---

**UNITED STATES
   SECURITIES 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 **DECEMBER 31, 2005**

[   ] 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

---

AZCOMININGINC.
INDEX TOFORM10-QSBFILINGFOR THEQUARTERENDEDDECEMBER31,2005

TABLE OFCONTENTS

PART IFINANCIALINFORMATION

**Page**Item 1.
      Financial Statements
      2Consolidated Balance Sheet, December 31, 2005 (Unaudited)
      2Consolidated Statements of Operations For the Three and Six
        Months Ended December 31, 2005 (Unaudited) and 2004 (Unaudited)
      3Consolidated Statements of Cash Flows For the Six Months
        Ended December 31, 2005 (Unaudited) and 2004 (Unaudited)
      4Notes to the Consolidated Financial Statements (Unaudited)
      5Item 2.
      Managements Discussion and Analysis and Plan of Operations
      10Item 3.
      Controls and Procedures .
      14**PART II****OTHER INFORMATION**Item 2.
      Changes in Securities and Use of Proceeds
      15Item 4.
      Submission of Matters to a Vote of Security Holders
      15Item 6.
      Exhibits
      16SIGNATURES
      16CERTIFICATIONS
      17


1

---

PARTIFINANCIALINFORMATION

ITEM1. FINANCIALSTATEMENTS

AZCOMININGINC. CONSOLIDATEDBALANCESHEETDECEMBER31,2005(UNAUDITED)

|ASSETS                                                  |  
|------------------------------------------------------- | -
|CURRENT ASSETS:                                         |  
|Cash and
      cash equivalents                         | $
|Prepaid expenses                                        |  
|Total Current Assets                                    |  
|CAPITAL ASSETS:                                         |  
|Land                                                    |  
|Building, net                                           |  
|                                                        |  
|OTHER ASSETS:                                           |  
|Idle
      plant and equipment, net                     |  
|Restricted cash                                         |  
|                                                        |  
|                                                        |  
|                                                        | $
|                                                        |  
|LIABILITIES AND
      STOCKHOLDERS (DEFICIT)           |  
|CURRENT LIABILITIES:                                    |  
|Accounts
      payable and accrued liabilities          | $
|Accrued interest payable
       related party          |  
|Line of
      credit                                    |  
|Accrued lease payments
      payable                    |  
|Accrued
      settlement obligations                    |  
|Derivative instrument
      liability                   |  
|Total Current Liabilities                               |  
|                                                        |  
|LONG TERM LIABILITIES:                                  |  
|Financing lease payable                                 |  
|Note payable,
      related party                       |  
|Asset retirement obligation                             |  
|Total Liabilities                                       |  
|                                                        |  
|                                                        |  
|STOCKHOLDERS (DEFICIT):                                |  
|Common stock,
      $.002 par value, 100,000,000 shares |  
|authorized and 62,990,501 shares issued and outstanding |  
|Additional paid
      in capital                        |  
|Deferred stock compensation                             |  
|Accumulated
      (deficit)                             |  
|Total Stockholders (Deficit)                           |  
|                                                        |  
|                                                        | $

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

2

---

AZCOMININGINC. CONSOLIDATEDSTATEMENTS OFOPERATIONS(UNAUDITED)

|                                                                  |   | Three Months Ended |   |   | Six Months Ended |  
|----------------------------------------------------------------- | - | ------------------ | - | - | ---------------- | -
|                                                                  |   | December 31,       |   |   | December 31,     |  
|                                                                  |   | 2005               |   |   | 2004             |  
|                                                                  |   |                    |   |   |                  |  
|SALES                                                             | $ | 5,500              |   | $ | 2,437            |  
|                                                                  |   |                    |   |   |                  |  
|OPERATING COSTS AND EXPENSES:                                     |   |                    |   |   |                  |  
|Mine related costs                                                |   | 85,368             |   |   | 34,944           |  
|General and administrative                                        |   | 311,370            |   |   | 265,623          |  
|General and
      administrative - stock compensation             |   | 340,283            |   |   | 8,480            |  
|Depreciation and amortization                                     |   | 6,171              |   |   | 5,770            |  
|Accretion of asset
      retirement obligation                    |   | 1,250              |   |   | 1,250            |  
|                                                                  |   | 744,442            |   |   | 316,067          |  
|                                                                  |   |                    |   |   |                  |  
|(LOSS) FROM OPERATIONS                                            |   | (738,942           | ) |   | (313,630         | )
|                                                                  |   |                    |   |   |                  |  
|OTHER INCOME (EXPENSES):                                          |   |                    |   |   |                  |  
|Gain on sale of
      assets                                      |   | 750                |   |   | --               |  
|Foreign currency exchange adjustment                              |   | 127                |   |   | (999             | )
|(Loss) gain on
      derivative instrument liability              |   | (1,009,440         | ) |   | 49,631           |  
|Interest income                                                   |   | 1,005              |   |   | 548              |  
|Relief of debt                                                    |   | 38,389             |   |   | --               |  
|Gain on conversion of debt                                        |   | 119,667            |   |   | 18,272           |  
|Accretion of
      discounts on notes payable and lease liability |   | (56,694            | ) |   | (52,027          | )
|Interest expense                                                  |   | (40,517            | ) |   | (47,727          | )
|Total
      Other (Expense)                                       |   | (946,713           | ) |   | (32,302          | )
|                                                                  |   |                    |   |   |                  |  
|(LOSS) BEFORE PROVISION FOR INCOME TAXES                          |   | (1,685,655         | ) |   | (345,932         | )
|                                                                  |   |                    |   |   |                  |  
|PROVISION FOR INCOME TAXES                                        |   | --                 |   |   | --               |  
|                                                                  |   |                    |   |   |                  |  
|NET (LOSS)                                                        | $ | (1,685,655         | ) | $ | (345,932         | )
|                                                                  |   |                    |   |   |                  |  
|                                                                  |   |                    |   |   |                  |  
|Basic and Diluted (Loss) Per
      Common Share                   | $ | (0.03              | ) | $ | (0.01            | )
|                                                                  |   |                    |   |   |                  |  
|Basic and Diluted Weighted
      Average Number                   |   |                    |   |   |                  |  
|of Common
      Shares Outstanding                                |   | 61,084,086         |   |   | 47,907,405       |  

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

3

---

AZCOMININGINC. CONSOLIDATEDSTATEMENTS OFCASHFLOWS(UNAUDITED)

|                                                                |   | Six Months Ended December
      31, |  
|--------------------------------------------------------------- | - | ----------------------------------- | -
|                                                                |   | 2005                                |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                           |   |                                     |  
|Net (loss)                                                      | $ | (3,297,363                          | )
|                                                                |   |                                     |  
|Adjustments to reconcile
      net (loss) to net cash (used in) |   |                                     |  
|operating
      activities:                                     |   |                                     |  
|Depreciation and amortization                                   |   | 12,341                              |  
|Stock compensation                                              |   | 1,357,779                           |  
|Accretion of asset retirement obligation                        |   | 2,500                               |  
|Amortization of debt discount                                   |   | 112,183                             |  
|(Gain) on sale of equipment                                     |   | (750                                | )
|Relief of debt                                                  |   | (38,389                             | )
|(Gain) on conversion of debt                                    |   | (119,667                            | )
|Foreign exchange currency rate adjustments                      |   | 1,425                               |  
|Loss
      (gain)on derivative instrument liability             |   | 1,230,855                           |  
|Net changes in operating assets and liabilities:                |   |                                     |  
|Accounts receivable                                             |   | --                                  |  
|Prepaid expenses                                                |   | (4,427                              | )
|Accounts payable and accrued liabilities                        |   | 42,515                              |  
|Accrued interest payable 
      related parties                |   | 70,667                              |  
|Accrued lease payments payable                                  |   | 270,000                             |  
|Net Cash (Used in) Operating Activities                         |   | (360,331                            | )
|                                                                |   |                                     |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                           |   |                                     |  
|Proceeds from sale of
      property and equipment              |   | 750                                 |  
|Capital
      asset addition                                    |   | --                                  |  
|Net Cash Provided by Investing
      Activities:                |   | 750                                 |  
|                                                                |   |                                     |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                           |   |                                     |  
|Proceeds
      from sale of common stock                        |   | 921,491                             |  
|Net Cash Provided by Financing
      Activities                 |   | 921,491                             |  
|                                                                |   |                                     |  
|INCREASE IN CASH AND CASH EQUIVALENTS                           |   | 561,910                             |  
|                                                                |   |                                     |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                  |   | 20,101                              |  
|                                                                |   |                                     |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                        | $ | 582,011                             |  

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

4

---

AZCOMININGINC.NOTES TO THECONSOLIDATEDFINANCIALSTATEMENTSDECEMBER31,2005(UNAUDITED)

NOTE1 - NATURE OFBUSINESS
  ANDBASIS 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.

Azco 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 six-month period ended December 31, 2005, 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- SUMMARY OFSIGNIFICANTACCOUNTINGPOLICIES

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

---

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-DERIVATIVEINSTRUMENTLIABILITY

The Company uses the Black-Scholes option-pricing model to
value options and warrants, and the embedded conversion option components of any
bifurcated embedded derivative instruments that are recorded as derivative
liabilities.

The warrant derivative liability associated with the financing
lease, at the time it was issued, January 16, 2002, was determined to be
$1,093,898 and at June 30, 2005, to be $81,057. The fair value of the warrant
derivative liability at September 30, 2005, was determined to be $302,472 using
the following assumptions, expected dividend yield of zero, expected stock price
volatility of 106.8%, risk free interest of 4.18% and remaining contractual life
of 1.3 years. The fair value of the derivative liability at December 31, 2005,
was determined to be $1,311,912 using the following assumptions, expected
dividend yield of zero, expected stock price volatility of 108.44%, risk free
interest of 4.38% and remaining contractual life of 1.04 years. Based upon this
change in fair value, the Company has recorded a non-cash loss on derivative
instrument liability during the quarter ended December 31, 2005, of $1,009,440
and a corresponding increase in the derivative instrument liability.

6

---

NOTE4-STOCKHOLDERS(DEFICIT)

Issuances of Common Stock

During the quarter ended September 30, 2005, the Company sold
3,938,245 shares of common stock at $0.10 - $0.20 per share for total cash
proceeds of $435,491.

At June 30, 2005 the Company had recorded $105,205 of deferred
stock compensation. During the three and six months ended December 31, 2005,
$39,479 and $99,625 was expensed, respectively, as general and administrative
stock compensation and the balance of $5,625 is in deferred stock
compensation.

During the quarter ended September 30, 2005, the Company issued
1,130,000 shares of common stock for investor relations and marketing services
to be provided over a period of three months, for an aggregate market value of
$214,700 which has been recorded as general and administrative stock
compensation.

On September 22, 2005, the Company issued 1,500,000 shares of
restricted common stock with an aggregate value of $450,000, based on the fair
market value on the transaction date. The total reduction of accrued wages and
interest amounted to $200,000 and the balance of $250,000 has been recorded as
general and administrative stock compensation expense.

On September 22, 2005, the Company issued 2,000,000 shares of
restricted 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 sold
1,902,333 shares of common stock at $0.15 - $0.45 per share for cash proceeds of
$486,000.

During the quarter ended December 31, 2005, the Company issued
760,000 shares of common stock for investor relations and marketing services
with an aggregate market value on the date of the transactions of $424,600 for
services to be rendered over a three to six month period. At December 31, 2005,
$231,146 was classified as deferred stock compensation and the balance of
$193,454 has been recorded as general and administrative stock compensation
expense.

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

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.

Stock Option and Warrants

The fair value of option grants during the six months ended
December 31, 2004 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 2.5 %, and a zero percent (0%) dividend yield. Transactions in
equity instruments with non-employees for goods and services are accounted for
by the fair value method. The proforma stock based compensation presented below
is comprised $210,000 recognized on the options granted in the six month period
ended December 31, 2004 and $51,041 recognized on option grants on October 7,
2003, that became vested in the period ended December 31, 2004.

7

---

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

|                                                                     |   | Six Months Ended December 31, |  
|-------------------------------------------------------------------- | - | ----------------------------- | -
|                                                                     |   | 2005                          |  
|                                                                     |   | (Unaudited)                   |  
|                                                                     |   |                               |  
|Net (loss), as reported                                              | $ | (3,297,363                    | )
|                                                                     |   |                               |  
|Deduct  stock-based compensation expense
      determined under the |   |                               |  
|fair value method, net of
      tax effect                           |   | --                            |  
|                                                                     |   |                               |  
|Pro forma net (loss)                                                 | $ | (3,297,363                    | )
|                                                                     |   |                               |  
|(Loss) per share:                                                    |   |                               |  
|Net
      (loss) per share, as reported                              | $ | (0.06                         | )
|                                                                     |   |                               |  
|Net
      (loss) per share, pro forma                                | $ | (0.06                         | )

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
  December 31, 2005. These options are exercisable at $0.10 and $0.11 per common
  share at varying dates through October 2013.

Warrants to purchase 2,900,000 of the Companys common stock
were outstanding at December 31, 2005. These warrants are exercisable between
$0.50 and $2.50 per common share at varying dates through April 2007.

Stock option and warrant activities for the six months ended
December 31, 2005, 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 December 31,
      2005 |  | 11,500,000    |  |  | $0.10          | 

Stock options and warrants exercisable at December 31, 2005,
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
    
    3.43
    
    $0.10
    
      $0.70
    
    300,000
    
    .20
    
    $0.70$0.11
    
    5,500,000
    
    6.40
    
    $0.11
    
      $0.50
    
    2,550,000
    
    1.04
    
    $0.50


8

---

11,500,000
    
    
    
      $0.10
    
      $2.50
    
    50,000
    
    1.26
    
      $2.502,900,000
    
    
    
      $0.56


NOTE5-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 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.

NOTE6-SUBSEQUENTEVENTS

Placement of Senior Secured Convertible Note

On March 21, 2006, Azco 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. Azco
received net proceeds of approximately $2,270,000 after deducting fees and
expenses. 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. Azco may pay principal and accrued interest in cash or, at Azco's option,
in shares of its common stock. The holder of each convertible note, at the
holders option, may convert the note into Azcos common stock at a conversion
price of $1.58 per share. Azco 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.
Azco also issued warrants to the note holders, giving the right for a period of
5 years to purchase in the aggregate 791,139 shares of Azco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 75,000 warrants exercisable at $1.58 per share. In
connection with the transaction, Azco 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 registration statement requirement is currently in default.

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.

9

---

Issuance of Equity

Subsequent to December 31, 2005 the Company issued 103,211
shares of common stock aggregating $125,000 pursuant to a debt conversion
agreement with iCapital.

Subsequent to December 31, 2005 the Company sold 165,000 shares
of common stock for total cash proceeds of $111,750.

Subsequent to December 31, 2005 , the Company issued in the
aggregate 405,000 shares of common stock with an aggregate market value on the
transaction dates of $568,250 to unrelated parties pursuant to consulting and
service agreements.

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 for $800,000, aggregating
$210,000.

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. Azco 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.

10

---

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:

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 December 31,
2005 and 2004

Sales

Sales increased $3,063 for the quarter ended December 31, 2005,
to $5,500 as compared to $2,437 for the quarter ended December 31, 2004. The
increase in sales is a result of increased 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 December 31,
2005, to $85,368 from $34,944 for the comparable quarter ended in 2004, or an
increase of $50,424. This increase in the current quarter is attributable to
consulting work performed on the Ortiz mine site amounting to $65,000 and was
offset by a decrease in property taxes of $14,791.

General and administrative increased to $311,370 for the quarter
  ended December 31, 2005, from $265,623 for the comparative quarter ended December
  31, 2004, an increase of $45,747. This increase in the current quarter is mainly
  attributable to increased costs in the areas of investor relations of $25,620,
  director and officer insurance of $3,125, consulting fees of $16,847, office
  operating costs of $5,423, payroll taxes of $4,905 and financing costs of $13,000
  These increases were offset by decreases in audit and accounting fees aggregating
  $24,575.

11



---

General and administrative stock compensation increased to
$340,283 for the quarter ended December 31, 2005, from $8,480 for the
comparative quarter ended December 31, 2004, an increase of $331,803. This
increase is attributable to stock compensation for consulting services to three
unrelated parties incurred in the current quarter in the areas of investor
relations.

Other Income and Expenses

Other income and expenses for the quarter ended December 31,
2005, were $(946,713) as compared to $(32,302) for the comparable period ended
December 31, 2004. The increase in other expenses incurred in the current period
of $914,411 is mainly attributable to an increase of recognized gain on the
conversion of debt and relief of debt aggregating $139,784 over the comparable
period, and an offsetting increase of a non-cash loss on derivative instrument
liability of $1,059,071 over the prior year comparable period.

Gain (loss) on Derivative Financial Instruments

Company recognized a loss on derivative financial instruments
of $(1,009,440) for the quarter ended December 31, 2005, as compared to a gain
of $49,631 for the comparable prior year period. This loss and gain arise from
adjustments to record Company derivative financial instruments at fair values in
accordance with current accounting standards. Company derivative financial
instruments arose in connection with a financing lease. Otherwise, Company
generally does not use derivative financial instruments for other purposes, such
as hedging cash flow or fair-value risks. Company uses the Black-Scholes model
to estimate the fair value of this derivative. Because Black-Scholes uses
Company stock price, changes in Company stock price will result in volatility in
Company earnings in future periods as Company continue to reflect Company
derivative financial instruments at fair values.

Operating Results for the Six Months Ended December 31, 2005
and 2004

Sales

Sales decreased $22,528 for the six months ended December 31,
2005, to $5,895 as compared to $28,423 for the six months ended December 31,
2004. 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 six months ended December
31, 2005, to $96,450 from $71,659 for the comparable six month period ended in
2004, or an increase of $24,791. This increase in the current six month period
is mainly attributable to consulting work performed on the Ortiz mine site
amounting to $65,000 and was offset by a decreases in property taxes of $29,582
and decreases aggregating $14,102 in general mining costs and mine lease
payments.

General and administrative increased to $567,953 for the six
months ended December 31, 2005, from $524,109 for the comparative six months
ended December 31, 2004, an increase of $43,844. This increase in the current
six-month period is mainly attributable to increases in salaries and payroll
taxes aggregating $10,170, consulting, investor relations and financing costs
aggregating $59,357, 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 $49,606.

12

---

General and administrative stock compensation increased to
$1,357,779 for the six months ended December 31, 2005, from $145,732 for the
comparative six month period ended December 31, 2004, an increase of $1,212,047.
The increase in the six 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 increased stock
compensation to consultants for the Company mainly in the area of investor
relations.

Other Income and Expenses

Other income and expenses for the six months ended December 31,
2005, were $(1,266,235) as compared to $(114,257) for the comparable six-month
period ended December 31, 2004. The increase in other expenses incurred in the
current six-month period of $1,151,978 is mainly attributable to an increase in
the gain on conversion of debt and relief of debt aggregating $139,784 and is
offset mainly by a decrease in the gain on the sale of assets aggregating
$28,217 and increase in a non-cash loss on a derivative instrument liability of
$1,268,246.

Gain (loss) on Derivative Financial Instruments

We recognized a loss on derivative financial instruments
$(1,230,855) for the six months ended December 31, 2005, and a gain in the
comparable prior year period of $37,391. This loss and gain 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. Otherwise, we generally
do not use derivative financial instruments for other purposes, such as hedging
cash flow or fair-value risks. We use the Black-Scholes model to estimate the
fair value of this derivative. Because Black-Scholes uses the Company stock
price, changes in the stock price will result in volatility in the earnings in
future periods as we continue to reflect the derivative financial instruments at
fair values.

PLAN OFOPERATIONS

Liquidity and Capital Resources

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

As of December 31, 2005, we had cash-on-hand of $582,011, a
negative working capital of $3,507,896 and an accumulated deficit of
$41,241,746.

Azco is continuing to seek funding for its mica project. The
Company anticipates financing these efforts during fiscal 2006 with minimal
proceeds of the sale of mica-filled plastic pellets and mica powder, including
cosmetic grade mica and from the sale of unused equipment. In addition, the
Company intends to obtain interim funding during fiscal 2006 by the sale of
unregistered common stock to accredited investors. To the extent that additional
capital is raised through the sale of equity or equity related securities, the
issuance of such securities could result in the dilution of our current
shareholders.

If and when financing is procured and production resumes, the
  Company expects that it will require a minimum of 12 months lead time in order
  for it to introduce its mica and feldspathic sand products into the markets
  and to build a customer base necessary for sustained sales and profitable operation.
  Although the Company anticipates being able to sell dual products of mica and
  feldspathic sand, it has not yet sold significant quantities of these products
  and has not entered into sales contracts. There are numerous factors beyond
  the Companys control that could affect markets for both mica and feldspathic
  sand. The profitability of the Companys operations could be adversely
  affected if it does not achieve the selling prices or sales volumes currently
  targeted for its products.

13

---

During the remainder of the Companys current fiscal year,
  the Company will continue concentrate on raising the necessary working capital
  through equity financing and acceptable debt facilities to insure the Companys
  ability to implement its business strategies. We intend 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 Companys Securities Act filings to facilitate this process.

We can make no assurance, however, that we 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 business strategies and severely threaten the
Companys ability to operate as a going concern.

Factors Affecting Future Operating Results

In an effort to bring the mica project to commercial
production, fund the Companys corporate commitments and initiate an exploration
program, Azco anticipates the need for at least $5.7 million of additional
financing during the next 36 months, in order to fund the following anticipated
uses:

Mica project operating losses
    $
    1,200,000Mica project capital expenditures
    
    2,800,000Corporate overhead and
      related expenses
    
    1,200,000Exploration program
    
    500,000Total funds required
    $
    5,700,000


This projection assumes that the Company will be able to
restructure its current debt and lease commitments whereby interest, principal
and lease payments will be paid from future mica project revenues or with equity
components.

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, raising of interim funding to provide for corporate survival,
restructuring of debt with secured creditors and arrangement of funding of $4.0
-$6.0 million. An important priority has been to bring the financial reports
current. We anticipate providing for interim financing of the Companys
activities by selling mica, on a limited basis, to key customers in the plastics
and cosmetic industries. We have 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. We will continue discussions with secured creditors
concerning restructuring of debt and believe such restructuring may be possible
in conjunction with a major project financing if such financing can be
arranged.

If we are unable to procure such additional funding, the
Company may be required to eliminate substantially all business activities to
conserve cash or may need to seek protection under the U.S. bankruptcy laws.

Off-Balance Sheet Arrangements

During the three months ended December 31, 2005, 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.

14

---

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 September 30, 2005, the Company sold
3,938,245 shares of restricted common stock at $0.10 - $0.20 per share for
aggregate proceeds of $435,491.

During the quarter ended September 30, 2005, the Company issued
1,130,000 shares of restricted common stock for services with an aggregate
market value of $214,700.

On September 22, 2005, the Company issued 1,500,000 shares of
restricted common stock for accrued wages and accrued interest with an aggregate
value of $450,000, based on the fair market value on the transaction date.

On September 22, 2005, the Company issued 2,000,000 shares of
restricted 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 sold
1,902,333 shares of restricted common stock at $0.15 - $0.45 per share for
aggregate proceeds of $486,000.

During the quarter ended December 31, 2005, the Company issued
760,000 shares of restricted common stock for services with an aggregate market
value of $424,600.

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

On December 21, 2005, the Company issued 500,000 shares of restricted
  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 related party.

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.

15

---

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 2, 2006 | AZCO MINING INC,                                  
|--------------------- | --------------------------------------------------
|                      |                                                   
|                      | By:   /s/ Pierce
      Carson                     
|                      | Pierce Carson                                     
|                      | Chief
      Executive Officer, President, Director
|                      | and Principal
      Accounting Officer            

16

---