<PAGE>
                                 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   7-1-01   to   9-30-01
                                         ------------  -------------

[ ]     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)

          Washington                                       91-0779945
------------------------------                 ---------------------------------
  (State or jurisdiction of                    (IRS Employer Identification No.)
incorporation or organization)

                   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>

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION                                         PAGE
                                                                        ----
<S>                                                                     <C>
ITEM 1.  FINANCIAL STATEMENTS                                           F-1

ITEM 2.  MANAGEMENT'S ANALYSIS AND DISCUSSION                           13

PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS                                              14

ITEM 2.  CHANGES IN SECURITIES                                          14

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                14

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS            15

ITEM 5.  OTHER INFORMATION                                              15

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                               15

SIGNATURES                                                              15
</TABLE>


<PAGE>

                         PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS





<PAGE>
                             METALINE CONTACT MINES

                              FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001



                            WILLIAMS & WEBSTER, P.S.

                          CERTIFIED PUBLIC ACCOUNTANTS

                        BANK OF AMERICA FINANCIAL CENTER
                          601 W. RIVERSIDE, SUITE 1940
                                SPOKANE, WA 99201
<PAGE>
                             METALINE CONTACT MINES

                                TABLE OF CONTENTS

ACCOUNTANT'S REVIEW REPORT                                                   F-1


FINANCIAL STATEMENTS

          Balance Sheets                                                     F-2
          Statements of Operations                                           F-3
          Statement of Stockholders' Equity                                  F-4
          Statements of Cash Flows                                           F-5

NOTES TO FINANCIAL STATEMENTS                                                F-6
<PAGE>
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, 2001, and the related statements of operations, stockholders'
equity, and cash flows for the nine months then ended. All information included
in these financial statements is the representation of the management of
Metaline Contact Mines.

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
auditing standards generally accepted in the United States of America, 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 accounting principles generally accepted in the United States of
America.

The financial statements for the year ended December 31, 2000 were audited by us
and we expressed an unqualified opinion on them in our report dated March 5,
2001, but we have not performed any auditing procedures since that date.

Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington

November 14, 2001


                                      F-1
<PAGE>
                             METALINE CONTACT MINES
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            September 30,     December 31,
                                                                                 2001            2000
                                                                             (Unaudited)
                                                                            -------------     ------------
<S>                                                                         <C>               <C>
ASSETS

      CURRENT ASSETS

           Cash and cash equivalents                                          $ 214,453        $ 321,761
           Federal tax deposit                                                       --               --
                                                                              ---------        ---------
               Total Current Assets                                             214,453          321,761
                                                                              ---------        ---------

      OTHER ASSETS

           Receivables from related parties                                     109,413          109,413
           Investment in LLC                                                     36,277           37,847
                                                                              ---------        ---------
               Total Other Assets                                               145,690          147,260
                                                                              ---------        ---------

      TOTAL ASSETS                                                            $ 360,143        $ 469,021
                                                                              =========        =========



LIABILITIES AND STOCKHOLDERS' EQUITY

      CURRENT LIABILITIES

           Accounts payable                                                   $      --        $   1,355
           Unrealized royalty income                                              3,000            3,000
                                                                              ---------        ---------
               Total Current Liabilities                                          3,000            4,355
                                                                              ---------        ---------

      COMMITMENTS AND CONTINGENCIES                                                  --               --
                                                                              ---------        ---------

      STOCKHOLDERS' EQUITY

           Common stock, $0.05 par value; 20,000,000 shares authorized,
               14,064,300 shares issued and outstanding                         703,222          703,222
           Additional paid-in capital                                           302,165          302,165
           Stock options                                                         13,632           13,632
           Accumulated deficit                                                 (661,876)        (554,353)
                                                                              ---------        ---------
               Total Stockholders' Equity                                       357,143          464,666
                                                                              ---------        ---------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                              $ 360,143        $ 469,021
                                                                              =========        =========
</TABLE>


                                       F-2
<PAGE>
                             METALINE CONTACT MINES
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                             Three Months Ended September 30,    Nine Months Ended September 30,
                                             --------------------------------    -------------------------------
                                                  2001             2000              2001             2000
                                               (Unaudited)      (Unaudited)       (Unaudited)      (Unaudited)
                                               -----------      -----------       -----------      -----------
<S>                                          <C>                <C>              <C>               <C>
REVENUES                                       $        --      $        --       $        --      $        --
                                               -----------      -----------       -----------      -----------


GENERAL AND ADMINISTRATIVE EXPENSES

        Consulting and management fees              30,000           30,075            90,000           90,075
        Accounting and legal fees                    7,303            1,192            21,668           11,903
        Transfer agent fees                            168              276               823              579
        Office                                       2,673            5,622            10,277            7,344
        Travel and meals                                --               81               739            1,594
        Taxes and licenses                              --               10                10               69
                                               -----------      -----------       -----------      -----------
           Total Expenses                           40,144           37,256           123,517          111,564
                                               -----------      -----------       -----------      -----------

OPERATING LOSS                                     (40,144)         (37,256)         (123,517)        (111,564)
                                               -----------      -----------       -----------      -----------

OTHER INCOME (EXPENSE)

        Royalty income                               3,000            3,000             9,000            9,000
        Interest income                                 --               40                --            3,563
        Dividend income                              2,120            5,148             8,264           12,526
        Miscellaneous income (expense)                  --             (755)              300             (755)
        Loss from investment in LLC                 (1,332)            (318)           (1,570)            (700)
                                               -----------      -----------       -----------      -----------
          Total Other Income                         3,788            7,115            15,994           23,634
                                               -----------      -----------       -----------      -----------

LOSS BEFORE TAXES                                  (36,356)         (30,141)         (107,523)         (87,930)

INCOME TAX EXPENSE                                      --               --                --               --
                                               -----------      -----------       -----------      -----------

NET LOSS                                       $   (36,356)     $   (30,141)      $  (107,523)     $   (87,930)
                                               ===========      ===========       ===========      ===========


NET LOSS PER COMMON SHARE,
        BASIC AND DILUTED                      $       nil      $       nil       $      0.01      $      0.01
                                               ===========      ===========       ===========      ===========

WEIGHTED AVERAGE NUMBER
        OF COMMON SHARES OUTSTANDING,
        BASIC AND DILUTED                       13,378,684       13,378,684        13,378,684       13,378,684
                                               ===========      ===========       ===========      ===========
</TABLE>


                                      F-3
<PAGE>
                             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, 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
         December 31, 2001                                     --          --          --      (122,207)         --     (122,207)
                                                       ----------    --------    --------     ---------     -------    ---------

BALANCE, DECEMBER 31, 2000 (unaudited)                 14,064,300     703,222     302,165      (554,353)     13,632      464,666

         Net loss for the nine months ended
         September 30, 2001                                    --          --          --      (107,523)         --     (107,523)
                                                       ----------    --------    --------     ---------     -------    ---------

BALANCE AT SEPTEMBER 30, 2001 (unaudited)              14,064,300    $703,222    $302,165     $(661,876)    $13,632    $ 357,143
                                                       ==========    ========    ========     =========     =======    =========
</TABLE>


                                      F-4
<PAGE>
                             METALINE CONTACT MINES
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                  Nine Months Ended
                                                                            ------------------------------
                                                                            September 30,    September 30,
                                                                                2001             2000
                                                                             (Unaudited)      (Unaudited)
                                                                            -------------    -------------
<S>                                                                         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
         Net loss                                                             $(107,523)       $ (87,934)
         Adjustments to reconcile net loss to net cash
             provided (used) by operating activities:
         Payment of expenses from issuance of stock                                  --           25,000
         Changes in assets and liabilities:
             (Increase) decrease in federal tax deposit                              --            1,500
             (Increase) decrease in account receivable                               --          117,355
             (Increase) in prepaid expenses                                          --           (1,000)
             (Increase) decrease in investment in LLC                             1,570              718
             Increase (decrease) in accounts payable                             (1,355)         (25,876)
             Increase (decrease) in unrealized royalty income                        --            3,000
                                                                              ---------        ---------
                       Net cash provided (used) by operating activities        (107,308)          32,763
                                                                              ---------        ---------

CASH FLOWS PROVIDED BY INVESTING ACTIVITIES                                          --               --
                                                                              ---------        ---------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES                                          --               --
                                                                              ---------        ---------

         Net increase (decrease) in cash and cash equivalents                  (107,308)          32,763

Cash and cash equivalents beginning of period                                   321,761          321,228
                                                                              ---------        ---------

Cash and cash equivalents for end of period                                   $ 214,453        $ 353,991
                                                                              =========        =========


SUPPLEMENTAL CASH FLOW DISCLOSURES:

         Income taxes paid                                                    $      --        $      --
                                                                              =========        =========
         Interest paid                                                        $      --        $      --
                                                                              =========        =========

NON-CASH TRANSACTIONS:

         Stock issued in payment of consulting and other expenses             $      --        $  25,000
                                                                              =========        =========
</TABLE>


                                      F-5
<PAGE>
                             METALINE CONTACT MINES
                        NOTES TO THE FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001


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 Pacific Northwest. The Company will continue to
seek business opportunities in natural resource based industries such as mining,
metals, and lumber.

In the last quarter of 1996, Metaline transferred substantially all of its
assets to a limited liability company. See Note 4.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies 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 accounting
principles generally accepted in the United States of America 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,
2001 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 accounting
principles generally accepted in the United States of America 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.


                                      F-6
<PAGE>
                             METALINE CONTACT MINES
                        NOTES TO THE FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments

The carrying amounts for cash, receivables, investments, 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, 2001, the Company has not engaged in any transactions that
would be considered derivative instruments or hedging activities.

Investments

The Company accounts for its investment in Metaline Contact Mines LLC using the
equity method. See Note 4.

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.

Income taxes

The Company recognizes deferred income tax assets and liabilities for the
expected future income tax consequences, based on enacted laws, of temporary
differences between the financial reporting and tax bases of assets, liabilities
and tax carryforwards. Deferred tax assets are then reduced, if deemed
necessary, by a valuation allowance for the amount of any tax benefits which,
more likely than not based on current circumstances, are not expected to
realized.

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. Outstanding options have
been excluded from the calculation of diluted loss per share as they would be
antidilutive, therefore basic and diluted loss per share are the same.


                                      F-7
<PAGE>
                             METALINE CONTACT MINES
                        NOTES TO THE FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001


NOTE 3 - CASH EQUIVALENTS

The Company holds funds which are primarily deposited in one money market
account, which funds are not insured by the Federal Deposit Insurance Company.
The balance in that account was $203,024 and $310,460 at September 30, 2001 and
December 31, 2000, respectively.

NOTE  4 - INVESTMENT IN LLC

On October 30, 1996, the Company organized 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. At the time of The LLC's
formation, the Company was the sole, managing 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.

At the beginning of 1998, the Company's former shareholders acquired 93% of The
LLC by transferring their stock in the Company to The LLC in exchange for
non-managing membership interests. (See Note 6.) 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% to reflect
its diluted investment in The LLC. After the write down of its investment and
net change in member capital during the year 1998, the value of the Company's
investment in The LLC was $45,440 at December 31, 1998.

After the dilution of its investment in The LLC, the Company continued as the
managing member of The LLC. See Note 5.

In 1999, a net loss of $7,187 in The LLC resulted in a decreased value of the
Company's interest to $38,383.

At December 31, 2000, the Company recorded a loss in The LLC of $405, resulting
in a decreased value of the Company's interest to $37,847. The loss recorded for
the nine months ending September 30, 2001 was $1,570.

NOTE 5 - CHANGE IN LLC OWNERSHIP

On June 1, 1998, Nor-Pac Limited Company (hereinafter "Nor-Pac"), a related
party, purchased control of The LLC from its three principal owners at the time
(Bunker Limited Partnership, Hecla Mining Company, and Metaline Mining & Leasing
Company) by acquiring these entities' non-managing membership interests in
Metaline Contact Mines LLC. See Note 11.


                                      F-8
<PAGE>
                             METALINE CONTACT MINES
                        NOTES TO THE FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001



NOTE 6 - 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 future years,
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 September 30, 2001, 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 5 regarding a
change in LLC ownership.

See Note 11 regarding management contract with related party.

NOTE 7 - COMMON STOCK

The Company has authorized the issuance of 20,000,000 shares of common stock at
a par value of $0.05 per share.

During the year ended December 31, 1999, the Company issued 750,000 shares of
common stock to Nor-Pac, a related party, for consulting fees valued at $37,500.

The Company issued 500,000 shares of its common stock to Nor-Pac during the year
ended December 31, 2000. These shares, valued at $25,000, were also issued for
consulting fees.

The Company did not issue any common stock or stock equivalents for the period
ended September 30, 2001.

NOTE 8 - 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


                                      F-9
<PAGE>
                             METALINE CONTACT MINES
                        NOTES TO THE FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001


NOTE 8 - STOCK OPTIONS (CONTINUED)

statements as consulting and management fees during the year ended December 31,
1999. 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, 2000 and September 30, 2001:

<TABLE>
<CAPTION>
                                                               Weighted
                                                               Average
                                                Number of      Exercise
                                                 Shares         Price
                                                ---------      --------
<S>                                             <C>            <C>
          Outstanding, January 1, 2000          1,000,000       $0.125
             Granted                                   --           --
             Exercised                                 --           --
             Forfeited                                 --           --
             Expired                                   --           --
                                                ---------       ------
          Outstanding, December 31, 2000        1,000,000       $0.125
                                                =========       ======
          Exercisable, December 31, 2000        1,000,000       $0.125
                                                =========       ======
          Outstanding, January 1, 2001          1,000,000       $0.125
             Granted                                   --           --
             Exercised                                 --           --
             Forfeited                                 --           --
             Expired                                   --           --
                                                ---------       ------
          Outstanding, September 30, 2001       1,000,000       $0.125
                                                =========       ======
          Exercisable, September 30, 2001       1,000,000       $0.125
                                                =========       ======
</TABLE>

The Company's weighted average fair value of options granted during the nine
months ended September 30, 2001, and December 31, 2000, respectively, was zero.

NOTE 9 - 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 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. Under this lease
agreement, Cominco obligated 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.


                                      F-10
<PAGE>
                             METALINE CONTACT MINES
                        NOTES TO THE FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001


NOTE 9 - MINING LEASE WITH PURCHASE OPTION (CONTINUED)

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 September 30, 2001, the Company has
received $48,016 in payments from Cominco.

NOTE 10 - INCOME TAXES

The Company did not provide an income tax benefit for any of the periods
presented because it has experienced operating losses since inception. The
Company's total tax net operating loss carryforwards were approximately $527,000
at September 30, 2001 which expire between 2018 and 2021. The deferred tax asset
attributed to net operating loss carryforwards at September 30, 2001 and
December 31, 2000, was as follows:

<TABLE>
<CAPTION>
                                           September 30,    December 31,
                                               2001             2000
                                           -------------    ------------
<S>                                        <C>              <C>
       Net operating loss carryforward       $ 527,000        $ 421,000
                                             =========        =========

       Deferred tax asset                    $ 179,000        $ 143,000
       Deferred tax asset valuation
            allowance                         (179,000)        (143,000)
                                             ---------        ---------
                                             $      --        $      --
                                             =========        =========
   </TABLE>

Metaline Contact Mines recorded a valuation allowance to reflect the estimated
amount of deferred tax assets which may not be realized principally due to the
expiration of net operating loss carryforwards. The valuation allowance of
deferred tax assets increased by $36,000 and $42,000 during the nine months
ended September 30, 2001 and year ended December 31, 2000, respectively.

NOTE  11 -  RELATED PARTIES

Related Party Receivables

The Company has approximately $109,000 of related party receivables on its
balance sheet. The majority of these receivables originated with the Company's
share of undistributed proceeds from a property sale by The LLC in 1998. The
Company fully expects to collect these receivables.


                                      F-11
<PAGE>
                             METALINE CONTACT MINES
                        NOTES TO THE FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001


NOTE  11 -  RELATED PARTIES (continued)

Management and Consulting Services

In June 1998, Metaline executed an agreement with Nor-Pac, a related party,
wherein, for providing management and consulting services to Metaline, Nor-Pac
was entitled to receive 500,000 shares of the Company's common stock in the
second half of 1998, 250,000 shares of the Company's common stock quarterly in
1999 and $10,000 per month thereafter commencing on January 1, 2000. The Company
issued 250,000 shares and 500,000 shares during the years ended December 31,
1999 and 2000, respectively, as required by the management and consulting
agreement, in addition to paying $120,000 in cash in 2000, and $40,000 cash plus
$50,000 accrued in accounts payable in the first nine months of 2001 for
services.


                                      F-12
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

        Results of Operations

        The Company had revenues from operations of $3,000 in the third quarter
        of 2001, the same as its operating revenues of $3,000 in the third
        quarter of 2000. However, the Company experienced an increased operating
        loss of $40,144 in the third quarter of 2001 versus $37,256 in the third
        quarter of 2000. The increased loss of $2,888 in the third quarter of
        2001 was predominantly due to increased accounting fees paid in
        connection with a proposed sale of the Company's assets and liabilities
        to another corporation.

        Consulting and management fees remained the same at $30,000. However,
        professional fees, consisting of legal and accounting, increased $6,111
        in the third quarter of 2001 to $7,303 versus $1,192 in the third
        quarter of 2000, due to increased accounting requirements and legal
        advice. Transfer agent fees decreased $108 in the third quarter of 2001
        to $168 from $276 in the third quarter of 2000 due to less activity
        required by the Company's transfer agent. Office supplies and expenses
        decreased to $2,673 in the third quarter of 2001 from $5,622 in the
        third quarter of 2000, or $2,949, due to the Company's decision not to
        continue with the sale of its assets to another corporation.

        The Company's other income decreased by $3,327 in the third quarter of
        2001 to $3,788 from $7,115 in the third quarter of 2000. The decrease
        was caused due to no interest income earned, lower balances and dividend
        rates on the Company's money market account, and a $1,332 loss from its
        investment in Metaline Contact Mines LLC.

        Financial Condition

        The Company's financial condition is such that it can continue at its
        current level of operations for an additional 1-1/2 years without the
        necessity of additional capital. Current level of operations includes
        maintaining compliance with the New Cominco Lease, and the reporting
        requirements of the SEC. 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), or from the sale of shares of
        the Company's authorized, but unissued, common stock.

        Under the New Cominco Lease, any production decision on the Company's
        mineral rights and properties is under the sole discretion and control
        of Cominco. 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. Any such sales of shares could be
        dilutive to the Company's then-existing shareholders, and any debt
        financings could involve restrictive covenants with respect to future
        capital raising activities, and other financial and operational matters.

        Presently 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; there are no material commitments for capital
        expenditures, except for the management of its own business affairs; and
        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.



                                      -13-
<PAGE>

        As a mineral resource exploration oriented enterprise, the Company will
        investigate future business opportunities that are consistent with its
        corporate charter and field of expertise, and in the opinion of
        management worthy of investigation. It should be noted, however, that
        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. Management has not
        recognized any such opportunities as of the date of this filing, nor
        does it expect to do so during the next 12-month period. In the event
        such an opportunity would materialize, the Company's initial due
        diligence process in investigating such opportunity would not involve
        any significant investment by the Company.

        Liquidity and Capital Resources

        To date, the Company has funded its capital requirements from revenues
        from operations, and dividends and interest earned on its cash accounts.
        The Company's cash position as of September 30, 2001 was $214,453 as
        compared to $321,761 as of September 30, 2000.

        The Company has no debt. The Company does not expect to incur any debt
        in the immediate future to expand its current level of operation, nor
        does it expect to expand its business operation in the immediate future.
        The Company's most significant cash requirement is its management fee of
        $10,000 per month payable under the terms of its Management Agreement
        with Nor-Pac. However, as a related party, Nor-Pac has contractually
        agreed in the Management Agreement to (i) review and adjust on a
        quarterly basis the amount of the management fees based on time spent on
        the Company's affairs, and (ii) convert management fees that are payable
        in cash into common stock in the Company in the event of a shortfall of
        cash (the exchange rate would be determined at the time of the
        shortfall). The Company also has a related party receivable from MCMLLC
        in the amount of $109,413 as of September 30, 2001. As the Managing
        Member of MCMLLC, the Company has the ability to collect on this
        receivable in the event of a shortfall of cash.

        Based on the foregoing, it is management's opinion that at its current
        level of operations the Company can satisfy its working capital
        requirements internally in the immediate future without the need to seek
        outside sources of equity or debt funding.


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

        The Company is not a party to any legal proceedings, and 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 annual Form 10-KSB
        (Filed on April 27, 2001).

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

        None.



                                      -14-

<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        The Company did not submit any matters to a vote of its shareholders
        during the third quarter of 2001.

        The Company did, however, file a Preliminary Proxy on Form 14A with the
        U.S. Securities and Exchange Commission (the "SEC") on May 21, 2001. On
        May 25, 2001, the SEC provided the Company with written comments
        concerning the Preliminary Proxy requiring additional disclosure. At the
        time it filed the Preliminary Proxy with the SEC, the Company was
        seeking shareholder approval to assign all of its assets and liabilities
        to Paymaster Resources Incorporated, a non-reporting Idaho corporation,
        in exchange for 14,064,300 shares of Paymaster's authorized, but
        unissued, common stock, which shares were to be ultimately distributed
        to the Company's shareholders in an amount equal to the shareholders
        respective shareholdings in the Company. The Company's Board of
        Directors has since decided not to pursue this course of action and will
        not file an amendment to the Preliminary Proxy.

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, 2001.


                                          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 16th day of November, 2001         METALINE CONTACT MINES


                                                  By:    /s/ John W. Beasley
                                                     ---------------------------
                                                         John W. Beasley
                                                         Secretary & Director



                                      -15-