| þ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period from 4-01-05 to 6-30-05 |
| o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT. |
| For the transition period from _____________ to _____________ |
| Commission file number 000-31025 | ||
| Washington | 91-0779945 | |
| (State or jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
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| EXHIBIT 31.1 | ||||||||
| EXHIBIT 31.2 | ||||||||
| EXHIBIT 32.1 | ||||||||
| EXHIBIT 32.2 | ||||||||
-2-
F-1
F-2
F-3
F-4
F-5
F-6
F-7
F-8
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-5-
The Company has prepared the unaudited financial statements presented below in accordance
with accounting principles generally accepted in the United States for interim financial
information, as well as the instructions to Form 10-QSB. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting principles for
complete financial statements. However, the financial statements have been reviewed by the
Company’s independent auditors, Williams & Webster, P.S., using professional standards and
procedures for conducting such reviews established by generally accepted auditing standards,
and we include herewith their report. It is the opinion of the Company’s management that
all adjustments considered necessary for the fair presentation of the interim financial
statements have been included. Operating results for the three-month period ended June 30,
2005 are not necessarily indicative of the results that may be expected for the full year
ending December 31, 2005.
For further information refer to the financial statements and footnotes thereto in the
Company’s Annual Report on Form 10-KSB for the year ended December 31, 2004.
Table of Contents
Table of Contents
Table of Contents
Table of Contents
JUNE 30, 2005
Table of Contents
JUNE 30, 2005
The Company is receiving royalty payments related to a lease agreement with Teck Cominco American,
Inc. (hereinafter “Teck Cominco”). Under the terms of the agreement, Teck Cominco has the right to
explore, develop, and mine the Company’s underground mineral rights in Pend Oreille County,
Washington for a period of twenty years with an option renewal period of the same length. Teck
Cominco is currently obligated to pay the Company $3,880 per quarter, with ascending quarterly
increments at each successive five year interval. The lease characterizes the aforementioned
quarterly disbursements as “advance royalty payments” which may be fully offset against a
three-percent production royalty retained by the Company. The lease agreement gives Teck 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 June 30, 2005, the Company has received
$113,379 in payments from Teck Cominco.
In January 2004, the Company issued 466,954 shares of its common stock to Paymaster Resources
Incorporated (hereinafter “Paymaster”), a related party (due to common officers and
directors), in order to acquire Paymaster’s interest in the Golden Chest Mine minerals lease to
patented mining claims in Shoshone County, Idaho. In this transaction, the Company also acquired
Paymaster’s interest in an exploration agreement with New Jersey Mining Company, which relates to
the aforementioned mining claims.
Table of Contents
JUNE 30, 2005
Options Outstanding
Options Exercisable
Weighted
Number of
Average
Number of
Shares
Remaining
Weighted
Shares
Weighted
Under
Contractual
Average
Under
Average
Exercise
Options
Life
Exercise
Options
Exercise
Price
Outstanding
(Years)
Price
Exercisable
Price
$
0.06
500,000
4.37
$
0.06
500,000
$
0.06
0.125
1,000,000
4.37
0.125
1,000,000
0.125
0.15
250,000
4.37
0.15
250,000
0.15
$
0.06-0.15
1,750,000
4.37
$
0.11
1,750,000
$
0.11
Table of Contents
JUNE 30, 2005
Table of Contents
RESULTS OF OPERATIONS
The Company had gross operating revenues from its 2 mineral projects of $5,204 during the
second quarter of 2005, versus $8,680 in 2004, broken down as follows:
Golden Chest Mine
The Company’s Golden Chest Mine generated revenues from operations of $1,324 in the second
quarter of 2005, versus $4,800 in the second quarter of 2004. The decrease of $3,476 was
the difference between the fair market value of the stock payment received during the
second quarter of 2004 from New Jersey Mining Company (hereinafter “New Jersey”) during the
exploration agreement on the mine, and actual cash NSR royalty payments received in the
second quarter of 2005 from the development ore mined during the 2004 ramp project.
Pend Oreille/Metaline Zinc Mines
The amount of the advanced royalties received from Teck Cominco American Incorporated
(hereinafter “Teck Cominco”) under the New Cominco Lease remained constant at $3,880 in the
second quarters of 2005 and 2004.
Operating Loss
The Company experienced an overall operating loss of $7,199 in the second quarter of 2005,
versus $5,992 in the second quarter of 2004. The increased loss was mainly due the
decrease in revenues received from the Golden Chest Mine project discussed above.
There was a $2,269 decrease in administrative expenses in the second quarter of 2005 to
$12,403, versus $14,672 in the second quarter of 2004. The decrease is attributable to: a
decrease of $490 in accounting fees; $608 in financial printing expenses; $1,738 in rent
expense; and $1,760 in transfer agent fees. These decreases were, however, offset by
increases of $1,345 in promotional fees, and other office expense-type items. Promotional
expenses have been increasing due to management’s efforts to introduce the Company and its
projects to the investment community.
Other Income
During the second quarter of 2005, the Company’s other income increased by $516, to $2,341,
from $1,825 in 2004, due to an increase in dividend income of $368, and the Company having
no loss on its 7% membership interest in Metaline Contact Mines LLC. Interest income
remained constant at $1,915 for the second quarters of 2005 and 2004.
FINANCIAL CONDITION
It is management’s opinion that the Company can continue as an on-going business at its
current level of operations for approximately 2 years without the infusion of additional
capital. Additional capital could be obtained from: increased revenues from operations;
the sale of shares of the Company’s authorized, but unissued, common stock; and/or the sale
of certain of the Company’s assets.
Table of Contents
On the subject of increasing revenues from operations, production decisions on the
Company’s mineral projects are under the sole control of third parties; namely, Teck
Cominco and New Jersey. However, during the second quarter of 2005, New Jersey commenced
commercial mining operations at the Company’s Golden Chest Mine. Anticipated production is
50 metric ton per day from which the Company will receive NSR production royalties. At
this time, however, the Company is unable to project the impact these NSR royalty revenues
will have on the Company’s future earnings due to the newness of the mining operation.
LIQUIDITY AND CAPITAL RESOURCES
Traditionally, the Company has funded its capital requirements from revenues from
operations, dividends earned on its cash accounts, and other income. As of June 30, 2005,
the Company’s cash position was $84,794, compared to $90,652 on June 30, 2004. The Company
has no debt, and does not expect to incur any debt in the immediate future. The Company’s
most significant cash requirements are professional fees and expenses associated with its
Securities and Exchange Commission reporting requirements.
The Company has a related party receivable from Nor-Pac Limited Company in the amount of
$109,413, with accrued interest of $34,466, as of June 30, 2005. The Company believes it
has the ability to collect this receivable in the event of a shortfall of cash. In
addition, the Company owns 60,000 shares of New Jersey common stock with a recorded value
of $25,600, which shares could be sold pursuant to Rule 144 of the Securities Act of 1933,
as amended.
Subsequent Event
On July 28, 2005, the Company received NSR production royalties from New Jersey, as
follows: $777.00 from the sale of sulfide concentrates generated from commercial mining
operations at the Golden Chest Mine during a portion of the second quarter of 2005; and
$75.31 from the sale of the balance of the higher-grade material recovered from the
cleanout of New Jersey’s ball mill from development ore mined during the 2004 ramp project.
The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) performed
an evaluation of the effectiveness of the design and operation of the Company’s disclosure
controls and procedures. On that evaluation, the CEO and CFO concluded that the Company’s
current disclosure controls and procedures were effective as of March 31, 2005 in ensuring
that all material information required in this quarterly report has been made known to them
in a timely fashion.
There have been no changes in the Company’s internal controls over financial reporting
during the quarter ended March 31, 2005 that has materially affected, or is reasonably
likely to materially affect, its internal controls over financial reporting.
For further information refer to the Controls and Procedures section in the Company’s
Annual Report on Form 10-KSB for the year ended December 31, 2004, incorporated herein by
reference.
The Company is not a party to any legal proceedings, and management is not aware of any
threatened litigation, claims or assessments.
Table of Contents
There has been no change in securities for the quarter ending June 30, 2005.
Subsequent Event
On July 22, 2005, the Company issued 1,000,000 of its authorized, but unissued, common
stock to Paymaster Resources Incorporated (“Paymaster”) pursuant to its agreement with
Paymaster to acquire the lease on the Golden Chest Mine.
None.
None.
None
(a)
Exhibit 31.1 — Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 — Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1 — Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2 — Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b)
No Form 8-K’s were filed during the 2nd quarter of 2005.
DATED this the 12th day of August, 2005
METALINE CONTACT MINES
By:
/s/ John W. Beasley
John W. Beasley
Secretary/Treasurer/CFO
EXHIBIT 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard l. Howell, President and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB being filed for Metaline Contact Mines (the "Registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
(a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of the Registrant's Board of Directors (or persons performing the equivalent functions):
(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weakness in internal controls; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's controls.
6. The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: August 12, 2005
/s/ Richard L. Howell
---------------------------------
Richard L. Howell
President and Chief Executive
Officer
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EXHIBIT 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John W. Beasley, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB being filed for Metaline Contact Mines (the "Registrant");
2. Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report.
4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
(i) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made to us by others within those entities, particularly during the period in which this quarterly report is being prepared.
(ii) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
(iii) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of the Registrant's Board of Directors (or persons performing the equivalent functions):
(i) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weakness in internal controls; and
(ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's controls; and
6. The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: August 12, 2005
/s/ John W. Beasley
--------------------------------
John W. Beasley
Secretary/Treasurer & CFO
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EXHIBIT 32.1
METALINE CONTACT MINES
CERTIFICATION PURSUANT TO
18 U.S.C. OF SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Metaline Contact Mines (the "Company") on Form 10-QSB for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard L. Howell, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
By: /s/ Richard L. Howell
-----------------------------
Richard L. Howell
President & Chief Executive
Officer
August 12, 2005
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EXHIBIT 32.2
METALINE CONTACT MINES
CERTIFICATION PURSUANT TO
18 U.S.C. OF SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Metaline Contact Mines (the "Company") on Form 10-QSB for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John W. Beasley, Secretary, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
By: /s/ John W. Beasley
-----------------------------
John W. Beasley
Secretary, Treasurer & Chief
Financial Officer
August 12, 2005
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