SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number: 000-27667
Metalline Mining Company
(Exact name of registrant as specified in its charter)
Nevada 91-1766677
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
1330 E. Margaret Ave.
Coeur d' Alene, ID 83815
(Address of principal executive offices)
Registrant's telephone number, including area code: (208)665-2002
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock The OTC-Bulletin Board
Title of each class Name of each exchange
on which registered
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period as the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
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 2, 2001 was $10,895,988. The number of shares of common
stock outstanding at such date was 9,740,595 shares. An additional 996,500 were
deemed outstanding at such date pursuant to presently exercisable warrants.
METALLINE MINING COMPANY ANNUAL REPORT
ON FORM 10-K FOR THE FISCAL YEAR
ENDED OCTOBER 31, 2000
TABLE OF CONTENTS Page
SAFE HARBOR STATEMENT (ii)
PART I
Item 1: Description of Business 1
Item 2: Risk Factors 7
Item 3: Description of Properties 11
Item 4: Legal Proceedings 12
Item 5: Indemnification of Directors and Officers 12
Item 6: Submission of Matters to a Vote of Security Holders 12
PART II
Item 7: Market for Registrant's Common Equity and
Related Stockholder Matters 13
Item 8: Recent Sale of Unregistered Securities 13
Item 9: Selected Financial Data 16
Item 10: Description of Securities 17
Item 11: Management's Discussion and Analysis of
Financial Condition and Plan of Operations 18
Item 12: Financial Statements and Supplementary Data 20
Item 13: Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 21
PART III
Item 14: Directors and Executive Officers of the Registrant 21
Item 15: Executive Compensation 22
Item 16: Security Ownership of Certain Beneficial Owners
and Management 25
Item 17: Certain Relationships and Related Transactions 25
PART IV
Item 18: Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 28
Index to Financials 29
Signatures F/S - 15
(i)
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 compen-
sation 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)
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Background
Metalline Mining Company is a development stage enterprise formed under
the laws of the State of Nevada, on August 20, 1993, to engage in the business
of mining.
Current Operations
Metalline currently owns one mining property located in Mexico known as
the Sierra Mojada Property. Metalline conducts its operations in Mexico through
its wholly owned subsidiary corporation, Minera Metalin S.A. de C.V.
The Sierra Mojada Property
The Mexican government owns the mineral rights. The exclusive right to
explore and exploit the mineral rights is granted by issuance of a concession
to a company or individual that denounces the area desired for exploration or
exploitation. After the concession has been issued an annual fee is paid to the
government and annual Proof of Labor must be filed to maintain the title to the
concession. The annual fee is determined on the basis of the area of the
concession and the type of activity on the concession. The concession can be
held for 6 years under the exploration fee, after 6 years the exploitation fee
is paid.
The Sierra Mojada Property is comprised of eight concessions totaling
7,060 hectares (17,446 acres). The concessions were acquired by purchase
agreements from the titled owners. The Company controls 100% of the
concessions. Minera Metalin has purchased title to the Sierra Mojada, Mojada 3,
Esmeralda, Unification Mineros Nortenos, Vulcano and Fortuna concessions.
Payments due in 2001 to complete the purchase of the La Blanca is 460,000 and
the Esmeralda I is $46,154 (U.S. Dollars).
A summary of the concessions is as follows:
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
=========
</table
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 200 kilometers on paved road to the
Penoles chemical plant at Laguna del Rey and then another 50 kilometers of
gravel road to Sierra Mojada. There is a well maintained, 1200 meter, gravel
airstrip. The District has high voltage electric power and is served by a rail
line, which was constructed from Escalon to the district in 1891 and later
connected to Monclova.
This part of Mexico is remote, arid and sparsely populated; the region is
known as the "zone of silence".
History
The initial discovery of silver ore in the Sierra Mojada Property was made
in 1879. Over the next 12 years numerous small mines developed along an
oxidized silver lead ore body known as the "lead manto" (a bed, layer or
strata). The lead manto was mined continuously for 3 kilometers and
discontinuously for another 2 kilometers. Ore was selectively mined and hauled
by wagon to Escalon on the railroad main line from El Paso to Mexico City; from
there it went to smelters in Mexico and the United States.
In September of 1891 the Mexican Northern Railroad completed its spur line
from Escalon to the district. Rail access stimulated development and the period
from 1891 to the late 1920's was the peak of productivity of the district. The
main lead manto was nearly mined out by 1905, the same year that the discovery
of the first silver-copper ore body was made. Additional discoveries of silver,
silver-copper, and silver-copper-zinc-lead ores provided production through the
1930's. Between 1922 and 1931 additional lead manto silver-lead ore was
discovered and mined to the southwest for some 1,400 meters under the Sierra
Mojada range, this manto was eventually mined for more than 2 kilometers.
By the mid 1920's many of the mines were under control of Penoles
Corporation ("Penoles") and ASARCO Corporation ("ASARCO"). ASARCO ceased mining
in the district in the late 1930's. Both companies still owned properties
during the 1940's and Penoles mined until the late 1950's when the Mineros
Nortenos Cooperative acquired the Penoles properties. The Mineros Nortenos
Cooperative ("Mineros Nortenos") has operated the San Salvador, Encantada and
Fronteriza mines since 1957 and direct shipped high-grade oxide zinc and lead-
silver ore to smelters in Mexico.
The lead manto produced 3 to 3.5 million tonnes with another 1.5 million
tonnes of similar ore coming from other ore bodies to the west and to the
southwest.
Mineros Nortenos has mined about 600,000 tonnes of predominantly oxide
zinc ore with grades of 20 to 50% zinc. Some of this ore was oxide silver-lead
and silver, copper, zinc and lead sulfide at grades of 1 to 4 kilogram silver
per tonne, 1 to 5% copper, 10 to 30% zinc and 30 to 70% lead. Production
records from 1978 to 1981 for the San Salvador mine average 33.5% zinc.
The Sierra Mojada Property has produced in excess of 10 million tonnes of
high-grade ore that graded in excess of 20% lead, 20% zinc, 1% copper and 1 kg
(31 ounces) silver per tonne that was shipped directly to the smelter. The
district has never had a mill to concentrate ore. All of the mining was done
selectively for ore of sufficient grade to direct ship; mill grade ore was left
unmined. More than 50 kilometers of underground workings are spread through the
5 kilometer by 2 kilometer area from which more than 45 mines have produced
ore. The deepest workings have ore grade mineralization and provide some of the
best targets for reserve development. In spite of the amount of historic work,
when a map of all of the historic workings is viewed there is much more
unexplored area in the 5 by 2 kilometer area than has been explored and the
vertical extent greater than 100 meters is totally unexplored.
The sediments are predominantly carbonate with some sandstone and shale
and the attitudes are near horizontal. The mines are dry and the rocks are
competent, there is very little unstable ground and the ore thickness is
amenable to high volume mechanized mining methods. Sierra Mojada has ideal
mining conditions and grades for low cost production.
Based upon the foregoing, Metalline is of the opinion that the magnitude
of the Sierra Mojada mineral system and its exploration potential is capable of
providing new reserves for many more years of mining. However, there is no
assurance as to the quantity or quality of the undeveloped reserves.
Geology
The Sierra Mojada District is located on the southern margin of the
Sabinas Basin, a large rift basin in northeastern Mexico, which formed during
Late Jurassic and Cretaceous tectonic extension.
Beginning in Latest Jurassic the Sabinas basin began to form with the
basin being dropped down to the north relative to the Coahuila Peninsula that
was being uplifted to the south. The Sierra Mojada fault is, possibly, one of
the faults that contributed to the rift basin forming process, which occurred
over a time span in excess of 80 million years. During basin formation the
Sierra Mojada fault, if present, would have been a normal fault due to crustal
extension. The most recent motion on the Sierra Mojada fault is post mineral
and reverse. The reverse motion most likely occurred as a result of Late
Cretaceous Laramide tectonic compression about 60 million years ago.
Stratigraphy
Upper Jurassic and Lower Cretaceous marine carbonate, sandstone and shale,
the La Casita and Menchaca Formations, are overlain by Lower Cretaceous red
beds, the San Marcos Formation, composed of conglomerate, sandstone, siltstone,
shale, tuff and mineralized carbonate sediments. The San Marcos is overlain by
a marine carbonate sequence of Early and Middle Cretaceous age, the Cupido, La
Pena, Aurora and Georgetown Formations.
Mineralization
Sierra Mojada has two mineral systems separated by the east west trending
Sierra Mojada Fault. North of the fault the mineralization is chemical
sedimentary disseminated to massive silver, copper, zinc and lead sulfide
deposited in the Menchaca Formation. South of the fault the mineralization is
deposited in the La Pena and Aurora Formations and consists of oxide zinc and
lead mantos and solution cavern filling, karst and interformational breccia
These two mineral systems have been brought into proximity to each other
by post mineral reverse motion on the Sierra Mojada Fault that faults the San
Marcos and Menchaca Formations against Aurora. The San Marcos and Menchaca
Formations are 25 million years older than the Aurora Formation.
The mineral systems have been mined in an east-west direction for over 5
kilometers, in a north-south direction in excess of 2 kilometers and for a
vertical extent of 100 meters.
The Sierra Mojada mineral systems are chemical sedimentary and brine
related. The ore minerals are in chemical equilibrium with the host rocks,
which are limestone, dolomite, carbonate shale and sandstone. There is no
alteration, silicification or skarn mineralization.
Mineralization has been episodically deposited in certain beds, resulting
in a vertical repetition of mineralized beds and ore bodies in the Menchaca
Formation and in the Aurora Formation. This Intermittent or episodic deposition
of mineralization has occurred over at least the 25 million years represented
by these two formations and it is possible that this process was ongoing during
deposition of the other units above the basement rocks. The thickness and
character of the rock units below the existing workings is unknown and will
have to be determined by drilling. With the evidence of the repetitive nature
of the mineralization the potential for additional discovery at depth is high.
Exploration and Development.
The Company has spent the last 4 years collecting historic data on the
district, geologic mapping and sampling of the surface and the underground
mines and has completed a reverse circulation drilling program consisting of 24
holes and a total of 6630 meters of drilling. During 2000 the North Limited
drilled 26 reverse circulation holes totaling 6,618 meters.
The drilling and channel sampling are the first step in developing ore
reserves at Sierra Mojada. Metalline's drilling consisted of fifteen holes
drilled on a grid of about 30 meters by 60 meters on the Encantada North zone,
north of the Sierra Mojada fault, to evaluate the silver, copper, zinc and lead
mineralization. Nine holes were drilled in the San Salvador, Encantada and
Fronteriza mines to test the oxide zinc mineral system south of the Sierra
Mojada fault. These holes were spaced at about 100 to 200 meter intervals over
a 1500 meter extent in the three mines. North's holes were all drilled to test
the oxide zinc mineralization in the San Salvador, Encantada and Fronteriza
mines. Three step out holes extent the mineralization 2 kilometers to the west
of the San Salvador mine. Three step out holes to the south did not encounter
mineralization.
The results confirm and expand the mineralization of the Encantada North
and the oxide zinc mantos. Multiple intersections of ore grade mineralization
over thick intervals were obtained, with some intersects of exceptional grade
and thickness. The results of the drill program have been released in news
releases dating from February 1999 through November 2000 and are available from
Metalline.
Exploration and evaluation of the mineral systems of the district and the
Metalline's total land position to define the limits of the known
mineralization and for discovery of new mineralization will continue and
accelerate.
The oxide zinc system in the San Salvador, Encantada and Fronteriza mines
and the Encantada North silver, copper, zinc, lead zone will move to
development stage for drilling, sampling and defining of an ore reserve. This
will involve surface and underground drilling and channel sampling, drifting
and raising in sufficient detail to determine the tonnage and grade of an ore
reserve and perform a feasibility study, including metallurgical studies, to
determine if the reserves are commercially viable.
Costs of these programs at this time have not been estimated, but will be
estimated as each stage of the exploration and development programs are planned
and budgeted.
Joint Venture Agreement
In October, 1999 Minera Metalin signed a Joint Venture Letter Agreement
with Minera North S. de R.L. de C.V. a wholly owned subsidiary of North Limited
of Melbourne Australia, a major international mining company. The agreement
allows North to acquire a 60% participating interest in Sierra Mojada by
exploring and completing a feasibility study (which shall be of a standard
acceptable to international banks as enabling them to lend funds to the
project) over a "Earn In Period" of not more than 5 years.
In August, 2000 Rio Tinto Ltd. Purchased North Ltd. For their iron ore
holding and have subsequently terminated the agreement with Minera Metalin.
Metalline has shown the project to a number of major mining companies who are
interested in a Joint Venture. Metalline is currently in negotiations with
these companies for a Joint Venture on Sierra Mojada.
Timetable
Definition of a 2 million tonne sulfide reserve and completion of a
feasibility study is estimated to take 1.5 to 2 years. Construction and
development of a 1000 tonne per day mine and mill will require an additional 2
years.
Defining a 20 million tonne oxide reserve would require 2 to 3 years of
drilling, an additional 1 to 2 years for completing a feasibility study and
about 5 years to develop the mine and build a hydrometallurgical plant.
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, complications 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."
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.
See "Business."
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 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
three full time and two part-time employees. 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. See "Business" and "Management."
14. NON-ARMS'S 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.
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 does not own any real or personal property other than the
following eight mining concessions:
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 offices,
residences, shops, and warehouse buildings, located at Calle Mina #1, La
Esmeralda, Coahuila, Mexico and its telephone and FAX number is 52 177 52100.
ITEM 4. LEGAL PROCEEDINGS.
The Company is not a party to any pending or threatened litigation and to
its knowledge, no action, suit or proceedings has been threatened against its
officers and its directors.
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.
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.
No matters were submitted to a vote of the Company's stockholders during
the year ended October 31, 2000.
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 2000, 1999, and 1998 are as follows:
Fiscal Quarter High Bid<F1> Low Bid<F1>
2000
Fourth Quarter 4 1/4 1 3/4
Third Quarter 4 3/8 3 1/4
Second Quarter 4 2 1/8
First Quarter 3 1/8 2
1999
Fourth Quarter 4 3/8 2 3/16
Third Quarter 4 3/8 1 1/2
Second Quarter 2 1/16 3/4
First Quarter 1 3/32 7/16
1998
Fourth Quarter 1 1/8 3/8
Third Quarter 1 1/2 7/8
Second Quarter 1 9/16 1 1/8
First Quarter 2 1/8 1 1/4
<FN>
<F1> These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not represent actual transactions.
</FN>
As of October 31, 2000, the Company has 120 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.
ITEM 8. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has 9,740,595 shares of Common Stock issued and outstanding as
of October 31, 2000. Of the 9,740,595 shares of the Company's Common Stock
outstanding, 3,840,245 shares are freely tradeable and 5,900,350 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.
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 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.
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 three years ended October 31, 2000 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
2000 1999 1998
----- ----- -----
Summary of Balance Sheets:
Working capital $1,090,094 $194,731 $282,066
Current assets 1,111,886 248,997 342,631
Total assets 5,540,059 1,422,506 1,209,950
Current liabilities 21,792 54,266 60,565
Long-term obligation 0 0 0
Total liabilities 21,792 54,266 60,565
Stockholder's equity 5,518,267 1,368,240 1,149,385
Summary of Statements
of Operations:
Revenues 0 0 0
Net loss <F1> (882,208) (1,423,045) (906,036)
Net loss per share (0.10) (0.22) (0.17)
- --------
<FN>
<F1> Cumulative losses for period from inception (Nov. 8, 1993) through October
31, 2000 were $4,340,450.
</FN>
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, 2000, 9,740,595 shares are
issued and outstanding of which 3,840,245 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.
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.
Warrants
Currently, the Company has outstanding warrants to acquire up to 996,500
shares of common stock at exercise prices ranging from $0.35 to $2.25 per
share. Each warrant permits the holder thereof to acquire one share of common
stock. The warrant expiration periods range from November 1, 2000 to September
15, 2005.
Transfer Agent
The transfer agent for the Company's Common Stock is Idaho Stock Transfer
Co., 421 Coeur d'Alene Avenue, Coeur d'Alene, Idaho 83814.
ITEM 11. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company has inadequate cash to maintain operations during the next
twelve months. In order to meet its cash requirements the Company will have to
raise additional capital through the sale of securities or loans. As of the
date hereof, the Company has not made sales of additional securities and there
is no assurance that it will be able to raise additional capital through the
sale of securities in the future. Further, the Company has not initiated any
negotiations for loans to the Company and there is no assurance that the
Company will be able to raise additional capital in the future through loans.
In the event that the Company is unable to raise additional capital, it may
have to suspend or cease operations.
The Company does not intend to purchase a plant or significant equipment.
The Company will hire employees on an as needed basis, however, the
Company does not expect any significant changes in the number of employees.
Results of Operations - Inception (August 20, 1993) through October 31, 2000.
The Company is in the development stage. 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. The
President and Vice President of the Company both have extensive experience in
mining, exploration and development.
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.
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.131 ("SFAS No.131"), Disclosures about
Segments of an Enterprise and Related Information, which supersedes SFAS No.
14, Financial Reporting for Segments of a Business Enterprise, establishes
standards for the new way that public enterprises report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS No. 131
defines operating segments as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. As the Company operates within one segment, the adoption of SFAS
No. 131 by the Company in 1998, did not have a significant impact on the
Company's financial position.
In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132 ("SFAS No. 132") Employer's
Disclosures about Pensions and other Post-retirement Benefits, which
standardizes the disclosure requirements for pension and other post-retirement
Benefits. The adoption of SFAS No. 132 did not materially impact the Company's
current disclosures.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
At October 31, 2000, the Company has not engaged in any transactions that would
be considered derivative instruments or hedging activities.
ITEM 12. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the Company for the years ended October 31,
2000, 1999, and 1998 included elsewhere in this report have been audited by
Williams & Webster, P.S., Spokane, Washington. An index to such financial
statements appears at Page 17 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 Registration Statement.
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 67 President and Chairman of the Board of Directors
Daniel Gorski 63 Vice President of Operations and a member
of the Board of Directors
Jim Czirr 46 Member of the Board of Directors and Consultant
Wayne Schoonmaker 63 Secretary & Treasurer
All directors hold office until the next annual meeting of shareholders
which is tentatively scheduled for March, 2001, 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.
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.
Daniel Gorski, Vice President of Operations and a member of the Board of
Directors
Since June 1996, Mr. Gorski has been the Vice President of Operations and
a member of the Board of Directors of the Company. Mr. Gorski has been a
consulting geologist and mine manager since 1974 working in the western U.S.
and Mexico. From January 1992 to June 1996, Mr. Gorski was employed as a
contract geologist, working in Mexico, employed by USMX, Inc., an exploration
and mining company located in Denver, Colorado. Mr. Gorski received a B.S.
degree in Geology from Ross State College, Alpine Texas and a M.A. in Geology
from the University of Texas in 1970.
Jim Czirr - Director and Financial Consultant
Since June 1998, Mr. Czirr has been a member of the Board of Directors and
a financial consultant to the company since December 1997. Mr. Czirr has over
20 years experience as a financial and public relations consultant in the areas
of business strategies, marketing, incentive programs, finance and capital
formation and has extensive experience in the brokerage business and in oil and
gas limited partnerships.
Wayne Schoonmaker - Secretary & Treasurer
From 1981 to 1993, Mr. Schoonmaker was Financial Manager of the Northwest
Mining Department of ASARCO and from 1978 to 1981, he was Chief Accountant at
ASARCO's Troy Unit in Montana, where he was responsible for the installation
and implementation of the accounting system for the start-up of the Troy Mine.
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 Corporation
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.
ITEM 15. EXECUTIVE COMPENSATION.
Summary Compensation.
The following table sets forth the compensation paid by the Company from
January 1, 1996 through December 31, 2000, 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 Payouts Securities
Names Other Under Restricted Other
Executive Annual Options/ Shares or Annual
Officer and Compen- SARs Restricted LTIP Compen-
Principal Year Salary Bonus sation Granted Share Payouts sation
Position Ended (US$) (US$) (US$) (#) Units(US$) (US$) (US$)
Merlin 2000 72,000 0 0 0 0 0 0
Bingham 1999 72,000 0 0 0 0 0 0
President 1998 72,000 0 0 0 0 0 0
1997 33,000 0 0 0 0 0 0
1996 21,000 0 0 0 0 0 0
Daniel 2000 72,000 0 0 0 0 0 0
Gorski 1999 72,000 0 0 0 0 0 0
Vice 1998 78,000 0 0 0 0 0 0
President 1997 54,000 0 0 0 0 0 0
1996 42,000 0 0 0 0 0 0
Jim 2000 0 0 35,745 0 0 0 0
Czirr 1999 0 0 36,000 0 0 0 0
Director 1998 0 0 36,000 100,000 0 0 0
1997 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0
Wayne 2000 18,000 0 0 0 0 0 0
Schoonmaker 1999 18,000 0 0 0 0 0 0
Secretary/ 1998 7,500 0 0 0 0 0 0
Treasurer 1997 0 0 0 0 0 0 0
1996 0 0 0 0 0 0 0
There are no other stock option plans, retirement, pension, or profit
sharing plans for the benefit of the Company's officers and directors.
Option/SAR Grants.
The following grants of stock options, whether or not in tandem with stock
appreciation rights ("SARs") and freestanding SARs have been made to officers
and/or directors:
Number of
Securities
Number of Underlying
Securities Options/SARs
Underlying Granted Exercise Number of
Options During Last or Base Options Expiration
Name SARs Granted 12 Months[1] Price($/Sh) Exercised Date
- ------ ------------ ------------ ----------- --------- --------
James
Czirr 100,000 -0- $0.75 -0- 11/01/04
James
Czirr 100,000 -0- $1.00 -0- 09/15/05
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that provide
compensation intended to serve as incentive for performance.
Compensation of Directors.
In general, the Directors do not receive any compensation for serving as
members of the Board of Directors. The Board has not implemented a plan to
award options to any Directors. There are no contractual arrangements with any
member of the Board of Directors other than with James Czirr. Mr. Czirr has
entered into a consulting agreement with the Company whereby Mr. Czirr supplies
financial and business consulting services and is compensated in stock and
options. See "Certain Relationships and Related Transaction."
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 Number of
of owner Shares Position Shares
- -------- --------- -------------------- --------
Merlin Bingham 935,000 President, CEO and Chairman 9.60%
of the Board of Directors
Daniel Gorski 766,600 Vice President of Operations 7.87%
and member of the
Board of Directors
Jim Czirr 490,100 Member of the Board of 5.03%
Directors
Wayne Schoonmaker 0 Secretary & Treasurer 0.00%
All officers and 2,191,700 22.50%
directors as a
group (4 persons)
Britannia Holdings 3,190,500 32.75%
King's House
The Grange
St. Peter Port
Guernsey
Channel Islands
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 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 December 1997, the Company entered into a consulting agreement with
James Czirr, a member of the Board of Directors. Pursuant to the consulting
agreement, Mr. Czirr supplies financial and business consulting services and is
compensated in stock and options.
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.
[The balance of this page has been intentionally left blank.]
METALLINE MINING COMPANY
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Certified
Public Accountants F/S-1
Financial Statements:
Balance Sheets as of October 31, 2000
and October 31, 1999 F/S-2
Statements of Loss for the Years Ended
October 31, 2000, 1999, 1998, and for
the period from inception (November 8, 1993)
to October 31, 2000 F/S-3
Statements of Changes in Stockholder's Equity
for the period from inception (November 8, 1993)
to October 31, 2000 F/S-4
Statements of Cash Flow for the Years Ended
October 31, 2000, 1999, 1998, and for the
period from inception (November 8, 1993) to
October 31, 2000 F/S-9
Notes to Financial Statements F/S-10
Summary of Accounting Policies F/S-10
Signatures F/S-16
[The balance of this page has been intentionally left blank.]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Metalline Mining Company
Coeur d'Alene, Idaho
IDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Metalline Mining Company (an
exploration stage company) as of October 31, 2000 and 1999, and the related
statements of operations, shareholders' equity, and cash flows for the years
then ended, and from November 8, 1993 (inception) through October 31, 2000.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Metalline Mining Company as of
October 31, 2000 and 1999, and the results of its operations and cash flows for
the years then ended and forthr period from November 8, 1993 (inception) to
October 31, 2000 in conformity with generally accepted accounting principles.
The accompanying 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
December 4, 2000
F/S-1
METALLINE MINING COMPANY
(An Exploration Stage Company)
BALANCE SHEETS
October 31, October 31,
2000 1999
ASSETS
CURRENT ASSETS
Cash $ 550,557 $ 240,662
Accounts receivable 547,237 -
Prepaid expenses 3,228 3,127
Employee advances 10,864 5,208
---------- ---------
Total Current Assets 1,111,886 248,997
MINERAL PROPERTIES 4,348,785 1,103,671
---------- ---------
PROPERTY AND EQUIPMENT
Office equipment 81,499 71,119
Plant, property, and equipment 86,047 61,047
Less: Accumulated depreciation (88,158) (62,328)
---------- ---------
Total Property and Equipment 79,388 69,838
---------- ---------
TOTAL ASSETS $ 5,540,059 $ 1,422,506
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,625 $ 16,766
Accrued liabilities 16,167 37,500
--------- ---------
Total Current Liabilities 21,792 54,266
--------- ---------
COMMITMENTS AND CONTINGENCIES - -
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value;
50,000,000 shares authorized,
9,740,595 shares issued and
7,215,095 shares issued and
outstanding, at October 31,
2000 and 1999 respectively 97,407 72,152
Additional paid-in capital 9,217,330 3,977,350
Stock options and warrants 543,980 776,980
Deficit accumulated during
development stage (4,340,450) (3,458,242)
---------- ---------
Total Stockholders' Equity 1,368,240 1,149,385
---------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $5,518,267 $1,368,240
========== =========
The accompanying notes are an integral part of these financial statements.
F/S-2
METALLINE MINING COMPANY
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
For the Years From Inception
Ended October 31, (November 8, 1993)
2000 1999 to October 31,2000
------- ------- ------------------
REVENUES
$ - $ - $ -
------- ------- ----------
GENERAL AND
ADMINISTRATIVE EXPENSES
Salaries 224,616 235,048 656,394
Office 88,880 31,155 177,657
Taxes and fees 50,244 - 50,485
Dues and subscriptions 2,316 - 2,316
Professional services 371,379 133,094 1,889,685
Property expenses 49,215 735,326 1,072,829
Depreciation 25,830 24,839 88,188
Marketing and research 78,459 50,783 129,242
Financing Costs - 216,000 276,000
--------- -------- ----------
Total Expenses 890,939 1,426,245 4,342,796
--------- -------- ----------
LOSS FROM
OPERATIONS $(890,939) (1,423,045) (4,342,796)
=========== ========== ============
OTHER INCOME (EXPENSES)
Miscellaneous income 20 - 20
Interest income 8,711 3,214 11,925
Interest expense - (14) (9,599)
------ ----- -------
Total Other Income 8,731 3,200 2,346
===== ===== ======
LOSS BEFORE INCOME TAXES (882,208) (1,423,045) (4,340,450)
INCOME TAXES - - -
------ ----- ------
NET LOSS $(882,208) $(1,423,045) $(4,340,450)
========= ========= =========
BASIC AND DILUTED
LOSS PER
COMMON SHARE $ (0.10) $ (0.22) $ (1.41)
========= ========= ===========
BASIC AND DILUTED
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 8,573,927 6,615,203 3,078,304
========== ========== ============
The accompanying notes are an integral part of these financial statements.
F/S-3
METALLINE MINING COMPANY
(An Exploration Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
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 - - - -
Loss for the year ended
October 31, 1994 - - - - - (8,831) (8,831)
------- ------- ------- ------- ------- - ------ -------
Balances at
October 31, 1994 192,160 1,922 (1,922) - - (8,831) (8,831)
3:1 common stock split 384,320 3,843 (3,843) - - - -
Loss for the year ended
October 31, 1995 - - - - - (7,861) (7,761)
------- ------- ------- ------- ------- ------- -------
Balance at
October 31, 1995 576,480 $ 5,765 $(5,765) $ - $ - $(16,592) $(16,592)
------- ------- ------- ------- ------- ------- -------
Issuance of common stock
as follows:
- - for cash at an average
of $0.11 per share 1,363,859 13,639 133,150 - - - 146,809
- - for services at
$0.10 per share 140,000 1,400 12,600 - - - 14,000
- - 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
Loss for the year ended
October 31, 1996 - - - - - (40,670) (40,670)
------- ------- ------- ------- ------- ------- -------
Balances at
October 31, 1996 3,132,339 $31,324 $153,485 $ - $ - $(57,262) $127,547
------- ------- ------- ------- ------- ------- -------
- -------
Table continued on next page.
The accompanying notes are an integral part of these financial statements.
F/S-4
METALLINE MINING COMPANY
(An Exploration Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
(continued)
Accumulated
Common Stock Stock Stock Deficit
----------------- Additional Sub- Options During Ex-
Number of Paid-in scriptions and ploration
Shares Amount Capital Receivable Warrants Stage Total
-------- ------ ------- ---------- -------- -------- ------
Balance brought
Forward 3,132,339 $ 31,324 $ 153,485 $ - $ - $(57,262) $127,547
Issuance of common
Stock as follows:
- for cash at an
average of $0.61
per share 1,060,400 10,604 639,039 - - - 649,643
- for services at
an average of
$0.74 per share 157,500 1,575 115,300 - - - 116,875
- - for payment of a loan
at $0.32 per share 100,200 1,002 30,528 - - - 31,530
Options issued as follows:
- - 300,000 shares at
$2.25 per share (cash) - - 3,000 - - - 3,000
Loss for year ended
October 31, 1997 - - - - - (582,919) (582,919)
------- ------- ------- ------- ------- ------- -------
Balances at
October 31, 1997 4,450,439 $44,505 $941,352 $ - $ - $(640,181) $345,676
------- ------- ------- ------- ------- ------- -------
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 included or
granted as follows:
- - 1,200,000 options at
$0.10 per share (cash) - - 120,000 - - - 120,000
- - for financing fees - - - - 60,000 - 60,000
- - for consulting fees - - - - 117,000 - 117,000
Loss for year ended
October 31, 1998 - - - - - (906,036) (906,036)
------- ------- ------- ------- ------- ------- -------
Balance at
October 31, 1998 6,090,739 $60,908 $2,757,694 $(300,000) $177,000 $(1,546,217) $(1149385)
------- ------- ------- ------- ------- ------- -------
- -------
Table continued on next page.
The accompanying notes are an integral part of these financial statements.
F/S-5
METALLINE MINING COMPANY
(An Exploration Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
(continued)
Accumulated
Common Stock Stock Stock Deficit
----------------- Additional Sub- Options During Ex-
Number of Paid-in scriptions and ploration
Shares Amount Capital Receivable Warrants Stage Total
-------- ------ ------- ---------- -------- -------- ------
Balance brought
forward 6,090,739 $60,908 $2,757,694 $(300,000) $177,000 $(1,546,217) $1149385
Prior period adjust-
ment for valuation of
warrants issued for
services - - - - 488,980 (488,980) -
------- ----- ------ ------ ------ -------- -----
Balance October 31,
1998 restated 6,090,739 60,908 2,757,694 (300,000) 665,980 (2,035,197) 1,149,385
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
Loss for year ended
October 31, 1999 - - - - - (1,423,045) (1423045)
------- ------- ------- ------- ------- ------- -------
Balance at
October 31, 1999 7,215,095 $72,152 $3,977,350 $ - $288,000 $(2,969,262) $1,368,240
------- ------- ------- ------- ------ ------- -------
Exercise of options at
$0.86 per share 950,000 9,500 1,090,750 - (288,000) - 812,250
Issuance of common stock
as follows:
- - for cash at an average
of $2.77 per share 1,440,500 14,405 3,972,220 - - - 3,986,625
Issuance of common stock
for services at $1.28
per share 120,000 1,200 152,160 (360) - - 153,000
Stock subscription received - - - 360 - - 360
Issuance of common stock
for equipment at $1.67
per share 15,000 150 24850 - - - 25,000
Warrants issued for services - - - - 55,000 - 55,000
Loss for the year ended
October 31, 2000 - - - - - (882,208) (882,208)
------ ----- ----- ----- ----- ------ ------
Balance,
October 31, 2000 9,740,595 $ 97,407 $9,217,330 $ - $543,980 $(4,340,450) $5,518,267
======== ===== ===== ==== ==== ===== =====
- -------
The accompanying notes are an integral part of these financial statements.
F/S-6
METALLINE MINING COMPANY
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
For the Years From Inception
Ended October 31, (November 8, 1993)
2000 1999 to October 31,2000
------- ------- ------------------
Cash flows from
operating activities:
Net loss $(882,208) $(1,423,045) $(4,340,450)
Adjustments to
reconcile net loss to
net cash used by
operating activities:
Depreciation 25,830 24,839 88,158
Payment of services from
issuance of stock 153,000 50,000 473,175
Payment of financing fees by
the issuance of stock options - 216,000 276,000
Payment of expenses with
issuance of stock - - 326,527
Warrants issued for services 55,000 - 543,980
(Increases) decreases in:
Foreign property tax
Refund receivable (547,236) - (547,236)
Accounts receivable - 2,849 -
Prepaid expenses (101) 23,334 (3,228)
Employee advances (5,656) (5,208) (10,864)
Increases (decreases) in:
Accounts payable (11,141) (36,662) 5,625
Accrued liabilities (21,334) (7,137) 16,167
-------- ------- -------
Net cash used by
operating activities (1,233,846) (1,155,030) (3,172,146)
--------- --------- ----------
Cash flows from
investing activities:
Equipment purchases (10,380) - (127,544)
Mining property
acquisitions (3,245,114) (331,030) (4,339,785)
--------- --------- ---------
Net cash used by
investing activities (3,255,494) (331,030) (4,467,329)
---------- ---------- ----------
Cash flows from
financing activities:
Proceeds from sales of
common stock 3,986,985 1,375,900 7,137,282
Proceeds from sales
of options 812,250 - 935,250
Deposits for sale
of stock - 37,500 87,500
Proceeds from
shareholder loans - - 30,000
--------- ---------- ----------
Net cash provided by
financing activities: 4,799,235 1,413,400 8,190,032
--------- ---------- ----------
Net increase (decrease)
in cash and cash
equivalents 309,895 (72,660) 550,557
Cash beginning of period 240,662 313,322 -
--------- ---------- ---------
Cash at end of period $550,557 $240,662 $550,557
========= ========== =========
Supplemental cash
flow disclosures:
Income taxes paid $ - $ - $ -
Interest paid $ - $ 14 $9,599
Non-cash financing
activities:
Common stock issued
for services $153,000 $50,000 $473,175
Common stock issued
for payment of expenses $ - $ - $326,527
Common stock issued
for equipment $25,000 $ - $40,000
Common stock issued
for payment of debt $ - $ - $80,000
Common stock issued for
financing fees $ - $216,000 $276,000
Warrants issued
for services $55,000 $ - $107,400
The accompanying notes are an integral part of these financial statements.
F/S-7
METALLINE MINING COMPANY
(An Exploration Stage Company)
Notes to the Financial Statements
October 31, 2000
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Metalline Mining Company ("the Company") was incorporated in the state of
Nevada on November 8, 1993 as the Cadgie Company for the purpose of acquiring
and developing mineral properties. The Cadgie Company was a spin-off from its
predecessor Precious Metal Mines, Inc. The Articles of Incorporation of Cadgie
Company were executed on August 20, 1993. On June 28, 1996, at a special
directors meeting, the Company's name was changed to Metalline Mining Company.
The Company's fiscal year-end is October 31.
The Company's efforts have been concentrated in expenditures related to
exploration properties, principally in the Sierra Mojada project located in
Coahuila, Mexico. The Company has not determined whether the exploration
properties contain ore reserves that are economically recoverable. The ultimate
realization of the Company's investment in exploration properties is dependent
upon the success of future property sales, the existence of economically
recoverable reserves, the ability of the Company to obtain financing or make
other arrangements for development, and upon future profitable production. The
ultimate realization of the Company's investment in exploration properties
cannot be determined at this time, and accordingly, no provision for any asset
impairment that may result, in the event the Company is not successful in
developing or selling these properties, has been made in the accompanying
financial statements.
The Company is actively seeking additional capital and management believes its
properties can ultimately be sold or developed to enable the Company to
continue its operations. However, there are inherent uncertainties in mining
operations and management cannot provide assurances that it will be successful
in this endeavor. Furthermore, the Company is in the development stage, as it
has not realized any revenues from its planned operations.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting is presented to assist in understanding
the Company's financial statements. The financial statements and notes are
representations of the Company's management, which is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method of
accounting.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F/S - 8
METALLINE MINING COMPANY
(An Exploration Stage Company)
Notes to the Financial Statements
October 31, 2000
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
RECLASSIFICATIONS
Certain amounts from prior periods have been reclassified to conform to the
current period presentation. This reclassification has resulted in no changes
to the Company's accumulated deficit or net losses presented.
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 commercial
minable reserve, the Company would expect to actively prepare the site for
extraction.
SEGMENT REPORTING
The Company adopted SFAS No.131, Disclosures about Segments of an Enterprise
and Related Information," in the fiscal year ended October 31, 1999. SFAS No.
131 requires disclosures about products and services, geographic areas and
major customers. The adoption of SFAS No. 131 did not affect the Company's
results of operations or financial position. The Company's mineral properties
were not engaged in any production activity. The Company had no segments
engaged in business activities at October 31, 2000 and, therefore, no segment
reporting is required.
FOREIGN OPERATIONS
The accompanying balance sheet includes $4,348,785 of the Company's mineral
properties and $632,975 of the Company's cash and receivables in Mexico.
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.
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 revenues 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for cash, marketable securities, accounts receivable,
accounts payable, notes payable and accrued liabilities approximate their fair
value.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity
of three months or less to be cash equivalents.
CONCENTRATION OF RISK
The Company maintains its domestic cash in primarily one commercial bank in
Coeur d'Alene, Idaho. Accounts are guaranteed by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000. As of October 31, 2000, the Company exceeded
the insured amount by $233,687. The Company also maintains cash at a bank in
Mexico. This account, which had a balance of $85,738 at October 31, 2000, is
denominated in pesos and is considered uninsured. The Company also has recorded
a refund receivable at October 31, 2000 from the overpayment of Mexican
property taxes. This receivable, originating from the payment of assessed taxes
on the Company's Mexican property concessions, is considered fully collectible.
DERIVATIVE INSTRUMENTS
In June 1998, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This new standard establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
At October 31, 2000, the Company has not engaged in any transactions that would
be considered derivative instruments or hedging activities.
F/S-9
METALLINE MINING COMPANY
(An Exploration Stage Company)
Notes to the Financial Statements
October 31, 2000
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Major additions and improvements
are capitalized. Minor replacements, maintenance and repairs that do not
increase the useful life of the assets are expensed as incurred. Depreciation
of property and equipment is determined using the straight-line and accelerated
methods over the expected useful lives of the assets of five years.
IMPAIRED ASSET POLICY
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
titled "Accounting for Impairment of Long-lived Assets." In complying with this
standard, the Company reviews its long-lived assets quarterly to determine if
any events or changes in circumstances have transpired which indicate that the
carrying value of its assets may not be recoverable. The Company determines
impairment by comparing the undiscounted future cash flows estimated to be
generated by its assets to their respective carrying amounts. The Company does
not believe any adjustments are needed to the carrying value of its assets at
October 31, 2000.
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.
REVENUE RECOGNITION POLICY
Revenues from sales of product will be recognized when the product is shipped.
EXPLORATION COSTS
In accordance with generally accepted accounting principles, the Company
expenses exploration costs as incurred. Exploration costs expensed during the
year ended October 31, 2000 were $78,459. The exploration costs expensed during
the Company's exploration stage are $129,242.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123
titled "Accounting for Stock-Based Compensation." This statement encourages,
but does not require, companies to recognize compensation expense for grants of
stock, stock options, and other equity instruments to employees based on fair
value. Transactions in equity instruments with non-employees for goods or
services must be accounted for on the fair value method. The Company has
adopted the fair value accounting prescribed by FAS 123.
F/S-10
METALLINE MINING COMPANY
(An Exploration Stage Company)
Notes to the Financial Statements
October 31, 2000
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
PROVISION FOR TAXES
At October 31, 2000 the Company had accumulated net operating losses of
approximately $4,300,000. No provisions for taxes or tax benefit has been
reported in the financial statements, as there is not a measurable means of
assessing future profits or losses.
GOING CONCERN
As shown in the accompanying financial statements, the Company has no revenues,
has incurred a net loss of $882,208 for the year ended October 31, 2000 and has
an accumulated deficit. 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 existence.
The Company's management believes that significant and imminent private
placements will generate sufficient cash for the Company to continue to operate
based on current expense projections.
BASIC AND DILUTED LOSS PER SHARE
Basic and diluted loss per share is computed by dividing the net loss by the
weighted average number of shares outstanding during the year. The weighted
average number of shares is calculated by taking the number of shares
outstanding and weighting them by the length of time that they were
outstanding.
Outstanding options and warrants representing 996,500 and 1,891,500 shares for
the periods ended October 31,2 000 and October 31, 1999, respectively, have
been excluded from the calculation of loss per share as they would be
antidilutive.
NOTE 3 - MINERAL PROPERTIES
SIERRA MOJADA MINING CONCESSION
In June of 1996, USMX (now named Dakota) and the Company entered into a joint
venture agreement, whereby the Company could acquire a 65% interest in a mining
concession named the Sierra Mojada Project, located in Coahuila, Mexico. Under
the terms of the agreement, the Company was to contribute two million dollars
($2,000,000) in work commitments over the following seven years.
After the execution of the USMX agreement, Dakota's interest (35%) in the joint
venture was sold to an entity, which subsequently defaulted on its joint
venture obligations. This action in 1998 triggered the elimination of the
joint venture and resulted in the Company assuming 100% control of the Sierra
Mojada concession without the need to spend $2,000,000 to vest its interest.
During the period of August 23, 1996 to September 2, 1997, the Company executed
five separate agreements for the acquisition of exploration concessions in the
same mining region as the Sierra Mojada Project in Mexico. Each agreement
enables the Company to explore the underlying property by paying stipulated
annual payments, which shall be applied in full toward the contracted purchase
price of the related concession.
Under the terms of the agreements, the Company is obligated to pay the
following amounts over the following two years:
Year ending, October 31, 2000 $3,355,384
Year ending, October 31, 2001 $ 103,076
During August 2000, the Company made the final payment for the first year and
acquired title to the Unification Mineros Nortenos Concession in the Sierra
Mojada Project. With this transaction, the Company has acquired title to all of
its concessions at Sierra Mojada.
F/S - 11
METALLINE MINING COMPANY
An Exploration Stage Company
Notes to the Financial Statements
October 31, 2000
NOTE 4 - RELATED PARTY TRANSACTIONS
In connection with a lawsuit against the company and others, Company
shareholders individually paid all of the litigation settlement from their
personal assets without any cost or obligation to the Company. See Note 8.
The Company receives rent-free office space in Coeur d'Alene from its
president. The value of the space is not considered materially significant for
financial reporting purposes.
NOTE 5 - COMMON STOCK
The Company (Cadgie Co.) was formed in August of 1993 and incorporated in
November 1993 by Mr. Carman Ridland of Las Vegas, Nevada as a spin-off from its
predecessor firm Precious Metal Mines, Inc. The Company issued 960,800 of its
$0.01 par value shares to Precious Metal Mines, Inc. for 16 unpatented mining
claims located near Philipsburg, Montana comprising the Kadex property group.
Precious Metal Mines, Inc. distributed the 960,800 shares of Cadgie Company to
its shareholders. One share of Cadgie Co. was exchanged for each share of
Precious Metal Mines, Inc. held by holders of record as of August 31, 1993.
On August 31, 1994, the directors of Cadgie Co. declared a 1:5 reverse stock
split of the outstanding Cadgie Co. shares, thus reducing the number of
outstanding shares from 960,800 to 192,160 shares.
On August 4, 1995 the directors of Cadgie Co. declared a 3:1 forward stock
split of the outstanding Cadgie Co. shares, thus increasing the number of
outstanding shares from 192,160 to 576,480.
In January 1996, Mr. Carmen Ridland, in a private sale, sold a controlling
interest in the corporation to Mr. Howard Crosby. On January 12, 1996, Mr.
Ridland transferred control of Cadgie Co. to Mr. Crosby and Mr. Robert
Jorgensen.
In June 1996, the Company completed a private placement of common stock
resulting in net proceeds of $25,000. The Company also issued 900,000 shares to
Messrs. Ryan, Bingham, and Gorski, who had formed a partnership to advance
development of the mining concession located in Coahuila, Mexico. The
partnership had an informal joint venture agreement with USMX, Inc. covering
the mining concessions. By acquiring the partnership interest, the Company was
able to negotiate and sign a formal joint venture agreement with USMX in July
1996. (See Note 3)
In August 1996, the Company changed its name to Metalline Mining Company.
In March 1997, the Company completed an issuance of common stock resulting in
net proceeds of $17,500. In April 1997, the Company issued to Royal Silver
Mines, Inc., 200,000 shares of common stock resulting in proceeds of $70,000.
During the six months ended October 31, 1997, the Company sold 676,600 shares
of common stock for cash, raising $516,560. In November and December 1997, the
Company sold 403,500 shares of common stock for cash thereby raising $403,500.
An additional $881,945 was raised between February and October 1998 as the
Company sold 915,000 more shares of its common stock.
F/S -12
METALLINE MINING COMPANY
An Exploration Stage Company
Notes to the Financial Statements
October 31, 2000
NOTE 5 - COMMON STOCK (continued)
During the year ended October 31, 1999, the Company sold 1,068,800 shares of
common stock for cash, raising $1,375,900. During October 1999, the Company
received $37,500 as a deposit toward the purchase of 50,000 shares. This stock
was issued in December 1999.
NON-CASH STOCK TRANSACTIONS
During November 1995, Metalline Mining Company's directors approved an issue of
45,000 shares of common stock to Mr. John Ryan for services rendered at $0.01
per share.
During June 1996, Metalline Mining Company issued 900,000 shares of common
stock for the assignment of mineral rights in the Sierra Mojada Project in
Coahuila, Mexico valued at $0.01 per share.
During October 1996, Metalline Mining Company issued 150,000 shares of common
stock for computer equipment. Also during October 1996, Metalline Mining
Company issued 120,000 shares of common stock to Mr. Dan Gorski and an
additional 20,000 shares of common stock to Mr. John Ryan for services
rendered.
During February 1997, the Company borrowed $30,000 from shareholders and issued
24,900 shares of common stock as a loan incentive.
During April 1997, 133,800 shares of common stock were issued for services and
expenses. A total of 24,900 shares of common stock were issued as loan
incentives (interest) for $30,000 in loans from shareholders. These shares were
issued at $0.30 per share. A total of 77,600 shares of common stock were issued
in exchange for wages during the months of January, February, and March of 1997
at $0.35 per share. A total of 31,300 shares of common stock were issued to
cover expenses incurred by shareholders at $0.35 per share.
In August 1997, 95,000 shares of common stock were issued for services at a
deemed value of $1.00 per share. Also in August 1997, 100,200 share of common
stock were issued to discharge shareholder debt.
In February 1998, 200,000 shares of common stock were issued for a mine
database. The shares were valued at $1.625 per share, resulting in a
transaction valued at $325,000. In September 1998, 80,000 shares of common
stock were issued for payment of shareholder debt. The shares were valued at
$1.00 per share, resulting in a transaction valued at $80,000.
In August 1999, 55,556 shares of common stock were issued for drilling
services. The shares were valued at $0.90 per share, resulting in a transaction
valued at $50,000.
In April 2000, 36,000 shares of common stock were issued for consulting
services and subscription receivable. The shares were valued at $2.51 per
share, resulting in a transaction valued at $90,360. In May 2000, 84,000 shares
of common stock were issued for consulting services. The shares were valued at
$0.75 per share, resulting in a transaction valued at $63,000. In June 2000,
15,000 shares of common stock were issued for equipment. The shares were valued
at $1.66 per share, resulting in a transaction valued at $25,000.
F/S - 13
METALLINE MINING COMPANY
An Exploration Stage Company
Notes to the Financial Statements
October 31, 2000
NOTE 6 - STOCK OPTIONS
Following is a summary of the stock options during the years ending October 31,
2000 and 1999.
Weighted
Average
Number Exercise
Of Shares Price
--------- ---------
Outstanding at 11/1/1998 1,200,000 $ 0.90
Granted - .90
Exercised (250,000) .90
Forfeited - .90
Expired - .90
---------- ------
Outstanding at 10/31/1999 950,000 $0.90
========= =====
Options exercisable at 10/31/1999 950,000 $0.90
========= =====
Outstanding at 11/1/1999 950,000 $0.90
Granted - .90
Exercised (950,000) .90
Forfeited - .90
Expired - .90
----------- -----
Outstanding at 10/31/2000 - -
=========== =====
Options exercisable at 10/31/2000 - -
=========== =====
NOTE 7 - WARRANTS
At October 31, 2000 and 1999, 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 become 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.
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 is 5%, volatility is 0.3 and expected
life is 7 years. Consulting expenses recognized for these warrants were $55,000
and $488,980 for the fiscal years ended 2000 and 1998, respectively.
F/S - 14
METALLINE MINING COMPANY
An Exploration Stage Company
Notes to the Financial Statements
October 31, 2000
NOTE 8 - COMMITMENTS AND CONTINGENCIES
At October 31, 1999, the Company was required to make land payments amounting
to $3,458,460 over the next two years. Payments were made in August 2000 for
completion of the first year commitment leaving a remaining commitment in the
amount of $103,076 at October 31, 2000. See Note 3.
During the year ended October 31, 1999, the Company settled a multi-plaintiff
lawsuit filed by some of Royal Silver Mines, Inc. shareholders for alleged
violations of securities laws. In settlement, certain shareholders of Metalline
Mining Company transferred their individually owned shares of Metalline common
stock to the Company's stock transfer agent for subsequent distribution to the
plaintiffs. No Company-owned assets were distributed in the settlement action.
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.
NOTE 9 - JOINT VENTURE AGREEMENT
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. North Limited is dedicated to
natural resource development that produces iron, uranium, base and precious
metals and forestry products. At October 31, 2000, North Limited had no vested
interest in the Sierra Mojada Project.
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F/S - 15
METALLINE MINING COMPANY
An Exploration Stage Company
Notes to the Financial Statements
October 31, 2000
SIGNATURES
In accordance with Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
METALLINE MINING COMPANY
BY: /s/ Merlin Bingham
Merlin Bingham,
its President
Date: January 29, 2001
By: /s/ Wayne Schoonmaker
Wayne Schoonmaker, its
Principal Accounting Officer
Date: January 29, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
By: /s/ Merlin Bingham By: /s/Jim Czirr
Merlin Bingham Jim Czirr
Director Director
Date: January 29, 2000 Date: January 29, 2000
By: /s/ Daniel Gorski By: /s/Wayne Schoonmaker
Daniel Gorski Wayne Schoonmaker
Vice President/Director Secretary/Treasurer,Director
Date: January 29, 2000 Date: January 29, 2000
By: /s/ Mario Ayub Touche
Mario Ayub Touche
Director
Date: January 29, 2000
F/S - 16