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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1998
Commission file number 001-05970
Silver Butte Mining Company
(Name of small business issuer in its charter)
Idaho 82-0263301
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
520 Cedar Street, Sandpoint, ID 83864
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (208) 263-5154
Securities registered under Section 12(b) of the Exchange Act:
Title of each class: Name of each exchange on which
registered
Common stock, $.05 per share None *
*The shares of the issuer are quoted by the Spokane Quotation Bureau.
Securities registered under section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 requirement for the past 90
days. Yes ( ) No (X)
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best or registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. ( )
State issuer's revenues for its most recent fiscal year: $4,839
The aggregate market value of voting stock held by nonaffiliates computed
by reference to the average bid and asked prices as of December 31, 1998, was
$192,682.
The number of shares of Common Stock, $.05 par value, outstanding as of
December 31, 1998, was 7,828,748.
DOCUMENTS INCORPORATED BY REFERENCE: Form 8-K dated January 15, 1999
This Form 10-KSB consists of 19 pages. The Table of Contents is listed on page
2.
*******************************************************************************
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 1998
*******************************************************************************
TABLE OF CONTENTS
<TABLE>
Page No.
<S> <C>
PART I
Item 1. Description of Business . . . . . . . . . . . . . 3
Item 2. Description of Property . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . . . 4
Item 4. Submission of Matters to a Vote of Security Holders . . . 4
PART II
Item 5. Market for Common Equity and
Related Stockholders Matters . . . . . . . . . . . . . 5
Item 6. Management's Discussion and Analysis or
Plan of Operations . . . . . . . . . . . . . 5-6
Item 7. Financial Statements . . . . . . . . . . . . . 7
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . 7
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance With Section 16(a) of the Exchange Act . . . . . 8-9
Item 10 Executive Compensation . . . . . . . . . . . . 9
Item 11 Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . 10
Item 12 Certain Relationships and Related Transactions . . . . . . 10
Item 13 Exhibits and Reports on Form 8-K . . . . . . . . . . . . 10
Signature Page . . . . . . . . . . . . 11
Financial Statements . . . . . . . . . . . . F1-F8
</TABLE>
Document page 2 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 1998
*******************************************************************************
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) The issuer was incorporated under the laws of the State of Idaho on
January 19, 1965, and was a mining company in the exploration stage from
its inception until it decided to abandon its status as a development stage
enterprise by ceasing all exploration activities in 1994. The issuer was
previously engaged in exploring for non-ferrous and precious metals,
principally silver and lead. However, the issuer was unable to develop any
commercial ore deposits, following many years of extensive exploration through
geologic sampling and mapping, core drilling, and tunneling. The properties
of the issuer are located in Bonner County, Idaho. See Item 2 of this report
for a further description of the issuer's properties.
The issuer's meager financial resources severely limit its ability to
carry out the type of exploration activity that it performed in past years,
and management considers it unlikely that the company will obtain additional
funding with which to undertake such exploration.
(b) (1) The issuer does not produce any significant product, nor does it
provide any significant service.
(2) There are no distribution requirements, because there are no
products or services.
(3) There have been no publicly announced new products or services.
(4) There is no competition to the issuer in maintenance of its
properties.
(5) The issuer does not make significant use of raw materials.
(6) The issuer does not have any significant customers.
(7) The issuer does not have any patents, trademarks, licenses,
franchises, concessions, or labor contracts. The issuer has a
mineral lease with the State of Idaho that requires minimum
royalty prepayments of $500 per year, and production royalties
of 5% of net smelter returns on metalliferous minerals, and $.50
per cubic yard of waste rock.
(8) The issuer would need government approval to reactivate any future
exploration programs, however the issuer has no plans of engaging
in future exploration.
(9) Government regulations have not had a significant effect on the
issuer's business.
(10) The issuer has not engaged in research and development activities
in the past two fiscal years.
(11) There have been no material effects on or costs to the issuer's
business as a result of complying with government regulations
protecting the environment. The issuer has a $5,000 certificate of
deposit in favor of the State of Idaho that serves as a bond to
assure that the leased property will be returned to the State in
satisfactory condition.
(12) The issuer had two employees during the year who worked part time.
Document page 3 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 1998
*******************************************************************************
ITEM 2. DESCRIPTION OF PROPERTY.
The registrant holds the following mining properties.
1. Mineral rights only of 11 patented mining claims covering
approximately 165 acres situated in Sections 1, Township 55 North, Range
2 West Boise Meridian, and Sections 5, 6 and 8, Township 55 North, Range 1
West Boise Meridian, Bonner County, Idaho.
2. One acre of deeded land encompassing the "Stidwell Adit" adjacent
to Mirror Lake in Section 31, Township 56 North, Range 1 West Boise Meridian,
Bonner County, Idaho.
3. Mineral lease number 4004 with the State of Idaho dated January 1,
1998, on the East 1650 feet of Section 36, Township 56 North, Range 1 West
Boise Meridian, Bonner County, Idaho, comprises about 200 acres. This lease
provides for annual minimum rent of $200 per year, and minimum prepaid
royalties of $500 per year during the first five years, and $1,000 during
the next five years. Production royalties rates are 5% of net smelter
returns on the value of metalliferous ore produced, and $.50 per cubic yard
of waste rock removed. The lease expires on December 31, 2007, is
renewable, and may be surrendered at the Company's option.
There are no known commercial ore deposits on any of the properties.
ITEM 3. LEGAL PROCEEDINGS.
There are no legal proceedings pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
Document page 4 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 1998
*******************************************************************************
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market information. There is no established market for the
issuer's Common Stock. The following bid prices are compiled by the Spokane
Quotation Service. These over-the-counter bid prices reflect inter-dealer
prices without retail mark-up, mark-down or commission, and may not
necessarily represent actual transactions.
<TABLE>
Fiscal Year End 8/31/98 Fiscal Year End 8/31/97
High Low High Low
----- ----- ----- -----
<C> <S> <S> <S> <S>
First Quarter Ending 11/30 $.01 $.01 $.01 $.01
Second Quarter Ending 2/28 $.01 $.01 $.01 $.01
Third Quarter Ending 5/31 $.01 $.01 $.01 $.01
Fourth Quarter Ending 8/31 $.01 $.01 $.01 $.01
</TABLE>
(b) As of August 31, 1998, there were approximately 1,600 holders of
record of the issuer's Common Stock.
(c) The issuer has never paid cash dividends, and has no plans of paying
dividends in the foreseeable future. There are no restrictions on the
issuer's ability to pay dividends.
The issuer has sold no securities within the last three years.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
(a) Does not apply.
(b) Managements Discussion and Analysis of Financial Condition and Results of
Operations:
Revenues
The issuer has no material revenue from operations. The most significant
sources of revenue of the issuer are interest from funds deposited in interest
bearing accounts, dividends from equity securities, and waste rock sales. In
1998 the issuer's interest earned decreased to $1,103 from $4,767 in 1997. The
decrease resulted from a lower level of funds in interest bearing accounts in
1998 as a result of the issuer investing a significant portion of cash in equity
money market accounts. This also resulted in $2,836 in dividend income during
1998. The issuer's interest and dividend income are determined by market
interest rates and the types of interest bearing accounts or instruments in
which the funds are invested. The issuer expects that its income will decrease
in future years because there will be a decreasing level of funds invested in
interest or dividend bearing accounts.
Document page 5 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 1998
*******************************************************************************
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
(Continued)
Expenses
The issuer's expenses are incurred for the maintenance and reclamation
of the issuer's mining properties, including leased property, and for
administrative expenses of the issuer. The issuer's expenses increased to
$12,559 in 1998 compared to $9,950 in 1997. The primary reasons for the
increase were higher compensation as a result of the resumption of reporting
activities by the issuer, and higher royalty costs of the issuer's leased
property.
Financial Position
Cash and cash equivalents decreased from $84,297 on August 31, 1997 to
$480 at August 31, 1998. This was primarily caused by management's decision to
invest in equity securities in 1998. A decrease in payables and an increase in
prepaid expenses during 1998 also contributed to the decrease in cash and cash
equivalents. The issuer does not have any commitments or plans for capital
expenditures that will require significant amounts of cash. Inflation does not
have a material impact on the issuer's financial results.
Cash Flows
In 1998 the issuer used more cash for operating activities than it
received from revenues by $13,481. This was the result of lower revenues and
higher expenses in 1998 as discussed above, and a reduction in payables during
1998. In 1997 the issuer received more cash than it expended by $3,207, due to
the deferring of expense payments. The issuer expects that its future cash
required by operating activities will continue to exceed the cash that the
issuer receives from revenues.
Document page 6 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 1998
*******************************************************************************
ITEM 7. FINANCIAL STATEMENTS.
The issuer meets the requirements of an "Inactive Registrant" according
to Section 210.3-11 of Regulation S-X. Those requirements, which describe the
issuer for the fiscal year ended August 31, 1998, are as follows:
(a) Gross receipts from all sources for the fiscal year are not in excess
of $100,000;
(b) The registrant has not purchased or sold any of its own stock, granted
options therefor, or levied assessments upon outstanding stock;
(c) Expenditures for all purposes for the fiscal year are not in excess of
$100,000;
(d) No material change in the business has occurred during the fiscal
year, including any bankruptcy, reorganization, readjustment or
succession or any material acquisition or disposition of plants,
mines, mining equipment, mine rights, or leases; and
(e) No exchange upon which the shares are listed, or governmental
authority having jurisdiction, requires the furnishing to it or the
publication of audited financial statements.
The issuer's financial statements have been prepared by management in
accordance with generally accepted accounting principles, and they are
unaudited.
The financial statements are appended as pages F1 through F8 following page 11.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
The issuer's last audit of financial statements was performed for the
fiscal year ended August 31, 1990. The issuer terminated audits of its
financial statements following that year because the costs of the annual audits
were seriously impairing the company's limited financial resources.
Document page 7 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 1998
*******************************************************************************
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
(a) Identification of Directors and Officers:
<TABLE>
Name and Years Terms Background Shares of Common
Positions Held Age Served Expire Past 5 Years Stock Owned
- ------------------ --- ------ -------- -------------- ----------------
<C> <S> <S> <S> <S> <S>
R. Richard Rice 54 Accountant 29,000
President 9 5/1/99
and Director 17 5/1/99
Robert J. Evans 74 Retired miner 8,000
Secretary/Treasurer 9 5/1/99
and Director 17 5/1/99
Marvin W. Farmer 68 Retired educator 7,000
Vice President 16 5/1/99
and Director 21 5/1/99
Joseph Zinger 59 Asst. Superintendent 1,000
Director 6 5/1/99
Terry McConnaughey 63 Ret. Law Enforcement 56,457
Director 2 5/1/99
Wayne Hohman 59 Retired educator 20,000
Director 2 5/1/99
</TABLE>
(b) There are no other significant employees of the issuer.
(c) There are no family relationships among the directors.
(d) There has been no involvement by the directors in any legal
proceedings during the past 5 years involving:
(1) Bankruptcy;
(2) Conviction in a criminal proceedings;
(3) An order, judgment, or decree, limiting his involvement in any
type of business, securities or commodities law;
(4) Violation of a federal or state securities or commodities law.
Document page 8 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 1998
*******************************************************************************
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. (continued)
Compliance with Section 16(a) of the Exchange Act.
Officers, Directors, and beneficial owners of 10% or more of the issuer's
Common Stock that failed to file on a timely basis the reports required by
section 16(a) of the Exchange Act based on a review of Forms 3, 4, and 5:
None
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth, for the fiscal years ended August 31,
1998, 1997, and 1996, compensation paid by the issuer to the President, and
Secretary/Treasurer and paid by Iron Mask Mining Company to the
Secretary/Treasurer for work performed for the benefit of the issuer. The
issuer reimbursed Iron Mask Mining Company for its payments on the issuer's
behalf in 1997 and 1996. These are the only officers that received
compensation in any of these years. The issuer has provided no stock options,
warrants, or stock appreciation rights. There are no other employment contracts
or incentive pay agreements with the officers, who are paid on an hourly basis
for work performed according to the terms and rates approved by the Board of
Directors.
<TABLE>
Long Term
Annual Compensation Compensation
Name and ------------------- --------------------- All Other
Principal Position Year Salary Bonus Awards Compensation
- ------------------ ------ ---------- ---------- -------- -------------
<C> <S> <S> <S> <S> <S>
R. Richard Rice 1998 $4,970 0 0 0
President 1997 2,210 0 0 0
1996 0 0 0 0
Robert J. Evans 1998 $ 825 0 0 0
Secretary/ 1997 1,350 0 0 0
Treasurer 1996 2,445 0 0 0
</TABLE>
Compensation of Directors: Each director receives $30 for each Board of
Directors or committee meeting that the director attends.
Document page 9 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 1998
*******************************************************************************
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security ownership of certain beneficial owners: No person of
record is known to own more than 5% of the registrant's Common Stock.
(b) Security ownership of management:
<TABLE>
Name and address Amount and Nature Percent
Title of Class of Beneficial Owner of Beneficial Ownership of Class
- ----------------- ---------------------- ------------------------- ---------
<C> <S> <S> <S>
Common Stock R. Richard Rice 29,000 0.37%
1314 J Street, Apt. B
Eureka, CA 95501
Common Stock Robert J. Evans 8,000 0.10%
P.O. Box 178
Ponderay, ID 83852
Common Stock Directors and 121,457 1.55%
Executive Officers
as a Group
</TABLE>
(c) There are no contractual arrangements known to issuer that may result
in a change in control of issuer.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits and index of exhibits:
None
(b) No reports on Form 8-K were filed during the last quarter of the
fiscal year ended August 31, 1998.
Document page 10 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 1998
*******************************************************************************
SIGNATURES
*******************************************************************************
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SILVER BUTTE MINING COMPANY
(Registrant)
By: /s/ R. Richard Rice Date: January 15, 1999
- --------------------------------- ---------------------------
R. Richard Rice
Title: President
In accordance with the Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
- ----------------------- --------------------------------- ----------------
/s/ R. Richard Rice President (Principal Executive January 15, 1999
R. Richard Rice and Accounting Officer)
and Director
/s/Robert J. Evans Secretary/Treasurer (Principal January 15, 1999
Robert J. Evans Financial Officer)
and Director
/s/Marvin W. Farmer Vice President January 15, 1999
Marvin W. Farmer and Director
/s/Joseph Zinger Director January 15, 1999
Joseph Zinger
/s/Terry McConnaughey Director January 15, 1999
Terry McConnaughey
Director January 15, 1999
Wayne Hohman
Document page 11 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 1998
*******************************************************************************
INDEX TO FINANCIAL STATEMENTS
<TABLE>
Page
Number
------
<C> <S>
Balance Sheets, August 31, 1998, and 1997 . . . . . . . . . . . . . . F2
Income Statements for the years ended August 31, 1998, and 1997 . . . F3
Cash Flow Statements for the years ended August 31, 1998, and 1997 . F4
Statements of Changes in Stockholders' Equity for the years ended
August 31, 1998, and 1997 . . . . . . . . . . . . . . . . . . . F5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . F6 - F8
</TABLE>
F1
Document page 12 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
BALANCE SHEETS
August 31, 1998, and 1997
<TABLE>
1998 1997
----------- ------------
<C> <S> <S>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 480 $ 84,297
Certificate of deposit for State lease 5,000 5,000
Marketable securities 70,336 --
Accounts receivable 1,091 1,092
Prepaid expenses 512 --
----------- ------------
TOTAL CURRENT ASSETS 77,419 90,389
PROPERTY, PLANT & EQUIPMENT
Properties 3,000 3,000
Equipment and machinery 19,704 19,704
Accumulated depreciation (19,704) (19,704)
----------- -----------
3,000 3,000
----------- -----------
TOTAL ASSETS $ 80,419 $ 93,389
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,660 $ 7,910
----------- -----------
TOTAL CURRENT LIABILITIES 2,660 7,910
SHAREHOLDERS' EQUITY
Capital stock, $.05 par value
per share, authorized 10,000,000
shares, issued and outstanding
7,828,748 shares 391,437 391,437
Additional paid-in capital 392,953 392,953
Accumulated deficit (706,631) (698,911)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 77,759 85,479
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 80,419 $ 93,389
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F2
Document page 13 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
INCOME STATEMENTS
For the Years Ended August 31, 1998, and 1997
<TABLE>
1998 1997
----------- ------------
<C> <S> <S>
REVENUES
Interest income $ 1,103 $ 4,767
Dividend income 2,836 --
Sale of rock 900 1,137
Miscellaneous other income -- 339
----------- -----------
Total revenue 4,839 6,243
----------- -----------
EXPENSES
Wages and other compensation 6,335 3,949
Professional services 2,860 3,860
Taxes and insurance 1,500 613
Rent 723 200
Office expense 644 546
Miscellaneous 497 780
----------- -----------
Total expenses 12,559 9,950
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (7,720) (3,707)
INCOME TAXES -- --
----------- -----------
NET INCOME (LOSS) $ (7,720) $ (3,707)
=========== ===========
Income (Loss) per Share of Common Stock
Outstanding $ (0.0010) $ (0.0005)
=========== ===========
Weighted Average Number of Common Shares
Outstanding 7,828,748 7,828,748
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F3
Document page 14 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
STATEMENT OF CASH FLOWS
For the Years Ended August 31, 1998, and 1997
<TABLE>
1998 1997
----------- ------------
<C> <S> <S>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (7,720) $ (3,707)
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Increase (decrease) in payables (5,250) 5,670
Decrease (increase) in prepaid expenses (512) 2,240
Decrease (increase) in receivables 1 (996)
----------- ------------
Net cash provided by (used in)
operating activities (13,481) 3,207
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash invested in marketable securities (75,000) --
Dividends received and reinvested in
marketable securities (2,836) --
Marketable securities redeemed 7,500 --
----------- ------------
Net cash used in
investing activities (70,336) --
----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (83,817) 3,207
Cash and Cash Equivalents at Beginning of Year 84,297 81,090
----------- ------------
Cash and Cash Equivalents at End of Year $ 480 $ 84,297
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F4
Document page 15 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended August 31, 1998, and 1997
<TABLE>
Common Stock
------------------------ Additional Accum-
Number Par Paid-in ulated
Of Shares Value Capital Deficit Total
----------- ----------- ----------- ----------- -----------
<C> <S> <S> <S> <S> <S>
Balances,
August 31, 1996 7,828,748 $ 391,437 $ 392,953 $ (695,204) $ 89,186
Net Loss -- -- -- (3,707) (3,707)
----------- ----------- ----------- ----------- -----------
Balances,
August 31, 1997 7,828,748 391,437 392,953 (698,911) 85,479
Net Loss -- -- -- (7,720) (7,720)
----------- ----------- ----------- ----------- -----------
Balances,
August 31, 1998 7,828,748 $ 391,437 $ 392,953 $ (706,631) $ 77,759
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F5
Document page 16 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
August 31, 1998, and 1997
*******************************************************************************
Note 1. COMPANY BUSINESS
The Company was incorporated under the laws of the State of Idaho on
January 19, 1965, and was in the exploratory mining stage from its inception
until it decided to abandon its status as a development stage enterprise by
ceasing all exploration activities in 1994. The Company's exploration efforts
developed no commercial ore deposits, and all capitalized mining costs were
written off. The Company continues to search for business opportunities in the
mining industry, and will also investigate opportunities in other industries.
The Company's meager financial resources severely limit its ability to carry
out the type of exploration activity that it performed in past years, and the
Company's management considers it unlikely that the Company will obtain
additional funding with which to undertake such exploration.
Note 2. ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results may differ from those estimates.
The significant accounting principles and practices of the Company are
as follows:
a. The financial statements are prepared on the accrual basis of
accounting.
b. Properties, equipment, and machinery are stated at cost.
c. Depreciation of machinery and equipment was computed using straight
line and accelerated methods of depreciation.
d. The Company considers cash equivalents to be highly liquid
investments with an original maturity of three months or less.
e. Accounting for income taxes is discussed in Note 5.
f. Earnings per share are computed using the weighted average number
of shares outstanding.
F6
Document page 17 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
August 31, 1998, and 1997
*******************************************************************************
Note 3. MARKETABLE SECURITIES
The Company has invested in certain money market fund equity securities
which it considers as available for sale according to Statement of Financial
Accounting Standards (SFAS) 115. Unrealized holdings gains and losses on such
securities are not expected, but will be excluded from earnings and reported as
a separate component of shareholders' equity, if gains or losses occur. The
cost of these marketable equity securities, when sold, will be determined by
the specific identification method.
The fair value of these securities, in accordance with SFAS 107, is
considered to be the same as their cost, based on quoted market prices.
Note 4. PROPERTIES
The Company owns mining properties consisting of the mineral rights to
eleven patented mining claims covering approximately 165 acres and one acre
of deeded land near Mirror Lake in Bonner County, Idaho. The Company is also
the lessee of a parcel of State of Idaho land which is more fully described
in Note 4.
On July 31, 1996, the Company sold the approximately seven acre Roof
Tunnel Claim for $61,500 and recorded a gain of $39,372.
The book values of the Company's properties owned are:
<TABLE>
<C> <S>
Mineral rights to eleven patented mining claims $1,100
One acre of deeded land near Mirror Lake 1,900
------
Total book value $3,000
======
</TABLE>
Note 5. MINERAL LEASE
The Company holds a mineral lease from the State of Idaho on
approximately 200 acres of land in Bonner County, Idaho. The lease is dated
January 1,1998, has a 10 year life that expires on December 31, 2007, and is
renewable at the Company's option for another 10 years. The Company may
surrender the lease by providing the Idaho Department of Lands a written
notice 30 days prior to its intended surrender date. The minimum annual
rent is $200 per year. The Company is also required to prepay a minimum
royalty of $500 per year for the first five years of the lease, and $1,000
per year for the second five years of the lease. The total minimum rent
commitment over the next five years is $3,500 if the Company does not
surrender the lease prior to the fifth year. The lease's production royalty
rates are 5% of net smelter returns for metalliferous minerals, and $.50 per
cubic yard of waste rock. Production from the lease has been limited to small
amounts of waste rock. The Company has provided a $5,000 certificate of
deposit in favor of the State in lieu of a conditional bond to assure the
Company's compliance to the terms of the lease.
F7
Document page 18 of 19
<PAGE>
SILVER BUTTE MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
August 31, 1998, and 1997
*******************************************************************************
Note 6. INCOME TAXES
The Company had at August 31, 1998, $295,941 of net operating loss
carryovers for Federal income tax purposes that expire on August 31 of the
years shown below:
<TABLE>
<C> <S> <S> <S>
2001 2,299 2008 $269,988
2002 3,786 2009 2,989
2003 2,922 2012 3,646
2006 1,892 2013 7,657
2007 762 --------
Totals $295,941
========
</TABLE>
The Company accounts for income taxes in accordance with FAS No. 109.
This statement establishes the criteria to be used for recognizing deferred
tax assets and deferred tax liabilities. These assets and liabilities result
from temporary differences between tax expense or benefit calculated for tax
reporting purposes and the tax expense or benefit calculated for financial
reporting purposes. The Company has no deferred tax liabilities. A deferred
tax asset for the remaining net operating loss carryovers is fully reserved
because management does not believe that it is more likely than not that the
carryovers will be utilized, and because it is uncertain if the Company will
realize any future taxable income.
Note 7. COMMITMENTS AND CONTINGENCIES
The Company sold a seven acre parcel of land in the fiscal year ended
August 31, 1996, that contained mine waste rock and mill tailings. The
Company believes there is a remote possibility that this property may require
some cleanup, and an even more remote possibility that the Company may be
required to participate in the cost of such a cleanup, which the Company
estimates would be less than $10,000.
F8
Document page 19 of 19
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the issuer's financial statements at August 31, 1998, (Unaudited) and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> AUG-31-1998
<CASH> 480
<SECURITIES> 70,336
<RECEIVABLES> 1,091
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 77,419
<PP&E> 22,704
<DEPRECIATION> 19,704
<TOTAL-ASSETS> 80,419
<CURRENT-LIABILITIES> 2,660
<BONDS> 0
0
0
<COMMON> 391,437
<OTHER-SE> (313,678)
<TOTAL-LIABILITY-AND-EQUITY> 80,419
<SALES> 0
<TOTAL-REVENUES> 4,839
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,559
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,720)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,720)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,720)
<EPS-PRIMARY> (0.001)
<EPS-DILUTED> (0.001)
</TABLE>
