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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 4-01-06 to  6-30-06
 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
    
    (IRS Employer Identification No.)organization)
 8601 Prichard Creek Road, Murray ID 83874
 (Issuers telephone number
 o o
 14,883,189
 o þ




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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
    
    6Item 4. Submission of Matters to a Vote of Security Holders
    
    6Item 5. Other Information
    
    6Item 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
 June 30,2006
    
    
    December 31,(unaudited)
    
    
    2005ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    87,766
    
    
    $
    82,772Prepaid expenses
    
    
    
    
    
    
    2,000Total Current Assets
    
    
    87,766
    
    
    
    84,772OTHER ASSETSRelated party receivable
    
    
    100,000
    
    
    
    109,413Accrued interest  related party receivable
    
    
    42,125
    
    
    
    38,296Investments
    
    
    25,600
    
    
    
    25,600Website, net of amortization
    
    
    417
    
    
    
    583Other assets
    
    
    250
    
    
    
    250Mineral lease, net of depletion
    
    
    249,959
    
    
    
    249,977Total Other Assets
    
    
    418,351
    
    
    
    424,119TOTAL ASSETS
    
    $
    506,117
    
    
    $
    508,891LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESUnearned royalty income
    
    $
    3,880
    
    
    $
    3,880Total Current Liabilities
    
    
    3,880
    
    
    
    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
    
    
    (830,280
    )
    
    
    (802,506
    )Total Stockholders Equity
    
    
    502,237
    
    
    
    505,011TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
    
    $
    506,117
    
    
    $
    508,891
  F-2




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METALINE CONTACT MINES
 STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)REVENUESRoyalty income
    
    $
    9,069
    
    
    $
    5,204
    
    
    $
    17,238
    
    
    $
    50,084GENERAL AND ADMINISTRATIVE EXPENSESAdministrative expenses
    
    
    39,734
    
    
    
    12,403
    
    
    
    50,196
    
    
    
    36,343TOTAL EXPENSES
    
    
    39,734
    
    
    
    12,403
    
    
    
    50,196
    
    
    
    36,343OPERATING INCOME (LOSS)
    
    
    (30,665
    )
    
    
    (7,199
    )
    
    
    (32,958
    )
    
    
    13,741OTHER INCOME (EXPENSE)Dividend income
    
    
    755
    
    
    
    427
    
    
    
    1,354
    
    
    
    734Interest income
    
    
    1,915
    
    
    
    1,914
    
    
    
    3,830
    
    
    
    3,829TOTAL OTHER INCOME
    
    
    2,670
    
    
    
    2,341
    
    
    
    5,184
    
    
    
    4,563INCOME (LOSS) BEFORE TAXES
    
    
    (27,995
    )
    
    
    (4,858
    )
    
    
    (27,774
    )
    
    
    18,304INCOME TAX EXPENSE
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME (LOSS)
    
    $
    (27,995
    )
    
    $
    (4,858
    )
    
    $
    (27,774
    )
    
    $
    18,304NET INCOME PER COMMON SHARE,
BASIC AND DILUTED
    
    $
    nil
    
    
    $
    nil
    
    
    $
    nil
    
    
    $
    nilWEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING,
BASIC
    
    
    14,816,522
    
    
    
    13,783,189
    
    
    
    14,799,856
    
    
    
    13,783,189
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METALINE CONTACT MINES
 STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005(unaudited)
    
    
    (unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (27,774
    )
    
    $
    18,304Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:Amortization and depletion expense
    
    
    184
    
    
    
    167Royalty expense paid with NJMC stock
    
    
    
    
    
    
    20,500Royalty income received in NJMC stock
    
    
    
    
    
    
    (41,000
    )Stock issued for professional services
    
    
    25,000
    
    
    
    Changes in assets and liabilities:Increase in accrued interest receivable
    
    
    (3,829
    )
    
    
    (3,829
    )Increase/(decrease) in prepaid expenses and other assets
    
    
    2,000
    
    
    
    (4,000
    )Decrease in note receivable
    
    
    9,413Net cash (used) by operating activities
    
    
    4,994
    
    
    
    (9,858
    )CASH FLOWS USED BY INVESTING ACTIVITIES:
    
    
    
    
    
    
    CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
    
    
    
    
    
    
    Net decrease in cash and cash equivalents
    
    
    4,994
    
    
    
    (9,858
    )Cash at beginning of period
    
    
    82,772
    
    
    
    90,652Cash at end of period
    
    $
    87,766
    
    
    $
    80,794SUPPLEMENTAL CASH FLOW DISCLOSURES:Income taxes paid
    
    $
    
    
    
    $
    Interest paid
    
    $
    
    
    
    $
    NON-CASH TRANSACTIONS:Royalty expense paid with NJMC stock
    
    $
    
    
    
    $
    20,500Royalty income received in NJMC stock
    
    $
    
    
    
    $
    41,000Stock issued for professional services
    
    $
    25,000
    
    
    $
    
  F-4




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




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METALINE CONTACT MINES
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
JUNE 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
JUNE 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
JUNE 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
JUNE 31, 2006
   NOTE 7  STOCK OPTIONS
  Options Outstanding
    
    
    Options ExercisableWeightedAverageRemaining
    
    
    Weighted
    
    
    
    
    
    
    WeightedContractual
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    Number
    
    
    Life
    
    
    Exercise
    
    
    Number
    
    
    ExercisePrice
    
    Outstanding
    
    
    (Years)
    
    
    Price
    
    
    Exercisable
    
    
    Price$         
        0.06
    
    

    500,000
    
    
    
    3.37
    
    
    $
    0.06
    
    
    
    500,000
    
    
    $
    0.060.125
    
    
    1,000,000
    
    
    
    3.37
    
    
    
    0.125
    
    
    
    1,000,000
    
    
    
    0.1250.15
    
    
    250,000
    
    
    
    3.37
    
    
    
    0.15
    
    
    
    250,000
    
    
    
    0.15$          0.06-0.15
    
    
    1,750,000
    
    
    
    3.37
    
    
    $
    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 $42,125, as of June 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. Increasing royalty revenues from our current mining
projects is under the sole control of third parties; namely, Teck Cominco and New Jersey
Mining Company. It is noteworthy that our royalty revenues increased by 74% during the second
quarter of 2006 compared to the same period in 2005.Other factors that could impact increased royalty revenues include: changes in precious
and base metals prices; unanticipated grade, geological, metallurgical, processing or other
problems at our mining projects; changes in project parameters as plans of the operators
are refined; and other economic and market conditions.
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(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.(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 PROCEEDINGS
  
 ITEM 2. CHANGES IN SECURITIES
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 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)
    
    There were no reports filed on Form 8-K during the quarter ended June 30, 2006.
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SIGNATURES
  DATED this the 7th day of August, 2006
    
    METALINE CONTACT MINESBy:
    
    /s/ John W. Beasley

John W. BeasleySecretary/Treasurer/CFO