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UNITED STATESSECURITIES AND EXCHANGE COMMISSION
  Washington, D.C.
20549

FORM 10-QSB

(Mark One)

[ x ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
  THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED **MARCH 31, 2006**

[]
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
  ACT

For the transition period from _______________ to
_______________

Commission File Number: 0-20430

AZCO MINING INC.(Exact name of Registrant as specified in its charter)

|Delaware                        | 84-1094315                       
|------------------------------- | ---------------------------------
|(State or other jurisdiction of | (IRS Employer Identification No.)
|incorporation or organization)  |                                  

7239 North El Mirage Road Glendale, AZ 85307(Address of principal executive offices)

(623) 935-0774(Issuers telephone number)

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 []
  No [ x ]

The number of shares outstanding of each of the issuers classes
of common equity was 63,963,712 shares of common stock, par value $0.002, as
of July 28, 2006.

Transitional Small Business Disclosure Format (check one):

Yes []
  No [ x ]

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AZCOMININGINC.
INDEX TOFORM10-QSBFILINGFOR THEQUARTERENDEDMARCH31,2006

TABLE OFCONTENTS

**Page****PART I****FINANCIAL INFORMATION**Item 1.
      Financial Statements
      2Consolidated Balance Sheet, March 31, 2006 (Unaudited)
      2Consolidated Statements of Operations For the Three and Nine
        Months Ended March 31, 2006 (Unaudited) and 2005 (Unaudited)
      3Consolidated Statements of Cash Flows For the Nine Months
        Ended March 31, 2006 (Unaudited) and 2005 (Unaudited)
      4Notes to the Consolidated Financial Statements (Unaudited)
      5Item 2.
      Managements Discussion and Analysis and Plan of Operations
      12Item 3.
      Controls and Procedures
      16**PART II****OTHER INFORMATION**Item 2.
      Changes in Securities and Use of Proceeds
      16Item 4.
      Submission of Matters to a Vote of Security Holders
      16Item 6.
      Exhibits
      17SIGNATURES
      17


1

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PARTIFINANCIALINFORMATION

ITEM1.          
FINANCIALSTATEMENTS

AZCOMININGINC. CONSOLIDATEDBALANCESHEETMARCH31,2006(UNAUDITED)

|ASSETS                                                            |   |             |  
|----------------------------------------------------------------- | - | ----------- | -
|CURRENT ASSETS:                                                   |   |             |  
|Cash
      and cash equivalents                                   | $ | 2,650,353   |  
|Debenture receivable                                              |   | 70,000      |  
|Prepaid
      expenses                                            |   | 182,667     |  
|Total
      Current Assets                                        |   | 2,903,020   |  
|                                                                  |   |             |  
|CAPITAL ASSETS:                                                   |   |             |  
|Land                                                              |   | 60,000      |  
|Building, net                                                     |   | 391,927     |  
|                                                                  |   | 451,927     |  
|OTHER ASSETS:                                                     |   |             |  
|Idle plant and equipment,
      net                               |   | 1,701,000   |  
|Restricted cash                                                   |   | 178,658     |  
|Deferred financing
      costs                                    |   | 299,766     |  
|                                                                  |   | 2,179,424   |  
|                                                                  |   |             |  
|                                                                  | $ | 5,534,371   |  
|                                                                  |   |             |  
|LIABILITIES AND STOCKHOLDERS (DEFICIT)                           |   |             |  
|                                                                  |   |             |  
|CURRENT LIABILITIES:                                              |   |             |  
|Accounts
      payable and accrued liabilities                    | $ | 939,499     |  
|Accrued interest payable
       related party                    |   | 3,750       |  
|Line of credit                                                    |   | 73,145      |  
|Accrued lease payments payable                                    |   | 1,755,000   |  
|Accrued settlement
      obligation                               |   | 50,000      |  
|Derivative instrument liabilities                                 |   | 3,455,083   |  
|Total Current Liabilities                                         |   | 6,276,477   |  
|                                                                  |   |             |  
|LONG TERM LIABILITIES:                                            |   |             |  
|Financing lease payable, less discount
      of $1,773,617        |   | 2,726,383   |  
|Note payable 
      related party                                |   | 750,000     |  
|Convertible debentures payable,
      less discount of $2,500,000 |   | --          |  
|Asset retirement
      obligation                                 |   | 64,059      |  
|Total
      Liabilities                                           |   | 9,816,919   |  
|                                                                  |   |             |  
|STOCKHOLDERS (DEFICIT):                                          |   |             |  
|Common stock, $.002
      par value, 100,000,000 shares           |   |             |  
|authorized,
      63,919,409 shares issued and outstanding        |   | 127,840     |  
|Additional paid in capital                                        |   | 37,681,536  |  
|Deferred compensation                                             |   | (360,659    | )
|Accumulated (deficit)                                             |   | (41,731,265 | )
|Total Stockholders (Deficit)                                     |   | (4,282,548  | )
|                                                                  |   |             |  
|                                                                  | $ | 5,534,371   |  

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

2

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AZCOMININGINC.CONSOLIDATEDSTATEMENTS OFOPERATIONS(UNAUDITED)

|                                                                 |   | Three Months Ended |   |   | Nine Months Ended |  
|---------------------------------------------------------------- | - | ------------------ | - | - | ----------------- | -
|                                                                 |   | March 31,          |   |   | March 31,         |  
|                                                                 |   | 2006               |   |   | 2005              |  
|                                                                 |   |                    |   |   |                   |  
|SALES                                                            | $ | 1,205              |   | $ | 25,131            |  
|                                                                 |   |                    |   |   |                   |  
|OPERATING COSTS AND EXPENSES:                                    |   |                    |   |   |                   |  
|Mine related costs                                               |   | 41,427             |   |   | 32,238            |  
|General and administrative                                       |   | 273,403            |   |   | 257,387           |  
|General and
      administrative - stock compensation            |   | 444,362            |   |   | 75,979            |  
|Depreciation and amortization                                    |   | 6,170              |   |   | 5,771             |  
|Accretion of asset
      retirement                              |   | 1,250              |   |   | 1,250             |  
|                                                                 |   | 766,612            |   |   | 372,625           |  
|                                                                 |   |                    |   |   |                   |  
|(LOSS) FROM OPERATIONS                                           |   | (765,407           | ) |   | (347,494          | )
|                                                                 |   |                    |   |   |                   |  
|OTHER INCOME (EXPENSE):                                          |   |                    |   |   |                   |  
|Gain on sale of
      asset                                      |   | --                 |   |   | 40,000            |  
|Gain on conversion of debt                                       |   | --                 |   |   | --                |  
|Relief of debt                                                   |   | --                 |   |   | --                |  
|Foreign currency exchange rate adjustment                        |   | 38                 |   |   | 102               |  
|Gain (loss)
      derivative instruments liability               |   | 356,829            |   |   | 49,624            |  
|Interest income                                                  |   | 3,121              |   |   | 954               |  
|Accretion of
      discounts on note payable and lease liability |   | (57,925            | ) |   | (53,157           | )
|Interest expense                                                 |   | (26,175            | ) |   | (47,585           | )
|Total
      Other Income (Expense)                               |   | 275,888            |   |   | (10,062           | )
|                                                                 |   |                    |   |   |                   |  
|(LOSS) BEFORE PROVISION FOR INCOME TAXES                         |   | (489,519           | ) |   | (357,556          | )
|                                                                 |   |                    |   |   |                   |  
|PROVISION FOR INCOME TAXES                                       |   | --                 |   |   | --                |  
|                                                                 |   |                    |   |   |                   |  
|NET (LOSS)                                                       | $ | (489,519           | ) | $ | (357,556          | )
|                                                                 |   |                    |   |   |                   |  
|                                                                 |   |                    |   |   |                   |  
|Basic and Diluted (Loss) Per
      Common Share                  | $ | (0.01              | ) | $ | (0.01             | )
|                                                                 |   |                    |   |   |                   |  
|Basic and Diluted Weighted
      Average Number                  |   |                    |   |   |                   |  
|of Common Shares Outstanding                                     |   | 63,458,945         |   |   | 48,697,900        |  

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

3

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AZCOMININGINC. CONSOLIDATEDSTATEMENTS OFCASHFLOWS(UNAUDITED)

|                                                          |   | Nine Months Ended March 31, |  
|--------------------------------------------------------- | - | --------------------------- | -
|                                                          |   | 2006                        |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                     |   |                             |  
|Net
      (loss)                                          | $ | (3,786,882                  | )
|                                                          |   |                             |  
|Adjustments to reconcile net (loss) to net cash (used in) |   |                             |  
|operating activities:                                     |   |                             |  
|Depreciation and amortization                             |   | 18,511                      |  
|Stock compensation                                        |   | 1,802,141                   |  
|Accretion of asset retirement obligation                  |   | 3,750                       |  
|Amortization of debt discount                             |   | 170,108                     |  
|Gain on conversion of debt                                |   | (119,667                    | )
|Relief of debt                                            |   | (38,389                     | )
|Foreign currency exchange rate adjustment                 |   | 1,387                       |  
|(Gain) on sale of equipment                               |   | (750                        | )
|Loss (gain) on derivative instruments liability           |   | 874,026                     |  
|Net
      changes in operating assets and liabilities:    |   |                             |  
|Accounts receivable                                       |   | --                          |  
|Prepaid expenses                                          |   | (43,309                     | )
|Accounts payable and accrued
      liabilities            |   | 18,418                      |  
|Accrued interest payable  related parties                |   | 94,417                      |  
|Accrued lease payments payable                            |   | 405,000                     |  
|Net Cash (Used in)
      Operating Activities             |   | (601,239                    | )
|                                                          |   |                             |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                     |   |                             |  
|Proceeds
      from asset disposition                     |   | 750                         |  
|Fixed asset addition                                      |   | --                          |  
|Net
      Cash Provided by Investing Activities:          |   | 750                         |  
|                                                          |   |                             |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                     |   |                             |  
|Proceeds from sale of common
      stock                  |   | 1,033,241                   |  
|Proceeds from
      convertible debenture notes           |   | 2,430,000                   |  
|Deferred finance costs                                    |   | (232,500                    | )
|Net
      Cash Provided by Financing Activities           |   | 3,230,741                   |  
|                                                          |   |                             |  
|INCREASE IN CASH AND CASH EQUIVALENTS                     |   | 2,630,252                   |  
|                                                          |   |                             |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF
      PERIOD      |   | 20,101                      |  
|                                                          |   |                             |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                  | $ | 2,650,353                   |  

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

4

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AZCOMININGINC.NOTES TO THECONSOLIDATEDFINANCIALSTATEMENTSMARCH31,2006(UNAUDITED)

NOTE1 - NATURE OFBUSINESSANDBASIS OFPRESENTATION

Azco Mining Inc. (the Company) is a mining company incorporated
in Delaware in August 1991. Its general business strategy is to acquire, explore
and develop mineral properties. The Companys principal assets are the leased
Ortiz gold project in New Mexico and the 100% owned Black Canyon mica project in
Arizona.

The Company is currently focused on financing efforts to: (1)
fund the re-opening and enhancement of its Black Canyon mica project, and (2)
acquire other high quality gold, silver and/or copper properties.

The unaudited interim consolidated financial statements of the
Company included herein have been prepared in accordance with generally accepted
accounting principles for interim financial information and in accordance with
the instructions for Form 10-QSB under the Security Exchange Act of 1934.These
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine-month period ended March 31, 2006, are not
necessarily indicative of the results that may be expected for the year ended
June 30, 2006. The unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and footnotes
thereto for the fiscal year ended June 30, 2005, included in the Companys
Annual Report on Form 10-KSB, as filed with Securities and Exchange Commission.

NOTE2-SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES

Net (Loss) per Common Share

The Company calculates net income (loss) per share as required
by Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per
Share. Basic earnings (loss) per share is calculated by dividing net income
(loss) by the weighted average number of common shares outstanding for the
period. Diluted earnings (loss) per share is calculated by dividing net income
(loss) by the weighted average number of common shares and dilutive common stock
equivalents outstanding. During the periods when they are anti-dilutive, common
stock equivalents, if any, are not considered in the computation. The impact of
outstanding stock options and warrants has not been included in the computation
of diluted loss per common share as it would be anti-dilutive.

Stock-Based Compensation

The Company accounts for equity instruments issued to employees
for services based on the fair value of the equity instruments issued and
accounts for equity instruments issued to other than employees based on the fair
value of the consideration received or the fair value of the equity instruments,
whichever is more reliably measurable.

The Company accounts for stock based compensation in accordance
with SFAS 123, "Accounting for Stock-Based Compensation." The
provisions of SFAS 123 allow companies to either expense the estimated fair
value of stock options or to continue to follow the intrinsic value method set
forth in Accounting Principles Board Opinion 25, "Accounting for Stock Issued
to Employees" (APB 25") but disclose the pro forma effects on net income
(loss) had the fair value of the options been expensed. The Company has elected
to continue to apply APB 25 in accounting for its stock option incentive
plans.

5

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Derivative Financial Instruments

The Company does not use derivative instruments to hedge
exposures to cash flow, market, or foreign currency risks.

The Company reviews the terms of convertible debt, equity
instruments and other financing arrangements issued to determine whether there
are embedded derivative instruments, including embedded conversion options that
are required to be bifurcated and accounted for separately as a derivative
financial instrument. Also, in connection with the issuance of financing
instruments, the Company may issue freestanding options or warrants that may,
depending on their terms, be accounted for as derivative instrument liabilities,
rather than as equity. The Company may also issue options or warrants to
non-employees in connection with consulting or other services they provide.

Derivative financial instruments are initially measured at
their fair value. For derivative financial instruments that are accounted for as
liabilities, the derivative instrument is initially recorded at its fair value
and is then re-valued at each reporting date, with changes in the fair value
reported as charges or credits to income. For option-based derivative financial
instruments, the Company uses the Black-Scholes option- pricing model to value
the derivative instruments. To the extent that the initial fair values of the
freestanding and/or bifurcated derivative instrument liabilities exceed the
total proceeds received, an immediate charge to income is recognized, in order
to initially record the derivative instrument liabilities at their fair value.

The discount from the face value of the convertible debt or
equity instruments resulting from allocating some or all of the proceeds to the
derivative instruments, together with the stated interest on the instrument, is
amortized over the life of the instrument through periodic charges to income,
usually using the effective interest method.

The classification of derivative instruments, including whether
such instruments should be recorded as liabilities or as equity, is reassessed
at the end of each reporting period. If reclassification is required, the fair
value of the derivative instrument, as of the determination date, is
reclassified. Any previous charges or credits to income for changes in the fair
value of the derivative instrument are not reversed. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based
on whether or not net-cash settlement of the derivative instrument could be
required within 12 months of the balance sheet date.

NOTE3  DEFERREDFINANCINGCOSTS

The Company incurred placement and legal fees in connection
with the private placement of senior secured convertible notes aggregating
$232,500 and costs associated with placement warrants amounting to $67,266. The
cost associated with these warrants was determined using Black-Scholes
option-pricing model utilizing the following assumptions, (1) risk free interest
rate of 4.62 %, (2) remaining contractual life of 3 years, (3) expected stock
price volatility of 111.95 % and (4) expected dividend yield of zero.

The deferred financing costs will be amortized over the life of
the debt facility of 17 months, beginning April 1, 2006.

NOTE4 - DERIVATIVEINSTRUMENTLIABILITIES

On March 21, 2006, the Company completed a private placement of
senior secured convertible notes, additional investment rights and warrants to
five institutional investors for an aggregate purchase price of $2,500,000.
These notes were evaluated using Emerging Issues Task Force (EITF) issue No.
00-19, Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Companys Own Stock (EITF 00-19) and it was
determined that the warrants, embedded conversion and interest components and
additional investment rights should be accounted for as derivative instrument
liabilities.

6

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Accordingly, they are to be marked to market each reporting
period, with the corresponding non-cash gain or loss reflected in the Companys
current period statement of operations.

The Company uses the Black-Scholes option-pricing model to
value options, warrants, imbedded conversion option components and additional
investment rights that are recorded as derivative liabilities. The fair value of
the financing lease payable derivative liability at June 30, 2005, was
determined to be $81,057 with the following assumptions, (1) expected dividend
yield of zero, (2) expected stock price volatility of 104.81 %, (3) risk free
interest of 3.66 % and (4) remaining contractual life of 1.55 years. The fair
market value of the convertible debenture derivative liabilities at March 21,
2006, was determined to be $2,867,211 with the following assumptions, (1) risk
free interest rates of 4.61% - 4.65%, (2) remaining contractual life between
1.45 - 5 years, (3) expected stock price volatility of 111.95% and (4) expected
dividend yield of zero. The fair market value of the derivative liabilities at
March 31, 2006, was determined to be $3,455,083 with the following assumptions,
(1) risk free interest rate of 4.82%, (2) remaining contractual life between .8
- 5 years, (3) expected stock price volatility of 113.56% and (4) expected
dividend yield of zero. Based upon the change in fair value, the Company has
recorded a non-cash gain on derivative instruments for the nine months ended
March 31, 2006, of $356,829 and a corresponding decrease in the derivatives
instruments liability. The impact of EITF 00-19 on the financial statements as
of and through March 31, 2006, was as follows:

|                                     |   | Derivative          |  |   |                 |  |   |                      |  
|------------------------------------ | - | ------------------- |  | - | --------------- |  | - | -------------------- | -
|                                     |   | Liability as of     |  |   | Derivative      |  |   | Derivative Liability |  
|                                     |   | Transition Date     |  |   | Liability as of |  |   | (Loss) Through       |  
|                                     |   | Or
      Issue date |  |   | March 31, 2006  |  |   | March 31, 2006       |  
|Financing Lease Payable Derivative   | $ | 81,057              |  | $ | 1,552,296       |  | $ | (1,471,239           | )
|                                     |   |                     |  |   |                 |  |   |                      |  
|Convertible Debenture:               |   |                     |  |   |                 |  |   |                      |  
|Compound Embedded Derivatives        |   | 2,016,341           |  |   | 1,293,022       |  |   | 723,319              |  
|Purchase Agreement
      Warrants    |   | 850,870             |  |   | 609,765         |  |   | 241,105              |  
|Totals                               | $ | 2,948,268           |  | $ | 3,455,083       |  |   | (506,815             | )
|                                     |   |                     |  |   |                 |  |   |                      |  
|Derivative Expense Related to        |   |                     |  |   |                 |  |   |                      |  
|Convertible Debenture
      Issuance |   |                     |  |   |                 |  |   | (367,211             | )
|                                     |   |                     |  |   |                 |  | $ | (874,026             | )

NOTE5-CONVERTIBLEDEBENTURENOTESPAYABLE

On March 21, 2006, the Company completed a private placement of
senior secured convertible notes, additional investment rights and warrants to
five institutional investors for an aggregate purchase price of $2,500,000, of
which $2,430,000 was received in March 2006 and the balance of $70,000 received
in early April 2006. After deducting fees and expenses of $232,500, the Company
received net cash proceeds of $2,267,500. The convertible notes have a term of
17 months and amortize over 12 months beginning on the first day of the fifth
month following their issuance. Interest on the principal amount outstanding
will accrue at a rate of 7% per annum. The Company may pay principal and accrued
interest in cash or, at the Company's option, in shares of its common stock. The
holder of each convertible note, at the holders option, may convert the note
into the Companys common stock at a conversion price of $1.58 per share. The
Company also granted additional investment rights to the investors, giving each
the right for 12 months to purchase, under the same terms, an additional
convertible note for 50% of the amount initially purchased. The Company also
issued warrants to the note holders, giving the right for a period of 5 years to
purchase in the aggregate 791,141 shares of the Companys common stock at a
price of $1.58 per share. Financial advisory fees included a fee equal to 8% of
the gross proceeds, and 75,001 warrants exercisable at $1.58 per share. In
connection with the transaction, the Company is required within 60 days of the
closing to file a registration statement with the Securities and Exchange
Commission and within 150 days to cause the registration statement to be
declared effective. The Company is in default under these provisions.

7

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These notes were evaluated under EITF 00-19 and it was
determined that the warrants, embedded conversion and interest components and
additional investment rights should be accounted for as derivative instrument
liabilities. Derivative financial instruments are initially measured at their
fair value. For derivative financial instruments that are accounted for as
liabilities, the derivative instrument is initially recorded at its fair value
and is then re-valued at each reporting date, with changes in the fair value
reported as charges or credits to income. For option-based derivative financial
instruments, the Black-Scholes option-pricing model is used to value the
derivative instruments. To the extent that the initial fair values of the
derivative instrument liabilities exceed the total proceeds received, an
immediate charge to income is recognized, in order to initially record the
derivative instrument liabilities at their fair value. The following depicts the
impact of EITF 00-19 on the recording of the convertible debentures notes,
discount on the notes and the derivative financial instruments associated with
the notes:

Gross proceeds from the notes
    $
    2,500,000Discount associated with the transaction
    
    (2,500,000
    )Net Debenture Liability
    $
    --


Distribution of note proceeds for initial values of derivative
instrument liabilities associated with the transaction:

Valuation of compound embedded derivative
    $
    2,016,341Valuation of purchase agreement warrants
    
    850,870Total
      Initial Derivative Liability
    
    2,867,211Excess amount over net proceeds from notescharged to operations
    
    (367,211
    )Net Note Proceeds
    $
    2,500,000


The discount from the face value of the convertible debt or
equity instruments resulting from allocating some or all of the proceeds to the
derivative instruments, together with the stated interest on the instrument, is
amortized over the life of the instrument through periodic charges to income,
usually using the effective interest method.

NOTE6-STOCKHOLDERS(DEFICIT)

Issuances of Common Stock

During the nine months ended March 31, 2006, the Company sold
6,005,578 shares of common stock at $0.10 - $0.70 per share for total cash
proceeds of $1,033,241.

During the quarter ended September 30, 2005, the Company issued
1,130,000 shares of common stock for services with an aggregate market value of
$214,700 on the date of the transaction. This is recorded as general and
administrative stock compensation during the six-month period ended December 31,
2005.

At June 30, 2005 the Company had recorded $105,250 of deferred
stock compensation. During the three and nine months ended March 31, 2006,
$2,812 and $102,437 was expensed, respectively, as general and administrative
stock compensation and the balance of $2,813 is in deferred stock compensation
for services to be provided over a three month period.

On September 22, 2005, the Company issued 750,000 shares each
  to the President and to a director, for a total of 1,500,000 shares of common
  stock with an aggregate value of $450,000, based on the fair market value on
  the transaction date. The shares were issued to reduce accrued wages and accrued
  interest payable of $100,000 each for a total of $200,000 and the balance of
  $250,000 was recorded as general and administrative stock compensation expense.

8

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On September 22, 2005, the Company issued 2,000,000 shares of
  common stock at a market value of $600,000 on the date of the transaction, to
  its President, for the rights, title and interest in and to the lease with New
  Planet Copper Mining Company. The value assigned to the transaction has been
  recorded as general and administrative stock compensation expense as the affiliated
  party had no monetary basis in the property.

During the quarter ended December 31, 2005, the Company issued
760,000 shares of common stock for investor relation and marketing services with
an aggregate market value on the date of the transactions of $424,600. At March
31, 2006, $55,013 was classified as deferred stock compensation for services to
be provided over a three-month period and $176,133 and $369,587 have been
recorded as general and administrative stock compensation expense in the three
month and the nine month periods ending March 31, 2006, respectively

On December 1, 2005, the Company issued 49,801 shares of common
stock at a value of $25,000 for payment on a settlement obligation with
iCapital.

On December 21, 2005, the Company issued 500,000 shares of
common stock at a market value of $420,000 on the date of the transaction for
payment of notes payable and related accrued interest to a shareholder, which
aggregated $539,667. The Company recognized a gain of $119,667 on the conversion
of debt to equity.

During the quarter ended March 31, 2006, the Company issued
405,000 shares of common stock for investor relations and marketing services
with an aggregate market value of $568,250 on the transaction dates. At March
31, 2006, $302,833 was classified as deferred stock compensation for services to
be rendered over a two to four month period and the balance of $265,417 has been
recorded as general and administrative stock compensation expense during the
quarter ended March 31, 2006

During the quarter ended March 31, 2006, the Company issued
58,908 shares of common stock at a value of $75,000 for payment on the iCapital
settlement obligation. This obligation was paid in full on May 1, 2006.

On March 15, 2006, a director exercised warrants to purchase
300,000 shares of common stock at $0.70 per share in exchange for a reduction of
accrued interest and principal on the note payable to the director, aggregating
$210,000.

Stock Options and Warrants

The fair value of option grants during the nine months ended
March 31, 2005, were estimated as of the date of grant utilizing the
Black-Scholes option-pricing model with the following average assumptions for
all grants, expected life of options of 3 years, volatility of 106%, risk-free
interest rate of two and one-half percent (2.5%), and a zero percent (0%)
dividend yield. The pro forma stock based compensation presented below is
comprised $210,000 recognized on the options granted in the nine month period
ended March 31, 2005, and $65,623 recognized on option grants on October 7,
2003, that became vested in the nine month period ended March 31, 2005.

The following table illustrates the pro forma effect on net
(loss) and loss per share if the Company had applied the fair value recognition
provisions of FASB Statement No. 148, Accounting For Stock-Based

Compensation - Transition & Disclosure, An Amendment To
FASB Statement No. 123, to stock-based employee compensation.

|                        |   | Nine Months Ended March 31, |  
|----------------------- | - | --------------------------- | -
|                        |   | 2006                        |  
|                        |   | (Unaudited)                 |  
|Net (loss), as reported | $ | (3,786,882                  | )

9

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|Deduct  stock-based compensation expense
      determined under the |   |            |   |   |            |  
|-------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|fair value method, net of
      tax effect                           |   | --         |   |   | (275,623   | )
|                                                                     |   |            |   |   |            |  
|Pro forma net (loss)                                                 | $ | (3,786,882 | ) | $ | (1,474,554 | )
|                                                                     |   |            |   |   |            |  
|(Loss) per share:                                                    |   |            |   |   |            |  
|Net
      (loss) per share, as reported                              | $ | (0.06      | ) | $ | (0.03      | )
|                                                                     |   |            |   |   |            |  
|Net
      (loss) per share, pro forma                                | $ | (0.06      | ) | $ | (0.03      | )

On March 21, 2006, the Company issued 866,142 warrants at an
exercise price of $1.58 under the terms of a private placement of senior secured
convertible notes. The debenture holders received 791,141 warrants with a five
year exercise period and 75,001 warrants were issued with a three year life for
financial advisory services to four parties. The warrants issued to the
debenture holders were valued as financial derivates as described in Note 4. The
warrants issued to the financial advisors were valued at $67,266 and is included
in deferred financing costs as described in Note 3.

Options to purchase 11,500,000 of the Companys common stock
  were outstanding under the Companys Stock Option Plan and non-plan at
  March 31, 2006. These options are exercisable at $0.10 and $0.11 per common
  share at varying dates through October 2013.

Warrants to purchase 3,466,142 of the Companys common stock
were outstanding at March 31, 2006. These warrants are exercisable between $0.50
and $2.50 per common share at varying dates through March 21, 2011.

Stock option and warrant activities for the nine months ended
March 31, 2006, were as follows:

|                              |  | Stock Options |  |   | Stock Warrants | 
|----------------------------- |  | ------------- |  | - | -------------- | 
|                              |  |               |  |   | Weighted       | 
|                              |  |               |  |   | Average        | 
|                              |  | Shares        |  |   | Price          | 
|                              |  |               |  |   |                | 
|Outstanding at June 30, 2005  |  | 11,500,000    |  | $ | 0.10           | 
|Granted                       |  | ---           |  |   | ---            | 
|Canceled                      |  | ---           |  |   | ---            | 
|Expired                       |  | ---           |  |   | ---            | 
|Exercised                     |  | ---           |  |   | ---            | 
|                              |  |               |  |   |                | 
|Outstanding at March 31, 2006 |  | 11,500,000    |  | $ | 0.10           | 

Stock options and warrants exercisable at March 31, 2006, are
as follows:

Exercisable Options
    Exercisable WarrantsWeighted
    
    
    
    WeightedAverage
    
    
    
    AverageRemaining
    Weighted
    
    
    Remaining
    WeightedExercise
    
    Contractual
    Average
    Exercise
    
    Contractual
    AveragePrice
    
    Life
    Exercise
    Price
    
    Life
    ExerciseRange
    Number
    (In
      Years)
      Price
    Range
    Number
    (In
      Years)
    Price$0.10
    6,000,000
    3.18
    $0.10
    $ 0.50
    2,550,000
    0.80
      $0.50$ 0.11
    5,500,000
    6.16
    $0.11
    $1.58
    866,142
    4.80
    $1.5811,500,000
    
    $0.10
    $2.50
    50,000
    1.02
      $2.503,466,142
    
    $0.80


10

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NOTE7COMMITMENTS ANDCONTINGENCIES

Consulting Agreement

On September 15, 2005, the Company entered into a consulting
agreement with an attorney who is the son of the Companys President and Chief
Executive Officer. Terms of the contract provide for compensation of $4,000 per
month and payment of certain expenses for an initial three-month period, after
which the contract extends on a month-to-month basis until terminated by either
party. On November 28, 2005, the contract was extended and the consultant was
awarded 50,000 shares of the Companys restricted common stock at a value of
$25,000. On May 2, 2006, the contracted was terminated and replaced with full
time employment at a salary of $5,000 per month. In connection with full-time
employment, the Company granted 50,000 options under its stock option plan at an
exercise price of $1.24 per share, the closing price on May 2, 2006.

NOTE8SUBSEQUENTEVENTS

Summit Silver-Gold Project

On May 4, 2006, for a cash price of $1,300,000, the Company
acquired 100% of the shares of The Lordsburg Mining Company, a New Mexico
corporation, from Imagin Minerals Inc., a privately owned industrial minerals
company. The major assets of The Lordsburg Mining Company include the Summit
mining property consisting of approximately 117 acres of patented mining claims
and 600 acres of unpatented mining claims in the Steeple Rock Mining District,
Grant County, southwestern New Mexico; the Lordsburg mill site property, located
approximately 60 miles south of the Summit property, consisting of approximately
257 acres of patented mining claims near Lordsburg, Hidalgo County, New Mexico;
mining and operating permits related to the Summit mining property and the
Lordsburg mill site property; and mineral processing equipment consisting of a
ball mill and 400 ton-per-day flotation plant, stored at Winston, Sierra County,
New Mexico. The Summit property is subject to underlying net smelter return
royalties capped at $4,000,000 and to a net proceeds interest on sales of
unbeneficiated mineralized rock with an end price of $2,400,000. The Company
holds The Lordsburg Mining Company as a wholly owned subsidiary. The Summit
acquisition is subject to a property identification agreement between the
Company and its President and Chief Executive Officer.

Issuance of Equity

Subsequent to March 31, 2006, the Company issued 44,303 shares
of common stock aggregating $50,000 pursuant to a debt conversion agreement with
iCapital. The obligation was paid in full in May 2006.

11

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ITEM2MANAGEMENTSDISCUSSION ANDANALYSIS ANDPLAN OFOPERATION

THIS FORM 10-QSB MAY CONTAIN CERTAIN FORWARD-LOOKING
STATEMENTS AS SUCH TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995 AND BY THE SECURITIES AND EXCHANGE COMMISSION IN ITS RULES,
REGULATIONS AND RELEASES, WHICH REPRESENT THE REGISTRANTS EXPECTATIONS OR
BELIEFS, INCLUDING BUT NOT LIMITED TO, STATEMENTS CONCERNING THE REGISTRANTS
OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL CONDITION, GROWTH AND ACQUISITION
STRATEGIES, INVESTMENTS, AND FUTURE OPERATIONAL PLANS. FOR THIS PURPOSE, ANY
STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE
DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, WORDS SUCH AS MAY, WILL, EXPECT, BELIEVE, ANTICIPATE,
INTENT, COULD, ESTIMATE, MIGHT, PLAN, PREDICT OR CONTINUE OR THE
NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE
SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE
REGISTRANTS CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A
VARIETY OF IMPORTANT FACTORS, INCLUDING UNCERTAINTY RELATED TO ACQUISITIONS,
GOVERNMENTAL REGULATION, MANAGING AND MAINTAINING GROWTH, THE OPERATIONS OF THE
COMPANY AND ITS SUBSIDIARIES, VOLATILITY OF STOCK PRICE AND ANY OTHER FACTORS
DISCUSSED IN THIS AND OTHER REGISTRANT FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE COMPANY DOES NOT INTEND TO UNDERTAKE TO UPDATE THE INFORMATION
IN THIS FORM 10-QSB IF ANY FORWARD-LOOKING STATEMENT LATER TURNS OUT TO BE
INACCURATE. THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
PRESENTED IN THE COMPANYS ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED JUNE
30, 2005.

GENERAL

Azco Mining Inc. is a U.S. mining company, incorporated in
August 1991 in the state of Delaware, with a general business strategy to
acquire and develop mining properties amenable to low cost production. The
Company is currently focused on financing efforts to: (1) fund the re-opening
and enhancement of its Black Canyon mica project located in Arizona, and (2)
acquire high quality gold, silver and/or copper properties.

CHANGESINCRITICALACCOUNTING
  ESTIMATES

The preparation of the consolidated financial statements in
conformity with United States generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amount 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. Management routinely makes judgments and estimates about the effects
of matters that are inherently uncertain. Note 2, Significant Accounting
Policies in the Notes to the Consolidated Financial Statements in the Companys
Form 10-KSB for the year ended June 30, 2005, describes the Companys
significant accounting policies which are reviewed by management on a regular
basis.

The Companys critical accounting estimates are those where the
Companys has made the most difficult, subjective or complex judgments in making
estimates, and/or where these estimates can significantly impact the financial
results under different assumptions and conditions. The critical accounting
estimates are:

12

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Derivative Financial Instruments - In connection with the
issuance of debt or equity instruments, the Company may issue options or
warrants to purchase the Companys common stock. In certain circumstances, these
options or warrants may be classified as derivative liabilities, rather than as
equity. Additionally, the debt or equity instruments may contain embedded
derivative instruments, such as conversion options, which in certain
circumstances may be required to be bifurcated from the associated host
instrument and accounted for separately as a derivative instrument liability.

The identification of, and accounting for, derivative instruments
  is complex. The derivative instrument liabilities are re-valued at the end of
  each reporting period, with changes in the fair value of the derivative liability
  recorded as charges or credits to income, in the period in which the changes
  occur. For warrants that are accounted for as derivative instrument liability,
  the determination of the fair value of these warrants using the Black-Scholes
  option-pricing model. That model requires assumptions related to the remaining
  term of the instruments and risk-free rates of return, the Companys current
  common stock price and expected dividend yield, and the expected volatility
  of the common stock price over the life of the warrants. The identification
  of, and accounting for, derivative instruments and the assumptions used to value
  them can significantly affect the financial statements.

RESULTS OFOPERATIONS

Operating Results for the Three Months Ended March 31, 2006
and 2005

Sales

Sales decreased $23,926 for the quarter ended March 31, 2006,
to $1,205 as compared to $25,131 for the quarter ended March 31, 2005. The
decrease in sales is a result of reduced sales of mica-filled plastic pellets.
The mica sold was sourced from inventory. The Company is not actively marketing
the mica pellets.

Operating Costs and Expenses

Mine related costs increased in the quarter ended March 31,
2006, to $41,427 from $32,238 for the comparable quarter ended in 2005, or an
increase of $9,189. This increase in the current quarter is attributable to
consulting work on the Ortiz mine site amounting to $15,460 and increased mine
site lease payments aggregating $8,893 and these increases were offset by a
decrease in property taxes of $15,267.

General and administrative increased to $273,403 for the
quarter ended March 31, 2006, from $257,387 for the comparative quarter ended
March 31, 2005, an increase of $16,016. This increase in the current quarter was
is mainly attributable to increased costs in the areas of consulting and
investor relations of $24,000, payroll and payroll taxes of $6,981, per diem of
$3,000 and financing costs of $13,000. These increases were offset by decreases
in audit and accounting fees aggregating $14,321 and decreased travel amounting
to $10,565.

General and administrative stock compensation increased to
$444,362 for the quarter ended March 31, 2006, from $75,979 for the comparative
quarter ended March 31, 2005, an increase of $368,383. This increase is
attributable to stock compensation for consulting services in the area of
investor relations to unrelated parties incurred in the current quarter.

Other Income and Expenses

Other income and expenses for the quarter ended March 31, 2006
were $275,888 as compared to $(10,062) for the comparable quarter ended March
31, 2005. The decrease in other expenses incurred in the current quarter of
$285,950 is mainly attributable to the reduction in the recognized gain on sale
of assets aggregating $40,000 and is offset by a decrease in accretion of
discounts on notes payable and lease liability and interest expense aggregating
$16,642 and an increased non-cash gain on derivative instrument liabilities of
$307,205.

13

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Gain (loss) on Derivative Financial
Instruments

The Company recognized a gain on derivative financial
instruments $356,829 for the quarter ended March 31, 2006, as compared to a gain
of $49,624 for the prior year comparable period. These non-cash gains arise from
adjustments to record the derivative financial instruments at fair values in
accordance with current accounting standards. The derivative financial
instruments arose in connection with a financing lease and convertible
debentures. Otherwise, the Company generally does not use derivative financial
instruments for other purposes, such as hedging cash-flow or fair-value risks.
The Company uses the Black-Scholes model to estimate the fair value of this
derivative. Because Black-Scholes uses the Companys stock price, changes in the
stock price will result in volatility in the earnings in future periods as the
Company continues to reflect the derivative financial instruments at fair
values.

Operating Results for the Nine Months Ended March 31, 2006
and 2005

Sales

Sales decreased $46,454 for the nine months ended March 31,
2006, to $7,100 as compared to $53,554 for the nine months ended March 31, 2005.
The decrease in sales is a result of reduced sales of mica-filled plastic
pellets as the Company is not actively marketing the product. The mica sold was
sourced from inventory. The Company continues sell inventoried mica into the
cosmetic and reinforced plastic industries, while it seeks financing to resume
production.

Operating Costs and Expenses

Mine related costs increased in the nine months ended March 31,
2006, to $137,877 from $103,897 for the comparable nine months ended in 2005, or
an increase of $33,980. This increase in the current nine month period is mainly
attributable to consulting work performed on the Ortiz mine site amounting to
$80,460 and increased mine lease payments aggregating $11,367 and was offset by
a decreases in property taxes of $44,919 and decreases aggregating $6,506 in
general mining costs.

General and administrative increased to $841,356 for the nine
  months ended March 31, 2006, from $781,496 for the comparative nine month period
  ended March 31, 2005, an increase of $59,860. This increase in the current nine-month
  period was mainly attributable to increases in salaries and payroll taxes aggregating
  $17,151, consulting, investor relations and financing costs aggregating $83,357,
  legal fees of $8,688 and director and officer insurance of $12,625. These increases
  were offset by decreases in auditing and accounting fees aggregating $63,927.

General and administrative stock compensation increased to
$1,802,141 for the nine months ended March 31, 2006, from $221,711 for the
comparative nine-month period ended March 31, 2005, an increase of $1,580,430.
The increase in the current nine-month period is mainly attributable an
aggregate of $850,000 stock compensation recognized on the conversion of accrued
interest and wages to the chairman of the board of directors and to the
President and CEO and the reacquisition of the New Planet Copper Mining Company,
and the balance of the increase attributable to increased stock compensation to
consultants for the Company mainly in the area of investor relations and
marketing services.

Other Income and Expenses

Other income and expenses for the nine months ended March 31,
2006, were $(990,347) as compared to $(124,319) for the comparable nine-month
period ended March 31, 2005. The increase in other expenses incurred in the
current nine-month period of $866,028 is mainly attributable to an increase in
the gain on conversion of debt and relief of debt aggregating $139,784 and a
decrease in discounts on notes payable and interest expense aggregating $20,446
and is offset by the decrease in the gain on the sale of assets aggregating
$68,217 and an increase in the non-cash loss on derivative instruments liability
of $961,621.

14

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Gain (loss) on Derivative Financial
Instruments

The Company recognized a loss on derivative financial
instruments $(874,026) for the nine months ended March 31, 2006, as compared to
a gain of $87,595 for the comparable prior year period. This non-cash loss and
gain arises from adjustments to record the derivative financial instruments at
fair values in accordance with current accounting standards. The derivative
financial instruments arose in connection with a financing lease and convertible
debentures. Otherwise, the Company generally does not use derivative financial
instruments for other purposes, such as hedging cash-flow or fair-value risks.
The Company uses the Black-Scholes model to estimate the fair value of this
derivative. Because Black-Scholes uses the Companys stock price, changes in the
stock price will result in volatility in the earnings in future periods as the
Company continues to reflect the derivative financial instruments at fair
values.

PLAN OFOPERATIONS

Liquidity and Capital Resources

To continue with the deployment of the Companys business
strategies, will require significant additional working capital. The Company
also will require additional working capital funds for continuing payments for
necessary corporate personnel, related general and administrative expenses.

As of March 31, 2006, the Company had cash-on-hand of
$2,650,353, a working capital deficit of $3,373,457 and an accumulated deficit
of $41,731,265. The improved cash position and working capital at March 31,
2006, is a direct result of the Company completing a convertible debenture debt
facility on March 21, 2006.

The Company currently is pursuing a joint venture or sale of
the mica operation. Management has determined that in the long run it would be
significantly more beneficial for the Company to deploy its resources in the
area of precious metals based upon the current and projected market trends in
this area.

The Company intends to seek to have the Companys securities
quoted on the OTC Bulletin Board in 2006, which may provide a better ability to
attract investors. We are in process of completing the Securities Act filings to
facilitate this process.

The Company can make no assurance, however, that the Company
will be able to have access to the capital markets in the future, or that the
financing will be available on terms acceptable to satisfy the Companys
anticipated cash requirements for operations. The Companys inability to access
various capital markets or acceptable financing could have a material effect on
the results of operations and deployment of the Companys business strategies
and severely threaten the Companys ability to operate as a going concern.

Factors Affecting Future Operating Results

Management has developed a plan to place the Company on an
improved financial footing. Important elements of the plan include becoming
compliant in the filing of the Companys annual and quarterly financial
statements, the continuing of raising of interim funding to provide for
deployment of operations on the Companys various property sites and
restructuring of debt with secured creditors. An important priority has been to
bring the financial reports current. The Company completed a debt facility on
March 21, 2006, to provide for interim financing of the Companys activities and
initial deployment of the Companys business strategies. The Company has
received verbal, non-binding expressions of interest for a larger project
financing once the Company becomes compliant in the filing of its financial
statements and its stock resumes trading on the Over the Counter Bulletin Board.
The Company is continuing discussions with secured creditors concerning
restructuring of debt and believes such restructuring may be possible in
conjunction with a major project financing if such financing can be
arranged.

15

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Off-Balance Sheet Arrangements

During the three months ended March 31, 2006, the Company did
not engage in any off-balance sheet arrangements as defined in Item 303(c) of
the SECs Regulation S-B.

ITEM3CONTROLS
  ANDPROCEDURES

The Companys Chief Executive Officer and also the Chief
Financial Officer have evaluated the Registrants disclosure controls and
procedures within 90 days of the filing date of this quarterly report. Based
upon this evaluation, the Companys Chief Executive Officer and Chief Financial
Officer have concluded that the Companys disclosure controls and procedures
pursuant to Exchange Act Rules 13a-15 and 15d-15 as of the end of the period
covered by this report are effective in ensuring that material information
required to be disclosed is included in the reports that it files with the
Securities and Exchange Commission and were timely recorded, processed and
reported within the time periods specified in the Securities and Exchange
commission rules and forms.

There were no significant changes in the Companys internal
controls or, to the knowledge of the management of the Company, in other factors
that could significantly affect these controls subsequent to the evaluation
date.

PARTIIOTHERINFORMATION

ITEM2.          
UNREGISTEREDSALE ANDOTHERDISTRIBUTIONS OFEQUITYSECURITIES ANDUSE OFPROCEEDS

During the quarter ended March 31, 2006, the Company sold
165,000 shares of restricted common stock at $0.45 - $0.70 per share for
aggregate proceeds of $111,750.

During the quarter ended March 31, 2006, the Company issued
405,000 shares of restricted common stock for services with an aggregate market
value of $568,250 on the date of the transactions.

During the quarter ended March 31, 2006, the Company issued
58,908 shares of restricted common stock at a market value on the date of the
transaction of $75,000 for payment on an accrued settlement obligation.

On March 15, 2006, the Company issued 300,000 shares of
restricted common stock for the exercise of warrants at $0.70 per share to a
related party in exchange for payment of accrued interest owed on a note payable
amounting to $160,000 at the time of the exercise and a reduction of principal
on the note payable of $50,000.

The Company is utilizing the proceeds from the sale of
restricted common stock for general working capital purposes.

ITEM4.          
  SUBMISSION OFMATTERS TO AVOTE OFSECURITYHOLDERS

None.

16

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ITEM6.          
EXHIBITS

(a) The following exhibits are filed as
part of this report:

|31.1 | Certification of Chief Executive
        officer and Chief accounting Officer of Periodic Report pursuant to Rule
        13a-14a and Rule 15d-14(a).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                      
|32.1 | Certification of Chief Executive
        officer and Chief accounting Officer pursuant to 18 U.S.C.  Section
        1350.                          

SIGNATURES

In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

|Dated: August 9, 2006 | **AZCO MINING INC,**                              
|--------------------- | --------------------------------------------------
|                      |                                                   
|                      | By:     /s/ Pierce
      Carson                   
|                      | Pierce
      Carson                               
|                      | Chief
      Executive Officer, President, Director
|                      | and
      Principal Accounting Officer            

17

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