitalized. The cost and related reserves of assets
sold or retired are removed from the accounts, and any resulting gain
or loss is reflected in results of operations.
F/S 16
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
(CONTINUED)
NOTE 4 MINERAL PROPERTIES
Sierra Mojada Mining Concessions
-----
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.
During the period 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.
During August 2000, the Company made the final payment for the first
year and acquired title to the Unificacion Mineros Nortenos Concession
in the Sierra Mojada Project. With this transaction, the Company
acquired title to all of its concessions at Sierra Mojada.
Under the terms of the above agreements, the Company was obligated to
pay and in fact did pay $103,076 during the year ended October 31,
2001.
NOTE 5 LONG-TERM LIABILITIES
The Company's long-term liabilities at October 31, 2004 and 2003 are as
follows:
2004 2003
---- ----
Note payable to bank, due July of 2008,
monthly principal and interest payments
at 4.94%, collateralized by a vehicle $ 15,783 $ 19,992
Less: Current portion (4,209) (4,209)
----- -----
$ 11,574 $ 15,783
====== ======
Loan maturities for each of the five years following October 31, 2004
are as follows:
2005 $ 4,111
2006 4,319
2007 4,537
2008 2,816
2009 -
-----
$ 15,783
======
NOTE 6 RELATED PARTY TRANSACTIONS
The Company receives rent-free office space in Coeur d'Alene, Idaho
from its president. The value of the space is not considered materially
significant for financial reporting purposes. The Company also has
given $34,022 in cash advances for travel to three of its officers at
October 31, 2004 under an accountable plan per IRS Regulation Section
1.62.
F/S 17
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
(CONTINUED)
NOTE 7 PREFERRED STOCK
At its March 1, 2001 annual shareholders meeting, the Company approved
a change to its articles of incorporation whereby the Company is
authorized to issue 1,000,000 shares of $0.01 par value preferred
stock. The specific features of the preferred stock are to be
determined by the Company's board of directors. At October 31, 2004,
there were no shares of preferred stock issued or outstanding.
NOTE 8 COMMON STOCK
During the year ended October 31, 2004, the Company issued 7,580,150
shares of common stock for cash consideration at $1.00 per share less
issuance costs of $698,863. Officers of the Company were issued 120,655
shares at an average of $1.26 per share in payment of accrued wages.
The Company also issued 141,286 shares in exchange for services
received. See Note 13.
During the year ended October 31, 2003, the Company sold 7,000 common
stock units with an ascribed cash value of $10,500. The Company also
sold 849,000 shares (without warrants) at an average price of $0.98 per
share. The Company also issued 100,000 shares of common stock under the
Penoles agreement for cash, at $2.00 per share. Additionally, 373,925
shares of common stock valued at $468,771 were issued as compensation
for officers.
During the year ended October 31, 2002, the Company sold 162,667 common
stock units with an ascribed cash value of $229,360 for common stock,
and $14,640 for warrants. The Company also issued 50,000 shares of
common stock under the Penoles agreement for cash at $2.00 a share.
Additionally, 86,078 shares of common stock valued at $104,875 were
issued as compensation to officers. On May 20, 2002, the Company
authorized the offering of 1,000,000 common stock units, with each unit
consisting of one share of common stock and one warrant equal to 1/3 of
a share of common stock.
During the year ended October 31, 2001, the Company issued 20,000
shares of common stock for the exercise of warrants valued at $10,760
and for cash of $15,000. Additionally, 57,000 shares of common stock
were issued for services valued at $112,680 and for cash of $390, and
250,000 shares of common stock with 125,000 warrants attached were
issued for $500,000 in cash.
During the year ended October 31, 2000, the Company sold 1,440,500
shares of its common stock for $3,968,625 cash, issued 120,000 shares
of common stock for services valued $153,360, issued 15,000 shares of
common stock for equipment valued at $25,000 and issued 950,000 shares
of common stock for options exercised at $0.86 per share.
During the year ended October 31, 1999, the Company sold 1,068,800
shares of common stock for $1,075,900 cash. In addition the Company
received $37,500 as a deposit toward the purchase of 50,000 shares
(this stock was issued in December 1999) and $300,000 for payment of
subscriptions receivable. The Company also issued 55,556 shares for
payment of drilling expenses valued at $50,000.
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. Services valued at $22,300 were paid
with 41,800 shares of common stock. An additional 1,398,500 shares of
common stock were issued for $1,065,445 cash and receivables, and a
subscription receivable of $300,000, between February and October 1998.
In April 1997, 250,000 common stock shares were issued for cash of
$87,500 and 133,800 shares of common stock were issued for services
valued at $45,583. In May and June 1997, 181,600 shares of common stock
were issued for $63,560 cash and 62,500 shares of common stock were
issued for services valued at$21,875. In August and October 1997,
420,000 and 75,000 shares of common stock were issued for cash of
$378,000 and $75,000,
F/S 18
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
(CONTINUED)
respectively. Additionally, during August 1997, 100,200 shares of
common stock were issued for debt of $31,530 and 95,000 shares of
common stock were issued for services valued at $95,000.
During November 1995, the Company's directors approved the issuance of
45,000 shares of common stock for services rendered at $0.01 per share.
During June 1996, the 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 to Mr. John Ryan, Merlin
Bingham, and Daniel 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.
During the year ended October 31, 1996, Metalline Mining Company issued
1,320,859 shares of common stock for $146,359 in cash. During October
1996, the Company issued 150,000 shares of common stock for computer
equipment valued at $15,000. Also during October 1996, the Company
issued 120,000 shares of common stock to Mr. Gorski and an additional
20,000 shares of common stock to Mr. Ryan for services rendered valued
at $14,000.
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.
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.
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.
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, 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
Metallines, Inc. held by holders of record as of August 31, 1993.
NOTE 9 STOCK OPTIONS
During the years ended October 31, 2004 and 2003, the Company did not
grant common stock options.
In 2002, the Company granted 100,000 options with an exercise price of
$1.25 and an expiration of seven years. The fair value of these options
was determined using the Black-Scholes option pricing model using a
risk free interest rate of 3.25% and a volatility of 42.49%. The total
value was calculated at $61,000.
[The balance of this page has been intentionally left blank.]
F/S 19
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
(CONTINUED)
Following is a summary of the stock options during the years ending
October 31, 2004 and 2003:
Weighted Average
Number Exercise
Of Shares Price
----- -----
Options outstanding at November 1, 2002 820,000 $ 1.67
Granted - -
Canceled - -
Exercised - -
---- ----
Options outstanding at October 31, 2003 820,000 $ 1.67
Granted - -
Canceled (100,000) -
Exercised - -
---- ----
Options outstanding at October 31, 2004 720,000 $1.60
===== ====
On March 1, 2001, the Company's shareholders approved a qualified stock
option plan (the "Plan"), which provides for non-statutory and
incentive stock options for employees, directors and consultants, and
has reserved a total of 1,000,000 shares of common stock for issuance
pursuant to the Plan. Summarized information about stock options
outstanding and exercisable at October 31, 2004 is as follows:
Options outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Price Outstanding Life (Years) Price Exercisable Price
----- ----- ----- ---- ----- ----
$ 1.25 100,000 4.77 $1.25 100,000 $ 1.25
1.32 320,000 1.93 1.32 320,000 1.32
1.75 100,000 3.35 1.75 100,000 1.75
2.15 200,000 5.33 2.15 200,000 2.15
--- ----- --- ---- ----- ---
$1.25-2.15 720,000 3.47 $ 1.60 720,000 $ 1.60
===== ===== === === ===== ===
NOTE 10 WARRANTS
The Company did not issue common stock warrants during the year ended
October 31, 2004.
During the year ended October 31, 2003, the Company issued 7,000 common
stock units that were made up of 7,000 shares of common stock and
warrants to purchase an additional 2,333 shares of common stock. As
part of the total cash purchase, the warrants were valued at $583.
During the year ended October 31, 2002, the Company issued 162,667
common stock units that were made up of 162,667 shares of common stock
and warrants to purchase an additional 54,222 shares of common stock.
As part of the total cash purchase, the warrants were valued at
$14,640.
During the year ended October 31, 2001, the Company issued 250,000
shares of stock with 125,000 warrants attached. These warrants were
valued at $3,424. Additionally 20,000 warrants were exercised for
$15,000 in cash and services valued at $10,760. The Company also issued
80,000 warrants for services, which were valued at $144,791.
F/S 20
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
(CONTINUED)
At October 31, 2000, there were outstanding warrants to purchase
996,500 shares of the Company's common stock, at prices ranging from
$0.75 to $2.00 per share. The warrants, which became exercisable in
1999, but have not been exercised, expire at various dates through
2005. The Company has reserved 996,500 shares for the expected exercise
of these warrants. These warrants were valued at $543,980 using the
method described below.
The fair value of each warrant is estimated on the issue date using the
Black-Scholes Option Price Calculation. The following assumptions were
made in estimating fair value: risk free interest of 5%, volatility of
0.3 and 0.5 and expected life of 5 to 10 years.
NOTE 11 COMMITMENTS AND CONTINGENCIES
Compliance with Environmental Regulations
-----
The Company's mining activities are subject to laws and regulations
controlling not only the exploration and mining of mineral properties,
but also the effect of such activities on the environment. Compliance
with such laws and regulations may necessitate additional capital
outlays, affect the economics of a project, and cause changes or delays
in the Company's activities.
Loss Contingencies
-----
In December 2002, Minera Metalin, the Company's Mexican subsidiary, was
named as a co-defendant in a lawsuit filed in Mexico regarding the
Company's purchase of two mining concessions. During the year ended
October 31, 2003 the Company settled this suit for approximately
$36,000. The Company paid approximately $13,800 at the time of
settlement, with the balance payable in six equal installments of
approximately $3,700. The Company has met its obligation under the
settlement at October 31, 2004.
NOTE 12 JOINT VENTURE AGREEMENT
Penoles Agreement
-----
On November 15, 2001, the Company entered into an agreement with
Compania Minera La Parrena S.A. de C.V. ("Penoles") whereby Penoles may
earn the right to acquire a 60% interest in certain mining concessions
located in the Sierra Mojada region of Coahuila, Mexico. The earn-in
right was contingent upon the following: delivery by Penoles within
four years of a pre-feasibility study, completion by Penoles of
$1,000,000 of qualified expenditures on the aforementioned mining
concessions, and Penoles purchase of up to 250,000 shares of
Metalline's common stock $2.00 per share. As of October 31, 2003,
Penoles had purchased 150,000 shares of common stock under this
agreement. See Note 8.
During the year ended October 31, 2003, the Company received
reimbursement of $151,536 from Penoles for expenses incurred by
Metalline, which were applied toward an aggregate $85,712 of qualified
expenditures incurred by Penoles. In November 2003, the agreement
between the Company and Minas Penoles was terminated by the Company.
Northern Limited
-----
On October 7, 1999, the Company announced that it entered into a five-
year "earn-in" type of a joint venture agreement with North Limited.
The agreement gives North Limited the right to earn into 60% of the
Company's Sierra Mojada Project by providing all funds necessary to
complete a feasibility study delivered in no more than five years 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. In August 2000, Rio Tinto
Limited purchased North Limited for its iron ore holdings and
subsequently terminated its agreement with the Company.
F/S 21
METALLINE MINING COMPANY
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2004
(CONTINUED)
NOTE 12 SUBSEQUENT EVENTS
In December 2004, the Company issued 139,272 shares of its common stock
at $1.00 per share to officers in payment of accrued wages.
[The balance of this page has been intentionally left blank.]
F/S 22
METALLINE MINING COMPANY
AN EXPLORATION STAGE COMPANY
OCTOBER 31, 2004
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: January 28, 2005
By: /s/ Wayne Schoonmaker
---------
Wayne Schoonmaker, its
Principal Accounting Officer
Date: January 28, 2005
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/ Roger Kolvoord
------- -------
Merlin Bingham Roger Kolvoord
President/Director Vice President-Business/Director
Date: January 28, 2005 Date: January 28, 2005
By: /s/Wayne Schoonmaker
---------
Wayne Schoonmaker
Secretary/Treasurer
Date: January 28, 2005
F/S 23
METALLINE MINING COMPANY
AN EXPLORATION STAGE COMPANY
OCTOBER 31, 2004
CERTIFICATIONS
I, Merlin D. Bingham, certify that:
1. I have reviewed this annual report on Form 10-KSB of Metalline
Mining Company.
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I, are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize, and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: January 28, 2005
/s/ Merlin D. Bingham
------------
President
METALLINE MINING COMPANY
AN EXPLORATION STAGE COMPANY
OCTOBER 31, 2004
CERTIFICATIONS
I, Wayne L. Schoonmaker , certify that:
1. I have reviewed this annual report on Form 10-KSB of Metalline
Mining Company.
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I, are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize, and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: January 28, 2005
/s/ Wayne L. Schoonmaker
------------
Principal Accounting Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Metalline Mining Company (the
"Company") on Form 10-KSB for the period ended October 31, 2004, as
filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Merlin D. Bingham, President of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition, and results of operations
of the Company.
/s/ Merlin D. Bingham
-----------
President
Dated: January 28, 2005
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Metalline Mining Company (the
"Company") on Form 10-KSB for the period ended October 31, 2004, as
filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Wayne L. Schoonmaker, Principal Accounting Officer
of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition, and results of operations
of the Company.
/s/ Wayne L. Schoonmaker
------------
Principal Accounting Officer
Dated: January 28, 2005