<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS UNDER SECTION
12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
METALINE CONTACT MINES
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(Name of Small Business Issuer in its charter)
Washington 91-0779945
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(State or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification No.)
6599 Prichard Creek Rd. Murray ID 83874
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (208) 682-2217
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Securities to be registered pursuant to Section 12(b) of the Act.
Title of each class Name of each exchange on
which registered
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Securities to be registered pursuant to Section 12(g) of the Act.
Common Stock - $0.05 Par Value
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(Title of Class)
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(Title of Class)
1 of 111 Total Pages
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FORWARD LOOKING STATEMENTS
Metaline Contact Mines (hereinafter referred to as the "Company") cautions
readers that certain important factors may affect the Company's actual results
and could cause such results to differ materially from any forward-looking
statements that may be deemed to have been made in this Form 10-SB or that are
otherwise made by or on behalf of the Company. For this purpose, any statements
contained in the Form 10-SB that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality of the
foregoing, words such as "may," "expect," "believe," "anticipate," "intend,"
"could," "estimate," "plan," or "continue" or the negative or other variations
thereof or comparable terminology are intended to identify forward-looking
statements. Factors that may affect the Company's results include, but are not
limited to, the Company's limited operating history, its ability to produce
additional products and services, its dependence on a limited number of
customers and key personnel, its possible need for additional financing, its
dependence on certain industries, and competition from its customers. With
respect to any forward-looking statements contained herein, the Company believes
that it is subject to a number or risk factors, including: competitive actions;
zinc prices; lack of available financing; and general economic and business
conditions. Any forward-looking statements in this report should be evaluated in
light of these important risk factors. The Company is also subject to other
risks detailed herein or set forth from time to time in the Company's filings
with the U.S. Securities and Exchange Commission.
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I
Item 1. Description of Business 4
Item 2. Management's Discussion and Analysis or Plan of Operation 6
Item 3. Description of Property 7
Item 4. Security Ownership of Certain Beneficial Owners and Management 8
Item 5. Directors and Executive Officers, and Promoters and Control Persons 9
Item 6. Executive Compensation 11
Item 7. Certain Relationships and Related Transactions 11
Item 8. Description of Securities 12
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters 13
Item 2. Legal Proceedings 14
Item 3. Changes in and Disagreements with Accountants 14
Item 4. Recent Sales of Unregistered Securities 14
Item 5. Indemnification of Directors and Officers 15
PART F/S
Item 1. Financial Statements 15
PART III
Item 1. Index to Exhibits 29
Item 2. Description of Exhibits 29
</TABLE>
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<PAGE> 4
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Metaline Contact Mines (hereinafter referred to as the
"Company") is filing this Form 10-SB on a voluntary basis in
order to make it's financial and other information equally
available to any interested parties or investors.
The Company was incorporated on November 15, 1928 pursuant to
the laws of the State of Washington, for the purposes of
engaging in the acquisition, leasing, exploration, development
and mining of mineral resource properties, and to conduct all
business appertaining thereto.
Immediately following its organization the Company began
acquiring unpatented zinc-lead mining claims and other mineral
rights in the Metaline District, Pend Oreille County, State of
Washington. The Company was inactive for many years, except for
maintaining its mineral holdings.
In 1946, Metaline Mining & Leasing Company, which operated
adjacent mineral properties, leased part of the Company's
unpatented claims for a period of 25 years, and through an
intermediary, Day Mines Inc., began acquiring the Company's
common stock. By 1949 the Company's common stock was 43%
controlled by Day Mines Inc. and 48% controlled by Sullivan
Mining Company (a joint venture between Hecla Mining Company and
Bunker Hill & Sullivan Mining Company), which had large
investments in the Metaline District. In that year the two
dominant stockholders removed the Company's Board of Directors
and installed their own slate of directors.
In 1959, Day Mines Inc., Bunker Hill and the Pend Oreille Mining
Company jointly undertook the Metaline Contact Expansion
("Metcontex") acquisition project. The Company remained a
non-operating corporation until after the expiration of its
lease with Metaline Mining & Leasing Company. Bunker Hill then
provided management services to the Company's holdings, and on
April 14, 1976 entered into an Exploration and Operating
Agreement (the "1976 Agreement") to conduct exploration
activities on the Company's properties.
In 1982, control of the Company and it's assets transferred from
The Bunker Hill Company to Bunker Limited Partnership. Operating
control of the 1976 Agreement was transferred to Pintlar Corp.,
a subsidiary of Gulf Resources & Chemical, the parent company of
The Bunker Hill Company. In 1990, Pintlar Corp. transferred
operating control of the 1976 Agreement to Resource Finance
Inc., the U.S. subsidiary of RFC Resource Finance Corporation of
Toronto, Ontario, Canada. In late 1996 or early 1997, Cominco
American Incorporated acquired operating control of the 1976
Agreement with its acquisition of Resource Finance Inc.
In October of 1996, the Company commenced a structured
reorganization in which the then-current Board of Directors
deemed it to be in the best interests of the Company and it's
shareholders to participate in the formation of a Delaware
limited liability company to be named Metaline Contact Mines LLC
(hereinafter referred to as "MCMLLC"), and contribute the
surface rights to the private real property described in Part I,
Item 3(a) below and standing timber thereon (the "Contributed
Assets") to MCMLLC in exchange for a 99% equity membership
interest in MCMLLC. MCMLLC was formed on October 30, 1996, and
the Contributed Assets were assigned to MCMLLC on the same date.
The Company retained all mineral rights to the Contributed
Assets and certain operating functions. In addition, the
shareholders of the Company were offered the opportunity to
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exchange their shares of common stock in the Company for
non-managing equity membership interests in MCMLLC. A total of
19 shareholders accepted the exchange offer resulting in MCMLLC
owning 11,686,643 shares of common stock in the Company, or
93.02%. Pursuant to the MCMLLC Amended and Restated Operating
Agreement, the Company is the Managing Member of MCMLLC.
On September 1, 1997, the Company negotiated a new Mining Lease
With Purchase Option with Cominco American Incorporated (the
"New Cominco Lease") on the Company's mineral rights, which New
Cominco Lease superseded the 1976 Agreement in its entirety. The
term of the New Cominco Lease is for 20 years, with an option
for an additional 20 year period, and so long thereafter as
there is commercial production from the Company's mineral
rights. Under the terms of the New Cominco Lease, the Company
receives an advance royalty of $3,000.00 per quarter for the
first 5 years, $4,000.00 per quarter for the next 5 years, and
$5,500.00 per quarter thereafter. The New Cominco Lease also
provides a 3% Net Smelter Returns production royalty upon the
commencement of commercial production. During the first 3 years
of production the production royalty is fixed at $150,000.00 per
year.
b. Business of Company.
1. The Company offers no products or services to the
general public. It leases it's mineral rights described
in Part I, Item 3(a) below to Cominco American
Incorporated, who, in turn, is currently exploring for
zinc.
2. Not applicable.
3. None.
4. The Company competes with other mining companies in
connection with the acquisition of mineral properties,
some of which have substantially greater financial
resources than the Company. The Company believes no
single company has sufficient market power to affect the
price or supply of zinc in the world market.
5. Not applicable.
6. Not applicable.
7. The Company leases it's mineral rights to Cominco
American Incorporated pursuant to the New Cominco Lease
described in Part I, Item 1(a) above.
8. Under the terms of the New Cominco Lease, the Company is
not responsible for any governmental approvals with
regard to it's mineral rights. However, in the event the
Company's Lessee, Cominco American Incorporated, is
successful in placing the Company's mineral rights into
commercial production, federal, state and local
governmental permits may be required, in which case
obtaining any such permits is the responsibility of
Cominco American Incorporated.
9. Under the terms of the New Cominco Lease, the Company is
not subject to any existing or probable governmental
regulations. However, the Company's Lessee, Cominco
American Incorporated, is subject to and responsible for
all existing and future governmental regulations with
regard to reclamation.
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<PAGE> 6
10. None.
11. In the event there is commercial production from the
Company's minerals rights, the costs and effects of
compliance with environmental laws are the
responsibility of the Company's Lessee, Cominco American
Incorporated.
12. None.
c. Reports to securities holders.
1. The Company is presently not required to deliver annual
reports to security holders, but will send an annual
report, including audited financial statements, in the
future.
2. The Company is presently not a reporting company and
does not file reports with the Securities and Exchange
Commission.
3. The public may read and copy all materials the Company
files with the U.S. Securities and Exchange Commission
(the "SEC") at the SEC's Public Reference Room at 450
Fifth Street N.W., Washington, D.C. 20549. The public
may also obtain information on the operation of the
Public Reference Room by calling the SEC at
1-800-SEC-0330.
d. Not applicable.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
(a) Not Applicable.
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(1) The Company's financial condition for the years 1998 and
1999 is such that it can continue at its current level
of operations for an additional 3 years without the
necessity of additional capital. Thereafter, the Company
may require additional capital for future operating
costs and working capital. Such additional capital could
be obtained from either increased revenues from
operations (in the event the Company's mineral rights
and properties are placed into commercial production by
Cominco American Incorporated), or from the sale of
shares of the Company's authorized, but unissued, common
stock. Under the terms of the New Cominco Lease, any
production decision on the Company's mineral rights and
properties is under the sole discretion and control of
Cominco American Incorporated. Further, there are no
assurances that the Company would be able to sell shares
of its authorized, but unissued, common stock on terms
acceptable to the Company.
The Company had an operating loss of $82,545 in 1999,
versus $26,317 in 1998. The increased loss of $56,228 in
1999 was due to the increase in consulting and
management fees paid for the entire 1999 fiscal year
versus one-half of the 1998 fiscal year.
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<PAGE> 7
(i) At present there are no trends, events or
uncertainties that have or are reasonably likely
to have a material impact on the Company's
short-term or long-term liquidity.
(ii) Not Material.
(iii) At present there are no material commitments for
capital expenditures, except for the management
of its own business affairs.
(iv) There are no known trends, events or
uncertainties that have or that are reasonably
expected to have a material impact on the
revenues from operations.
(v) Income from the Company's investment in MCMLLC
for the year 1998 of $455,538 versus a loss in
the year 1999 of $7,187 was due to a one-time
gain by the Company in it's investment in MCMLLC
due to MCMLLC's sale of a significant portion of
its assets in 1998. There were no such sales in
1999.
(vi) The increase in general and administrative
expenses to $95,545 for the year 1999 versus
$35,325 in 1998 was due to the increase in
consulting and management fees of $79,567 paid
in 1999 versus $12,500 in 1998. The cause of the
net loss in the year 1999 of $71,459 versus net
income in 1998 of $429,951 was due to the
one-time income derived from the Company's
investment in MCMLLC under the Company's
structured reorganization. (See Note 3 of the
Financial Statements).
(vii) None.
(2) Not applicable.
ITEM 3. DESCRIPTION OF PROPERTY.
(a) The Company owns the mineral rights to 8,210 acres of real
property located in the County of Pend Oreille, State of
Washington. The real property to which the mineral rights are
attached consists of 5,798 acres of fee simple property, 487
acres of patented lode mining claims, and 1,925 acres of
unpatented lode mining claims. The unpatented mining claims
owned by the Company are subject to the paramount title of the
United States of America. All of the mineral rights are leased
to Cominco American Incorporated as described in Part I, Item
1(a) above.
The Company rents office facilities at 6599 Prichard Creek Road,
Murray, Idaho 83874.
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(b) Investment Policies.
(1) Not applicable.
(2) Not applicable.
(3) Not applicable.
(c) Description of Real Estate and Operating Data.
(1) Not applicable.
(2) Not applicable.
(3) The Company rents its office facilities pursuant to an
Office Service Agreement, dated June 1, 1998, as amended
on July 1, 1999, between Murrayville Land Company LLC
and the Company. The term of the agreement is
month-to-month, for $200.00 per month, plus its share of
the operating costs of the facility, and other expenses.
(4) Not applicable.
(5) Not applicable.
(6) In the opinion of management, the Company's properties
are adequately covered by insurance.
(7) Not applicable.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security Ownership of Certain Beneficial Owners.
<TABLE>
<CAPTION>
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(1) (2) (3) (4)
TITLE OF CLASS NAME AND AMOUNT AND PERCENT OF CLASS
ADDRESS OF NATURE OF
BENEFICIAL BENEFICIAL
OWNER OWNER
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<S> <C> <C> <C>
Common Metaline Contact 11,236,643 79.89%
Contact Mines LLC Direct Owner
P.O. Box 387
Murray, ID 83874(1)
Common Nor-Pac Limited 1,500,000 10.66%
Company Direct Owner
P.O. Box 412
Murray, ID 83874
</TABLE>
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Note 1: Metaline Contact Mines LLC is 99.994% owned by Nor-Pac Limited
Company.
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<PAGE> 9
(b) Security Ownership of Management.
<TABLE>
<CAPTION>
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(1) (2) (3) (4)
TITLE OF CLASS NAME AND AMOUNT AND PERCENT OF CLASS
ADDRESS OF NATURE OF
BENEFICIAL BENEFICIAL
OWNER OWNER
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<S> <C> <C> <C>
Common Richard L. Howell 3,184,161 22.64%
P.O. Box 472 Indirect Owner
Lewiston, ID 83501(1)
Common Ed Pommerening 3,184,161 22.64%
P.O. Box 369 Indirect Owner
Pinehurst, ID 83850(2)
John W. Beasley 1,592,081 11.32%
P.O. Box 387 Indirect Owner
Murray, ID 83874(3)
Common Directors & Executive 6,368,322 56.60%
Officers, as a group Indirect Owner
</TABLE>
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Note 1: Richard L. Howell is the Trustee of the R.L. and M.D. Howell
Trust, the owner of a 25% equity membership interest in Nor-Pac
Limited Company.
Note 2: Ed Pommerening is the President and Manager of Riverview
Timber Services LLC, the owner of a 25% equity membership
interest in Nor-Pac Limited Company.
Note 3: John W. Beasley is the President and Manager of J.W. Beasley
Interests LLC, a limited partner (as to 50%) of G.G.J.B. &
K.G.P.B. Holdings Limited Partnership (hereinafter referred to
as "GGJB"). GGJB is the owner of a 25% equity membership
interest in Nor-Pac Limited Company.
(c) Changes in Control.
None.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, AND PROMOTERS AND CONTROL PERSONS.
(a) Identify directors and executive officers.
(1) Richard L. Howell, age 65; John W. Beasley, age 55; Ed
Pommereing, age 52.
(2) Richard L. Howell, President and Director; John W.
Beasley, Secretary and Director; Ed Pommerening,
Director.
(3) All of the individuals named in Part I, Item 5(a)(1) and
5(a)(2) above have held their respective positions since
June 1, 1998.
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<PAGE> 10
(4) Richard L. Howell. Mr. Howell has been the President and
a director of the Company since 1998. From 1978 to 1995,
Mr. Howell was the Personal Representative of the Estate
of Nelson R. Howard and Trustee of the Testamentary
Trust created under the Will of Nelson R. Howard. Mr.
Howell is currently the President and Director of Two
Rivers International Inc., a director of Paymaster
Resources Incorporated, and the President and member of
the Board of Governors of Mission Mountain Interests
Ltd. Co., Trinidad LLC, Nor-Pac Limited Company, L-7
Land & Cattle Co. LLC, Bitterroot Holdings LLC, and
Murrayville Land Company LLC.
John W. Beasley. Mr. Beasley has been the Secretary and
a director of the Company since 1998. He holds a
Bachelor of Science degree in Agricultural Economics
from the University of California at Berkeley. From 1967
to 1975, Mr. Beasley played professional football for
the Minnesota Vikings (including Super Bowl IV) and New
Orleans Saints. From 1976 to 1982, he held numerous
management positions with the Gulf Consolidated Services
organization, including Vice President - Eastern
Hemisphere in London, England. From 1992 to present, Mr.
Beasley has been President and Manager of J.W. Beasley
Interests LLC, and is currently the President and a
director of Paymaster Resources Incorporated, Secretary
and a member of the Board of Governors of Mission
Mountain Interests Ltd. Co., Nor-Pac Limited Company,
Murrayville Land Company, Prichard Creek Resource
Partners LLC, Bitterroot Holdings LLC, and East-of-Idaho
LLC.
Ed Pommerening. Mr. Pommerening has been a director of
the Company since 1998. He holds a Bachelor of Science
degree in Forestry from the University of Idaho. From
1974 to 1982, Mr. Pommerening was the Forester for The
Bunker Hill Company, and from 1982 to 1991 for the
Bunker Limited Partnership. From 1991 through 1993, Mr.
Pommerening was the Forester for Pintlar Corp. From 1993
to the present, Mr. Pommerening has been the President
and Manager of Riverview Timber Services LLC, and is
currently the Secretary and a director of Paymaster
Resources Incorporated, and a member of the Board of
Governors of Nor-Pac Limited Company, and Bitterroot
Holdings LLC.
(5) None.
(b) Identify Significant Employees.
None.
(c) Family Relationships.
None.
(d) Involvement in Certain Legal Proceedings.
(1) None.
(2) None.
(3) None.
(4) None.
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ITEM 6. EXECUTIVE COMPENSATION.
(a) General.
(1) None.
(2) None.
(b) Summary Compensation Table.
Not applicable.
(c) Option/SAR Grants Table.
Not applicable.
(d) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR
Value Table.
Not applicable.
(e) Long-Term Incentive Plan ("LTIP") Awards Table.
Not applicable.
(f) Compensation of Directors.
1. Directors of the Company receive $175.00 for each
regularly scheduled meeting of directors, and $350.00
for each specially scheduled meeting, plus normal
out-of-pocket expenses incurred to attend said meetings.
2. None.
(g) Employment Contracts and Termination of Employment and
Change-in-Control Arrangements.
None.
(h) Reporting On Repricing of Options/SAR's.
Not applicable.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) On June 1, 1998, the Company entered into an Agreement for
Management and Consulting Services with Nor-Pac Limited Company
(hereinafter referred to as the "Management Agreement"), which
Management Agreement was amended by First Amendment to the
Agreement for Management and Consulting Services, dated January
1, 1999. Under the terms of the Management Agreement Nor-Pac
Limited Company (hereinafter referred to as "Nor-Pac") provides
the Company with certain management and consulting services, and
Nor-Pac is entitled to receive Five Hundred Thousand (500,000)
shares of the Company's authorized, but unissued, common stock
in the second half of 1998, Two Hundred Fifty Thousand (250,000)
shares quarterly in 1999, and Ten Thousand Dollars ($10,000.00)
per month thereafter commencing on January
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<PAGE> 12
1, 2000. In the event in 1999 the Company's common stock becomes
publicly traded on NASDAQ's Over-the-Counter Electronic Bulletin
Board (OTCBB), Nor-Pac shall receive as additional compensation
Five Hundred Thousand (500,000) shares of common stock and One
Million (1,000,000) shares if the Company's common stock become
listed on NASDAQ.
Nor-Pac is Seventy Five Percent (75%) owned by entities that are
owned, directly or indirectly, in whole or in part, by Richard
L. Howell, John W. Beasley and Ed Pommerening, directors of the
Company. By virtue of their respective interests in these
entities, Richard L. Howell, John W. Beasley and Ed Pommerening
may be deemed to have an indirect material interest in the
transaction.
On June 1, 1998, the Company entered into an Office Services
Agreement with Murrayville Land Company LLC (the "Office
Agreement"), which Office Agreement was amended on July 1, 1999.
Under the terms of the Office Agreement, Murrayville provides
the Company with office facilities and the use of office
equipment on a monthly basis for $200 per month, plus its
proportionate share of office overhead.
Murrayville Land Company LLC is 66.66% owned by entities that
are owned by Richard L. Howell and John W. Beasley, officers and
directors of the Company. By virtue of their respective
interests in these entities, Richard L. Howell and John W.
Beasley may be deemed to have an indirect material interest in
the transaction.
(b) Not applicable.
(c) Metaline Contact Mines LLC ("MCMLLC"), a Delaware limited
liability company, owns 79.89% of the outstanding shares of the
Company. The Company is the Managing Member of MCMLLC.
(d) Transactions With Promoters.
(1) None.
(2) None.
ITEM 8. DESCRIPTION OF SECURITIES.
(a) Common Stock.
(1) The Company is authorized to issue 20,000,000 shares of
Common Stock, par value $0.05 per share. The Company
presently has 14,064,300 shares of Common Stock issued
and outstanding, which are held by 303 shareholders.
All shares of Common Stock have equal voting rights,
and, when validly issued and outstanding, are entitled
to one vote per share in all matters to be voted upon by
shareholders. The shares of Common Stock have no
preemptive, subscription, conversion or redemption
rights and may be issued only as fully paid and
non-assessable shares. Cumulative voting in the election
of Directors is not permitted. In the event of
liquidation of the Company, each shareholder is entitled
to receive a proportionate share of the Company's assets
available for distribution to shareholders after the
payment of liabilities and after distribution in full of
preferential amounts, if any. All shares of the
Company's Common Stock issued and outstanding are fully
paid and non-assessable. Holders of the Common Stock are
entitled to a pro-rata share in dividends and
distributions
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<PAGE> 13
with respect to the Common Stock, as may be declared by
the Board of Directors out of funds legally available
therefore.
(2) Not applicable.
(3) None.
(4) None.
(b) Debt Securities.
(1) Not applicable.
(2) Not applicable.
(3) Not applicable.
(4) Not applicable.
(c) Other Securities To Be Registered.
None.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
(a) Market Information.
(1) On June 4, 1999, the Company's common stock was approved
for trading on the National Quotation Bureau's "Pink
Sheets".
(i) Not applicable.
(ii) The range of high and low bid information for
the last four quarters is as follows:
<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
2nd Quarter, 1999: $0.25 $0.0625
3rd Quarter, 1999: $0.25 $0.0625
4th Quarter, 1999: $0.25 $0.0625
1st Quarter, 2000: $0.25 $0.0625
</TABLE>
Quotations were supplied by J. Alexander
Securities Inc., Los Angeles, California, and,
commencing in the first quarter of 2000, by
Olson Paine, Spokane, Washington. Quoted prices
are inter-dealer prices, without retail mark-up,
mark-down or commissions, and may not represent
actual transactions.
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<PAGE> 14
(2) (i) Management approved the reservation of 2,000,000
shares of the Company's common stock for options
pursuant to the 1999 Stock Option Plan (the
"Stock Option Plan"). On November 15, 1999, the
Company held a Special Meeting of Shareholders,
who approved the Stock Option Plan. On November
16, 1999, the Company issued options to its
three (3) directors and an independent
consultant totaling One Million (1,000,000)
shares.
(ii) 450,000 shares.
(iii) None.
(b) Holders.
There are 303 shareholders of the Company's common stock.
(c) Dividends.
The Company has issued no dividends to date and there are no
immediate plans to issue dividends this year or in the immediate
future.
ITEM 2. LEGAL PROCEEDINGS.
(a) Neither the Company, its directors, officers or affiliates, or
owners of record or beneficially of more than 5% of any class of
voting securities, is a party to any pending legal proceedings,
nor do any of the above named parties expect to be a party to
any future legal proceedings.
(b) The Company is not aware of any governmental authority that is
contemplating legal proceedings against the Company, its mineral
rights or properties.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
(a) There have been no changes in or disagreements with accountants
on accounting and financial disclosure of the Company during the
Company's two most recent fiscal years.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
a. On October 26, 1998, the Company issued Two Hundred Fifty
Thousand (250,000) shares of its authorized, but unissued,
common stock to Nor-Pac Limited Company, an Idaho limited
liability company ("Nor-Pac"), pursuant to the terms of the
Management Agreement described in Part I, Item 7(a) above..
On January 29, 1999, the Company issued Two Hundred Fifty
Thousand (250,000) shares of its authorized, but unissued,
common stock to Nor-Pac, pursuant to the terms of the Management
Agreement described in Part I, Item 7(a) above.
On February 18, 1999, the Company issued Two Hundred Fifty
Thousand (250,000) shares of its authorized, but unissued,
common stock to Nor-Pac, pursuant to the terms of the Management
Agreement described in Part I, Item 7(a) above.
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<PAGE> 15
On July 15, 1999, the Company issued Two Hundred Fifty Thousand
(250,000) shares of its authorized, but unissued, common stock
to Nor-Pac, pursuant to the terms of the Management Agreement
described in Part I, Item 7(a) above.
On January 18, 2000, the Company issued Five Hundred Thousand
(500,000) shares of its authorized, but unissued, common stock
to Nor-Pac, pursuant to the terms of the Management Agreement
described in Part I, Item 7(a) above.
(b) There are no underwriters or public offering of the shares
mentioned above. The shares were issued to a related party
pursuant to the terms of the Agreement for Management and
Consulting Services described in Part I, Item 7(a) above.
(c) The shares were issued for other than cash. The consideration
received by the Company was the management and consulting
services provided pursuant to the terms of the Agreement for
Management and Consulting Services mentioned in Part I, Item
7(a) above.
(d) Section 4(2) of the Securities Act of 1933, as amended.
(e) Not applicable.
(f) Not applicable.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended By-Laws of the Company indemnify all of its officers and
directors, past, present and future, against any and all expenses
incurred by them, and each of them, which may be incurred in any legal
action brought against any or all of them while serving as an officer
and/or director of the Company, so long as such action(s) or refusal to
take action(s) by any or all of them was not willful, grossly negligent,
fraudulent, or with criminal intent
PART F/S
ITEM 1. FINANCIAL STATEMENTS.
The audited financial statements of the Company and related notes which
are included in this registration statement have been examined by
Williams & Webster, P.A., Certified Public Accountants, and have been
included in reliance upon the opinion of such accountants given their
authority as a expert in auditing and accounting.
- 15 -
<PAGE> 16
================================================================================
METALINE CONTACT MINES
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Williams & Webster, P.S.
Certified Public Accountants
Bank of America Financial Center
601 W. Riverside, Suite 1940
Spokane, WA 99201
================================================================================
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<PAGE> 17
METALINE CONTACT MINES
TABLE OF CONTENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statement of Changes in Stockholders' Equity 4
Statements of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6
</TABLE>
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<PAGE> 18
[WILLIAMS & WEBSTER, P.S. LETTERHEAD]
The Board of Directors
Metaline Contact Mines
Murray, Idaho
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Metaline Contact Mines as of
December 31, 1999 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. 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 Metaline Contact Mines at
December 31, 1999 and 1998, and the results of its operations, stockholders'
equity, and cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ WILLIAMS & WEBSTER, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
March 29, 2000
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<PAGE> 19
METALINE CONTACT MINES
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 321,228 $ 407,347
Federal tax deposit 1,500 --
--------- ---------
TOTAL CURRENT ASSETS 322,728 407,347
--------- ---------
OTHER ASSETS
Receivables from related parties 226,768 129,413
Investment in LLC 38,253 45,440
--------- ---------
TOTAL OTHER ASSETS 265,021 174,853
--------- ---------
TOTAL ASSETS $ 587,749 $ 582,200
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES $ 25,876 $ --
--------- ---------
TOTAL CURRENT LIABILITIES 25,876 --
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $0.05 par value; 20,000,000 shares authorized,
13,564,300 and 12,814,300 shares issued and outstanding 678,222 640,722
Additional paid-in capital 302,165 302,165
Stock options 13,632 --
Accumulated deficit (432,146) (360,687)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 561,873 582,200
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 587,749 $ 582,200
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 20
METALINE CONTACT MINES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
REVENUES
Royalty income $ 12,000 $ 9,008
------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES
Consulting and management fees 79,567 12,500
Accounting and legal fees 8,728 18,166
Transfer agent fees 957 1,169
Repairs and maintenance -- 1,082
Rent 2,075 1,050
Office 2,260 703
Utilities 135 372
Travel and meals 744 137
Taxes and licenses 79 86
Insurance -- 60
------------ ------------
Total Expenses 94,545 35,325
------------ ------------
OPERATING INCOME (LOSS) (82,545) (26,317)
------------ ------------
OTHER INCOME
Interest income 2,355 730
Dividend income 15,918 --
Income (Loss) from investment in LLC (7,187) 455,538
------------ ------------
Total Other Income 11,086 456,268
------------ ------------
NET INCOME (LOSS) BEFORE TAXES (71,459) 429,951
INCOME TAX EXPENSE -- --
------------ ------------
NET INCOME (LOSS) $ (71,459) $ 429,951
============ ============
NET INCOME (LOSS) PER COMMON SHARE $ (0.01) $ 0.03
============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 13,378,684 12,626,800
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 21
METALINE CONTACT MINES
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
Number of Total
Common Common Paid-in Accumulated Stock Stockholders'
Stock Shares Stock Capital Deficit Options Equity
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, AT DECEMBER 31, 1997 12,564,300 $ 628,222 $ 302,165 $ (790,638) $ -- $ 139,749
Issuance of stock at September 30, 1998
in payment of consulting fees at 250,000 12,500 -- -- -- 12,500
$0.05 per share
Net income for the year ended
December 31, 1998 -- -- -- 429,951 -- 429,951
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, AT DECEMBER 31, 1998 12,814,300 640,722 302,165 (360,687) -- 582,200
Issuances of stock for consulting fees at
$0.05 per share 750,000 37,500 -- -- -- 37,500
Stock options granted November 16, 1999 -- -- -- -- 13,632 13,632
Net loss for the year ended -- -- -- (71,459) -- (71,459)
December 31, 1999
---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1999 13,564,300 $ 678,222 $ 302,165 $ (432,146) $ 13,632 $ 561,873
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 21 -
<PAGE> 22
METALINE CONTACT MINES
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (71,459) $ 429,951
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Changes in assets and liabilities:
Increase in account receivable (97,355) (96,358)
Decrease in investment in LLC 7,187 --
Increase in accounts payable 25,876 --
Decrease (increase) in other assets (1,500) 52,613
Payment of expenses from stock options granted 13,632 --
Payment of expenses from issuance of stock 37,500 12,500
--------- ---------
Net cash provided (used) by operating activities (86,119) 398,706
--------- ---------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES -- --
--------- ---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES -- --
--------- ---------
Net increase (decrease) in cash and cash equivalents (86,119) 398,706
Cash and cash equivalents beginning of year 407,347 8,641
--------- ---------
Cash and cash equivalents for end of year $ 321,228 $ 407,347
========= =========
Supplemental cash flow disclosures:
Income taxes paid $ -- $ --
Interest paid $ -- $ --
NON-CASH TRANSACTIONS
Stock issued in payment of consulting and other expenses $ 37,500 $ 12,500
Payment of expenses from stock options granted $ 13,632 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 22 -
<PAGE> 23
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Metaline Contact Mines (hereinafter "Metaline") was incorporated in November of
1928 under the laws of the State of Washington for the purpose of engaging in
mining and the buying and selling of ores, metals, and minerals.
The Company was reorganized and recapitalized in 1960 and its articles of
incorporation were amended to expand its business purposes to include various
additional business activities. Metaline has continued its operations since its
formation and has historically acquired land, mineral rights, patented lode
mining claims, and timber.
In the last quarter of 1996, Metaline transferred substantially all of its
assets to a limited liability company. See Note 3 and Note 8.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented to
assist in understanding the financial statements. The financial statements and
notes are representations of the Company's management which is responsible for
their integrity and objectivity. These accounting policies conform to 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.
Earnings Per Share
Earnings per share was computed by dividing the net income (loss) by the
weighted average number of shares outstanding during the year. The weighted
average number of shares was calculated by taking the number of shares
outstanding and weighting them by the amount of time they were outstanding.
Impaired Asset Policy
The Company evaluates the recoverability of long-lived assets when events and
circumstances indicate that such assets might be impaired. The Company
determines impairment by comparing the undiscounted future cash flows estimated
to be generated by these assets to their respective carrying amounts.
- 23 -
<PAGE> 24
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Mineral Properties
Costs of acquiring, exploring, and developing mineral properties are capitalized
by project area. Costs to maintain the mineral rights and leases are expensed as
incurred. When a property reaches the production stage, the related capitalized
costs will be amortized, using the units-of-production method on the basis of
periodic estimates of ore reserves. Mineral properties are periodically assessed
for impairment of value and any losses are charged to operations at the time of
impairment.
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 sold based on the proportion of
claims sold to the claims remaining within the project area. See Note 4.
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 may differ from estimates.
NOTE 3 - INVESTMENTS IN LLC
On October 30, 1996, Metaline formed a Delaware limited liability company,
Metaline Contact Mines, LLC (hereinafter "The LLC"), and transferred
substantially all of its assets (primarily real property surface rights and
timber) to The LLC. In the remaining months of 1996, the majority of Metaline's
shareholders transferred their stock in Metaline to The LLC in exchange for
non-managing member interests in The LLC. The process of conveying stock in
exchange for LLC interests was part of a structured transaction which allowed
Metaline's primary owners to transfer equity out of a corporation and into
another entity, prior to the entity's eventual disposition. At the conclusion of
this share exchange, The LLC owned 93 percent of the outstanding stock of
Metaline. Both before and after the share exchange, Metaline was the managing
member of The LLC. See Note 5 and Note 9.
- 24 -
<PAGE> 25
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 3 - INVESTMENTS IN LLC (CONTINUED)
When Metaline formed the aforementioned LLC (as The LLC's only owner), it
transferred assets to The LLC and recorded its investment in The LLC at
$674,834, the net book value of the assets transferred. At the end of 1996, when
Metaline's former shareholders had acquired 93 percent of The LLC, Metaline
recorded a loss of $627,596 to reflect its decreased (from 100 percent to seven
percent) investment in The LLC.
In 1998, the majority of the Company's interest in The LLC was expensed in
connection with the sale of the majority of The LLC's assets. See Note 5.
In 1999, a net loss in The LLC resulted in a decreased value of the Company's
interest to $38,382.
NOTE 4 - MINERAL PROPERTIES
In 1996, Metaline transferred timber and real property surface rights to The LLC
(see Note 3) but retained underground mineral rights to the transferred real
property and its mining claims, located in Pend Oreille County in Washington
State. The timber and real property surface rights were deemed by management to
have a value equal to their recorded cost and this cost was transferred to The
LLC. The related mineral rights are carried at no cost on Metaline's books.
In 1997, Metaline and The LLC jointly leased certain Pend Oreille County real
estate and all of its mineral rights to a major mining company. See Note 6.
NOTE 5 - RELATED PARTIES
During 1996, $33,055 was advanced to The LLC for operating expenditures. At
December 31, 1998, the remaining balance was $24,055. These funds are recorded
on Metaline's books as part of a non-current, related party receivable.
During 1998, The LLC sold property for a net gain of $5,958,762. Metaline's
share of this gain was $507,858. The Company recorded a non-current, related
party receivable of $105,470 for the balance of the distribution which is
expected to be received in 2000.
In June 1998, Metaline executed an agreement with Nor-Pac Limited Company
wherein, for providing management and consulting services to Metaline, Nor-Pac
was entitled to receive 500,000 shares of Metaline common stock in the second
half of 1998, 250,000 shares of Metaline common stock quarterly in 1999 and
$10,000 per month thereafter commencing on January 1, 2000. In the event that
Metaline's common stock becomes publicly trading on NASDAQ or equivalent stock
exchange, Nor-Pac shall receive as additional compensation
- 25 -
<PAGE> 26
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 5 - RELATED PARTIES (CONTINUED)
1,000,000 shares of common stock (if public trading commences in 1999). In
September 1998, Metaline issued 250,000 shares of common stock to Nor-Pac and
also issued another 250,000 shares in January 1999.
Throughout 1999, two additional stock issuances to Nor-Pac occurred totaling
500,000 shares in payment of consulting fees for the first and second quarter of
1999. Consulting fees for the third and fourth quarter of 1999 have been accrued
and it is expected that shares will be issued in the year 2000 in full payment
of the services.
On September 20, 1999, the Company's Board of Directors approved a $95,000 loan
to Nor-Pac at an annual interest rate of 8.25%. The uncollateralized, short-term
instrument is due, in full, on September 20, 2000.
For additional information on related parties, see Notes 3, 6 and 9.
NOTE 6 - MINING LEASE WITH PURCHASE OPTION
On September 1, 1997, Metaline and The LLC acting jointly as lessors, executed
an agreement with Cominco American Incorporated (hereinafter "Cominco") wherein
Cominco received the right to explore, develop, and mine Metaline's underground
mineral rights in Pend Oreille County, Washington for a period of twenty years
with an option renewal period of the same length. Under this lease agreement,
Cominco obligates itself to pay the lessors $3,000 per quarter for the first
five years of the lease with ascending quarterly increments at each successive
five year interval.
The aforementioned quarterly disbursements are characterized by the lease as
"advance royalty payments" which may be fully offset against a three-percent
production royalty retained by the lessors.
The lease agreement, while providing that Cominco must expend $125,000 in
exploration work within the first five years of the lease, also gives Cominco
the option to purchase 200 surface acres of the leased property for fair market
value during the lease term.
From the inception of the lease through December 31, 1999, Metaline has received
$27,016 in payments from Cominco.
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<PAGE> 27
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 7 - INCOME TAXES
The Company has available at December 31, 1998 and 1999 unused operating loss
carryforwards that may be applied against future taxable income and that expire
as follows:
<TABLE>
<S> <C>
12-31-2018 $ 244,581
12-31-2019 $ 52,925
</TABLE>
No deferred tax benefit has been reported in the financial statements, as the
Company believes there is a significant chance that the net operating loss
carryforwards will expire unused. Accordingly, the potential tax benefits of the
net operating loss carryforwards are offset by a valuation allowance of the same
amount.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
All earnings from The LLC in 1997 and 1996 were attributed by The LLC's
principal owners to Metaline. Accordingly, Metaline reported these earnings as
its own taxable income (on both Metaline's and The LLC's federal income tax
returns) although Metaline retained only a 6.9861 percent interest in The LLC
from the end of 1996 to December 31, 1998. For calendar 1998 and 1999, Metaline
will report only its pro rata share (6.9861%) of taxable income from The LLC,
with other LLC members reporting their respective share of LLC taxable income.
The LLC has agreed, in writing, to indemnify Metaline for any prior year income
distributions requested by other LLC members. As of December 31, 1999, no cash
or property distributions were made by the LLC to its members for
indemnification purposes. In view of the ownership changes in The LLC, future
distributions are expected to be made by The LLC to its members as determined
from time to time by Metaline, its managing member. See Note 9 regarding a
change in LLC ownership and see Note 5 regarding related party commitment.
NOTE 9 - CHANGE IN LLC OWNERSHIP
On June 1, 1998, Nor-Pac Limited Company purchased control of Metaline from its
three principal owners at the time (Bunker Limited Partnership, Hecla Mining
Company, and Metaline Mining & Leasing Company) by acquiring these entities'
interests in Metaline Contact Mines LLC. See Note 1 and Note 5.
- 27 -
<PAGE> 28
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 10 - STOCK OPTIONS
Metaline adopted a stock option plan on November 16, 1999. Under the plan, the
Company may grant options for up to 2,000,000 shares of common stock at an
initial exercise price of $0.125. The options may be exercised until November
16, 2009, at which time they expire.
Following is a summary of the status of fixed options outstanding at December
31, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
--------- ------
<S> <C> <C>
Outstanding, January 1, 1999 -- $ --
Granted 1,000,000 0.125
Exercised -- --
Forfeited -- --
Expired -- --
--------- ------
Outstanding, December 31, 1999 1,000,000 $0.125
========= ======
Exercisable, December 31, 1999 1,000,000 $0.125
========= ======
</TABLE>
NOTE 11 - SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the following event occurred:
On March 1, 2000, a payment of $25,000 was received from Metaline Contact Mines
LLC, which will be applied to the account receivable from related parties. See
Note 5.
- 28 -
<PAGE> 29
PART III
ITEM 1. INDEX TO EXHIBITS.
<TABLE>
<CAPTION>
Exhibit Number Title Page
-------------- ----- ----
<S> <C> <C>
3(i) Articles of Incorporation 30
3(ii) By-Laws 45
10(i) Mining Lease With Purchase Option 57
10(ii)(A) Agreement for Management and Consulting Services 97
</TABLE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
DATED this the 14th day of July, 2000. "Registrant"
METALINE CONTACT MINES
By: /s/ JOHN W. BEASLEY
---------------------------------
John W. Beasley
Secretary
ITEM 2. DESCRIPTION OF EXHIBITS.
<TABLE>
<S> <C>
3(i) A complete copy of the Company's Articles of Incorporation, as amended.
3(ii) A complete copy of the Company's By-Laws, as amended.
10(i) A complete copy of the Mining Lease With Purchase Option.
10(ii)(A) A complete copy of the Agreement for Management and Consulting
Services, as amended.
</TABLE>
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