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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period from 7-01-06 to 9-30-06
 o
    
    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
 
  Washington
    
    91-0779945(State or jurisdiction of incorporation or 
organization)
    
    (IRS Employer Identification No.)
  
   
  14,883,189
 o o
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TABLE OF CONTENTS
  
 PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    F-1Item 2. Managements Discussion and Analysis
    
    
    3Item 3. Controls and Procedures
    
    
    5PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    5Item 2. Changes in Securities
    
    
    5Item 3. Defaults Upon Senior Securities
    
    
    5Item 4. Submission of Matters to a Vote of Security Holders
    
    
    5Item 5. Other Information
    
    
    5Item 6. Exhibits and Reports on Form 8-K
    
    
    6SIGNATURES
    
    
    7EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
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PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
  F-1




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METALINE CONTACT MINES  BALANCE SHEETS
 September 30,2006
    
    
    December 31,(unaudited)
    
    
    2005ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    83,088
    
    
    $
    82,772Royalties receivable
    
    
    2,716
    
    
    
    Prepaid expenses
    
    
    
    
    
    
    2,000Total Current Assets
    
    
    85,804
    
    
    
    84,772OTHER ASSETSRelated party receivable
    
    
    100,000
    
    
    
    109,413Accrued interest  related party receivable
    
    
    43,875
    
    
    
    38,296Investments
    
    
    25,625
    
    
    
    25,600Website, net of amortization
    
    
    333
    
    
    
    583Other asset
    
    
    250
    
    
    
    250Total Other Assets
    
    
    170,083
    
    
    
    174,142PROPERTY & EQUIPMENTMineral lease, net of depletion
    
    
    249,948
    
    
    
    249,977Machinery and equipment
    
    
    599
    
    
    
    250,547
    
    
    
    249,977TOTAL ASSETS
    
    $
    506,434
    
    
    $
    508,891LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESRoyalties payable  Golden Chest Mine
    
    $
    1,358
    
    
    $
    Unearned royalty income
    
    
    3,880
    
    
    
    3,880Total Current Liabilities
    
    
    5,238
    
    
    
    3,880COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS EQUITYCommon stock, $0.05 par value;
20,000,000 shares authorized, 14,883,189 and
14,783,189 shares issued and outstanding, respectively
    
    
    781,570
    
    
    
    776,570Additional paid-in capital
    
    
    503,040
    
    
    
    483,040Stock options
    
    
    47,907
    
    
    
    47,907Accumulated deficit
    
    
    (831,321
    )
    
    
    (802,506
    )Total Stockholders Equity
    
    
    501,196
    
    
    
    505,011TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    506,434
    
    
    $
    508,891
  F-2




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METALINE CONTACT MINES  STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)REVENUESRoyalty income
    
    $
    9,211
    
    
    $
    8,483
    
    
    $
    26,449
    
    
    $
    58,566GENERAL AND ADMINISTRATIVE EXPENSESAdministrative expenses
    
    
    12,805
    
    
    
    10,076
    
    
    
    63,001
    
    
    
    46,418TOTAL EXPENSES
    
    
    12,805
    
    
    
    10,076
    
    
    
    63,001
    
    
    
    46,418OPERATING INCOME (LOSS)
    
    
    (3,594
    )
    
    
    (1,593
    )
    
    
    (36,552
    )
    
    
    12,148OTHER INCOME (EXPENSE)Dividend income
    
    
    804
    
    
    
    517
    
    
    
    2,158
    
    
    
    1,251Interest income
    
    
    1,749
    
    
    
    1,915
    
    
    
    5,579
    
    
    
    5,744TOTAL OTHER INCOME
    
    
    2,553
    
    
    
    2,432
    
    
    
    7,737
    
    
    
    6,995INCOME (LOSS) BEFORE TAXES
    
    
    (1,041
    )
    
    
    839
    
    
    
    (28,815
    )
    
    
    19,143INCOME TAX EXPENSE
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME (LOSS)
    
    $
    (1,041
    )
    
    $
    839
    
    
    $
    (28,815
    )
    
    $
    19,143NET INCOME (LOSS) PER COMMON SHARE,
BASIC AND DILUTED
    
    $
    nil
    
    
    $
    nil
    
    
    $
    nil
    
    
    $
    nilWEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING,
BASIC
    
    
    14,883,189
    
    
    
    14,783,189
    
    
    
    14,827,633
    
    
    
    14,116,522
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METALINE CONTACT MINES  STATEMENTS OF CASH FLOWS
 Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005(unaudited)
    
    
    (unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (28,815
    )
    
    $
    19,143Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:Amortization expense
    
    
    279
    
    
    
    250Stock issued for professional fees
    
    
    25,000
    
    
    
    Changes in assets and liabilities:Increase in accounts receivable
    
    
    (2,716
    )
    
    
    Decrease in note receivable
    
    
    9,413
    
    
    
    Increase in accrued interest receivable
    
    
    (5,579
    )
    
    
    (5,744
    )Decrease in prepaid expenses
    
    
    2,000
    
    
    
    Increase in investment
    
    
    (25
    )
    
    
    Increase in accounts payable
    
    
    1,358
    
    
    
    523Net cash used by operating activities
    
    
    915
    
    
    
    14,172CASH FLOWS USED BY INVESTING ACTIVITIES:
    
    
    (599
    )
    
    
    (20,500
    )CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
    
    
    
    
    
    
    (1,414
    )Net decrease in cash and cash equivalents
    
    
    316
    
    
    
    (7,742
    )Cash at beginning of period
    
    
    82,772
    
    
    
    90,652Cash at end of period
    
    $
    83,088
    
    
    $
    82,910SUPPLEMENTAL CASH FLOW DISCLOSURES:Income taxes paid
    
    $
    
    
    
    $
    Interest paid
    
    $
    
    
    
    $
    NON-CASH TRANSACTIONS:Rent expense paid with NJMC stock
    
    $
    
    
    
    $
    20,500Royalty income received in NJMC stock
    
    $
    
    
    
    $
    41,000Stock issued for acquisition of Golden Chest Mine Lease
    
    $
    
    
    
    $
    250,000
  F-4




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METALINE CONTACT MINES  CONDENSED NOTES TO THE FINANCIAL STATEMENTS  SEPTEMBER 30, 2006
 NOTE 1  ORGANIZATION AND DESCRIPTION OF BUSINESS
     NOTE 2  BASIS OF PRESENTATION
    F-5




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METALINE CONTACT MINES  CONDENSED NOTES TO THE FINANCIAL STATEMENTS  SEPTEMBER 30, 2006
 NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Accounting Method
  Basic and Diluted Net Loss Per Share
  Cash and Cash Equivalents
  Compensated Absences
  Concentration of Risk
  Derivative Instruments
  F-6




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METALINE CONTACT MINES  CONDENSED NOTES TO THE FINANCIAL STATEMENTS  SEPTEMBER 30, 2006
    Fair Value of Financial Instruments
  Investments
  Recent Accounting Pronouncements
    F-7




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METALINE CONTACT MINES  CONDENSED NOTES TO THE FINANCIAL STATEMENTS  SEPTEMBER 30, 2006
  Revenue Recognition
  Use of Estimates
  NOTE 4  MINERAL PROPERTIES
 Pend Oreille/Metaline Zinc Mines
  F-8




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METALINE CONTACT MINES  CONDENSED NOTES TO THE FINANCIAL STATEMENTS  SEPTEMBER 30, 2006
  Golden Chest Mine
  NOTE 5  RELATED PARTY TRANSACTIONS
   NOTE 6  INCOME TAXES
  F-9




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METALINE CONTACT MINES  NOTES TO THE FINANCIAL STATEMENTS  SEPTEMBER 30, 2006
  NOTE 7  STOCK OPTIONS
  Options Outstanding
    
    
    Options ExercisableWeighted AverageRemainingContractual Life
    
    
    Weighted Average
    
    
    
    
    
    
    Weighted AverageExercise Price
    
    Number Outstanding
    
    
    (Years)
    
    
    Exercise Price
    
    
    Number Exercisable
    
    
    Exercise Price$0.06
    
    
    500,000
    
    
    
    3.12
    
    
    $
    0.06
    
    
    
    500,000
    
    
    $
    0.060.125
    
    
    1,000,000
    
    
    
    3.12
    
    
    
    0.125
    
    
    
    1,000,000
    
    
    
    0.1250.15
    
    
    250,000
    
    
    
    3.12
    
    
    
    0.15
    
    
    
    250,000
    
    
    
    0.15$0.06-0.15
    
    
    1,750,000
    
    
    
    3.12
    
    
    $
    0.11
    
    
    
    1,750,000
    
    
    $
    0.11
 NOTE 8  COMMON STOCK
   F-10




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
       Golden Chest Mine
  Pend Oreille/Metaline Zinc Mines
  Operating Loss
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Other Income
  Loss Before Taxes
     (a)
    
    Collection of Receivables. We have a related party receivable from Nor-Pac Limited
Company (Nor-Pac) of $100,000, with accrued interest of $43,875, as of September 30, 2006.
Nor-Pac owns approximately 81% of our outstanding shares, and has related directors.
Accordingly, we believe we have the ability to collect this receivable in the event of a
shortfall of cash.(b)
    
    Increase Royalty Revenues. As a royalty-based company, increasing our royalty
revenues from our current mining projects are under the control of our lessees, Teck Cominco
and New Jersey Mining Company.Factors that could influence increased royalty revenues include: changes in precious and
base metals prices; unanticipated grade, geological, metallurgical, processing or other
problems; changes in project parameters as plans of the operators are refined; and other
economic and market conditions.(c)
    
    Sale of Companys Common Stock. There are no assurances that we would be able to
sell shares of our authorized, but unissued, common stock on acceptable terms. Additionally,
any such sales of shares could be dilutive to our shareholders.
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(d)
    
    Sale of Certain Assets. We own 60,000 shares of New Jersey common stock (hereinafter
the NJMC Shares) with a recorded value of $25,600. 5,000 of the NJMC Shares are
free-trading, and 55,000 of the NJMC Shares are eligible to be sold pursuant to Rule 144 of
the Securities Act of 1933, as amended.
 
 ITEM 3.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Controls
   
 PART II  OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEDDINGS
  
 ITEM 2.
    
    CHANGES IN SECURITIES
  
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
  
 ITEM 5.
    
    OTHER INFORMATION
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ITEM 6.
    
    EXHIBITS AND REPORTS ON FORM 8-K
 (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)
    
    Form 8-K was filed on July 19, 2006, announcing the Companys operating offices had been
relocated to the Golden Chest Mine near Murray, Idaho.
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SIGNATURES
  DATED this the 13th day of November, 2006
    METALINE CONTACT MINESBy:
    /s/ John W. BeasleyJohn W. BeasleySecretary/Treasurer/CFO -7-