U.S.
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q


(Mark
One)





R
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934
              
              FOR
      THE QUARTERLY PERIOD ENDED January 31,
  2010.





£
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934
              
              FOR
      THE TRANSITION PERIOD OF _________ TO
_________.





Commission
File Number: 001-33125





METALLINE MINING
COMPANY


(Exact
name of registrant as specified in its charter)





Nevada
            91-1766677State
      or other jurisdiction of
            (I.R.S.
      Employerincorporation
      or organization
            Identification
      No.)





1330 E. Margaret Ave., Coeur
d’Alene, ID 83815


(Address
of principal executive offices, including zip code)





Registrant’s
telephone number: (208)
665-2002





Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes RNo o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes o   No
o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or smaller reporting
company:





Large
accelerated filer o                         Accelerated
filer o                           Non-accelerated
filer o                                 Smaller
reporting Company R





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes oNo R





As of
March 12, 2009, there were 55,366,829 shares of the Registrant’s $.01 par value
Common Stock (“Common Stock”), the Registrant’s only outstanding class of voting
securities, outstanding

















PART
I – FINANCIAL INFORMATION











ITEM
1. FINANCIAL STATEMENTS











METALLINE
MINING COMPANY


QUARTERLY
REPORT ON FORM 10-Q


FOR
THE QUARTERLY PERIOD ENDED JANUARY 31, 2010








INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS





PAGEConsolidated
      Financial Statements:Consolidated
      Balance Sheets as January 31, 2010 and October 31, 2009
            
            2Consolidated
      Statements of Operations for the three months ended
              January
      31, 2010 and January 31, 2009, and for the period from
      inception
              (November
      8, 1993) to January 31, 2010
            
            3Consolidated
      Statements of Cash Flows for the three months ended
              January
      31, 2010 and January 31, 2009, and for the period from
      inception
              (November
      8, 1993) to January 31, 2010
            
            4-5Notes
      to Consolidated Financial Statements
            
            6-19



















[The
balance of this page has been intentionally left blank.]












METALLINE
MINING COMPANY


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
BALANCE SHEETS





January
      31,
              2010
            
            
            October
      31,
              2009(Unaudited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
            
            $
            2,624,865
            
            
            $
            1,482,943Other
      receivables
            
            
            17,068
            
            
            
            18,303Prepaid
      expenses
            
            
            213,612
            
            
            
            134,122Prepaid
      income taxes
            
            
            23,606
            
            
            
            —Total
      Current Assets
            
            
            2,879,151
            
            
            
            1,635,368PROPERTY
      CONCESSIONSSierra
      Mojada District (Note 4)
            
            
            3,707,945
            
            
            
            3,713,722EQUIPMENTOffice
      and mining equipment, net of accumulated depreciation
              of
      $726,075 and $679,659, respectively (Note 5)
            
            
            1,036,896
            
            
            
            1,005,733OTHER
      ASSETSValue-added
      tax receivable, net of allowance for uncollectible taxes of
              $273,335
      and $273,761, respectively (Note 3)
            
            
            732,613
            
            
            
            686,992TOTAL
      ASSETS
            
            $
            8,356,605
            
            
            $
            7,041,815LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESAccounts
      payable
            
            $
            181,212
            
            
            $
            55,037Accrued
      liabilities and expenses
            
            
            169,157
            
            
            
            346,446Deferred
      salaries and costs (Note 5)
            
            
            —
            
            
            
            393,903Income
      tax payable
            
            
            —
            
            
            
            9,290Total
      Current Liabilities
            
            
            350,369
            
            
            
            804,676COMMITMENTS
      AND CONTINGENCIES (Notes 6 and  10)STOCKHOLDERS’
      EQUITY (Notes 7, 8 and 9)Common
      stock, $0.01 par value; 160,000,000 shares authorized,
              55,366,829
      and 48,834,429 shares issued and outstanding, respectively
            
            
            553,668
            
            
            
            488,344Additional
      paid-in capital
            
            
            58,127,432
            
            
            
            55,144,214Deficit
      accumulated during exploration stage
            
            
            (53,226,412
            )
            
            
            (51,917,015
            )Other
      comprehensive income
            
            
            2,551,548
            
            
            
            2,521,596Total
      Stockholders’ Equity
            
            
            8,006,236
            
            
            
            6,237,139TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            8,356,605
            
            
            $
            7,041,815
















METALLINE
MINING COMPANY


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)





Three
      Months Ended
              January
      31,
            
            
            Period
      from
              November
      8, 1993
      (Inception)
              to
      January 31,2010
            
            
            2009
            
            
            2010REVENUES
            
            $
            —
            
            
            $
            —
            
            
            $
            —EXPLORATION
      AND PROPERTY HOLDING COSTSExploration
      and property holding costs
            
            
            405,899
            
            
            
            478,099
            
            
            
            17,330,397Depreciation
      and asset write-off
            
            
            43,470
            
            
            
            45,537
            
            
            
            919,366TOTAL
      EXPLORATION AND PROPERY HOLDING COSTS
            
            
            449,369
            
            
            
            523,636
            
            
            
            18,249,763GENERAL
      AND ADMINISTRATIVE EXPENSESSalaries
      and payroll
            
            
            279,637
            
            
            
            377,603
            
            
            
            13,662,364Office
      and administrative
            
            
            88,110
            
            
            
            66,347
            
            
            
            2,802,698Professional
      services
            
            
            402,844
            
            
            
            307,735
            
            
            
            11,444,844Directors
      fees
            
            
            47,736
            
            
            
            64,393
            
            
            
            3,209,487Provision
      for uncollectible value-added taxes
            
            
            ---
            
            
            
            ---
            
            
            
            276,518Depreciation
            
            
            4,434
            
            
            
            5,780
            
            
            
            224,754TOTAL
      GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            822,761
            
            
            
            821,858
            
            
            
            31,620,665LOSS
      FROM OPERATIONS
            
            
            (1,272,130
            )
            
            
            (1,345,494
            )
            
            
            (49,870,428
            )OTHER
      (EXPENSES) INCOMEInterest
      and investment income
            
            
            689
            
            
            
            850
            
            
            
            838,098Foreign
      currency transaction loss
            
            
            (52,652
            )
            
            
            (2,013,150
            )
            
            
            (3,905,627
            )Miscellaneous
      ore sales, net of expenses
            
            
            ---
            
            
            
            ---
            
            
            
            134,242Miscellaneous
      income
            
            
            ---
            
            
            
            ---
            
            
            
            82,351Interest
      and financing expense
            
            
            ---
            
            
            
            ---
            
            
            
            (289,230
            )TOTAL
      OTHER (EXPENSES) INCOME
            
            
            (51,963
            )
            
            
            (2,012,300
            )
            
            
            (3,140,166
            )LOSS
      BEFORE INCOME TAXES
            
            
            (1,324,093
            )
            
            
            (3,357,794
            )
            
            
            (53,010,594
            )INCOME
      TAX (BENEFIT) EXPENSE
            
            
            (14,696
            )
            
            
            3,575
            
            
            
            89,728NET
      LOSS
            
            $
            (1,309,397
            )
            
            $
            (3,361,369
            )
            
            $
            (53,100,322
            )OTHER
      COMPREHENSIVE INCOME (LOSS)
              Foreign
      currency translation adjustments
            
            
            29,952
            
            
            
            1,461,706
            
            
            
            2,551,548COMPREHENSIVE
      LOSS
            
            $
            (1,279,445
            )
            
            $
            (1,899,663
            )
            
            $
            (50,548,774
            )BASIC
      AND DILUTED NET LOSS PER COMMON SHARE
            
            $
            (0.03
            )
            
            $
            (0.08
            )BASIC
      AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES
      OUTSTANDING
            
            
            51,660,868
            
            
            
            39,709,427





The accompanying notes are an integral part of these
consolidated financial statements
  3





METALLINE
MINING COMPANY


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)


Three
      Months Ended
              January
      31,
            
            
            Period
      from
              November
      8,
              1993
      (Inception)
              to
      January 31,2010
            
            
            2009
            
            
            2010CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
            
            $
            (1,309,397
            )
            
            $
            (3,361,369
            )
            
            $
            (53,100,322
            )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Depreciation
      and equipment write-off
            
            
            47,903
            
            
            
            51,317
            
            
            
            1,146,555Provision
      for uncollectible value-added taxes
            
            
            —
            
            
            
            —
            
            
            
            275,132Noncash
      expenses
            
            
            —
            
            
            
            —
            
            
            
            126,864Foreign
      currency transaction loss
            
            
            52,609
            
            
            
            2,009,353
            
            
            
            4,059,772Common
      stock issued for services
            
            
            —
            
            
            
            —
            
            
            
            1,237,047Common
      stock issued for compensation
            
            
            —
            
            
            
            —
            
            
            
            1,059,946Options
      issued for compensation
            
            
            37,806
            
            
            
            169,234
            
            
            
            7,125,016Common
      stock issued for directors fees
            
            
            20,736
            
            
            
            —
            
            
            
            618,180Options
      and warrants issued for directors fees
            
            
            —
            
            
            
            —
            
            
            
            1,665,705Stock
      options issued for services
            
            
            —
            
            
            
            —
            
            
            
            849,892Stock
      options issued for financing fees
            
            
            —
            
            
            
            —
            
            
            
            276,000Common
      stock issued for payment of expenses
            
            
            —
            
            
            
            —
            
            
            
            326,527Stock
      warrants issued for services
            
            
            —
            
            
            
            —
            
            
            
            1,978,243(Increase)
      decrease in:Value
      added tax receivable
            
            
            (47,285
            )
            
            
            (71,589
            )
            
            
            (1,157,317
            )Other
      receivables
            
            
            1,263
            
            
            
            (1,520
            )
            
            
            (23,284
            )Prepaid
      taxes and expenses
            
            
            (104,004
            )
            
            
            (19,208
            )
            
            
            (235,123
            )Increase
      (decrease) in:Accounts
      payable
            
            
            126,175
            
            
            
            (43,396
            )
            
            
            181,177Accounts
      payable - related parties
            
            
            —
            
            
            
            10,692
            
            
            
            —Income
      tax payable
            
            
            (9,394
            )
            
            
            (4,659
            )
            
            
            3,039Accrued
      liabilities and expenses
            
            
            (179,052
            )
            
            
            (55,280
            )
            
            
            201,593Deferred
      salaries and costs
            
            
            (393,903
            )
            
            
            —
            
            
            
            —Other
      liabilities
            
            
            —
            
            
            
            3,859
            
            
            
            7,649Net
      cash used by operating activities
            
            
            (1,756,543
            )
            
            
            (1,312,566
            )
            
            
            (33,377,709
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of investments
            
            
            —
            
            
            
            —
            
            
            
            (21,609,447
            )Proceeds
      from investment sales
            
            
            —
            
            
            
            —
            
            
            
            21,609,447Equipment
      purchases
            
            
            (81,079
            )
            
            
            (2,754
            )
            
            
            (2,405,267
            )Mining
      property acquisitions
            
            
            —
            
            
            
            —
            
            
            
            (4,632,037
            )Net
      cash used by investing activities
            
            
            (81,079
            )
            
            
            (2,754
            )
            
            
            (7,037,304
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from sales of common stock
            
            
            2,990,000
            
            
            
            —
            
            
            
            37,692,194Proceeds
      from sales of options and warrants
            
            
            —
            
            
            
            —
            
            
            
            949,890Proceeds
      from exercise of warrants
            
            
            —
            
            
            
            —
            
            
            
            4,697,347Proceeds
      from shareholder loans
            
            
            —
            
            
            
            —
            
            
            
            30,000Payment
      of note payable
            
            
            —
            
            
            
            —
            
            
            
            (15,783
            )Net
      cash provided by financing activities:
            
            
            2,990,000
            
            
            
            —
            
            
            
            43,353,648Effect
      of exchange rates on cash
            
            
            (10,456
            )
            
            
            (25,896
            )
            
            
            (313,770
            )Net
      increase (decrease) in cash and cash equivalents
            
            
            1,141,922
            
            
            
            (1,341,216
            )
            
            
            2,624,865Cash
      and cash equivalents beginning of period
            
            
            1,482,943
            
            
            
            2,228,779
            
            
            
            —Cash
      and cash equivalents end of period
            
            $
            2,624,865
            
            
            $
            887,563
            
            
            $
            2,624,865




The accompanying notes are an integral part of these
consolidated financial statements






METALLINE
MINING COMPANY


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)





Three
      Months Ended
              January
      31,
            
            
            Period
      from
              November
      8,
              1993
      (Inception)
              to
      January 31,2010
            
            
            2009
            
            
            2010SUPPLEMENTAL
      CASH FLOW DISCLOSURES:Income
      taxes paid
            
            $
            18,605
            
            
            $
            4,086
            
            
            $
            108,539Interest
      paid
            
            $
            —
            
            
            $
            —
            
            
            $
            286,771NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Common
      stock issued for equipment
            
            $
            —
            
            
            $
            —
            
            
            $
            25,000Common
      stock options issued for financing fees
            
            $
            —
            
            
            $
            —
            
            
            $
            276,000Common
      stock options issued for non-cash options
            
            $
            —
            
            
            $
            —
            
            
            $
            59,220






















The accompanying notes are an integral part of these
consolidated financial statements











NOTE
1 – ORGANIZATION, DESCRIPTION OF BUSINESS, GOING CONCERN AND MANAGEMENT
PLANS





Organization and Description
of Business





Metalline
Mining Company (the “Company”) was incorporated in the State of Nevada on
November 8, 1993 as the Cadgie Company for the purpose of acquiring and
developing mineral properties. The Cadgie Company was a spin-off from its
predecessor, Precious Metal Mines, Inc. On June 28, 1996, at a special directors
meeting, the Company’s name was changed to Metalline Mining Company. The
Company’s fiscal year-end is October 31. The Company has not realized any
revenues from its planned operations and is considered an Exploration Stage
Company.





The
Company expects to engage in the business of mineral exploration. The Company
currently owns several mining concessions in Mexico (collectively known as the
Sierra Mojada Property). The Company conducts its operations in Mexico through
its wholly owned subsidiary corporations, Minera Metalin S.A. de C.V. (“Minera
Metalin”) and Contratistas de Sierra Mojada S.A. de
C.V  (“Contratistas”). The Company formed a new wholly owned
subsidiary, Metalline Mining Delaware Inc, on December 3, 2009 to merge with
Dome Ventures Corporation pursuant to the agreement below.





The
Company’s efforts have been concentrated in expenditures related to exploration
properties, principally in the Sierra Mojada Property located in Coahuila,
Mexico. The Company has not determined whether the exploration properties
contain ore reserves that are economically recoverable. The ultimate realization
of the Company’s investment in exploration properties is dependent upon the
success of future property sales, the existence of economically recoverable
reserves, the ability of the Company to obtain financing or make other
arrangements for development, and upon future profitable production. The
ultimate realization of the Company’s investment in exploration properties
cannot be determined at this time, and accordingly, no provision for any asset
impairment that may result, in the event the Company is not successful in
developing or selling these properties, has been made in the accompanying
consolidated financial statements.





Merger Agreement with Dome
Ventures





On
December 4, 2009, Metalline executed an Agreement and Plan of Merger and
Reorganization (the “Merger Agreement”) with Dome Ventures Corporation (“Dome”)
whereby upon the closing of the transaction described in the Merger Agreement,
Dome will become a wholly owned subsidiary of Metalline.  Dome is a
publicly held resource company based in Vancouver, British Columbia, Canada.
Dome’s common stock is listed on the TSX Venture Exchange (TSX-V) under the
symbol "DV.U". Dome holds three exploration licenses in Gabon, West Africa and
recently announced a joint venture agreement with AngloGold Ashanti Limited on
two of its licenses, Ndjole and Mevang. At the same time Dome entered into a
second joint venture agreement on the Ogooue license held by AngloGold Ashanti
Limited.





Pursuant
to the Merger Agreement, on December 22, 2009, Metalline closed a private
placement of 6,500,000 units of the Company, at a price of $.46 per unit, with
each unit consisting of one share of common stock of the Company and one common
stock purchase warrant of the Company, two of which warrants will entitle the
holder to purchase one share of common stock.  The warrants are
exercisable if the Merger Agreement between Dome and Metalline is terminated and
then only for a term extending until one year following the date of issuance,
with an exercise price of $0.57 per share of common stock.  This
private placement was completed on December 22, 2009 with total net proceeds of
$2,990,000.  Further pursuant to the Merger Agreement, Dome raised
$13,010,000 through a private placement of special warrants of Dome on January
11, 2010. The funds are currently being held in escrow by Dome pending the
closing of the transaction.





Both Dome
and Metalline must submit the proposed transaction to their respective
stockholders for approval, and accordingly completing the transaction is subject
to both parties receipt of their stockholders’ approval.  As such, the
Merger Agreement obligates Metalline to prepare and file with the Securities and
Exchange Commission a registration statement pursuant to which it will seek
stockholder approval of the transaction and register the shares of common stock
to be issued to Dome’s stockholders.  The registration statement was
filed and became effective March 9, 2010.  Metalline will be
considered the acquirer for accounting purposes.














NOTE
1 – ORGANIZATION, DESCRIPTION OF BUSINESS, GOING CONCERN AND MANAGEMENT PLANS
(continued)





Upon the
closing of the transaction described in the Merger Agreement, Metalline will
acquire all of the outstanding shares of Dome by the issuance of 47,724,561
shares of common stock.  The number of Metalline common shares to be
received by each Dome shareholder will depend on the number of Dome shares
outstanding at the closing of the transaction.   Additionally,
upon the effective date of the transaction all outstanding Dome warrants will be
exchanged for warrants to acquire Metalline common stock on equivalent
terms.  The parties anticipate that the Metalline common stock issued
in the transaction will be listed on both the NYSE Amex and the TSX
Venture Exchange.





The
Merger Agreement sets forth a number of conditions precedent for completion of
the transaction, and contains other standard provisions for transactions of this
nature, including transaction protection terms, standard representations,
warranties and covenants. There can be no assurance that Metalline will be able
to meet the conditions precedent to the transaction contemplated by the Merger
Agreement. The shareholders meetings for Dome and Metalline are scheduled on
April 14th and
April 15thof
2010, respectively. The parties expect to close the transaction on April 15,
2010.  If the merger is not completed by May 30, 2010, the Merger
Agreement will terminate.





Going Concern and Management
Plans





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. Since its inception in November
1993, the Company has not generated revenue and has incurred a net loss of
$53,100,322 from inception through January 31, 2010.  Accordingly, the
Company has not generated cash flow from operations and has primarily relied
upon private placement of its common stock and proceeds from warrant exercises
to fund its operations.  As of January 31, 2010, the Company had a
working capital balance of $2,528,782.





As
discussed above, the Company executed a Merger Agreement with Dome on December
4, 2009, whereby upon the closing of the transaction, Dome will become a wholly
owned subsidiary of the Company.  In connection with the merger,
Metalline closed a $2,990,000 private placement on December 22,
2009.  These funds are currently being used to ramp-up its exploration
activities at Sierra Mojada and to fund its working capital while the Company
works to close the Dome merger.   Further pursuant to the merger,
Dome has raised $13,010,000 through a private placement of special warrants on
January 11, 2010 and is currently holding these funds in escrow pending
completion of the merger.





The
Merger Agreement contains several conditions precedent for the transaction to be
completed, all of which must be met by May 30, 2010.  In the event the
Company is unable to successfully close the Merger transaction, the Company may
not have sufficient working capital to operate during the next fiscal year.
These conditions raise substantial doubt about the Company’s ability to continue
as a going concern. The consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets, or the amounts or classification of liabilities that
may result from the possible inability of the Company to continue as a going
concern. Management’s plans with regards to these conditions are described
below.





In the
event the Company is unable to successfully close the Dome transaction,
Management will likely reduce exploration activities and reduce administrative
costs to conserve capital while it tries to secure alternative sources of
capital to fund its operations and continue exploration of the Sierra Mojada
Property.  Management would likely also immediately resume its efforts
to explore for various sources of additional capital including additional equity
funding, joint venture participation, strategic partner and smelter and metal
trading companies willing to fund projects
for a commitment of product. If the Company is unable to quickly find
alternative sources of capital, its business, financial condition and results of
operations will be adversely impacted.











NOTE
2 – BASIS OF PRESENTATION





These
unaudited interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Regulation S-K as promulgated by the
Securities and Exchange Commission ("SEC").  Accordingly, these
financial statements do not include all of the disclosures required by generally
accepted accounting principles in the United States of America for complete
financial statements.  These unaudited interim financial statements
should be read in conjunction with the audited financial statements for the year
ended October 31, 2009.  In the opinion of management, the unaudited
interim financial statements furnished herein include all adjustments, all of
which are of a normal recurring nature, necessary for a fair statement of the
results for the interim period presented.





The
preparation of financial statements in accordance with generally accepted
accounting principles in the United States of America requires the use of
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities known to exist as
of the date the financial statements are published, and the reported amounts of
revenues and expenses during the reporting period.  Uncertainties with
respect to such estimates and assumptions are inherent in the preparation of the
Company's financial statements; accordingly, it is possible that the actual
results could differ from these estimates and assumptions and could have a
material effect on the reported amounts of the Company's financial position and
results of operations.





Operating
results for the three-months ended January 31, 2010 are not necessarily
indicative of the results that may be expected for the year ending October 31,
2010.





NOTE
3 - 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 U.S. and have been consistently applied in
the preparation of the financial statements.





Concentration of
Risk





The
Company maintains its domestic cash and marketable securities in a commercial
depository account and a brokerage account.  The commercial depository
account and bank deposits held in the brokerage account are insured by the
Federal Deposit Insurance Corporation (FDIC) for up to $250,000. The brokerage
account typically includes short-term highly liquid fixed income securities such
as United States Treasury Bills, money market funds, and certificates of
deposit.  As of January 31, 2010, the Company did not hold any fixed
income investments.   The Company also maintains cash in banks in
Mexico.  These accounts, which had U.S. dollar balances of $68,016 and
$38,851 at January 31, 2010 and October 31, 2009, respectively, are denominated
in pesos and are considered uninsured. At January 31, 2010, the Company’s cash
balances included $2,341,087 which was not federally insured.





Earnings Per
Share





Basic
earnings per share includes no dilution and is computed by dividing net income
available to common shareholders by the weighted average common shares
outstanding for the period. Diluted earnings per share reflect the potential
dilution of securities that could share in the earnings of an entity similar to
fully diluted earnings per share. Although there were common stock equivalents
of 21,134,713 shares and 18,346,568 shares outstanding at January 31, 2010 and
2009, respectively, they were not included in the calculation of earnings per
share because they would have been considered anti-dilutive.





Subsequent
Events





The
Company has evaluated events, if any, which occurred subsequent to January 31,
2010 to ensure that such events have been properly reflected in these
consolidated financial statements. No subsequent events were identified that
required disclosure in the consolidated financial statements.














NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.





Exploration
Costs





In
accordance with accounting principles generally accepted in the United States of
America, the Company expenses exploration costs as incurred. Exploration costs
expensed during the three months ended January 31, 2010 and 2009 were $405,899
and $478,099, respectively. The exploration costs expensed to date during the
Company’s exploration stage amount to $17,330,397.





Foreign Currency
Translation





Assets
and liabilities of the Company’s foreign operations are translated into U.S.
dollars at the year-end exchange rates, and revenue and expenses are translated
at the average exchange rates during the period. Exchange differences arising on
translation are disclosed as a separate component of stockholders’ equity.
Realized gains and losses from foreign currency transactions are reflected in
the results of operations.  Intercompany transactions and balances
with the Company’s Mexican subsidiaries are considered to be short-term in
nature and accordingly all foreign currency transaction gains and losses on
intercompany loans are included in the consolidated statement of
operations.





Foreign
Operations





The
accompanying balance sheet at January 31, 2010 contains Company assets in
Mexico, including: $3,707,945 in mineral properties; $1,672,421 (before
accumulated depreciation) of property and equipment; $732,613 in value-added tax
receivable; $179,830 in prepaid expenses and $68,016 of cash. Although this
country is generally considered economically stable, it is always possible that
unanticipated events in foreign countries could disrupt the Company’s
operations. The Mexican government does not require foreign entities to maintain
cash reserves in Mexico.





Value-Added Tax
Receivable





The
Company records a receivable for value added (“IVA”) taxes recoverable from
Mexican authorities on goods and services purchased by its Mexican
subsidiaries.  As of January 31, 2010, the Company has filed IVA tax
returns with the Mexican authorities to recover approximately $704,000 of IVA
taxes paid by its Mexican subsidiaries from 2005 through 2008.  During
2008, the Mexican authorities requested the Company to provide copies of
supporting documentation for amounts filed.  The Company worked with
the Mexican authorities to provide the requested documentation and answer
questions related to these tax returns, but the Company was unable to recover
the IVA tax amounts.





In
September 2008, the Company hired an IVA tax consultant to assist the Company in
recovering the IVA taxes. The IVA tax consultant performed a detailed review of
the IVA tax returns for 2005, 2006, and 2007 and suggested the Company eliminate
certain small dollar items and items that lack clear supporting documentation to
expedite recovery of these IVA tax amounts.  The Company prepared
revised IVA tax returns and presented them to the Mexican authorities. However,
the Mexican authorities rejected the returns and requested further
information.





During
2008 and 2009, the Company continued to work with the Mexican authorities to
provide requested information and resolve any outstanding tax
issues.  Several times the Company presented the tax returns along
with supporting information to the Mexican authorities only to receive notices
requesting further information.  The Company met with senior
government officials in charge of our returns on at least two different
occasions in attempt to resolve these issues.  Despite assurances that
the returns would be accepted as filed, the Mexican authorities again rejected
our returns in October 2009.  The Company plans to challenge the
governments repeated request for information and aggressively pursue collection
of all outstanding IVA tax amounts.











NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Given the
continued uncertainty as to the ultimate collection of these taxes, Management
evaluated the estimated collectability of the IVA amounts as of October 31, 2009
and increased its allowance for uncollectible taxes to approximately 3.6 million
pesos or $273,761.  The allowance for uncollectible taxes was
estimated by management based upon a number of factors including length of time
the returns have been outstanding, general economic conditions in Mexico and
estimated net recovery after commissions. Management evaluated the IVA tax
receivable at January 31, 2010 and has determined that the allowance for
uncollectible taxes of 3.6 million pesos or $273,335 is adequate as of January
31, 2010.  The Company will continue to reflect the IVA tax receivable
as a long-term asset on the Consolidated Balance Sheet as of January 31,
2010.





Marketable
Securities





The
Company classifies marketable securities as trading, available-for-sale, or
held-to-maturity. Marketable securities include investments with maturities
greater than three months, but not exceeding twelve months.   As
of January 31, 2010, the Company did not have marketable
securities.





Accounting for Loss
Contingencies and Legal Costs





From time
to time, the Company is named as a defendant in legal actions arising from our
normal business activities. The Company records an estimated loss contingency
when information available prior to issuance of our financial statements
indicates that it is probable that a loss has been incurred at the date of the
financial statements and the amount of the loss can be reasonably
estimated.  The consolidated financial statements do not reflect any
material amounts related to possible unfavorable outcomes of claims and lawsuits
to which we are currently a party because we currently believe that such claims
and lawsuits are not expected, individually or in the aggregate, to result in a
material adverse effect on our financial condition. However, it is possible that
these contingencies could materially affect our results of operations, financial
position and cash flows in a particular period if we change our assessment of
the likely outcome of these matters.   Legal costs incurred in
connection with loss contingencies are considered period costs and accordingly
are expensed in the period services are provided.





Income
Taxes





Income
taxes are accounted for based upon the asset and liability method. Under this
approach, deferred income taxes are recorded to reflect the tax consequences in
future years of differences between the tax basis of assets and liabilities and
their financial reporting amounts at each year-end. A valuation allowance is
recorded against deferred tax assets if management does not believe the Company
has met the “more likely than not” standard imposed by this guidance to allow
recognition of such an asset.





Effective
November 1, 2007, the Company adopted accounting guidance for uncertainty in
income taxes.  This guidance addresses the determination of whether
tax benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. The Company may recognize the tax benefit
from uncertain tax positions only if it is at least more likely than not that
the tax position will be sustained on examination by the taxing authorities,
based on the technical merits of the position. The tax benefits recognized in
the financial statements from such a position should be measured based on the
largest benefit that has a greater than 50% likelihood of being realized upon
settlement with the taxing authorities. This accounting standard also provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods and disclosure.





Fair Value
Measurements








On
November 1, 2008, the Company adopted new accounting guidance on fair value
measurements. The new guidance defines fair value, establishes a framework for
measuring fair value under U.S. GAAP and expands disclosures about fair
value measurements. The new fair value accounting guidance is applied
prospectively for financial assets and liabilities measured on a recurring basis
as of November 1, 2008. The adoption of this guidance did not have a material
impact on the Company’s financial position, results of operations or cash
flows.














NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





In
February 2008, the Financial Accounting Standards Board
(“FASB”)  issued further accounting guidance which delayed the
effective date of applying fair value measurements for nonfinancial assets and
nonfinancial liabilities,





The
Company measures certain assets and liabilities at fair value. Fair value is
defined as an “exit price” which represents the amount that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants as of the measurement date. As such, fair value is a
market-based measurement that should be determined based on assumptions that
market participants would use in valuing an asset or liability. The new
accounting guidance also requires the use of valuation techniques to measure
fair value that maximize the use of observable inputs and minimize the use of
unobservable inputs. As a basis for considering such assumptions and inputs, a
fair value hierarchy has been established which identifies and prioritizes three
levels of inputs to be used in measuring fair value.




The three
levels of the fair value hierarchy are as follows:





Level 1
            Unadjusted
      quoted prices in active markets that are accessible at the measurement
      date for identical, unrestricted assets or
  liabilities;





Level 2
            Quoted
      prices in markets that are not active, or inputs that are observable,
      either directly or indirectly, for substantially the full term of the
      asset or liability;





Level 3
            Prices
      or valuation techniques that require inputs that are both significant to
      the fair value measurement and unobservable (supported by little or no
      market activity).




Under
fair value accounting, assets and liabilities are classified in their entirety
based on the lowest level of input that is significant to the fair value
measurement. As of January 31, 2010 and October 31, 2009, the Company had no
financial on non-financial assets or liabilities required to be reported for
fair value purposes.





The
carrying amounts of the Company’s financial instruments, including cash and cash
equivalents, other receivable, and accounts payable approximate fair value at
January 31, 2010 and October 31, 2009 due to the short maturities of these
financial instruments.





On
November 1, 2008, the Company adopted a pronouncement on what is now codified as
Accounting Standards Codification 820, Fair Value Measurements and
Disclosure.  This pronouncement provides authoritative guidance
regarding the fair value option for financial assets and financial
liabilities.  This guidance provides a choice to measure many
financial instruments and certain other items at fair value on specified
election dates and requires disclosures about the election of the fair value
option. Unrealized gains and losses on items for which the fair value option has
been elected are reported in earnings. The Company has chosen not to elect the
fair value option for any financial or non-financial instruments as of the
adoption date, thus this authoritative guidance did not have an impact on the
Company's financial position or results of operations.





Recent Accounting
Pronouncements





Effective
July 1, 2009, the FASB Accounting Standards Codification (“ASC”) became the
single official source of authoritative, nongovernmental U.S. GAAP. The
historical U.S. GAAP hierarchy was eliminated and the ASC became the only level
of authoritative U.S. GAAP, other than guidance issued by the SEC. The Company’s
accounting policies were not affected by the conversion to ASC. However,
references to specific accounting standards in the notes to our consolidated
financial statements have been changed to refer to the appropriate section of
the ASC.

















NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





In
December 2007, the FASB issued a pronouncement on what is now codified as ASC
805, Business
Combinations.  This pronouncement revised the authoritative
guidance on business combinations, including the measurement of acquirer shares
issued in consideration for a business combination, the recognition of
contingent consideration, the accounting for pre-acquisition gain and loss
contingencies, the recognition of capitalized in-process research and
development, the accounting for acquisition-related restructuring cost accruals,
the treatment of acquisition-related transaction costs, and the recognition of
changes in the acquirer’s income tax valuation allowance. The new accounting
guidance also establishes disclosure requirements to enable the evaluation of
the nature and financial effects of the business combination. The new guidance
was effective as of the beginning of an entity’s fiscal year that begins after
December 15, 2008, and was adopted by the Company on November 1, 2009. The
adoption of this new guidance had no material impact on the Company’s financial
position, results of operations or cash flows.





In April
2009, the FASB issued a pronouncement on what is now codified as ASC 805, Business
Combinations.  This pronouncement issued authoritative guidance
on accounting for assets acquired and liabilities assumed in a business
combination that arise from contingencies, which amends the provisions related
to the initial recognition and measurement, subsequent measurement and
disclosure of assets and liabilities arising from contingencies in a business
combination under previously issued guidance. The authoritative guidance
requires that such contingencies be recognized at fair value on the acquisition
date if fair value can be reasonably estimated during the allocation period. The
new guidance was effective as of the beginning of an entity’s fiscal year that
begins after December 15, 2008, and was adopted by the Company on November
1, 2009. The adoption of this new guidance had no material impact on the
Company’s financial position, results of operations or cash flows.





In August
2009, the FASB issued Accounting Standards Update (“ASU”) 2009-5, Topic 820
which clarified techniques for valuing a liability in circumstances where a
quoted price for an identical liability is not available.  This new
accounting guidance became effective for interim periods beginning after August
31, 2009 and was adopted by the Company on November 1, 2009. The adoption of
this new guidance had no material impact on the Company’s financial position,
results of operations or cash flows.





In
January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06
which provides amendments to ASC Topic 820 that will provide more robust
disclosures about (1) the different classes of assets and liabilities measured
at fair value, (2) the valuation techniques and inputs used, (3) the activity in
Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and
3. The new disclosures and clarifications of existing disclosures are effective
for interim and annual reporting periods beginning after December 15, 2009,
except for the disclosures about purchases, sales, issuances and settlements in
the roll forward of activity in Level 3 fair value measurements. Those
disclosures are effective for fiscal years beginning after December 15, 2010,
and for interim periods within those years. The Company does not expect that the
adoption of ASU No. 2010-06 will have a material effect on its results of
operations and financial position.





Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force) and the United States Securities and Exchange Commission did
not or are not believed to have a material impact on the Company's present or
future consolidated financial statements.





NOTE
4 – CONCESSIONS IN THE SIERRA MOJADA DISTRICT





Sierra Mojada Mining
Concessions





The
Company owns 20 mining concessions consisting of 19,461.15 hectares (about
48,090 acres) in the mining region known as the Sierra Mojada District located
in Sierra Mojada, Coahuila, Mexico.  The mining concessions are
considered one prospect area and are collectively referred to as the Sierra
Mojada Project.




The
Company purchased eleven of the concessions from Mexican entities and/or Mexican
individuals and the remaining nine concessions were granted by the Mexican
government.  Each mining concession enables the Company to explore the
underlying concession in consideration for the payment of semi-annual fee to the
Mexican government and completion of certain annual assessment
work.  Annual assessment work in excess of statutory annual
requirements can be carried forward and applied to future
periods.  The Company has completed sufficient work to meet future
requirements for many years.












NOTE
4 – CONCESSIONS IN THE SIERRA MOJADA DISTRICT (continued)





As of
January 31, 2010, the Company owns the following mining concessions in the
Sierra Mojada District:





Concession
            
            Acquisition
      Method
            
            Date
            
            Hectares
            
            
            Cost
      Basis(3)Sierra
      Mojada (1)
            
            Purchased
            
            5/30/2000
            
            
            4,818.49
            
            
            $
            13,031Sierra
      Mojada Fraccion I
            
            Claim
      Filed
            
            11/17/2009
            
            
            .05
            
            
            
            -Sierra
      Mojada Fraccion II
            
            Claim
      Filed
            
            11/17/2009
            
            
            .01
            
            
            
            -Sierra
      Mojada Fraccion III
            
            Claim
      Filed
            
            11/17/2009
            
            
            .33
            
            
            
            -Sierra
      Mojada Fraccion IV
            
            Claim
      Filed
            
            11/17/2009
            
            
            1.18
            
            
            
            -Mojada
      3
            
            Purchased
            
            5/30/2000
            
            
            722.00
            
            
            
            -Unificacion
      Mineros Nortenos
            
            Purchased
            
            8/30/2000
            
            
            336.79
            
            
            
            3,023,069Vulcano
            
            Purchased
            
            8/30/2000
            
            
            4.49
            
            
            
            -Esmeralda
      1
            
            Purchased
            
            8/20/2001
            
            
            95.50
            
            
            
            148,567Esmeralda
            
            Purchased
            
            3/20/1997
            
            
            117.50
            
            
            
            209,852La
      Blanca
            
            Purchased
            
            8/20/2001
            
            
            33.50
            
            
            
            100,770Fortuna
            
            Claim
      Filed
            
            12/8/1999
            
            
            13.96
            
            
            
            62,981Mojada
      2
            
            Claim
      Filed
            
            7/17/2006
            
            
            3,500.00
            
            
            
            -El
      Retorno
            
            Purchased
            
            4/10/2006
            
            
            817.65
            
            
            
            12,657Los
      Ramones
            
            Purchased
            
            4/10/2006
            
            
            8.60
            
            
            
            229El
      Retorno Fracc. 1
            
            Purchased
            
            4/20/2006
            
            
            5.51
            
            
            
            76Dormidos
            
            Claim
      Filed
            
            4/9/2007
            
            
            2,326.10
            
            
            
            -Agua
      Mojada
            
            Claim
      Filed
            
            1/26/2007
            
            
            2,900.00
            
            
            
            5,011Alote(2)
            
            Claim
      Filed
            
            5/17/2007
            
            
            3,749.00
            
            
            
            4,981Volcan
      Dolores
            
            Purchased
            
            9/24/2007
            
            
            10.49
            
            
            
            126,72119,461.15
            
            
            $
            3,707,945


______________________


(1)On
November 17, 2009, the Dirección General de Minas issued title 235371 to replace
title 198513 and increase the hectares on the Sierra Mojada property from
4,767.32 hectares to 4,818.49 hectares.


(2)Title for this concession is pending.


(3)Certain concession costs are individually insignificant.





NOTE
5 - EQUIPMENT





The
following is a summary of the Company's property and equipment at January 31,
2010 and October 31, 2009, respectively:





January
      31,
            
            
            October
      31,2010
            
            
            2009Mining
      equipment
            
            $
            1,244,795
            
            
            $
            1,209,471Well
      equipment
            
            
            31,190
            
            
            
            31,239Communication
      equipment
            
            
            7,276
            
            
            
            7,288Buildings
      and structures
            
            
            139,462
            
            
            
            139,679Vehicles
            
            
            129,345
            
            
            
            114,369Computer
      equipment and software
            
            
            160,490
            
            
            
            160,629Office
      equipment
            
            
            21,007
            
            
            
            10,238Assets
      under construction
            
            
            29,406
            
            
            
            12,4791,762,971
            
            
            
            1,685,392Less:  Accumulated
      depreciation
            
            
            (726,075
            )
            
            
            (679,659
            )$
            1,036,896
            
            
            $
            1,005,733

















NOTE
5 – EQUIPMENT (continued)





Depreciation
expense for the three months ended January 31, 2010 and 2009 was $47,903 and
$51,317 respectively. The Company evaluates the recoverability of property and
equipment 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. Maintenance and repairs are expensed as incurred. Replacements
and betterments are capitalized. The cost and related reserves of assets sold or
retired are removed from the accounts, and any resulting gain or loss is
reflected in results of operations.





NOTE
6 – SHAREHOLDER RIGHTS PLAN





On June
11, 2007, the Board of Directors adopted a Shareholders’ Right Plan through the
adoption of a Rights Agreement, which became effective
immediately.  In connection with the adoption of the Rights Agreement,
the Board of Directors declared a distribution of one Right for each outstanding
share of the Company’s common stock, payable to shareholders of record at the
close of business on June 22, 2007. The Right is attached to the underlying
common share and will remain with the common share if the share is sold or
transferred.





In
certain circumstances, in the event that any person acquires beneficial
ownership of 20% or more of the outstanding shares of the Company’s common
stock, each holder of a Right, other than the acquirer, would be entitled to
receive, upon payment of the purchase price, which is initially set at $20 per
Right, a number of shares of the Company’s common stock having a value equal to
two times such purchase price. The Rights will expire on June 11,
2017.





NOTE
7 - COMMON STOCK





Pursuant
to the Merger Agreement, on December 22, 2009, the Company closed a private
placement of 6,500,000 units of the Company, at a price of $.46 per unit, with
each unit consisting of one share of common stock of the Company and one common
stock purchase warrant of the Company, two of which warrants will entitle the
holder to purchase one share of common stock.  The warrants are
exercisable only if the Merger Agreement between Dome and Metalline is
terminated and then only for a term extending until one year following the date
of issuance, with an exercise price of $0.57 per share of common
stock.  This private placement was completed on December 22, 2009 with
total net proceeds of $2,990,000.  During the three months ended
January 31, 2010, the Company also issued 32,400 shares of common stock at an
average market price of $0.64 per share to its independent directors for
services provided during the quarter ended January 31, 2010.





During
the comparative three-months ended January 31, 2009, the Company did not issue
any common stock.  The Company accrued $10,692 for costs associated
with director shares for the quarter ended January 31, 2009 and on February 9,
2009, the Company issued 32,400 shares to independent directors for services
provided during the quarter ended January 31, 2009.





NOTE
8 - STOCK OPTIONS





The
Company has two existing qualified stock option plans.  Under the 2006
Stock Option Plan (the “2006 Plan’) the Company may grant non-statutory and
incentive options to employees, directors and consultants for up to a total of
5,000,000 shares of common stock.  Under the 2000 Equity Incentive
Plan (the “2000 Plan”) the Company may grant non-statutory and incentive options
to employees, directors, and consultants for up to a total of 1,000,000 shares
of common stock.  Options are typically granted with an exercise price
equal to the closing market price of the Company’s stock at the date of grant
and have a contractual term of 9 to 10 years.  Prior to October 31,
2006, most stock option grants were immediately vested at date of
grant.  Subsequent grants have typically been issued with a graded
vesting schedule over approximately 2 to 3 years.  Certain option
awards provide for accelerated vesting if there is a change in control (as
defined in the 2006 Plan).  New shares are issued upon exercise of
stock options.














NOTE
8 - STOCK OPTIONS (continued)





On
December 22, 2009, the Board of Directors of the Company adopted the 2010 Stock
Option and Stock Bonus Plan (the “Plan”). The Company intends to submit the
Plan to its shareholders for approval at its next meeting of shareholders.
 To date no options or bonuses have been granted under the
Plan.





The fair
value of each option award is estimated on the date of grant using the
Black-Scholes-Merton valuation model.  Expected volatility is based
upon weighted average of historical volatility over the expected term of the
option and implied volatility.  The expected term of stock options is
based upon historical exercise behavior and expected exercised
behavior.  The risk-free interest rate is based upon implied yield on
a U.S. Treasury zero-coupon issue with a remaining term equal to the expected
term of the option.  The dividend yield is assumed to be none as the
Company does not anticipate paying any dividends in the foreseeable
future.





No
options were granted or exercised during the three months ended January 31, 2010
and January 31, 2009.





The
following is a summary of stock option activity for the three months ended
January 31, 2010 is as follows:





Options
            
            Shares
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Weighted
              Average
      Remaining Contractual
              Life
      (Years)
            
            
            Aggregate
              Intrinsic
              ValueOutstanding
      at November 1, 2009
            
            
            5,005,623
            
            
            $
            2.27Granted
            
            
            --
            
            
            
            --Exercised
            
            
            --
            
            
            
            --Forfeited
      or Expired
            
            
            --
            
            
            
            --Outstanding
      at January 31, 2010
            
            
            5,005,623
            
            
            $
            2.27
            
            
            
            6.68
            
            
            $
            211,686Vested
      or Expected to Vest at January 31, 2010
            
            
            4,938,955
            
            
            $
            2.27
            
            
            
            6.66
            
            
            $
            211,686Exercisable
      at January 31, 2010
            
            
            4,938,955
            
            
            $
            2.27
            
            
            
            6.66
            
            
            $
            211,686




The
Company recognized stock-based compensation costs for stock options of $37,806
and $169,233 for the three months ended January 31, 2010 and 2009,
respectively.  The Company typically does not recognize any tax
benefits for stock options due to the Company’s recurring losses. The Company
currently expects all outstanding options to vest.  Compensation cost is
revised if subsequent information indicates that the actual number of options
vested is likely to differ from previous estimates.





Summarized
information about stock options outstanding and exercisable at January 31, 2010
is as follows:





Options
      Outstanding
            
            
            Options
      ExercisableExercise
              Price
            
            
            Number
              Outstanding
            
            
            Weighted
              Ave.
              Remaining
      Contractual
              Life
      (Years)
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Number
              Exercisable
            
            Weighted
              Average
              Exercise
              Price$
            0.34
            
            
            
            705,619
            
            
            
            9.04
            
            
            $
            0.34
            
            
            
            705,619
            
            
            
            $
            0.341.25-1.32
            
            
            
            100,000
            
            
            
            .67
            
            
            
            1.32
            
            
            
            100,000
            
            
            
            
            1.322.15-2.85
            
            
            
            3,950,004
            
            
            
            6.36
            
            
            
            2.51
            
            
            
            3,883,336
            
            
            
            
            2.514.30
            
            
            
            250,000
            
            
            
            7.38
            
            
            
            4.30
            
            
            
            250,000
            
            
            
            
            4.30$
            0.34-4.30
            
            
            
            5,005,623
            
            
            
            6.68
            
            
            $
            2.27
            
            
            
            4,938,955
            
            
            
            $
            2.27














NOTE
8 - STOCK OPTIONS (continued)





A summary
of the nonvested shares as of January 31, 2010 and changes during the three
months ended January 31, 2010 is as follows:





Nonvested
      Shares
            
            Shares
            
            
            Weighted-Average
              Grant-Date
              Fair
      ValueNonvested
      at November 1, 2009
            
            
            266,670
            
            
            $
            1.69Granted
            
            
            -
            
            
            
            -Vested
            
            
            (200,002)
            
            
            
            1.67Forfeited
            
            
            -
            
            
            
            -Nonvested
      at January 31, 2010
            
            
            66,668
            
            
            $
            1.73




As of
January 31, 2010, there was $35,765 of total unrecognized compensation costs
related to nonvested share based compensation arrangements granted under the
qualified stock option plans.  That cost is expected to be recognized
over a weighted average period of 0.92 years.





NOTE
9 - WARRANTS





The
Company may issue warrants to investors in connection with private placements of
Company stock or for financial services in connection with private placements or
investor relations.  Warrants issued for financial services or
investor relations are typically granted with an exercise price equal to the
market price of the Company’s stock at the date of grant. The fair value of each
warrant is estimated on the date of grant using the Black-Scholes-Merton
valuation model. Expected volatility is based upon weighted average of
historical volatility over the contractual term of the warrant and implied
volatility.  The risk-free interest rate is based upon implied yield
on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected
term of the option.  The dividend yield is assumed to be none as the
Company has not paid dividends nor does not anticipate paying any dividends in
the foreseeable future.





A summary
of warrant activity for the three months ended January 31, 2010 is as
follows:





Warrants
            
            Shares
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Weighted
              Average
              Remaining
      Contractual
              Life
      (Years)
            
            
            Aggregate
              Intrinsic
      ValueOutstanding
      at November 1, 2009
            
            
            12,979,090
            
            
            
            1.23Issued
      with private placement
            
            
            3,250,000
            
            
            
            0.57Issued
      for services
            
            
            —
            
            
            
            —Exercised
            
            
            —
            
            
            
            —Forfeited
      or expired
            
            
            (100,000
            )
            
            
            2.63Outstanding
      at January 31, 2010
            
            
            16,129,090
            
            
            $
            1.09
            
            
            
            1.24
            
            
            $
            624,937Exercisable
      at January 31, 2010
            
            
            12,879,090
            
            
            $
            1.22
            
            
            
            1.33
            
            
            $
            397,437





Pursuant
to the private placement transaction described in Note 7, the Company issued
warrants to acquire 3,250,000 of common stock.The warrants are only
exercisable if the Merger Agreement between Dome and Metalline is terminated and
then only for a term extending until one year following the date of issuance,
with an exercise price of $0.57 per share of common stock.











NOTE
9 – WARRANTS





Summarized
information about warrants outstanding and exercisable at January 31, 2010 is as
follows:




Warrants Outstanding
              
              
              Warrants ExercisableExercise
                Price
              
              
              Number
                Outstanding
              
              
              Weighted
                Ave.
                Remaining
      Contractual
                Life
      (Years)
              
              
              Weighted
                Average
                Exercise
                Price
              
              
              Number
                Exercisable
              
              Weighted
                Average
                Exercise
                Price$0.34
      - $0.57
              
              
              
              5,985,976
              
              
              
              1.61
              
              
              $
              .54
              
              
              
              2,735,976
              
              
              
              $
              .49$1.25
      - $1.25
              
              
              
              9,085,169
              
              
              
              .97
              
              
              
              1.25
              
              
              
              9,085,169
              
              
              
              
              1.25$2.00
      - $2.42
              
              
              
              557,945
              
              
              
              1.03
              
              
              
              2.31
              
              
              
              557,945
              
              
              
              
              2.31$3.40
      - $3.40
              
              
              
              500,000
              
              
              
              1.92
              
              
              
              3.40
              
              
              
              500,000
              
              
              
              
              3.40$0.34
      - $3.40
              
              
              
              16,129,090
              
              
              
              1.24
              
              
              $
              1.09
              
              
              
              12,879,090
              
              
              
              $
              1.22
  NOTE
10 - COMMITMENTS AND CONTINGENCIES





Compliance with
Environmental Regulations





The
Company’s mining activities are subject to laws and regulations controlling not
only the exploration and mining of mineral properties, but also the effect of
such activities on the environment. Compliance with such laws and regulations
may necessitate additional capital outlays, affect the economics of a project,
and cause changes or delays in the Company’s activities.





Employment
Agreements





The
Company has entered into executive employment agreements with four of its
executive officers.  The employment agreements have a term of one year
from January 1, 2010 with automatic renewal for an additional year on each
anniversary.  The employment agreements also provide for twelve months
of severance in the event the agreement is not renewed for the calendar year
following a change in control. The employment agreements with Merlin Bingham,
Roger Kolvoord, Robert Devers, and Terry Brown provide for an annual base salary
of $247,000, $224,000, $165,000 and $150,000, respectively.





Deferred Salaries &
Directors Fees





Effective
February 1, 2009, the Company’s executive officers and corporate employees
entered into salary deferral agreements with the Company to defer 25% to 50% of
their base salaries in order to help the Company conserve working
capital.  Similarly, each of the Company’s three independent directors
entered into a deferral agreement with the Company to defer 100% of the cash
portion of their director’s fees effective February 1, 2009. The Company
continued to defer these costs until December 24, 2009, when the Board of
Directors determined that the Company had obtained sufficient operating capital
to fund its operations.





Royalty
Agreement





In
connection with the purchase of certain mining concessions, the Company has
agreed to pay the previous owners a net royalty interest on revenue from future
mineral sales.














NOTE
10 - COMMITMENTS AND CONTINGENCIES (continued)





Mining
Concessions
 
 The
Company holds title to several mining concessions in Mexico that require the
Company to conduct a certain amount of work each year to maintain these
concessions.  Annual work in excess of these statutory requirements
can carry forward to future periods.  The Company has accumulated a
large enough carry forward to meet future requirements for several
years.  The mining concessions also require the Company to pay
semi-annual fees to the Mexican government.


NOTE
11 – INCOME TAXES





Provision for
Taxes





The
Company files a United States federal income tax return on a fiscal year-end
basis and files Mexican income tax returns for its two Mexican subsidiaries on a
calendar year-end basis.  The Company and one of its wholly-owned
subsidiaries, Minera Metalin, have not generated taxable income since inception.
Contratistas, another wholly-owned Mexican
subsidiary, generated taxable income based upon intercompany fees with Minera
during the three months ended January 31, 2010 and 2009.





On
October 1, 2007, the Mexican government enacted a new law, which was
effective January 1, 2008 that introduces a new minimum flat tax system.
This new flat tax system integrates with the regular income tax system and is
based on cash-basis net income that includes only certain receipts and
expenditures.  The flat tax is set at 17.5% of cash-basis net income as
determined, with transitional rates of 16.5% and 17.0% in 2008 and 2009,
respectively.  If the flat tax is positive, it is reduced by the regular
income tax and any excess is paid as a supplement to the regular income
tax.  If the flat tax is negative, it may serve to reduce the regular
income tax payable in that year or can be carried forward for a period of up to
ten years to reduce any future flat tax.





In
December 2009, tax reform legislation proposed by Mexican Congress was published
in the Official Journal of the Federation and became law. Under the provisions
of the new law, the corporate tax rate will increase from 28% to 30% beginning
in calendar year 2010, decrease from 30% to 29% in calendar year 2013, and
return to 28% in calendar year 2014.  The increase in the corporate
tax rate will result in higher foreign income taxes for
Contratistas.  The Company has elected not to adjust the effective tax
rate for deferred tax purposes as it anticipates that the corporate income tax
rate will return back to 28% in the years in which the tax differences are
expected to reverse.





The
Company’s provision for income taxes for the three months ended January 31, 2010
consisted of a tax credit of $14,969 related to a provision to return true-up
for foreign income taxes for the calendar year ended December 31,
2009.  The Company’s provision for income taxes of $3,575 for the
three months ended January 31, 2009 consists of current foreign income tax
provision.  There was no federal or state income tax provision for the
three months ended January 31, 2010 and 2009.





Accounting for Uncertainty
in Income Taxes





Effective
November 1, 2007, the Company adopted accounting guidance for uncertainty in
income taxes.  This guidance addresses the determination of whether
tax benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. The Company may recognize the tax benefit
from uncertain tax positions only if it is at least more likely than not that
the tax position will be sustained on examination by the taxing authorities,
based on the technical merits of the position. The tax benefits recognized in
the financial statements from such a position should be measured based on the
largest benefit that has a greater than 50% likelihood of being realized upon
settlement with the taxing authorities. This accounting standard also provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods and disclosure.





The
Company did not have any unrecognized tax benefits or changes in unrecognized
tax benefits during the three month period ended January 31, 2010 and
accordingly no reconciliation of the beginning and ending amount of unrecognized
tax benefits is presented.





The
Company does not have any unrecognized tax benefits as of January 31, 2010 and
accordingly the Company’s effective tax rate will not be materially affected by
unrecognized tax benefits.















NOTE
11 – INCOME TAXES (continued)





The
following tax years remain open to examination by the Company’s principal tax
jurisdictions.




United
      States:
              Mexico:
            1993
      and all following years
              1997
      and all following years




The
Company has not identified any uncertain tax position for which it is reasonably
possible that the total amount of unrecognized tax benefit will significantly
increase or decrease within the next twelve months.





The
Company’s policy is to classify tax related interest and penalties as income tax
expense.  There is no interest or penalties estimated on the
underpayment of income taxes as a result of these unrecognized tax
benefits.





NOTE
12 – SEGMENT INFORMATION





The
Company operates in one business segment being the exploration of mineral
property interests.





Geographic
information is approximately as follows:





January
      31,
              2010
            
            
            October
      31,
              2009Identifiable
      assetsMexico
            
            $
            5,724,000
            
            
            $
            5,566,000United
      States
            
            
            2,633,000
            
            
            
            1,476,000$
            8,357,000
            
            
            $
            7,042,000





For
      the three months ended
            
            
            November
      8, 1993 (Inception) ToJanuary
      31,
            
            
            January
      31,2010
            
            2009
            
            
            2010Net
      loss for the periodMexico
            
            $
            (488,000
            )
            
            $
            (2,660,000
            )
            
            $
            (18,408,000
            )United
      States
            
            
            (821,000
            )
            
            
            (701,000
            )
            
            
            (34,692,000
            )$
            (1,309,000
            )
            
            $
            (3,361,000
            )
            
            $
            (53,100,000
            )
























ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.





When we
use the terms “Metalline Mining Company,” the “Company,” “we,” “us,” “our,” or
“Metalline,” we are referring to Metalline Mining Company and its subsidiaries,
unless the context otherwise requires. We have included technical terms
important to an understanding of our business under “Glossary of Common Terms”
in our Annual Report on Form 10-K for the fiscal year ended October 31, 2009.
Throughout this document we make statements that are classified as
“forward-looking.”





Cautionary
Statement about Forward-Looking Statements





This
Quarterly Report on Form 10-Q includes certain statements that may be deemed to
be “forward-looking statements.” All statements, other than statements of
historical facts, included in this Form 10-Q that address activities, events or
developments that our management expects, believes or anticipates will or may
occur in the future are forward-looking statements. Such forward-looking
statements include discussion of such matters as:





·
            The amount and nature of future
      capital, development and exploration
  expenditures;





·
            The timing of exploration
      activities; and





·
            Business strategies and
      development of our business
plan.





Forward-looking
statements also typically include words such as “anticipate”, “estimate”,
“expect”, “potential”, “could” or similar words suggesting future outcomes.
These statements are based on certain assumptions and analyses made by us in
light of our experience and our perception of historical trends, current
conditions, expected future developments and other factors we believe are
appropriate in the circumstances. Such statements are subject to a number of
assumptions, risks and uncertainties, including such factors as the volatility
and level of silver and zinc prices, currency exchange rate fluctuations,
uncertainties in cash flow, expected acquisition benefits, exploration mining
and operating risks, competition, litigation, environmental matters, the
potential impact of government regulations, and other matters discussed under
the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year
ended October 31, 2009 and subsequent periodic reports, many of which are beyond
our control. Readers are cautioned that forward-looking statements are not
guarantees of future performance and that actual results or developments may
differ materially from those expressed or implied in the forward-looking
statements.





The
Company is under no duty to update any of these forward-looking statements after
the date of this report. You should not place undue reliance on these
forward-looking statements.





Cautionary
Note





The
Company is an exploration stage company and does not currently have any known
reserves and cannot be expected to have reserves unless and until a feasibility
study is completed for the Sierra Mojada concessions that shows proven and
probable reserves. There can be no assurance that the Company’s concessions
contain proven and probable reserves and investors may lose their entire
investment in the Company. See “Risk Factors.”





Merger Agreement with Dome
Ventures





On
December 4, 2009, Metalline executed an Agreement and Plan of Merger and
Reorganization (the “Merger Agreement”) with Dome Ventures Corporation (“Dome”)
whereby upon the closing of the transaction described in the Merger Agreement,
Dome will become a wholly owned subsidiary of Metalline.  Dome is a
publicly held resource company based in Vancouver, British Columbia, Canada.
Dome’s common stock is listed on the TSX Venture Exchange (TSX-V) under the
symbol "DV.U". Dome holds three exploration licenses in Gabon, West Africa and
recently announced a joint venture agreement with AngloGold Ashanti Limited on
two of its licenses, Ndjole and Mevang. At the same time Dome entered into a
second joint venture agreement on the Ogooue license held by AngloGold Ashanti
Limited.













Pursuant
to the Merger Agreement, on December 22, 2009, Metalline closed a private
placement of 6,500,000 units of the Company, at a price of $.46 per unit, with
each unit consisting of one share of common stock of the Company and one common
stock purchase warrant of the Company, two of which warrants will entitle the
holder to purchase one share of common stock.  The warrants are only
exercisable if the Merger Agreement between Dome and Metalline is terminated and
then only for a term extending until one year following the date of issuance,
with an exercise price of $0.57 per share of common stock.  This
private placement was completed on December 22, 2009 with total net proceeds of
$2,990,000.  Further pursuant to the Merger Agreement, Dome closed a
private placement of special warrants of Dome on January 11, 2010 for gross
proceeds of $13,010,000.  The funds will be held in escrow pending the
closing of the transaction.





Upon the
closing of the transaction described in the Merger Agreement, Metalline will
acquire all of the outstanding shares of Dome by the issuance of 47,724,561
shares of common stock.  The number of Metalline common shares to be
received by each Dome shareholder will depend on the number of Dome shares
outstanding at the closing of the transaction.   Additionally,
upon the effective date of the transaction all outstanding Dome warrants will be
exchanged for warrants to acquire Metalline common stock on equivalent
terms.  The parties anticipate that upon closing the transaction,
Metalline’s common stock will be listed on both the NYSE Amex and the TSX
Venture Exchange.  Metalline will be considered the acquirer for
accounting purposes.





The
Merger Agreement sets forth a number of conditions precedent for completion of
the transaction, and contains other standard provisions for transactions of this
nature, including transaction protection terms, standard representations,
warranties and covenants. There can be no assurance that Metalline will be able
to meet the conditions precedent to the transaction contemplated by the Merger
Agreement. The stockholders’ meetings for Dome and Metalline are scheduled for
April 14th and
15th of
2010, respectively. The parties expect to close the transaction on April 15,
2010.  If the Merger is not completed by May 30, 2010, the Merger
Agreement will terminate.





Going Concern – Presentation
of Financial Statements





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. Since its inception in November
1993, the Company has not generated revenue and has incurred a net loss of
$53,100,322 from inception through January 31, 2010.  Accordingly, the
Company has not generated cash flow from operations and has primarily relied
upon private placement of its common stock and proceeds from warrant exercises
to fund its operations.  As of January 31, 2010, the Company had
working capital of $2,528,782.





As
discussed above, the Company has executed a Merger Agreement with Dome and
currently the $13,010,000 raised by Dome through the sale of special warrants is
being held in escrow pending the closing of the transaction.  The
closing of this transaction is subject to several conditions including
shareholder approval by both companies, and registration of the common stock to
be issued to the Dome shareholders.  In the event the Company is
unable to successfully close this transaction, the Company may not have
sufficient working capital to operate during the next fiscal year. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets, or the amounts or classification of liabilities that may result from the
possible inability of the Company to continue as a going concern. Management’s
plans with regards to these conditions are described in Liquidity and Capital
Resources below.





Results
of Operation





Three Months Ended January
31, 2010 and January 31, 2009





For the
three months ended January 31, 2010, the Company experienced a consolidated net
loss of $1,309,000 or $0.03 per share, compared to a consolidated net loss of
$3,361,000 or $0.08 per share during the comparable period last
year.  The $2,052,000 decrease in consolidated net loss is primarily
due to a $1,960,000 decrease in foreign currency translation loss.












Exploration
and property holding costs





Exploration
and property holding costs decreased $75,000 or 14% to $449,000 for the three
months ended January 31, 2010 compared to $524,000 for the comparable period
last year.  This decrease was primarily due to a reduction in
operating personnel that occurred in 2009 as the Company scaled back its
drilling and exploration activities at the end of fiscal 2009 to conserve
operating capital.  In connection with the closing of the private
placement in December 2009, the Company began to ramp-up drilling and
exploration activities at Sierra Mojada.  The Company plans to further
expand its exploration activities upon closure of the Dome merger.





General
and Administrative Costs





General
and administrative expenses remained relatively flat at $823,000 for the three
months ended January 31, 2010 as compared to $822,000 for the comparable period
last year.  Lower stock based compensation from stock options in
salaries and payroll expenses and directors fees was offset by higher
professional fees.  Stock based compensation for options account for a
significant part of general and administrative expenses and was a primary factor
for several of the fluctuations described below.





Salaries
and payroll expense decreased $98,000 or 26% from the comparable period in
2009.  This decrease was primarily due to lower stock based
compensation related to stock options which decreased to $38,000 in 2010 as
compared to $143,000 during the comparable period in 2009.





Office
and administrative expenses increased $22,000 or 33% to $88,000 for the three
months ended January 31, 2010 as compared to $66,000 for the comparable period
last year.  The increase was primarily due to higher regulatory
fees.




Professional
services increased $95,000 or 31% to $403,000 for the three months ended January
31, 2010 as compared to $308,000 for the comparable period last
year.  The increase was due to higher legal and accounting costs
related to the Dome Merger and higher engineering costs related to work on the
resource model at Sierra Mojada.  Legal costs in the comparable period
in 2009 included $125,000 of legal costs related to the Mineros Nortenos lawsuit
(which was settled in early November 2009).  Professional fees, more
specifically engineering and project related consulting costs will continue to
increase during 2010 as the Company expands its exploration work at Sierra
Mojada.





Directors’
fees decreased $16,000 or 25% to $48,000 for the three months ended January 31,
2010 as compared to $64,000 for the comparable period last
year.  Stock based compensation associated with stock options
decreased $27,000 from the comparable period last year and were partially
mitigated by a higher average market price of shares granted to independent
directors for quarterly services.





Other
Income (Expense)





Other
Income (Expense) was $52,000 of expense for the three months ended January 31,
2010 as compared to $2,012,000 of expense for the comparable period last
year.  The decrease was due a $1,960,000 decrease in foreign currency
translation loss on intercompany loans to the Company’s Mexican
subsidiaries.  During the three months ended January 31, 2010, the
Mexican Peso to U.S. dollar exchange rate increased from 13.09 pesos per USD to
13.11 pesos per USD resulting in a foreign exchange loss of $53,000. During the
comparable period last year, the Mexican Peso to U.S. dollar exchange rate
increased from 12.90 pesos per USD to 14.28 pesos per USD resulting in a more
significant foreign exchange loss of $2,013,000.  As of January 31,
2010, the Company has a $21.3 million dollar intercompany receivable from Minera
which is subject to foreign currency translation gains and losses.





Interest
income continues to remain low due to low average investment balances and low
investment yields.












Liquidity
and Capital Resources





Cash
Flows





During
the three months ended January 31, 2010, the Company primarily utilized cash and
cash equivalents and proceeds from private placement of its common stock to fund
its operations which primarily consist of development and exploration of the
Sierra Mojada property.  During the three months ended January 31,
2010, the Company received $2,990,000 of proceeds from the sale of common stock
through a private placement.  As a result, cash and cash equivalents
increased from $1,483,000 at October 31, 2009 to $2,625,000 at January 31,
2010.   Cash flows used in operations for the three months ended
January 31, 2010 was $1,756,000 as compared to $1,312,000 for the comparable
period in 2009.  The $444,000 increase in cash used in operations was
primarily due to payment of deferred salaries and costs and reduction in accrued
liabilities.





Capital
Resources





As of
January 31, 2010, the Company had cash and cash equivalents of
$2,625,000.  Since inception, the Company has relied primarily upon
proceeds from private placements of its equity securities and warrant exercises
as its primary sources of financing to fund its operations. We anticipate
continuing to rely on sales of our securities in order to continue to fund our
business operations. Issuances of additional shares will result in dilution to
our existing stockholders. There is no assurance that we will be able to
complete any additional sales of our equity securities or that we will be able
arrange for other financing to fund our planned business
activities.





In
connection with the Dome Merger Agreement, the Company completed a private
placement of $2,990,000 on December 22, 2009.  The Company plans to
use these proceeds to fund operations while it works to close the proposed
merger transaction and to begin to ramp-up exploration activities at Sierra
Mojada.





The
Company believes that the successful completion of the Dome Merger Transaction
will provide additional funding to allow the Company to expand exploration
activities at Sierra Mojada over the next 2-3 years.  However, the
Dome Merger Transaction is subject to number of conditions precedent including
Dome raising $13,010,000 through a private placement of special warrants, both
companies obtaining shareholder approval, and the Company’s registration of
common stock to be issued to the Dome shareholders.  Dome completed
the $13,010,000 special warrant offering on January 11, 2010 and is currently
holding these funds in escrow pending the closing of the merger
transaction.  In the event the Company is unable to successfully close
the Merger transaction, the Company may not have sufficient working capital to
operate during the next fiscal year.





NYSE
Amex Listing Deficiency





On May 1,
2009, the Company received a notice of deficiency from the NYSE Amex stating the
Company was not in compliance with Section 1003(a)(iii) of the Company Guide
which requires listed issuers that have sustained losses from continuing
operations and/or net losses in its five most recent fiscal years to maintain
stockholders' equity of at least $6,000,000. The notice also stated that
Metalline was not in compliance with Section 1003(a)(iv) of the Company Guide
which provides that as a result of our sustained substantial losses or as a
result of our existing financial sources that it appears questionable, in the
opinion of the Exchange, as to whether Metalline will be able to continue
operations and/or meet our obligations as they mature.





The
Company submitted a plan of compliance addressing how we intend to regain
compliance with the NYSE Amex listing standards and on July 13, 2009, the NYSE
Amex granted the Company an extension regain compliance.  On November
2, 2009, NYSE Amex notified the Company that it had regained compliance with
Section 1003(a)(iv) and indicated the Company had until November 2, 2010 to
regain compliance with section 1003(a)(iii) which requires issuers to have a
minimum stockholders equity of $6,000,000.  As of January 31, 2010,
the Company’s stockholders’ equity was $8,006,236; however the Company will need
to demonstrate that it can maintain its stockholders’ equity over $6,000,000
before it can regain compliance with 1003(a)(iii).  If the transaction
with Dome is completed in accordance with the agreement between the parties it
would likely increase the Company’s stockholders’ equity and likely help the
Company to regain compliance with section 1003(a)(iii).












As such,
and subject to certain conditions, the Company’s common stock continues to be
listed on the Exchange during the extension period.  The Company is
subject to ongoing review by the Exchange and there can be no assurance that
Metalline will be able to regain compliance with the NYSE Amex listing
standards.





Capital
Requirements and Liquidity; Need for Subsequent Funding





The
Company will adjust its expenditures in consideration of its available resources
and the tasks to be performed.  Company management and our board of
directors monitor our overall costs and expenses and, if necessary, adjust
Company programs and planned expenditures in an attempt to ensure we have
sufficient operating capital.We continue to evaluate
our costs and planned expenditures for our on-going project at our Sierra Mojada
mining concessions.





The
continued exploration and development of the Sierra Mojada project will require
significant amounts of additional capital. The Company expects to have
additional funds available at the closing of a strategic transaction with Dome
Ventures Corporation due to cash on hand held by Dome and the proceeds of the
special warrant offering by Dome. However, the closing of that transaction is
subject to a number of conditions precedent, and there can be no assurance that
the transaction will be completed.





If the
contemplated transaction with Dome does not occur the Company likely will need
to explore other sources of funding during fiscal 2010 or consider reducing its
planned activities.  The weak US and global economies combined with
instability in global financial and capital markets have currently limited the
availability of this funding.  If the disruptions in the global
financial and capital markets continue, debt or equity financing may not be
available to us on acceptable terms, if at all. Equity financing, if available,
may result in substantial dilution to existing stockholders.  If we are
unable to fund future operations by way of financing, including public or
private offerings of equity or debt securities, our business, financial
condition and results of operations will be adversely impacted.





Once the
Company has gathered sufficient drilling data on the Silver Polymetallic
Mineralization, the Company (subject to having sufficient financial resources)
can then resume work on the feasibility study.  Following the
completion of the feasibility study, the Company would then proceed to the
construction phase, which would entail construction of a mine and related
infrastructure pursuant to a mine plan developed specifically for the Company's
concessions, and construction of an extraction plant to extract metal from the
ore that would be mined. In order to proceed with the construction phase, the
Company would need to rely on additional equity or debt financing, or the
Company may seek joint venture partners or other alternative financing
sources.





Off
Balance Sheet Arrangements





We have
no significant off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to our
stockholders.




Recent Accounting
Pronouncements








Effective
July 1, 2009, the FASB Accounting Standards Codification (“ ASC”) became
the single official source of authoritative, nongovernmental U.S. GAAP. The
historical U.S. GAAP hierarchy was eliminated and the ASC became the only level
of authoritative U.S. GAAP, other than guidance issued by the SEC. The Company’s
accounting policies were not affected by the conversion to ASC. However,
references to specific accounting standards in the notes to our consolidated
financial statements have been changed to refer to the appropriate section of
the ASC.





In
February 2008, the FASB issued authoritative guidance which delays the effective
date for non-financial assets and non-financial liabilities, except for items
that are recognized or disclosed at fair value in the financial statements on a
recurring basis (that is, at least annually) The new guidance was adopted by the
Company on November 1, 2009. The adoption of this new guidance had no material
impact on the Company’s financial position, results of operations or cash
flows.












In
December 2007, the FASB issued a pronouncement on what is now codified as ASC
805, Business
Combinations.  This pronouncement revised the authoritative
guidance on business combinations, including the measurement of acquirer shares
issued in consideration for a business combination, the recognition of
contingent consideration, the accounting for pre-acquisition gain and loss
contingencies, the recognition of capitalized in-process research and
development, the accounting for acquisition-related restructuring cost accruals,
the treatment of acquisition-related transaction costs, and the recognition of
changes in the acquirer’s income tax valuation allowance. The new accounting
guidance also establishes disclosure requirements to enable the evaluation of
the nature and financial effects of the business combination. The new guidance
was effective as of the beginning of an entity’s fiscal year that begins after
December 15, 2008, and was adopted by the Company on November 1, 2009. The
adoption of this new guidance had no material impact on the Company’s financial
position, results of operations or cash flows.





In April
2009, the FASB issued a pronouncement on what is now codified as ASC 805, Business
Combinations.  This pronouncement issued authoritative guidance
on accounting for assets acquired and liabilities assumed in a business
combination that arise from contingencies, which amends the provisions related
to the initial recognition and measurement, subsequent measurement and
disclosure of assets and liabilities arising from contingencies in a business
combination under previously issued guidance. The authoritative guidance
requires that such contingencies be recognized at fair value on the acquisition
date if fair value can be reasonably estimated during the allocation period. The
new guidance was effective as of the beginning of an entity’s fiscal year that
begins after December 15, 2008, and was adopted by the Company on November
1, 2009. The adoption of this new guidance had no material impact on the
Company’s financial position, results of operations or cash flows.





In August
2009, the FASB issued Accounting Standards Update (“ASU”) 2009-5, Topic 820
which clarified techniques for valuing a liability in circumstances where a
quoted price for an identical liability is not available.  This new
accounting guidance became effective for interim periods beginning after August
31, 2009 and was adopted by the Company on November 1, 2009. The adoption of
this new guidance had no material impact on the Company’s financial position,
results of operations or cash flows.





In
January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06
which provides amendments to ASC Topic 820 that will provide more robust
disclosures about (1) the different classes of assets and liabilities measured
at fair value, (2) the valuation techniques and inputs used, (3) the activity in
Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and
3. The new disclosures and clarifications of existing disclosures are effective
of interim and annual reporting periods beginning after December 15, 2009,
except for the disclosures about purchases, sales, issuances and settlements in
the roll forward of activity in Level 3 fair value measurements. Those
disclosures are effective for fiscal years beginning after December 15, 2010,
and for interim periods within those years. The Company does not expect that the
adoption of Update No. 2010-06 will have a material effect on its results of
operations and financial position.





Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force)and the United States Securities and Exchange Commission did
not or are not believed to have a material impact on the Company's present or
future consolidated financial





Critical Accounting
Policies





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make a variety of estimates and
assumptions that affect (i) the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and (ii) the reported amounts of revenues and expenses during the
reporting periods covered by the financial statements.





Our
management routinely makes judgments and estimates about the effect of matters
that are inherently uncertain. As the number of variables and assumptions
affecting the future resolution of the uncertainties increase, these judgments
become even more subjective and complex. Although we believe that our estimates
and assumptions are reasonable, actual results may differ significantly from
these estimates. Changes in estimates and assumptions based upon actual results
may have a material impact on our results of operation and/or financial
condition. We have identified certain accounting policies that we believe are
most important to the portrayal of our current financial condition and results
of operations.












Property
Concessions





Costs of
acquiring property concessions are capitalized by project area upon purchase or
staking of the associated claims. Costs to maintain the property concessions and
leases are expensed as incurred. When a property concession reaches the
production stage, the related capitalized costs will be amortized, using the
units of production method on the basis of periodic estimates of ore reserves.
To date no concessions have reached production stage.





Property
concessions are periodically assessed for impairment of value and any diminution
in value is charged to operations at the time of impairment. Should a property
concession be abandoned, its capitalized costs are charged to operations. The
Company charges to operations the allocable portion of capitalized costs
attributable to property concessions sold. Capitalized costs are allocated to
property concessions abandoned or sold based on the proportion of claims
abandoned or sold to the claims remaining within the project area.





Deferred tax assets and
liabilities





The
Company recognizes the expected future tax benefit from deferred tax assets when
the tax benefit is considered to be more likely than not of being realized.
Assessing the recoverability of deferred tax assets requires management to make
significant estimates related to expectations of future taxable income.
Estimates of future taxable income are based on forecasted cash flows and the
application of existing tax laws in each jurisdiction. To the extent that future
cash flows and taxable income differ significantly from estimates, the ability
of the Company to realize deferred tax assets could be impacted. Additionally,
future changes in tax laws in the jurisdictions in which the Company operates
could limit the Company’s ability to obtain the future tax
benefits.





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.





Foreign Currency
Translation





While the
Company’s functional currency is the U.S. dollar, the local currency is the
functional currency of the Company’s wholly-owned Mexican
subsidiaries.  The assets and liabilities relating to Mexican
operations are exposed to exchange rate fluctuations.  Assets and
liabilities of the Company’s foreign operations are translated into U.S. dollars
at the year-end exchange rates, and revenue and expenses are translated at the
average exchange rates during the period. Exchange differences arising on
translation are disclosed as a separate component of shareholders’ equity.
Realized gains and losses from foreign currency transactions are reflected in
the results of operations.  Intercompany transactions and balances
with the Company’s Mexican subsidiaries are considered to be short-term in
nature and accordingly all foreign currency translation gains and losses on
intercompany loans are included in the consolidated statement of
operations.





Accounting for Stock Options
and Warrants Granted to Employees and Non-employees





On
November 1, 2006, the Company adopted accounting guidance for share-based
payments that generally requires the fair value of share-based payments,
including grants of employee stock options, be recognized in the statement of
operations based on their grant date fair values.  Prior to the
Company’s adoption this guidance, the fair value of the Company’s stock options
was determined using a Black-Scholes pricing model, which assumed no expected
dividends and estimated the option expected life, volatility and risk-free
interest rate at the time of grant.  Prior to the adoption of this
accounting guidance, the Company used historical and implied market volatility
as a basis for calculating expected volatility.












The
Company uses the Black-Scholes pricing model as a method for determining the
estimated fair value for employee stock awards.  The expected term of
the options is based upon evaluation of historical and expected future exercise
behavior.  The risk-free interest rate is based upon U.S. Treasury
rates at the date of grant with maturity dates approximately equal to the
expected life of the grant.  Volatility is determined upon historical
volatility of the Company’s stock and adjusted if future volatility is expected
to vary from historical experience.  The Company has not historically
issued any dividends and it does not expect to in the future.  The
Company uses the graded vesting attribution method to recognize compensation
costs over the requisite service period.





The
Company also used the Black-Scholes valuation model to determine the fair market
value of warrants.   Expected volatility is based upon weighted
average of historical volatility over the contractual term of the warrant and
implied volatility. The risk-free interest rate is based upon implied yield on a
U.S. Treasury zero-coupon issue with a remaining term equal to the contractual
term of the option. The dividend yield is assumed to be none as the Company has
not paid dividends nor does not anticipate paying any dividends in the
foreseeable future.





Impairment of Long-Lived
Assets





We review
the net carrying value of all facilities, including idle facilities, on a
periodic basis. We estimate the net realizable value of each property based on
the estimated undiscounted future cash flows that will be generated from
operations at each property, the estimated salvage value of the surface plant
and equipment and the value associated with property interests. These estimates
of undiscounted future cash flows are dependent upon the estimates of metal to
be recovered from proven and probable ore reserves and mineral resources
expected to be converted into mineral reserves, future production cost estimates
and future metals price estimates over the estimated remaining mine life. If
undiscounted cash flows are less than the carrying value of a property, an
impairment loss is recognized based upon the estimated expected future cash
flows from the property discounted at an interest rate commensurate with the
risk involved.





Environmental
Matters





When it
is probable that costs associated with environmental remediation obligations
will be incurred and they are reasonably estimable, we accrue such costs at the
most likely estimate. Accruals for estimated losses from environmental
remediation obligations generally are recognized no later than completion of the
remedial feasibility study for such facility and are charged to provisions for
closed operations and environmental matters. We periodically review our accrued
liabilities for such remediation costs as evidence becomes available indicating
that our remediation liability has potentially changed. Such costs are based on
our current estimate of amounts that are expected to be incurred when the
remediation work is performed within current laws and regulations. Recoveries of
environmental remediation costs from other parties are recorded as assets when
their receipt is deemed probable.





Accounting
for reclamation and remediation obligations requires management to make
estimates unique to each mining operation of the future costs the Company will
incur to complete the reclamation and remediation work required to comply with
existing laws and regulations. Actual costs incurred in future periods could
differ from amounts estimated. Additionally, future changes to environmental
laws and regulations could increase the extent of reclamation and remediation
work required. Any such increases in future costs could materially impact the
amounts charged to earnings. As of January 31, 2010, the Company has no accrual
for reclamation and remediation obligations because the Company has not engaged
in any significant activities that would require remediation under its current
concessions or inherited any known remediation obligations from acquired
concessions. Any reclamation or remediation costs related to abandoned
concessions has been previously expensed.



















ITEM
3.  QUANTITATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Foreign
Currency Exchange Risk





Although
a large amount of our expenditures are in U.S. dollars, certain purchases of
labor, operating supplies and capital assets are denominated in Mexican pesos or
other currencies. As a result, currency exchange fluctuations may impact the
costs of our operations. Specifically, the appreciation of Mexican Peso against
the U.S. dollar may result in an increase in operating expenses and capital
costs at the Sierra Mojada Project in U.S. dollar terms. To reduce this risk, we
maintain minimum cash balances in foreign currencies, including Mexican Pesos
and complete most of our purchases, including capital expenditures relating to
the Sierra Mojada Project, in U.S. dollars.  We currently do not
engage in any currency hedging activities.





ITEM
4T. CONTROLS AND PROCEDURES




Evaluation
of Disclosure Controls and Procedures.




As of
January 31, 2010, we have carried out an evaluation under the supervision of,
and with the participation of our Chief Executive Officer and our Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Rule 13a-15(e) under the
Securities and Exchange Act of 1934, as amended.  Based on the
evaluation as of January 31, 2010, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e)) under the Securities Exchange Act of 1934) were
effective.





Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Securities Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms.  Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in our reports filed under the Exchange Act
is accumulated and communicated to our management, including our principal
executive officer and our principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure.





(b)   Changes
In Internal Controls
Over Financial Reporting





There was
no change in the Company’s internal control over financial reporting that
occurred during the quarter ended January 31, 2010 that has materially affected,
or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.













PART
II – OTHER INFORMATION





Item
1. LEGAL PROCEEDINGS





None.





Item
1A. RISK FACTORS





There
were no material changes from the risk factors included in our Form 10-K for the
year ended October 31, 2009.





Item
2. UNREGISTERED SALES OF EQUITY SECURITIES AND PROCEEDS





Recent Sales of Unregistered
Securities





Following
are descriptions of all unregistered sales of Company equity securities during
the first fiscal quarter and as of March 12, 2010, excluding transactions that
were previously reported in a Form 8-K.





On
January 29, 2010 we issued an aggregate of 32,400 shares of the Company’s common
stock to our independent directors (each an accredited investor) for services
performed for the quarter ended January 31, 2010.   These shares were
issued under our 2006 Stock Option Plan and issued in consideration for
services.  The shares were issued in reliance on the exemptions from
registration contained in Section 4(2) and 4(6) of the 1933 Act.  No
commissions or other remuneration were paid for this issuance.





Item
3. DEFAULT UPON SENIOR SECURITES





None.





Item
4. [RESERVED]





None.





Item
5.  OTHER INFORMATION





None.





Item
6.  EXHIBITS




2.1
              
              Agreement
      and Plan of Merger and Reorganization dated December 4, 2009. 33.1(a)
              
              Articles
      of Incorporation. 13.1(b)
              
              Certificate
      of Amendment to Articles of Incorporation.13.1(c)
              
              Certificate
      of Amendment to Articles of Incorporation. 23.1(d)
              
              Certificate
      of Amendment to Articles of Incorporation.43.2
              
              Bylaws.210.2
              
              Form
      of Voting Agreement310.3
              
              2010
      Stock Option and Stock Bonus Plan 3    
 14
              
              Code
      of Ethics 431.1
              
              Certification of CEO Pursuant to Exchange Act Rules
      13a-14 and 15d-14, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.31.2
              
              Certification of CFO Pursuant to Exchange Act Rules
      13a-14 and 15d-14, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002, filed herewith.32.1
              
              Certification of CEO Pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
      filed herewith.32.2
              
              Certification of CFO Pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
      filed herewith.


______________________


(1)
            Incorporated
      by reference from Form 10-SB, filed October 15,
  1999.


(2)
            Incorporated
      by reference from Form 10-QSB, filed September 19,
  2006.


(3)Incorporated
by reference from Current Report on Form 8-K dated February 3,
2010.


(4)
            Incorporated
      by reference from Form 10-KSB, filed January 31,
  2007.




























SIGNATURES





In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.




METALLINE
      MINING COMPANYDated:
      March 16, 2010
            By
            /s/
      Merlin BinghamMerlin
      Bingham,President
      and Principal Executive OfficerDated:
      March 16, 2010
            By
            /s/ Robert DeversRobert
      Devers,Chief
      Financial Officer and Principal Accounting Officer