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 April 30,
      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
   No 





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
June 4, 2010, there were 103,207,412 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 APRIL 30, 2010





INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS





PAGEConsolidated
      Financial Statements:Consolidated
      Balance Sheets as of April 30, 2010 and October 31, 2009
            
            2Consolidated
      Statements of Operations for the three and six months ended
              April
      30, 2010 and April 30, 2009, and for the period from
inception
              (November
      8, 1993) to April 30, 2010
            
            3Consolidated
      Statements of Cash Flows for the six months ended
              April
      30, 2010 and April 30, 2009, and for the period from
inception
              (November
      8, 1993) to April 30, 2010
            
            4-5Notes
      to Consolidated Financial Statements
            
            6-24














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




























METALLINE
MINING COMPANY


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
BALANCE SHEETS (Unaudited)





April
      30,
              2010
            
            
            October
      31,
              2009ASSETSCURRENT
      ASSETSCash
      and cash equivalents
            
            $
            15,336,022
            
            
            $
            1,482,943Other
      receivables
            
            
            29,531
            
            
            
            18,303Prepaid
      expenses
            
            
            247,982
            
            
            
            134,122Prepaid
      income taxes
            
            
            33,702
            
            
            
            —Total
      Current Assets
            
            
            15,647,237
            
            
            
            1,635,368PROPERTY
      CONCESSIONSSierra
      Mojada, Mexico (Note 5)
            
            
            4,344,292
            
            
            
            3,713,722Gabon,
      Africa (Notes 5 and 6)
            
            
            4,496,915
            
            
            
            —8,841,207
            
            
            
            3,713,722EQUIPMENTOffice
      and mining equipment, net of accumulated depreciation
              of
      $825,063 and $679,659, respectively (Note 7)
            
            
            1,330,359
            
            
            
            1,005,733OTHER
      ASSETSValue-added
      tax receivable, net of allowance for uncollectible taxes of $447,916 and
      $273,761, respectively (Note 3)
            
            
            770,640
            
            
            
            686,992Goodwill
      (Note 4)
            
            
            19,738,862
            
            
            
            —Other
      assets
            
            
            4,200
            
            
            
            —20,513,702
            
            
            
            686,992TOTAL
      ASSETS
            
            $
            46,332,505
            
            
            $
            7,041,815LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESAccounts
      payable
            
            $
            326,534
            
            
            $
            55,037Accrued
      liabilities and expenses
            
            
            138,771
            
            
            
            346,446Payable
      to joint venture partner (Note 6)
            
            
            143,398
            
            
            
            —Deferred
      salaries and costs (Note 11)
            
            
            —
            
            
            
            393,903Income
      tax payable
            
            
            666
            
            
            
            9,290Total
      Current Liabilities
            
            
            609,369
            
            
            
            804,676COMMITMENTS
      AND CONTINGENCIES (Notes 8 and  11)STOCKHOLDERS’
      EQUITY (Notes 8, 9 and 10)Common
      stock, $0.01 par value; 300,000,000 shares authorized,
              103,207,412
      and 48,834,429 shares issued and outstanding, respectively
            
            
            1,032,074
            
            
            
            488,344Additional
      paid-in capital
            
            
            96,431,713
            
            
            
            55,144,214Deficit
      accumulated during exploration stage
            
            
            (53,257,735
            )
            
            
            (51,917,015
            )Other
      comprehensive income
            
            
            1,517,084
            
            
            
            2,521,596Total
      Stockholders’ Equity
            
            
            45,723,136
            
            
            
            6,237,139TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            46,332,505
            
            
            $
            7,041,815The
      accompanying notes are an integral part of these consolidated financial
      statements.
              
              
              2







METALLINE
MINING COMPANY


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)





Three Months
              Ended
              April 30,
            
            
            Six Months
              Ended
              April 30,
            
            
            Period from November 8, 1993 (Inception) to
      April 302010
            
            
            2009
            
            
            2010
            
            
            2009
            
            
            2010REVENUES
            
            $
            —
            
            
            $
            —
            
            
            $
            —
            
            
            $
            —
            
            
            $
            —EXPLORATION
      AND PROPERTY HOLDING COSTSExploration
      and property holding costs
            
            
            434,965
            
            
            
            320,289
            
            
            
            840,864
            
            
            
            798,388
            
            
            
            17,765,362Depreciation
      and asset write-off
            
            
            51,494
            
            
            
            43,138
            
            
            
            94,964
            
            
            
            88,675
            
            
            
            970,860TOTAL
      EXPLORATION AND PROPERY HOLDING COSTS
            
            
            486,459
            
            
            
            363,427
            
            
            
            935,828
            
            
            
            887,063
            
            
            
            18,736,222GENERAL
      AND ADMINISTRATIVE EXPENSESSalaries
      and payroll expenses
            
            
            253,225
            
            
            
            461,760
            
            
            
            532,862
            
            
            
            839,364
            
            
            
            13,915,586Office
      and administrative expenses
            
            
            133,787
            
            
            
            69,619
            
            
            
            221,897
            
            
            
            135,965
            
            
            
            2,936,486Professional
      services
            
            
            337,344
            
            
            
            120,916
            
            
            
            740,188
            
            
            
            428,651
            
            
            
            11,782,189Directors
      fees
            
            
            69,030
            
            
            
            103,645
            
            
            
            116,766
            
            
            
            168,038
            
            
            
            3,278,517Provision
      for uncollectible value-added taxes
            
            
            152,049
            
            
            
            ---
            
            
            
            152,049
            
            
            
            ---
            
            
            
            428,567Depreciation
            
            
            4,906
            
            
            
            5,845
            
            
            
            9,340
            
            
            
            11,625
            
            
            
            229,661TOTAL
      GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            950,341
            
            
            
            761,785
            
            
            
            1,773,102
            
            
            
            1,583,643
            
            
            
            32,571,006LOSS
      FROM OPERATIONS
            
            
            (1,436,800
            )
            
            
            (1,125,212
            )
            
            
            (2,708,930
            )
            
            
            (2,470,706
            )
            
            
            (51,307,228
            )OTHER
      INCOME (EXPENSES)Interest
      and investment income
            
            
            6,649
            
            
            
            329
            
            
            
            7,339
            
            
            
            1,178
            
            
            
            844,748Foreign
      currency transaction gain (loss)
            
            
            1,399,478
            
            
            
            733,120
            
            
            
            1,346,825
            
            
            
            (1,280,029
            )
            
            
            (2,506,149
            )Miscellaneous
      ore sales, net of expenses
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            134,242Miscellaneous
      income
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            82,351Interest
      and financing expense
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            ---
            
            
            
            (289,230
            )TOTAL
      OTHER INCOME (EXPENSE)
            
            
            1,406,127
            
            
            
            733,449
            
            
            
            1,354,164
            
            
            
            (1,278,851
            )
            
            
            (1,734,038
            )LOSS
      BEFORE INCOME TAXES
            
            
            (30,673
            )
            
            
            (391,763
            )
            
            
            (1,354,766
            )
            
            
            (3,749,557
            )
            
            
            (53,041,266
            )INCOME
      TAXES
            
            
            650
            
            
            
            (12,979
            )
            
            
            (14,046
            )
            
            
            (9,403
            )
            
            
            90,379NET
      LOSS
            
            $
            (31,323
            )
            
            $
            (378,784
            )
            
            $
            (1,340,720
            )
            
            $
            (3,740,154
            )
            
            $
            (53,131,645
            )OTHER
      COMPREHENSIVE INCOME (LOSS) – Foreign currency translation
      adjustments
            
            
            (1,034,464
            )
            
            
            (543,252
            )
            
            
            (1,004,512
            )
            
            
            918,454
            
            
            
            1,517,084COMPREHENSIVE
      LOSS
            
            $
            (1,065,787
            )
            
            $
            (922,036
            )
            
            $
            (2,345,232
            )
            
            $
            (2,821,700
            )
            
            $
            (51,614,561
            )BASIC
      AND DILUTED NET LOSS PER COMMON SHARE
            
            $
            
            *
            
            $
            (0.01
            )
            
            $
            (0.02
            )
            
            $
            (0.09
            )BASIC
      AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES
      OUTSTANDING
            
            
            63,418,568
            
            
            
            39,754,694
            
            
            
            57,442,278
            
            
            
            39,731,686*
      Less than $.01 per share




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













METALLINE
MINING COMPANY


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)


Six
      months Ended
              April
      30,
            
            
            Period
      from
              November
      8,
              1993
      (Inception)
              to
      April 30,2010
            
            
            2009
            
            
            2010CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
            
            $
            (1,340,720
            )
            
            $
            (3,740,154
            )
            
            $
            (53,131,645
            )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Depreciation
      and equipment write-off
            
            
            105,488
            
            
            
            100,235
            
            
            
            1,204,140Provision
      for uncollectible value-added taxes
            
            
            149,920
            
            
            
            —
            
            
            
            425,052Noncash
      expenses
            
            
            —
            
            
            
            —
            
            
            
            126,864Foreign
      currency transaction (gain) loss
            
            
            (1,337,306
            )
            
            
            1,204,449
            
            
            
            2,669,856Common
      stock issued for services
            
            
            —
            
            
            
            —
            
            
            
            1,237,047Common
      stock issued for compensation
            
            
            —
            
            
            
            —
            
            
            
            1,059,946Options
      issued for compensation
            
            
            47,559
            
            
            
            463,643
            
            
            
            7,134,769Common
      stock issued for directors fees
            
            
            56,016
            
            
            
            19,440
            
            
            
            653,460Options
      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, net of merger transaction:Value
      added tax receivable
            
            
            (123,739
            )
            
            
            (112,731
            )
            
            
            (1,233,771
            )Other
      receivables
            
            
            7,505
            
            
            
            129
            
            
            
            (17,042
            )Prepaid
      income taxes and expenses
            
            
            (128,870
            )
            
            
            (18,936
            )
            
            
            (259,989
            )Increase
      (decrease) in, net of merger transaction:Accounts
      payable
            
            
            19,425
            
            
            
            (69,313
            )
            
            
            74,428Income
      tax payable
            
            
            (8,885
            )
            
            
            (9,411
            )
            
            
            3,548Accrued
      liabilities and expenses
            
            
            (225,805
            )
            
            
            (7,370
            )
            
            
            154,840Deferred
      salaries and costs
            
            
            (393,903
            )
            
            
            127,134
            
            
            
            —Payable
      to joint venture partner
            
            
            130,124
            
            
            
            —
            
            
            
            130,124Other
      liabilities
            
            
            —
            
            
            
            2,349
            
            
            
            7,649Net
      cash used by operating activities
            
            
            (3,043,191
            )
            
            
            (2,040,536
            )
            
            
            (34,664,357
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of investments
            
            
            —
            
            
            
            —
            
            
            
            (21,609,447
            )Proceeds
      from investment sales
            
            
            —
            
            
            
            —
            
            
            
            21,609,447Cash
      acquired in merger with Dome Ventures (Note 4)
            
            
            2,618,548
            
            
            
            —
            
            
            
            2,618,548Equipment
      purchases
            
            
            (297,400
            )
            
            
            (4,108
            )
            
            
            (2,621,588
            )Acquisition
      of mining concessions
            
            
            (368,730
            )
            
            
            —
            
            
            
            (5,000,767
            )Net
      cash provided by (used by) investing activities
            
            
            1,952,418
            
            
            
            (4,108
            )
            
            
            (5,003,807
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from sales of common stock
            
            
            14,951,516
            
            
            
            171,500
            
            
            
            49,653,710Proceeds
      from sales of options and warrants
            
            
            —
            
            
            
            —
            
            
            
            949,890Proceeds
      from exercise of warrants
            
            
            40,000
            
            
            
            —
            
            
            
            4,737,347Proceeds
      from shareholder loans
            
            
            —
            
            
            
            —
            
            
            
            30,000Payment
      of note payable
            
            
            —
            
            
            
            —
            
            
            
            (15,783
            )Net
      cash provided by financing activities:
            
            
            14,991,516
            
            
            
            171,500
            
            
            
            55,355,164Effect
      of exchange rates on cash
            
            
            (47,664
            )
            
            
            48,862
            
            
            
            (350,978
            )Net
      increase (decrease) in cash and cash equivalents
            
            
            13,853,079
            
            
            
            (1,824,282
            )
            
            
            15,336,022Cash
      and cash equivalents beginning of period
            
            
            1,482,943
            
            
            
            2,228,778
            
            
            
            —Cash
      and cash equivalents end of period
            
            $
            15,336,022
            
            
            $
            404,496
            
            
            $
            15,336,022The
      accompanying notes are an integral part of these consolidated financial
      statements.
              
              4










METALLINE
MINING COMPANY


(AN
EXPLORATION STAGE COMPANY)


CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED) (Unaudited)








Six
      months Ended
              April
      30,
            
            
            Period
      from
              November
      8,
              1993
      (Inception)
              to
      April 30,2010
            
            
            2009
            
            
            2010SUPPLEMENTAL
      CASH FLOW DISCLOSURES:Income
      taxes paid
            
            $
            27,024
            
            
            $
            14,219
            
            
            $
            116,958Interest
      paid
            
            $
            —
            
            
            $
            —
            
            
            $
            286,771NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Common
      stock issued in merger with Dome
            
            $
            24,840,886
            
            
            $
            —
            
            
            $
            24,840,886Warrants
      issued in merger with Dome
            
            $
            1,895,252
            
            
            $
            —
            
            
            $
            1,895,252Common
      stock issued for equipment
            
            $
            —
            
            
            $
            —
            
            
            $
            25,000Common
      stock options issued for financing fees
            
            $
            —
            
            
            $
            —
            
            
            $
            276,000Common
      stock options issued for non-cash options
            
            $
            —
            
            
            $
            —
            
            
            $
            59,220The
      accompanying notes are an integral part of these consolidated financial
      statements.
              
              
              5



















NOTE
1 – ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING CONCERN





Organization and Description
of Business





Metalline
Mining Company (the “Company” or “Metalline”) 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”).





On April
16, 2010, Metalline Mining Delaware, Inc., a wholly-owned subsidiary of the
Company, was merged with and into Dome Ventures Corporation
(“Dome”).  As a result, Dome became a wholly-owned subsidiary of the
Company.  Dome’s subsidiaries include its wholly-owned subsidiaries
Dome Asia Inc., and Dome International Global Inc., which are incorporated in
the British Virgin Islands.  Dome International Global Inc.’s
subsidiaries include its wholly-owned subsidiary, Dome Ventures SARL Gabon, as
well as its 99.99%-owned subsidiary incorporated in Nigeria, Dome Minerals
Nigeria Limited. Dome conducts its exploration activities in Africa through Dome
Ventures SARL Gabon. We have included the financial results of Dome and its
subsidiaries in our consolidated statement of operations effective April 16,
2010.





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.





Going
Concern





As a
result of our recurring losses from operations and limited capital resources
during the fiscal year ended October 31, 2009, our independent registered public
accounting firm’s report on our financial statements as of October 31, 2009 and
for the fiscal years ended October 31, 2009 and 2008 included an explanatory
paragraph expressing substantial doubt about the Company’s ability to continue
as a going concern.





On April
16, 2010, the Company successfully closed the Dome merger transaction and
special warrant offering resulting in an increase in cash and cash equivalents
of approximately $14,580,000.  The increase in cash and cash
equivalents has improved the Company’s working capital and management believes
it has sufficient working capital to operate over the next 12 months and this
additional working capital removes the substantial doubt about the Company’s
ability to continue as a going concern for this time period.





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.





6








NOTE
2 – BASIS OF PRESENTATION (continued)





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 six-months ended
April 30, 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 cash equivalents in bank and demand
deposit accounts with major financial institutions with high credit
standings.  Although cash deposits held in domestic financial
institutions are insured by the Federal Deposit Insurance Corporation (FDIC) for
up to $250,000, certain bank accounts held by the Company exceed these federally
insured limits. As of April 30, 2010, the Company’s domestic cash and cash
equivalent balances included $13,984,055 which was not federally insured. The
Company has not experienced any losses on such accounts and management believes
that using major financial institutions with high credit ratings mitigates the
credit risk in cash.





The
Company also maintains cash in bank accounts in Mexico, Canada, and
Africa.  These accounts are denominated in the local currency and are
considered uninsured.  As of April 30, 2010 and October 31, 2009, the
U.S. dollar equivalent balance for these accounts was $133,846 and $38,851,
respectively.





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 stock options and warrants
in the aggregate of 19,832,994 shares and 19,395,187 shares outstanding at April
30, 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 April 30,
2010 to ensure that such events have been properly reflected in these
consolidated financial statements. See Note 14 for subsequent
events.





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.











NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)







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 six months ended April 30, 2010 and 2009 were $840,864 and
$798,388, respectively. The exploration costs expensed to date during the
Company’s exploration stage amount to $17,765,362.





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 and African 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
Company has significant assets in Coahuila, Mexico and Gabon,
Africa.  The following table details foreign assets included in the
accompanying balance sheet at April 30, 2010:





Mexico
            
            
            GabonCash
      and cash equivalents
            
            $
            52,051
            
            
            $
            39,644Other
      receivables
            
            
            11,982
            
            
            
            17,549Prepaid
      expenses
            
            
            234,620
            
            
            
            —Mining
      concessions
            
            
            4,344,294
            
            
            
            4,496,915Office
      & mining equipment, net
            
            
            1,250,997
            
            
            
            58,034Value-added
      tax receivable, net
            
            
            706,936
            
            
            
            63,704Other
      assets
            
            
            —
            
            
            
            4,200$
            6,600,880
            
            
            $
            4,680,046


Although
these countries are generally considered economically stable, it is always
possible that unanticipated events in foreign countries could disrupt the
Company’s operations. Neither the Mexican government nor the Gabonese government
requires foreign entities to maintain cash reserves in their respective
country.





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 April 30, 2010, the Company has filed IVA tax
returns with the Mexican authorities to recover approximately $751,000 of IVA
taxes paid by its Mexican subsidiaries from 2005 through 2008.  IVA
tax returns for approximately $404,000 of IVA taxes paid to vendors for goods
and services purchased in 2009 and 2010 have not yet been filed, but are
recorded as receivable as amounts are still recoverable.





During
2008, the Mexican authorities reviewed the IVA tax returns filed and requested
the Company to provide copies of supporting documentation for amounts
filed.  Over the last several years, the Company has worked
extensively with IVA tax consultants and Mexican authorities to provide the
requested documentation and answer questions related to these tax returns, but
has been unable to recover the IVA tax amounts.





At
October 31, 2009, management evaluated the estimated collectability of the IVA
amounts 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 the length of
time the returns have been outstanding, general economic conditions in Mexico
and estimated net recovery after commissions.













NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





During
2010, management continues to aggressively pursue collection of these IVA
taxes.  The Company has changed its fiscal reporting jurisdiction to a
larger municipality and has hired a new IVA tax consultant in an effort to
collect these tax receivables.  Due to the continued uncertainty as to
ultimate collection of the IVA tax receivable, management evaluated the IVA tax
receivable at April 30, 2010 and increased the allowance for uncollectible taxes
to 5.5 million pesos or $447,916.  The Company continues to reflect
the net IVA tax receivable as a long-term asset on the Consolidated Balance
Sheet as of April 30, 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 six months, but not exceeding twelve months.   As of
April 30, 2010, the Company did not own any 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 the 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.  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.





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, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually).
The new accounting guidance for nonfinancial assets and nonfinancial liabilities
was effective for the Company’s fiscal year beginning November 1, 2009. The
adoption of the new guidance applicable to non financial assets and liabilities
did not have a material effect on its financial position, results of operations
or cash flows.











NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





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 April 30, 2010 and October 31, 2009, the Company had no
financial or 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 receivables, accounts payable, payable to joint venture
partner, and income tax payable, approximate fair value at April 30, 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.





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.





Goodwill





Goodwill
represents the excess, at the date of acquisition, of the purchase price of the
business acquired over the fair value of the net tangible and intangible assets
acquired. Annually, the Company performs a fair value and potential impairment
assessment of its goodwill. An impairment analysis is done more frequently if
certain events or circumstances arise that would indicate a change in the fair
value of the non-financial asset has occurred (i.e., an impairment
indicator).


NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





In
evaluating its goodwill, the Company compares the carrying value of the net
assets of each reporting unit to its respective fair value. This represents the
first step of the impairment test. If the fair value of a reporting unit is less
than the carrying value of its net assets, the Company must proceed to step two
of the impairment test. Step two involves allocating the calculated fair value
to all of the tangible and identifiable intangible assets of the reporting unit
as if the calculated fair value was the purchase price in a business
combination. To the extent the carrying value of the goodwill exceeds its
implied fair value under step two of the impairment test, an impairment charge
equal to the difference is recorded. During the quarter ended April 30, 2010,
the Company did not identify an impairment indicator relative to its goodwill.
As a result, the Company was not required to conduct the first step of the
impairment test. However, if in future periods the Company determines that the
carrying amount of the net assets of its reporting units exceeds the respective
fair value as a result of step one, the application of step two of the
impairment test could result in a material impairment charge to the goodwill
associated with the Dome transaction.  The Company will perform its
annual impairment test of goodwill during the quarter ended April 30,
2011.





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
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 a material impact on the Company’s financial
position, results of operations and cash flows for the six months ended April
30, 2010 due to the acquisition of Dome.





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.














NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





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 – MERGER WITH DOME VENTURES





On April
16, 2010 (the “Merger Date”), a wholly-owned subsidiary of the Company was
merged with and into Dome, resulting in Dome becoming a wholly-owned subsidiary
of the Company (the “Merger”). To effect the Merger, Dome stockholders received
0.968818 shares of the Company’s common stock for each share of Dome common
stock they held as of the Merger Date. Additionally, on the Merger Date, all
outstanding warrants to acquire Dome common stock were exchanged for warrants to
acquire the Company’s common stock on equivalent terms.  As a result
of the merger transaction, the holders of the Company’s common stock prior to
the Merger Date own approximately 53% of the Company post-merger and the former
Dome shareholders own approximately 47% of the Company post-merger. Dome is a
resource company that holds three exploration licenses in Gabon, West Africa and
recently entered into a joint venture agreement with AngloGold Ashanti Limited
(“AngloGold”) on two of its licenses, Ndjole and Mevang. Dome also entered into
a second joint venture agreement on the Ogooue license held by AngloGold (Note
6).





Based on
the closing price of the Company’s common stock on the Merger Date, the
consideration received by Dome shareholders in the Merger had a value of
approximately $26.7 million as detailed below.





Conversion
      Calculation
            
            
            Estimated
              Fair
      ValueDome
      common stock outstanding on the Merger Date
            
            
            49,260,624Less:
      Dome common stock issued in connection with the special warrant offering
      (a)
            
            
            (28,911,111
            )Dome
      common stock outstanding on the Merger Date attributable to the merger
      consideration
            
            
            20,349,513Multiplied
      by Metalline’s stock price as of the Merger Date multiplied by the
      exchange ratio of 0.968818 ($1.26 x 0.968818)
            
            $
            1.2207
            
            
            $
            24,840,886Fair
      value of the Metalline warrants issued to replace Dome warrants as of the
      Merger Date (b)
            
            
            
            
            
            
            1,895,252Merger
      consideration transferred
            
            
            
            
            
            $
            26,736,138





(a)
            
            In
      accordance with ASC Topic 805-10, Business Combinations —
      Overall (“ASC 805-10”), transactions entered into primarily for the
      benefit of the combined entity, rather than primarily for the benefit of
      the acquired company should be accounted for as a separate
      transaction.  The special warrant offering described above was
      completed for the benefit of the combined entity and therefore the value
      of the








12








NOTE
4 – MERGER WITH DOME VENTURES (continued)





Metalline
      common shares issued in exchange for the shares acquired upon the
      conversion of the special warrants was treated as a separate financing
      transaction and not included as part of the merger
      consideration.(b)
            
            Represents
      the fair value of warrants to acquire 2,228,281 shares of Company common
      stock issued to replace Dome warrants outstanding as of the Merger Date.
      ASC 805-10 requires that the fair value of replacement warrants be
      included in the consideration transferred.  The fair value of
      the Metalline equivalent warrants was estimated using the Black-Scholes
      valuation model utilizing the assumptions noted
  below.





Stock
      price
            
            $1.26Post
      conversion strike price
            
            $0.41Average
      expected volatility
            
            98%Dividend
      yield
            
            NoneAverage
      risk-free interest rate
            
            0.12%Average
      contractual term
            
            .19
      yearsBlack-Scholes
      average value per warrant
            
            $0.8505





The
expected volatility of the Metalline’s stock price is based on the average
historical volatility which is based on daily observations and duration
consistent with the expected life assumption and implied
volatility.  The average contractual term of the warrants is based on
the remaining contractual exercise term of each warrant.  The risk
free interest rate is based on U.S. treasury securities with maturities equal to
the expected life of the warrants.





The
transaction has been accounted for using the acquisition method of accounting
which requires, among other things, the assets acquired and liabilities assumed
to be recognized at their fair values as of the Merger Date. The following table
summarizes the estimated fair values of major assets acquired and liabilities
assumed:




Estimated
      Fair ValueCash
      and cash equivalents
            
            $
            2,618,548Other
      receivables
            
            
            17,942Prepaid
      expenses
            
            
            6,404Property
      Concessions – Gabon, Africa
            
            
            4,496,915Equipment
            
            
            59,331Value-added
      tax receivable
            
            
            65,129Other
      assets
            
            
            4,294Accounts
      payable
            
            
            (251,577
            )Accrued
      expenses
            
            
            (6,436
            )Payable
      to joint venture partner
            
            
            (13,274
            )Total
      identifiable net assets
            
            
            6,997,276Goodwill
            
            
            19,738,862Estimated
      consideration expected to be transferred
            
            $
            26,736,138





As of the
merger date, the expected fair value of other receivables and value-added tax
receivable approximated the historical cost.  Property concessions do
not have a useful life pursuant to the Company’s policy on property concessions
described in Note 3.





Goodwill
is calculated as the excess of the consideration transferred over the net assets
recognized and represents the expected cost synergies of the combined business,
assembled workforce, and the going concern nature of Dome and its subsidiaries.
The Company estimates that the $19.7 million of goodwill, relating to Dome’s
pre-merger historical tax basis, will be not deductible for tax
purposes.



















NOTE
4 – MERGER WITH DOME VENTURES (continued)





A single
estimate of fair value results from a complex series of judgments about future
events and uncertainties and relies heavily on estimates and assumptions. The
Company’s judgments used to determine the estimated fair value assigned to each
class of assets acquired and liabilities assumed, as well as asset lives, can
materially impact the Company’s results from operations. The Company’s
management allocated the acquisition cost to the assets acquired and liabilities
assumed based on the estimated fair value of Dome’s tangible and identifiable
assets and liabilities.  The amount allocated to the property concessions
was based on a valuation report prepared by a third party appraisal firm. 
The allocation is not considered final as of the date of this report as
management is still reviewing certain of the underlying assumptions and
calculations used in the allocation relating primarily to the current assets and
liabilities of Dome that were acquired.  However, the Company believes the
final purchase price allocation will not be materially different than presented
herein





During
the six months ended April 30, 2010, the Company incurred merger related
transaction costs consisting primarily of legal and accounting fees of
$253,025.  These costs are included in professional fees on the
consolidated statement of operations.





Actual and Pro-forma Impact
of the Merger





Dome’s
net loss of $35,234 for the period from the Merger Date through April 30, 2010
is included in the Company’s consolidated statement of operations for the three
and six months ended April 30, 2010.  The net loss for Dome represents
a net loss per share of less than $0.01 per share for the Company during the
three and six months ended April 30, 2010.





The
following table presents supplemental pro forma information as if the Merger had
occurred on November 1, 2009 for the three and six months ended April 30,
2010 and November 1, 2008 for the three and six months ended April 30,
2009. As such, all periods presented include merger related charges. The pro
forma consolidated results are not necessarily indicative of what the Company’s
consolidated net loss would have been had the Company completed the Merger on
November 1, 2009, or November 1, 2008. In addition, the pro forma consolidated
results do not purport to project the future results of the combined Company nor
do they reflect the expected realization of any cost savings associated with the
Merger.
  Three
      Months Ended April 30,
                
                
                Six
      Months Ended April 30,2010
                
                
                2009
                
                
                2010
                
                
                2009Revenues
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —Net
      loss
                
                
                (371,000
                )
                
                
                (979,000
                )
                
                
                (1,587,000
                )
                
                
                (5,469,000
                )Loss
      per share
                
                $
                
                *
                
                $
                (0.01
                )
                
                $
                (0.02
                )
                
                $
                (0.06
                )*Less than $0.01 per share


2010 Pro
forma Results





The 2010
pro forma results were calculated by combining the results of Metalline with the
stand-alone historical results of Dome for the three and six months ended
March 31, 2010. Additionally the following adjustments were made to account
for certain costs which would have been incurred had the acquisition commenced
on November 1, 2009:





•
            
            Record
      additional depreciation for $60,000 estimated fair value of fixed assets
      identified in the merger using an estimated remaining life of two
      years.•
            
            Eliminate
      historical compensation costs for Dome officers/directors incurred during
      the period and record additional directors fees for the chairman and two
      additional independent directors added in conjunction with the
      merger.




2009 Pro
forma Results





The 2009
pro forma results were calculated by combining the historical financial results
of Metalline with the stand-alone historical results of Dome for the three
and six months ended March 31, 2009. Additionally, the following
adjustments were made to account for certain costs that would have



















NOTE
4 – MERGER WITH DOME VENTURES (continued)








•
              
              Recorded
      additional depreciation for $60,000 estimated fair value of fixed assets
      identified in the merger using an estimated remaining life of two
      years.•
              
              Eliminated
      historical compensation costs for Dome officers/directors incurred during
      the period and record additional directors’ fees for the chairman and two
      additional independent directors added in conjunction with the
      merger.•
              
              Added
      $278,000 and $635,000 of transaction costs that were incurred to
      consummate the merger during the three and six months ended April 30,
      2010, respectively.




NOTE
5 – MINING CONCESSIONS





Sierra Mojada Mining
Concessions





The
Company owns or has an option to acquire 27 mining concessions consisting of
19,580 hectares (about 48,385 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.




During
the quarter ended, April 30, 2010, the Company entered into agreements with
several Mexican individuals to acquire seven mining concessions in the Sierra
Mojada prospect area.  The agreements are considered option purchase
agreements and give the Company the option, but not the obligation, to acquire
the seven concessions at established prices over the next 3-5
years.  Pursuant to the option purchase agreements, the Company is
required to make certain payments on a semi-annual or annual basis over the
terms of these contracts.  The Company will record these payments as
mining concession assets.  In the event the Company elects not to move
forward with the purchase option outlined in the agreements, the Company will
expense all cumulative costs deferred for each respective
concession.  As of April 30, 2010, the Company has capitalized
$385,000 of payments pursuant to these option purchase agreements.





The
Company purchased eleven of the concessions from Mexican entities and/or Mexican
individuals and 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 a 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.





Gabon Mining
Concessions





The
Company, through its wholly-owned subsidiary Dome, owns three exploration
licenses (Ndjole, Mevang, and Mitzic) each covering approximately 2,000 square
kilometers in Gabon, Africa.  The exploration licenses were granted in
July 2008 and entitle the Company to employ sub-surface exploration methods,
such as drilling and trial mining.





As
discussed in Note 6, two of Dome’s licenses, Ndjole and Mevang, are in subject
to a joint venture agreement with AngloGold, whereby AngloGold has a right to
earn certain interests in these licenses.  Dome also has a joint
venture interest in the Ogooue license that is owned by
AngloGold.  Dome’s third license, the Mitzic license, has iron ore
potential and the Company, through Dome, is looking for a joint venture partner
on this license.





The
exploration licenses are valid for three years and are renewable twice with each
renewal lasting for three years. The Company must spend 200,000,000 CFA francs
in order to renew each exploration license for a second term of three years and
400,000,000 CFA francs in order to renew the license for a third term of three
years. The Company must spend 800,000,000 CFA francs in the third term. Dome may
apply for a mining license at any time during these periods.  As of
April 30, 2010, one United States dollar approximates 505 CFA
francs.











NOTE
6 – JOINT VENTURE AGREEMENTS





In
October 2009, Dome and AngloGold entered into two joint venture agreements; the
Ogooue Joint Venture Agreement and Ndjole and Mevang Joint Venture
Agreement.





Ogooue
Joint Venture Agreement





AngloGold
acquired a reconnaissance license over an area comprising 8,295 square
kilometers in Gabon, Africa. This license was acquired by AngloGold for its gold
potential. The joint venture is an 80/20 joint venture in favor of AngloGold.
AngloGold has made a firm commitment to spend $100,000 on exploration and will
solely fund the first $3 million of exploration expenditures, after which the
parties will contribute on an 80/20 basis. Joint venture dilution provisions
apply whereby if Dome is diluted in the future to a joint venture interest of 5%
or less due to lack of contribution to exploration budgets, its interest will be
converted to a 2% Net Smelter Return which can be purchased at an appraised
value 14 months after commencement of commercial production. Should AngloGold
elect not to spend the aforesaid $3 million, the lease shall be assigned to
Dome.





Ndjole
and Mevang Joint Venture Agreement





Dome is
the owner of the Ndjole and Mevang exploration licenses, each comprised of 2,000
square kilometers. Under the terms of the joint venture, AngloGold earned a 20%
interest by paying Dome $400,000 upon signing of the joint venture agreement in
October 2009. AngloGold can earn an additional 40% interest by paying Dome
$100,000 per year over the next three years and by incurring exploration
expenditures in the amount of $3.7 million over the next three years at the rate
of $1 million in the first year, $1.2 million in the second year and $1.5
million in the third year.  As of April 30, 2010, AngloGold has paid
approximately $839,000 of exploration costs pursuant to the provision
above.





Once it
has earned a 60% interest, AngloGold can earn an additional 10% interest (70%
total) by spending $5 million on exploration expenditures within two years of
earning into a 60% interest as set out above. When the parties have a 70/30
joint venture, if Dome elects not to contribute to work programs and budgets,
AngloGold can elect to earn an additional 15% interest (85% total) by carrying
the project to a completed pre-feasibility study. Should AngloGold fail to
perform as set out above, a 100% interest in the licenses shall revert to Dome
and the joint venture will cease. AngloGold shall be entitled to withdraw from
the joint venture after it has spent $1 million on exploration
expenditures.





Joint
venture dilution provisions apply whereby if Dome is diluted in the future to a
joint venture interest of 5% or less due to lack of contribution to exploration
budgets, its interests will be converted to a 2% Net Smelter Return which can be
purchased at appraised value 14 months after commencement of commercial
production.





Dome is
operating the exploration program on behalf of AngloGold and receives funds from
time-to-time to continue the joint venture operations in Gabon. As at April 30,
2010 Dome had a balance of $143,398 received from Anglo for ongoing exploration
costs. These funds are reflected as a payable to joint venture partner on the
Company’s consolidated balance sheet.














NOTE
7 - EQUIPMENT





The
following is a summary of the Company's property and equipment at April 30, 2010
and October 31, 2009, respectively:





April
      30,
            
            
            October
      31,2010
            
            
            2009Mining
      equipment
            
            $
            1,477,592
            
            
            $
            1,209,471Well
      equipment
            
            
            42,055
            
            
            
            31,239Communication
      equipment
            
            
            7,772
            
            
            
            7,288Buildings
      and structures
            
            
            148,970
            
            
            
            139,679Vehicles
            
            
            216,409
            
            
            
            114,369Computer
      equipment and software
            
            
            198,489
            
            
            
            160,629Office
      equipment
            
            
            23,212
            
            
            
            10,238Assets
      under construction
            
            
            40,923
            
            
            
            12,4792,155,422
            
            
            
            1,685,392Less:  Accumulated
      depreciation
            
            
            (825,063
            )
            
            
            (679,659
            )$
            1,330,359
            
            
            $
            1,005,733





Depreciation
expense for the six months ended April 30, 2010 and 2009 was $104,304 and
$100,300 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
8 - COMMON STOCK





On
December 22, 2009, the Company closed a private placement of 6,500,000 units, at
a price of $0.46 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 entitled the holder to purchase one share of common stock. As
a result of the closing of the Merger on April 16, 2010, the warrants issued as
part of this private placement were terminated in accordance with their
terms.  Total proceeds from this private placement were
$2,990,000.





On
January 10, 2010, Dome raised $13,010,000 through a private placement of special
warrants.  The private placement was completed through a syndicate of
Canadian investment dealers and each special warrant automatically converted
into one share of Dome common stock immediately prior to the closing of the
Merger.  The funds were held in escrow pending the
closing.





On April
16, 2010, the Company completed the Merger and issued a total of 47,724,583
shares of common stock for all the issued and outstanding shares of Dome. Based
upon the closing exchange ratio of 0.968818 shares of Metalline common shares
for each single share of Dome common stock, the Company determined that
28,009,594 common shares of Metalline were issued pursuant to the special
warrant offering and 19,714,989 common shares of Metalline were issued for
merger consideration.  After deducting offering costs of $1,048,484,
the total net proceeds from the special warrant offering were
$11,961,516.





Pursuant
to ASC 805-10, the 19,714,989 shares issued for merger consideration was
measured at $1.26, the closing market price of the Company’s common stock on
April 16, 2010.





Also
during six months ended April 30, 2010, the Company issued 80,000 shares of
common stock upon the exercise of warrants at an average cash consideration of
$0.50 per share and issued 64,800 shares of common stock at an average market
price of $0.82 per share to its independent directors for services
provided.











NOTE
8 - COMMON STOCK (continued)





A summary
of the common stock and additional paid in capital activity for the six months
ended April 30, 2010 is as follows:





Common
      Shares Issued
            
            
            Common
      Share Amount
            
            
            Additional
      Paid-In Capital
            
            
            Total
      CapitalBalance,
      October 31, 2009
            
            
            48,834,429
            
            
            $
            488,344
            
            
            $
            55,144,214
            
            
            $
            55,632,558Common
      stock issued in private placement at average price of $0.46 per
      share
            
            
            6,500,000
            
            
            
            65,000
            
            
            
            2,925,000
            
            
            
            2,990,000Common
      stock issued in special warrant offering at average price of $0.46 per
      share less offering costs of $1,048,484
            
            
            28,009,594
            
            
            
            280,096
            
            
            
            11,681,420
            
            
            
            11,961,516Common
      stock issued for Dome merger consideration at $1.26 per
    share
            
            
            19,714,989
            
            
            
            197,150
            
            
            
            24,643,736
            
            
            
            24,840,886Common
      stock issued for exercise of warrants at an average price of $0.50 per
      share
            
            
            80,000
            
            
            
            800
            
            
            
            39,200
            
            
            
            40,000Common
      stock issued for directors fees at an average price of $0.82 per
      share
            
            
            68,400
            
            
            
            684
            
            
            
            55,332
            
            
            
            56,016Warrants
      issued for replacement of Dome warrants
    at  merger
            
            
            —
            
            
            
            —
            
            
            
            1,895,252
            
            
            
            1,895,252Stock
      based compensation for options
            
            
            —
            
            
            
            —
            
            
            
            47,559
            
            
            
            47,559Balance,
      April 30, 2010
            
            
            103,207,412
            
            
            $
            1,032,074
            
            
            $
            96,431,713
            
            
            $
            97,463,787





During
the comparative six months ended April 30, 2009, the Company completed a private
placement of 686,000 units at $0.25 per unit.  Each unit consisted of
one share of restricted common stock and one half of a warrant.  Each
whole warrant is exercisable at $0.50 per share and has a term of 3
years.  Net proceeds from these placements were $171,500. Also during
the six months ended April 30, 2009, the Company issued 64,800 shares of common
stock at an average market price of $0.30 per share to its independent directors
for services provided.





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 anti-takeover mechanisms of the Rights
Agreement were not triggered by the merger transaction with Dome and no holders
of the Rights were entitled to exercise their Rights as a result of that
transaction or any events described in the Merger Agreement.  The Rights
will expire on June 11, 2017.














NOTE
9 - STOCK OPTIONS





The
Company has three 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.  Under the 2010 Stock Option and Stock Bonus Plan
(the”2010 Plan”), the lesser of (i) 30,000,000 shares or (ii) 10% of the total
shares outstanding will be reserved to be issued upon the exercise of options or
the grant of stock bonuses.  As of April 30, 2010, 10,300,000 shares
are available for issuance under the 2010 Plan.





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.





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 six months ended April 30, 2010 and
April 30, 2009.





The
following is a summary of stock option activity for the six months ended April
30, 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
            
            
            (200,000
            )
            
            
            2.15Outstanding
      at April 30, 2010
            
            
            4,805,623
            
            
            $
            2.27
            
            
            
            6.71
            
            
            $
            451,596Vested
      or Expected to Vest at April 30, 2010
            
            
            4,805,623
            
            
            $
            2.27
            
            
            
            6.71
            
            
            $
            451,596Exercisable
      at April 30, 2010
            
            
            4,738,955
            
            
            $
            2.28
            
            
            
            6.69
            
            
            $
            451,596




The
Company recognized stock-based compensation costs for stock options of $47,559
and $463,644 for the six months ended April 30, 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.














NOTE
9 - STOCK OPTIONS (continued)





Summarized
information about stock options outstanding and exercisable at April 30, 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
            
            
            
            8.79
            
            
            $
            0.34
            
            
            
            705,619
            
            
            $
            0.341.25-1.32
            
            
            
            100,000
            
            
            
            0.43
            
            
            
            1.32
            
            
            
            100,000
            
            
            
            1.322.18-2.85
            
            
            
            3,750,004
            
            
            
            6.46
            
            
            
            2.53
            
            
            
            3,683,336
            
            
            
            2.534.30
            
            
            
            250,000
            
            
            
            7.14
            
            
            
            4.30
            
            
            
            250,000
            
            
            
            4.30$
            0.34-4.30
            
            
            
            4,805,623
            
            
            
            6.71
            
            
            $
            2.27
            
            
            
            4,738,955
            
            
            $
            2.28




A summary
of the nonvested shares as of April 30, 2010 and changes during the six months
ended April 30, 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 April 30, 2010
            
            
            66,668
            
            
            $
            1.73








As of
April 30, 2010, there was $26,012 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 0.67 years.




NOTE
10 - WARRANTS





At times
the Company has issued warrants to investors in connection with private
placements of Company stock or in consideration for financial
services.  Warrants issued in consideration for financial services 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.














NOTE
10 – WARRANTS (continued)





A summary
of warrant activity for the six months ended April 30, 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
      in merger with Dome
            
            
            2,228,281
            
            
            
            0.41Exercised
            
            
            (80,000
            )
            
            
            0.50Forfeited
      or expired
            
            
            (3,350,000
            )
            
            
            0.63Outstanding
      at April 30, 2010
            
            
            15,027,371
            
            
            $
            1.10
            
            
            
            0.94
            
            
            $
            2,559,389Exercisable
      at April 30, 2010
            
            
            15,027,371
            
            
            $
            1.10
            
            
            
            0.94
            
            
            $
            2,559,389





Pursuant
to the private placement transaction that closed in December 2009 and described
in Note 8, the Company issued warrants to acquire 3,250,000 of common
stock.The warrants
were  only to be exercisable if the merger agreement between Dome and
Metalline was 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.  As a result of the closing of the Merger on April 16,
2010, the warrants issued in this private placement were terminated in
accordance with their terms.





In
connection with the Merger, the Company issued 2,228,281 warrants with an
exercise price of $0.41 to replace all of the outstanding warrants of Dome at
the time of the Merger.  As detailed in Note 4, the fair value of the
warrants using the Black-Scholes valuation model was $1,895,252.





During
the six months ended April 30, 2010, warrants to acquire 80,000 shares of common
stock were exercised at an average exercise price of $0.50 per
share.  The warrants had an intrinsic value of $54,800 at time of
exercise.





Summarized
information about warrants outstanding and exercisable at April 30, 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
      - $0.50
            
            
            
            4,884,257
            
            
            
            1.28
            
            
            $
            0.46
            
            
            
            4,884,257
            
            
            $
            0.46$1.25
      - $1.25
            
            
            
            9,085,169
            
            
            
            0.73
            
            
            
            1.25
            
            
            
            9,085,169
            
            
            
            1.25$2.00
      - $2.42
            
            
            
            557,945
            
            
            
            0.78
            
            
            
            2.31
            
            
            
            557,945
            
            
            
            2.31$3.40
      - $3.40
            
            
            
            500,000
            
            
            
            1.68
            
            
            
            3.40
            
            
            
            500,000
            
            
            
            3.40$0.34
      - $3.40
            
            
            
            15,027,371
            
            
            
            0.94
            
            
            $
            1.10
            
            
            
            15,027,371
            
            
            $
            1.10















NOTE
11 - 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.





On April
16, 2010 the Company and Brian Edgar, the Executive Chairman of the Board of
Directors, agreed to the materials terms of his compensation but have not yet
executed an agreement memorializing those terms.  Mr. Edgar will
receive $7,500 per month in his capacity as Executive Chairman.  If
Mr. Edgar is terminated from his position of Executive Chairman without cause or
if he is terminated from that position within twelve months of a change of
control event he will be entitled to a payment equal to twelve months of his
base compensation.





Deferred Salaries &
Directors Fees





Effective
February 1, 2009, the persons then serving as 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 persons then serving as 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.





Mining Concessions -
Mexico





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
12 – 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, has historically generated taxable income based upon intercompany
fees billed to Minera.













NOTE
12 – INCOME TAXES (continued)





On April
16, 2010, a wholly-owned subsidiary of the Company, was merged with and into
Dome Ventures Corporation (“Dome”) resulting in Dome becoming a wholly-owned
subsidiary of the Company.  Dome, a Delaware corporation with offices
in Canada, files tax returns in the United States and Canada and Dome Ventures
SARL Gabon files tax returns in Gabon, Africa.  Dome and its
subsidiaries do not currently generate taxable income.





The
Company’s provision for income taxes for the six months ended April 30, 2010
consisted of a tax credit of $14,046 related to a provision to return true-up
for foreign income taxes for Contratistas for the calendar year ended December
31, 2009.  The Company’s provision for income taxes of $9,403 for the
six months ended April 30, 2009 consists of a provision to return true-up for
Contratistas for 2008 foreign income taxes.  There was no federal or
state income tax provision for the six months ended April 30, 2010 and
2009.





Mexico Tax
Legislation





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.





Net Operating Loss
Carryforward Limitation





The Tax
Reform Act of 1986 contains provisions that limit the utilization of net
operating loss and tax credit carry forwards if there has been a change in
ownership as described in Section 382 of the Internal Revenue Code. As a
result of the Dome merger in April 2010, substantial changes in the Company’s
ownership have occurred that may limit or reduce the amount of net operating
loss carryforward that the Company could utilize in the future to offset taxable
income.  We have not completed a detailed Section 382 study at this
time to determine what impact , if any, that ownership changes may have had on
our operating loss carryforwards. In each period since our inception, we have
recorded a valuation allowance for the full amount of our deferred tax assets,
as the realization of the deferred tax asset is uncertain. As a result, we have
not recognized any federal or state income tax benefit in our consolidated
statement of operations.





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 six month period ended April 30, 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
April 30, 2010 and accordingly the Company’s effective tax rate will not be
materially affected by unrecognized tax benefits.





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




United
      States:
            1993 and all
      following yearsMexico:
            1997 and all
      following yearsCanada
            1999 and all
      following yearsAfrica
            2008 and all
      following years












NOTE
12 – INCOME TAXES (continued)





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 unrecognized tax
benefits.








NOTE
13 – SEGMENT INFORMATION





The
Company operates in one business segment being the exploration of mineral
property interests. The Company has mineral property interests in Sierra Mojada,
Mexico and Gabon, Africa.








Geographic
information is approximately as follows:





April
      30,
              2010
            
            
            October
      31,
              2009Identifiable
      assetsMexico
            
            $
            6,601,000
            
            
            $
            5,566,000Canada
            
            
            723,000
            
            
            
            —Africa
            
            
            4,680,000
            
            
            
            —United
      States
            
            
            14,589,000
            
            
            
            1,476,000$
            26,593,000
            
            
            $
            7,042,000






For
      the three months ended
                April
      30,
              
              
              For
      the six months ended
                April
      30,
              
              
              November
      8, 1993 (Inception) To
                April
      30,2010
              
              
              2009
              
              
              2010
              
              
              2009
              
              
              2010Net
      income (loss) for the periodMexico
              
              $
              791,000
              
              
              $
              382,000
              
              
              $
              303,000
              
              
              $
              (2,279,000
              )
              
              $
              (17,617,000
              )Canada
              
              
              (11,000
              )
              
              
              —
              
              
              
              (11,000
              )
              
              
              —
              
              
              
              (11,000
              )Africa
              
              
              (25,000
              )
              
              
              —
              
              
              
              (25,000
              )
              
              
              —
              
              
              
              (25,000
              )United
      States
              
              
              (786,000
              )
              
              
              (761,000
              )
              
              
              (1,608,000
              )
              
              
              (1,461,000
              )
              
              
              (35,479,000
              )$
              (31,000
              )
              
              $
              (379,000
              )
              
              $
              (1,341,000
              )
              
              $
              (3,740,000
              )
              
              $
              (53,132,000
              )








NOTE
14 – SUBSEQUENT EVENTS





On June
10, 2010, warrants to acquire 290,645 shares of common stock were exercised at
an average exercise price of $0.41 per share.  The warrants had an
intrinsic value of $69,755 at time of exercise.
















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 “expects”, “anticipates”,
“targets”, “goals” “projects”, “intends”, “plans”, “believes”, “seeks”,
“estimates”, “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 commodity 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 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” set forth in the Company’s Annual Report
on Form 10-K for the year ended October 31, 2009.





Business
Overview





Metalline,
a Nevada corporation, is an exploration stage company, engaged in the business
of mineral exploration.  The Company currently owns several
concessions, which are located in the municipality of Sierra Mojada, Coahuila,
Mexico (the “Property”).  The Company’s primary objective is to define
sufficient mineral reserves on the Property to justify the development of a
mechanized mining operation (the “Project”).  The Company conducts its
operations in Mexico through its wholly owned Mexican subsidiaries, Minera
Metalin S.A. de C.V. (“Minera”) and Contratistas de Sierra Mojada S.A. de C.V.
(“Contratistas”).












On April
16, 2010, the Company completed a merger transaction with Dome Ventures
Corporation (“Dome”), whereby Dome became a wholly owned subsidiary of the
Company.  Dome holds three exploration licenses in Gabon, West Africa
that cover approximately 6,000 square kilometers and recently entered into a
joint venture agreement with AngloGold Ashanti Limited (“AngloGold”) on two of
its licenses, Ndjole and Mevang. Dome also entered into a second joint venture
agreement on the Ogooue license held by AngloGold.  Dome’s third
license, the Mitzic license, has iron ore potential and the Company is currently
looking for joint venture partners for this license.  Operations in
Gabon are conducted by Dome’s subsidiary Dome Ventures SARL Gabon.





Current
Developments





On
December 22, 2009, the Company closed a private placement of 6,500,000 units, at
a price of $0.46 per unit for total proceeds of $2,990,000.  The
proceeds from this placement were used to fund operations while the Company
worked to close the proposed merger transaction with Dome and to begin to
ramp-up exploration activities at Sierra Mojada.





On April
15, 2010 the Company held a special meeting of stockholders at which the
Company’s stockholders approved, among other things, the issuance of 47,724,583
shares of Company common stock to effect the merger transaction involving
Dome.  On April 16, 2010, pursuant to the terms and conditions of the
Agreement and Plan of Merger and Reorganization, dated December 4, 2009 (the
“Merger Agreement”), among the Company, Dome, and Metalline Mining Delaware,
Inc., a wholly owned subsidiary of Metalline (“Merger Sub”), Merger Sub merged
with and into Dome with Dome being the survivor in that transaction (the
“Merger”).  As a result, Dome became a wholly owned subsidiary of
Metalline. Dome’s principal business activities are the acquisition and
exploration of mineral properties domiciled in Gabon,
Africa.





In
connection with the Dome merger transaction, Dome closed a private placement of
special warrants and at the closing of the Merger, $11,961,516 of net proceeds
was released from escrow and made available to the combined
company.  As a result of the special warrant offering and cash
acquired in the Dome merger transaction, the Company’s cash and cash equivalents
increased by $14,580,000.  The Company plans to use the majority of
these funds to expand exploration activities at Sierra Mojada over the next 2-3
years.  The Sierra Mojada project will be the Company’s primary focus,
while exploration costs in Gabon are funded by AngloGold pursuant to the terms
of the joint venture agreements.





Following
the successful closing of the merger transaction with Dome on April 16, 2010 the
Company moved forward with its 2010 budget plan for the Sierra Mojada project,
which calls for an aggressive exploration drilling program on the silver
mineralization located north of the Sierra Mojada
fault.  Approximately 44,000 meters of drilling are planned for
calendar 2010, of which over 3,400 meters have been drilled as of the end of
April. The pace of drilling is accelerating through double shifting of the
Company’s three diamond drills and the use of three drilling contractors. A
recently purchased reversed circulation drill has been overhauled and is in
transit to Sierra Mojada, which will result in at least seven drills turning on
the project at the peak of activities.  Initially all seven drills
will be focused on the north side silver mineralization on the west end of the
Company’s concessions.





The
Company has also started to ship some of its stockpile of samples to ALS CHEMEX,
Vancouver for assay.  The Company had previously accumulated a sample
stockpile of about 7,000 samples when capital resources were limited. These
samples were analyzed by the Company's assay lab and exceeded the screen limit
of 10 grams per tonne silver and/or 1% zinc. They are being shipped for assay at
the rate of 700-1000 samples per week. As of June 3, 2010, there are over 2,000
samples in process for assay and the first results are beginning to be returned.
The results of this work will be detailed in press releases as results are
received and evaluated.





The
Company plans to complete a comprehensive update of the resource model by the
end of 2010. An initial program of metallurgical test work is in progress to
assess recoveries by various process methods that can be expected from the
silver and associated zinc, copper and lead mineralization. This program will be
expanded as more samples are available from core drilling in the west end. The
results of drilling and metallurgy studies are scheduled to be available for use
in a Preliminary Economic Assessment (Scoping Study) beginning early next
year.












Further,
during the quarter ended, April 30, 2010, the Company entered into two
agreements with several Mexican individuals to acquire seven additional mining
concessions in the Sierra Mojada prospect area.  The agreements are
considered option purchase agreements and give the Company the option, but not
the obligation to acquire the seven concessions at established prices over the
next 3-5 years.




Activities
in Gabon, as part of the AngloGold joint ventures, have consisted of geochemical
sampling of soils and rocks, and geological mapping. Preparation for trenching
and man-portable core sampling to evaluate extensive geochemical anomaly zones
is in progress.





Results
of Operation





Upon the
closing of the Merger on April 16, 2010 Dome became a wholly owned subsidiary of
the Company.  The Company’s consolidated balance sheet as of April 30,
2010 includes Dome’s assets and liabilities as of that date. Further, the
financial results from Dome from April 16, 2010 through April 30, 2010 are
included in the Company’s consolidated statement of operations and statements of
cash flows for the three and six month periods ended April 30,
2010.





Three Months Ended April 30,
2010 and April 30, 2009





For the
three months ended April 30, 2010, the Company experienced a consolidated net
loss of $31,000 or less than $0.01 per share, compared to a consolidated net
loss of $379,000 or $0.01 per share during the comparable period last
year.  The $348,000 decrease in consolidated net loss is primarily due
to a $666,478 increase in foreign currency translation gain, which was largely
caused by the U.S. dollar strengthening compared to the Mexico
peso.  This was partially offset by a $123,000 increase in exploration
and property holding costs and a $188,000 increase in general and administrative
costs.





Exploration
and property holding costs





Exploration
and property holding costs increased $123,000 or 34% to $486,000 for the three
months ended April 30, 2010 compared to $363,000 for the comparable period last
year.  This increase was primarily due to increased drilling and
exploration costs as the Company increased its drilling and exploration
activities on the Sierra Mojada properties.  Management plans to use
the additional capital now available to the Company as a result of the merger
transaction with Dome to continue to expand exploration activities at Sierra
Mojada.  Exploration activities on the Gabon properties (recently
acquired in the Dome merger) will continue to be funded by our joint venture
partner, AngloGold.





General
and Administrative Costs





General
and administrative expenses increased $188,000 or 25% to $950,000 for the three
months ended April 30, 2010 as compared to $762,000 for the comparable period
last year.  This increase was primarily due to a $216,000 increase in
professional fees and a $152,000 increase in provision for uncollectible
value-added taxes.  These increases were partially mitigated by
$209,000 decrease in salaries and payroll expenses.  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 $209,000 or 45% from the comparable period in
2009.  Stock based compensation related to stock options was
significantly lower at $10,000 in 2010 as compared to $227,000 during the
comparable period in 2009.  Stock based compensation in the comparable
period last year was higher due to $138,000 of stock based compensation for
options granted in connection with salary deferral agreements entered into
during 2009 and higher pro-rata compensation on options granted in 2007 and
2008.





Office
and administrative expenses increased $64,000 or 91% to $134,000 for the three
months ended April 30, 2010 as compared to $70,000 for the comparable period
last year.  Higher travel costs, stock exchange related fees, and
shareholder relations costs related to the Dome transaction all contributed to
this increase.










Professional
services increased $216,000 or 179% to $337,000 for the three months ended April
30, 2010 as compared to $121,000 for the comparable period last
year.  The increase was primarily due to higher engineering and
professional fees on the Sierra Mojada properties.  In addition, legal
and accounting fees were significantly higher due to the Dome merger transaction
and corresponding costs to prepare and distribute a joint proxy
statement/prospectus on Form S-4 for this transaction.




Directors’
fees decreased $35,000 or 34% to $69,000 for the three months ended April 30,
2010 as compared to $104,000 for the comparable period last year.  The
decrease was primarily attributable to a $69,000 decrease in stock based
compensation associated with stock option grants.  The lower stock
based compensation on options was partially mitigated by higher average market
price for shares granted to independent directors.  In addition, the
current quarter also included pro-rata fees for two new independent directors
added in conjunction with the Dome merger.





During
the quarter ended April 30, 2010, the Company recorded an additional provision
of $152,000 for uncollectible value-added taxes.  The Company
continues to aggressively pursue collection of these taxes in Mexico, but has
been unsuccessful in recovering these amounts from the Mexican
authorities.





Other
Income (Expense)





Other
Income increased $673,000 to $1,406,000 for the three months ended April 30,
2010 as compared to $733,000 for the comparable period last year.  The
increase is primarily due to a $666,000 increase in foreign currency translation
gain on intercompany loans to its Mexican subsidiaries.  During the
three months ended April 30, 2010, the Mexican Peso to U.S. dollar exchange rate
decreased from 13.11 pesos per USD to 12.27 pesos per USD resulting in a gain of
$1,399,000 whereas the exchange rate fluctuation in 2009 was slightly
lower.  As of April 30, 2009, the Company has a $22.5 million dollar
intercompany receivable from Minera and Contratistas.





Interest
income was $6,000 higher in 2010 as compared to 2009 due to recent increase in
cash and cash equivalents from the special warrant offering and closing of the
Dome merger transaction.





Six months Ended April 30,
2010 and April 30, 2009





For the
six months ended April 30, 2010, the Company experienced a consolidated net loss
of $1,341,000 or $0.02 per share, compared to a consolidated net loss of
$3,740,000 or $0.09 per share during the comparable period last
year.  The $2,399,000 decrease in consolidated net loss is primarily
due to a $2,627,000 change in foreign currency translation
gain/loss.





Exploration
and property holding costs





Exploration
and property holding costs increased $49,000 or 5.5% to $936,000 for the six
months ended April 30, 2010 compared to $887,000 for the comparable period last
year.  This increase was primarily due to increased drilling and
exploration activities at Sierra Mojada.  The increase in drilling and
exploration activities in large part  began upon the successful
closing of the private placement in December 2009 and increased further upon the
closing of the Dome merger transaction on April 16, 2010.  Management
plans to expand exploration activities at Sierra Mojada significantly during the
next quarter.





General
and Administrative Costs





General
and administrative expenses increased $189,000 or 12% to $1,773,000 for the six
months ended April 30, 2010 as compared to $1,584,000 for the comparable period
last year.  Higher professional fees and provision for uncollectible
value-added taxes for the 2010 period were partially offset by lower stock based
compensation from stock options in salaries and payroll expenses and directors
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 $306,000 or 36% from the comparable period in
2009.  This decrease was primarily due to lower stock based
compensation related to stock options which decreased to $48,000 in 2010 as
compared to $369,000 during the comparable period in 2009.













Office
and administrative expenses increased $86,000 or 63% to $222,000 for the six
months ended April 30, 2010 as compared to $136,000 for the comparable period
last year.  The increase was primarily due to higher regulatory fees
and shareholder relation costs due to the associated shareholder meeting and
proxy statement for the Dome merger.  In addition, travel costs were
higher in 2010.




Professional
services increased $311,000 or 72% to $740,000 for the six months ended April
30, 2010 as compared to $429,000 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 $51,000 or 30% to $117,000 for the six months ended April 30,
2010 as compared to $168,000 for the comparable period last
year.  Stock based compensation associated with stock options
decreased $115,000 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.  In addition, two new independent
directors were added in April 2010.





Other
Income (Expense)





Other
Income (Expense) was $1,354,000 of income for the six months ended April 30,
2010 as compared to $1,279,000 of expense for the comparable period last
year.  The decrease was due a $2,627,000 change in foreign currency
translation loss on intercompany loans to the Company’s Mexican
subsidiaries.  During the six months ended April 30, 2010, the Mexican
Peso to U.S. dollar exchange rate decreased from 13.09 pesos per USD to 12.28
pesos per USD resulting in a foreign exchange gain of $1,347,000. During the
comparable period last year, the Mexican Peso to U.S. dollar exchange rate
increased from 12.90 pesos per USD to 13.76 pesos per USD resulting in a foreign
exchange loss of $1,280,000.  As of April 30, 2010, the Company has a
$22.5 million dollar intercompany receivable from Minera and Contratistas which
is subject to foreign currency translation gains and losses.





Interest
income was $6,000 higher in 2010 as compared to 2009 due to recent increase in
cash and cash equivalents from the special warrant offering and closing of the
Dome merger transaction.





Material
Changes in Financial Condition; Liquidity and Capital Resources





Cash
Flows





During
the six months ended April 30, 2010, the Company primarily utilized cash and
cash equivalents and proceeds from issuance of its common stock to fund its
operations which primarily consisted of development and exploration of the
Sierra Mojada property.  During the six months ended April 30, 2010,
the Company received $14,951,000 of proceeds from the sale of common stock and
acquired $2,619,000 of cash in the merger with Dome Ventures. As a result, cash
and cash equivalents increased from $1,483,000 at October 31, 2009 to
$15,336,000 at April 30, 2010.





Cash
flows used in operations for the six months ended April 30, 2010 increased to
$3,043,000 as compared to $2,041,000 for the comparable period in
2009.  Higher exploration costs at Sierra Mojada and higher general
and administrative costs due to the Dome merger were the primary reasons for
this increase.  In addition, payment of deferred salaries and costs
and reduction in accrued liabilities also contributed to the increase in cash
used in operations.  During the six months ended, April 30, 2010, the
Company purchased $297,000 of equipment and spent $369,000 on acquisition of
mining concessions.  Prior year capital spending was significantly
lower due to limited working capital.





Capital
Resources





As of
April 30, 2010, the Company had cash and cash equivalents of $15,336,022 and
working capital of $15,037,868, as compared to cash and cash equivalents of
$1,482,943 and working capital of $830,692 as of October 31,
2009.   The significant increases in our liquidity and working
capital were in large part a result of funds raised in the private placement
transaction completed in December 2009 and the successful completion of the Dome
merger transaction in April 2010.  The closing of the Dome transaction
and special warrant offering resulted in an increase in cash and cash
equivalents of $14,580,000.  The Company plans to primarily use this
funding to expand exploration activities at Sierra Mojada over the next 2-3
years.












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. Although we believe our current financial
resources are sufficient to fund the Company’s planned operations over the next
2-3 years, 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.





Resolution
of Former NYSE Amex Listing Deficiencies





On April
29, 2010, the NYSE Amex notified the Company that it deemed the Company to have
regained compliance with the deficiencies it referenced in a notice of
deficiency letter received from NYSE Amex dated May 1, 2009.





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. 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 a
feasibility study.  Following the completion of a 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 a material impact on the Company’s financial
position, results of operations or cash flows for the six months ended April 30,
2010 due to the Dome merger transaction.





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 foreign
subsidiaries.  The assets and liabilities relating to foreign
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 April 30, 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





(a)
            Evaluation
      of Disclosure Controls and
Procedures.





As of
April 30, 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 April
30, 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





On April
16, 2010, the Company closed the Merger and Dome became a wholly-owned
subsidiary of the Company.  Dome has several foreign subsidiaries and
conducts exploration activities in Gabon, Africa through Dome Ventures SARL
Gabon.  We are not yet required to evaluate, and have not fully
evaluated Dome and its foreign subsidiaries’ internal control over financial
reporting and, therefore, any material changes in internal control over
financial reporting that may result from this acquisition were not disclosed in
this Quarterly Report on Form 10-Q. We intend to disclose all material changes
in internal control over financial reporting resulting from this acquisition
prior to or in our Annual Report on Form 10-K for the fiscal year ending October
31, 2010, in which report we will be required for the first time to include Dome
in our annual assessment of internal control over financial
reporting.





Subject
to Dome’s internal control over financial reporting discussed above, there have
not been any changes in the Company’s internal control over financial reporting
during the quarter ended April 30, 2010 that have materially affected, or are
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





Except as
described below, and except for the general application of the Risk Factors set
forth in the our Form 10-K for the year ended to Dome and its operations in
Gabon, there were no material changes from the risk factors included in our Form
10-K for the year ended October 31, 2009.





Our
results of operations and financial condition could be adversely affected by
changes in currency exchange rates.





Our
results of operations and financial condition are affected in part by currency
exchange rates portions of our operating costs in Mexico and now Gabon are
denominated in the local currency. A weakening U.S. Dollar will have the
effect of increasing operating costs while a strengthening U.S. Dollar will
have the effect of reducing operating costs. The Gabon local currency is tied to
the Euro. The exchange rate between the Euro and the U.S. dollar has fluctuated
widely in response to international political conditions, general economic
conditions and other factors beyond our control.





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 second fiscal quarter and as of  June 12, 2010, excluding
transactions that were previously reported.





On April
20, 2010 we issued 50,000 shares of common stock upon the exercise of
warrants.  The warrants were issued at $0.50 per share resulting in
cash proceeds to the Company of $25,000.   The shares of common
stock were issued in reliance on the exemptions from registration contained in
Section 4(2) of the Securities Act of 1933 (the “1933 Act”) and Rule 506
promulgated thereunder.  No commissions or other remuneration were
paid for this issuance.





On April
26, 2010 we issued 30,000 shares of common stock upon the exercise of
warrants.  The warrants were issued at $0.50 per share resulting in
cash proceeds to the Company of $15,000.   The shares of common
stock were issued in reliance on the exemptions from registration contained in
Section 4(2) of the Securities Act of 1933 (the “1933 Act”) and Rule 506
promulgated thereunder.  No commissions or other remuneration were
paid for this issuance.





On April
30, 2010 we issued an aggregate of 36,000 shares of the Company’s common stock
to our independent directors (each an accredited investor) for services
performed for the quarter ended April 30, 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.





On June
10, 2010 we issued 290,645 shares of common stock upon the exercise of
warrants.  The warrants were issued at $0.41 per share resulting in
cash proceeds to the Company of $119,164.   The shares of common
stock were issued in reliance on the exemptions from registration contained in
Section 4(2) of the Securities Act of 1933 (the “1933 Act”) and Rule 506
promulgated thereunder.  No commissions or other remuneration were
paid for this issuance.











Item
3. DEFAULT UPON SENIOR SECURITES





None.





Item
4. [RESERVED]





Item
5.  OTHER INFORMATION





None.





Item
6.  EXHIBITS





Incorporated
      by ReferenceExhibit
      Number
            
            Exhibit
      Description
            
            Form
            Date
            Exhibit
            
            Filed
      Herewith3.1.1
            
            Articles
      of Incorporation.
            
            10-SB
            10/15/99
            3.13.1.2
            
            Certificate
      of Amendment to Articles of Incorporation
            
            10-SB
            10/15/99
            3.33.1.3
            
            Certificate
      of Amendment to Articles of Incorporation
            
            10-QSB
            9/19/06
            3.23.1.4
            
            Certificate
      of Amendment to Articles of Incorporation
            
            10-KSB
            1/31/07
            3.1B3.1.5
            
            Certificate
      of Amendment to Articles of Incorporation
            
            8-K
            4/15/10
            3.13.1.6
            
            Bylaws.
            
            
            
            
            
            X14
            
            Code
      of Ethics
            
            10-KSB
            1/31/07
            1431.1
            
            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.
            
            
            
            
            
            X31.2
            
            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.
            
            
            
            
            
            X32.1
            
            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.
            
            
            
            
            
            X32.2
            
            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.
            
            
            
            
            
            X














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:
      June 14, 2010
            By
            /s/
      Merlin BinghamMerlin
      Bingham,President
      and Principal Executive OfficerDated:
      June 14, 2010
            By
            /s/ Robert DeversRobert
      Devers,Chief
      Financial Officer and Principal Accounting Officer