<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period from 7-1-00 to 9-30-00
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
ACT.
For the transition period from __________ to __________.
Commission file number 000-31025
METALINE CONTACT MINES
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
Washington 91-0779945
--------------------------------- ----------------------------------
(State or jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
</TABLE>
6599 Prichard Creek Road, Murray, ID 83874
------------------------------------------
(Address of principal executive offices)
208-682-2217
------------------------
(Issuer's telephone number)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: 14,064,300
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. PLAN OF OPERATION
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
METALINE CONTACT MINES
TABLE OF CONTENTS
<TABLE>
<S> <C>
ACCOUNTANT'S REVIEW REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statement of Stockholders' Equity 4
Statements of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6
</TABLE>
<PAGE> 4
The Board of Directors
Metaline Contact Mines
Murray, Idaho
ACCOUNTANT'S REVIEW REPORT
We have reviewed the accompanying balance sheet of Metaline Contact Mines as of
September 30, 2000 and the related statements of operations, stockholders'
equity and cash flows for the nine months and three months ended September 30,
2000 and September 30, 1999, respectively. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The financial statements for the year ended December 31, 1999 were audited by us
and we expressed an unqualified opinion on them in our report dated March 29,
2000, but we have not performed any auditing procedures since that date.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, WA
October 31, 2000
<PAGE> 5
METALINE CONTACT MINES
FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
WILLIAMS & WEBSTER, P.S.
CERTIFIED PUBLIC ACCOUNTANTS
BANK OF AMERICA FINANCIAL CENTER
601 W. RIVERSIDE, SUITE 1940
SPOKANE, WA 99201
<PAGE> 6
METALINE CONTACT MINES
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited)
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 353,991 $ 321,228
Federal tax deposit -- 1,500
--------- ---------
Total Current Assets 353,991 322,728
--------- ---------
OTHER ASSETS
Receivables from related parties 109,413 226,768
Prepaid expenses 1,000 --
Investment in LLC 37,535 38,253
--------- ---------
Total Other Assets 147,948 265,021
--------- ---------
TOTAL ASSETS $ 501,939 $ 587,749
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -- $ 25,876
Unrealized royalty income 3,000 --
--------- ---------
Total Current Liabilities 3,000 25,876
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $0.05 par value; 20,000,000 shares authorized,
14,064,300 and 13,564,300 shares issued and outstanding 703,222 678,222
Additional paid-in capital 302,165 302,165
Stock options 13,632 13,632
Accumulated deficit (520,080) (432,146)
--------- ---------
Total Stockholders' Equity 498,939 561,873
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 501,939 $ 587,749
========= =========
</TABLE>
See accompanying notes and accountant's review report.
2
<PAGE> 7
METALINE CONTACT MINES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
-------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ -- $ -- $ -- $ --
------------ ------------ ------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES
Consulting and management fees 30,075 12,500 90,075 37,785
Accounting and legal fees 1,192 104 11,903 7,442
Transfer agent fees 276 207 579 450
Office 5,622 942 7,344 2,703
Utilities -- 44 4 135
Travel and meals 81 -- 1,594 --
Taxes and licenses 10 20 69 79
------------ ------------ ------------ ------------
Total Expenses 37,256 13,817 111,568 48,594
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (37,256) (13,817) (111,568) (48,594)
------------ ------------ ------------ ------------
OTHER INCOME
Royalty income 3,000 3,000 9,000 9,000
Interest income 40 653 3,563 653
Dividend income 5,148 5,440 12,526 12,972
Miscellaneous income (expense) (755) 653 (755) 653
Income (Loss) from investment in LLC (318) (300) (700) (900)
------------ ------------ ------------ ------------
Total Other Income 7,115 9,446 23,634 22,378
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE TAXES (30,141) (4,371) (87,934) (26,216)
INCOME TAX EXPENSE -- -- -- --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (30,141) $ (4,371) $ (87,934) $ (26,216)
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE,
BASIC AND DILUTED $ nil $ nil $ nil $ nil
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING,
BASIC AND DILUTED 13,378,684 12,626,800 13,378,684 12,626,800
============ ============ ============ ============
</TABLE>
See accompanying notes and accountant's review report.
3
<PAGE> 8
METALINE CONTACT MINES
STATEMENT OF STOCKHOLDERS' EQUITY
<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
$0.05 per share 250,000 12,500 -- -- -- 12,500
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 to officers and
directors for consulting fees -- -- -- -- 13,632 13,632
Net loss for the year ended
December 31, 1999 -- -- -- (71,459) -- (71,459)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1999 13,564,300 678,222 302,165 (432,146) 13,632 561,873
Issuances of stock for accounts payable at
$0.05 per share 500,000 25,000 -- -- -- 25,000
Net loss for the period ended
September 30, 2000 -- -- -- (87,934) -- (87,934)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE, September 30, 2000 (unaudited) 14,064,300 $ 703,222 $ 302,165 $ (520,080) $ 13,632 $ 498,939
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes and accountant's review report.
4
<PAGE> 9
METALINE CONTACT MINES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
--------------------------------
September 30, September 30,
2000 1999
(Unaudited) (Unaudited)
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (87,934) $ (26,216)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Changes in assets and liabilities:
(Increase) decrease in federal tax deposit 1,500 (293)
(Increase) decrease in account receivable 117,355 (95,653)
(Increase) in prepaid expenses (1,000) --
(Increase) decrease in investment in LLC 718 901
Increase (decrease) in accounts payable (25,876) --
Increase (decrease) in unrealized royalty income 3,000 --
Payment of expenses from issuance of stock 25,000 37,500
--------- ---------
Net cash provided (used) by operating activities 32,763 (83,761)
--------- ---------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES -- --
--------- ---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES -- --
--------- ---------
Net increase (decrease) in cash and cash equivalents 32,763 (83,761)
Cash and cash equivalents beginning of period 321,228 407,347
--------- ---------
Cash and cash equivalents for end of period $ 353,991 $ 323,586
========= =========
Supplemental cash flow disclosures:
Income taxes paid $ -- $ --
========= =========
Interest paid $ -- $ --
========= =========
NON-CASH TRANSACTIONS
Stock issued in payment of consulting and other expenses $ 25,000 $ 37,500
========= =========
</TABLE>
See accompanying notes and accountant's review report.
5
<PAGE> 10
MCM
WEIGHTED AVERAGE CALCULATION
<TABLE>
<CAPTION>
TOTAL DAYS TOTAL WEIGHTED
DAYS IN FROM SHARES AVERAGE
PERIOD INCEPTION FACTOR OUTSTANDING OUTSTANDING
------- ---------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C>
CALCULATION FROM INCEPTION
03-12-1999 to 03-24-1999 12 504 0.0238095 0 0
03-25-1999 to 03-16-2000 327 504 0.6488095 4,300,000 2,789,881
03-17-2000 to 04-16-2000 30 504 0.0595238 4,340,000 258,333
04-17-2000 to 07-09-2000 83 504 0.1646825 4,483,037 738,278
07-10-2000 to 08-31-2000 52 504 0.1031746 4,433,037 457,377
---------- ------------
504 1 4,243,869
============
3 MOS ENDED 8-31-1999
06-01-1999 to 08-31-1999 92 92 1 4,300,000 4,300,000
---------- ------------
92 1 4,300,000
============
CALCULATION FROM INCEPTION
TO 08-31-1999
03-12-1999 to 03-24-1999 12 181 0.0662983 0 0
03-25-1999 to 08-31-1999 169 181 0.9337017 4,300,000 4,014,917
---------- ------------
181 1 4,014,917
============
3 MOS ENDED 8-31-2000
06-01-2000 to 07-09-2000 39 92 0.423913 4,483,037 1,900,418
07-10-2000 to 08-31-2000 53 92 0.576087 4,433,037 2,553,815
---------- ------------
92 1 4,454,233
============
6 MOS ENDED 08-31-2000
03-01-2000 to 03-16-2000 16 184 0.0869565 4,300,000 373,913
03-17-2000 to 04-16-2000 30 184 0.1630435 4,340,000 707,609
04-17-2000 to 07-09-2000 83 184 0.451087 4,483,037 2,022,240
07-10-2000 to 08-31-2000 55 184 0.298913 4,433,037 1,325,093
---------- ------------
184 1 4,428,854
============
</TABLE>
<PAGE> 11
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
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.
Interim Financial Statements
The interim financial statements as of and for the period ended September 30,
2000 included herein have been prepared for the Company without audit. They
reflect all adjustments, which are, in the opinion of management, necessary to
present fairly the results of operations for these periods. All such adjustments
are normal recurring adjustments. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full fiscal year.
Use of Estimates
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
6
<PAGE> 12
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
The carrying amounts for cash, receivables, and payables approximate their fair
value.
Derivative Instruments
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This 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 September 30, 2000, the Company has not engaged in any transactions that
would be considered derivative instruments or hedging activities.
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. The
Company does not believe any adjustments are needed to the carrying value of its
assets at September 30, 2000.
Investments
The Company accounts for its investment in Metaline Contact Mines LLC using the
equity method. See Note 3.
Compensated Absences
Currently, the Company has no employees; therefore it is impracticable to
estimate the amount of compensation for future absences and no liability has
been recorded in the accompanying financial statements. The Company's policy
will be to recognize the costs of compensated absences when actually paid to
employees.
Basic and Diluted Loss Per Share
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding. Basic and diluted loss
per share was the same, as there were no common stock equivalents outstanding.
7
<PAGE> 13
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 3 - INVESTMENTS IN LLC
On October 30, 1996, Metaline formed a Delaware limited liability company,
Metaline Contact Mines, LLC (hereinafter "The LLC"). Upon organization of The
LLC, The Company transferred substantially all of its assets (primarily real
property surface rights and timber) to The LLC. The Company recorded its initial
investment in The LLC at $674,834, the net book value of the assets transferred.
At the time of The LLC's formation, the Company was the sole member in The LLC,
representing 100% ownership.
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.
At the beginning of 1998, the Company's former shareholders acquired 93 percent
of The LLC by transferring their stock in the Company to The LLC in exchange for
non-managing member interests. At the conclusion of this share exchange, the
Company's percentage of ownership in The LLC was reduced to seven percent (7%).
The Company wrote down its initial investment by 93%, thus a loss of $627,596
was recorded to reflect its diluted investment in The LLC. After the write down
of its investment, application of The LLC's capital gains, and The LLC's
operating loss for the year ended December 31, 1998, the value of the Company's
investment in The LLC was $45,440.
Both before and after the share exchange, the Company was the managing member of
The LLC. See Note 5 and Note 9.
In 1999, a net loss in The LLC resulted in a decreased value of the Company's
interest to $38,383.
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
September 30, 2000, the remaining balance was approximately $4,000. These funds
are recorded on Metaline's books as part of a non-current, related party
receivable.
8
<PAGE> 14
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 5 - RELATED PARTIES (CONTINUED)
During 1998, The LLC sold property for a net gain of $5,958,762. Metaline's
share of this gain before adjustment of the Company's investment from The LLC's
operating results and write down from its substantial decrease in ownership of
The LLC (See Note 3) 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 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.
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.
9
<PAGE> 15
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 6 - MINING LEASE WITH PURCHASE OPTION (CONTINUED)
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.
NOTE 7 - INCOME TAXES
The Company has available unused operating loss carryforwards that may be
applied against future taxable income of $244,581 and $52,925 expiring on
December 31, 2018 and 2019, respectively.
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. The estimated operating loss attributed to the nine months ended
September 30, 2000 was $87,000.
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.
10
<PAGE> 16
METALINE CONTACT MINES
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 10 - STOCK OPTIONS
On November 16, 1999, the board of directors approved the Metaline Contact Mines
1999 Stock Option Plan. This plan allows the Company to distribute up to
2,000,000 shares of common stock shares to officers, directors, employees and
consultants through the authorization of the Company's board of directors at an
initial exercise price of $0.125. The options may be exercised until November
16, 2009, at which time they expire.
The fair value of each option granted was estimated on the grant date using the
Black-Scholes Option Price Calculation. The following assumptions were made to
estimate fair value: the risk-free interest rate is 6.11%, volatility is 0.3,
and the expected life of the options is ten years. Accordingly, $13,632 of the
option's expense was initially recorded in the Company's financial statements as
consulting and management fees. In accordance with Financial Accounting Standard
No. 123 paragraph 115, this expense was deemed to be an estimate, subject to
adjustment by decreasing the expense in the period of forfeiture.
Following is a summary of the status of fixed options outstanding at December
31, 1999 and September 30, 2000:
<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
========= =========
Outstanding, January 1, 2000 1,000,000 $ 0.125
Granted -- --
Exercised -- --
Forfeited -- --
Expired -- --
--------- ---------
Outstanding, September 30, 2000 1,000,000 $ 0.125
========= =========
Exercisable, September 30, 2000 1,000,000 $ 0.125
========= =========
</TABLE>
11
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
(a) Plan of Operation.
(1) The Company's Plan of Operation for the next twelve months will
be to maintain its compliance with the terms and conditions of
the New Cominco Lease, and its reporting requirements under the
Securities Exchange act of 1934, as amended.
Under the terms of the New Cominco Lease, the Company is not
required to participate financially in any exploration,
development or mining expenditures initiated by Cominco. All
such requirements are for the sole account of Cominco.
Additionally, Cominco pays the Company advance royalties of
$12,000 per year for the first five (5) years of the term of the
New Cominco Lease, $18,000 per year for the next five (5) years,
and $22,000 per year thereafter against a 3% Net Smelter Return
royalty on production in the event any of the Company's mineral
holdings subject to the New Cominco Lease commence commercial
production.
(i) It is the opinion of management that the Company has
sufficient cash reserves, and other income in the form
of advance royalties and interest on its cash reserves,
to satisfy its cash requirements for the next three (3)
years. The Company will not need to raise any additional
funds in the next twelve (12) months.
(ii) The Company is not involved in any product research and
development.
(iii) The Company does not expect to purchase or sell any
plant, or significant equipment.
(iv) The Company does not expect to change the number of
employees.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any legal proceedings. Management is not
aware of any threatened litigation, claims or assessments.
ITEM 2. CHANGES IN SECURITIES.
There has been no change in securities since January 8, 2000.
All of the Company's issuance of securities was disclosed in its Amended
Form 10-SB (Filed on ____________, 2000).
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
<PAGE> 18
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
No exhibits required.
There were no reports filed on Form 8-K during the three month period
ended September 30, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DATED this the 15th day of October, 2000.
METALINE CONTACT MINES
By: /s/ John W. Beasley
-----------------------------------
John W. Beasley
Secretary
