<PAGE>
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, 2000
Commission file number 1-5970
Silver Butte Mining Company
(Name of small business issuer in its charter)
Idaho 82-0263301
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
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 _X_ No ___
Check if there is no disclosure of delinquent files 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: $3,926
The aggregate market value of voting stock held by nonaffiliates computed
by reference to the average bid and asked prices as of August 31, 2000, was
$313,150.
The number of shares of Common Stock, $.05 par value, outstanding
as of August 31, 2000, was 7,828,748.
DOCUMENTS INCORPORATED BY REFERENCE: None
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 2000
TABLE OF CONTENTS
Page No.
PART I
Item 1. Description of Business 3-4
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 of Plan of Operations 5
Item 7. Financial Statements 6
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 7
Item 10 Executive Compensation 8
Item 11 Security Ownership of Certain Beneficial Owners and Management 9
Item 12 Certain Relationships and Related Transactions 9
Item 13 Exhibits and Reports on Form 8-K 9
Signature Page 10
Financial Statements F1-F8
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 2000
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 an exploration 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 three fiscal years.
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 2000
(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 three employees during the year who worked
part time.
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.
-----------------------------
Management is unaware of any pending or active legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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None
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 2000
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
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(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.
FYE 8-31-2000 FYE 8-31-1999
------------------------ -------------------------
High Low High Low
----- ----- ----- ------
First Quarter Ended 11/30 $.06 $.02 $.01 $.01
Second Quarter Ended 2/28 $.06 $.02 $.01 $.01
Third Quarter Ended 5/31 $.06 $.02 $.01 $.01
Fourth Quarter Ended 8/31 $.06 $.02 $.01 $.01
(b) As of August 31, 2000, there were approximately 1,590 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. The
issue'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 of
dividend bearing accounts. Net changes between the two years were deemed to be
immaterial.
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 2000
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (continued)
-------------------------------------------------------------------------------
Expenses
The registrant's expenses are incurred for the maintenance of the
issuer's mining properties, including leased property, and for administrative
expenses of the registrant. A net change between the three years was deemed to
be immaterial.
Financial Position
Cash and cash equivalents decreased from $6,893 on August 31, 1999 to
$5,652
at August 31, 2000. The registrant 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
During the past three years the registrant used more cash for operating
activities than it received from non-operating revenues. This was the result of
the registrant continuing to incur more expenses than it generated in
non-operating revenues. The registrant expects that its future cash required
by operating activities will continue to exceed the cash that the registrant
receives from non-operating revenues.
ITEM 7. FINANCIAL STATEMENTS
-------------------------------
The registrant meets the requirements of an "Inactive Registrant" according
to 210.3-11 of Regulation S-X. Those requirements, which describe the
registrant for the fiscal year ended August 31, 2000, 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 registrant's unaudited financial statements have been prepared by the
registrant's accountant in accordance with generally accepted accounting
principles.
The financial statements are appended as pages F1 through F8 following page 11.
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 2000
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
--------------------------------------------------------------------------------
FINANCIAL DISCLOSURE.
----------------------
None.
The registrant's last audit of financial statements was performed for the
fiscal year ended August 31, 1990. The registrant terminated audits of its
financial statements following that year because the costs of the annual audits
were seriously impairing the registrant's limited financial resources.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
-------------------------------------------------------------------
PERSONS;COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
-----------------------------------------------------------------
(a) Identification of Directors and Officers:
Shares
Name and Years Terms Background of Common
Positions Held Age Served Expire Past 5 Years Stock Owned
------------------- --- ------ --------- -------------- ------------
Terry McConnaughey 65 Retired law 56,457
President and 4 5/1/2001 enforcement
Director
Robert J. Evans 76 Retired miner 8,000
Secretary/Treasurer 11 5/1/2001
and Director 19 5/1/2001
Joseph Zinger 61 Asst. 1,000
Director 8 5/1/2001 superintendent
R. Richard Rice 56 Accountant 29,000
Director 19 5/1/2001
Wayne Hohman 61 Retired educator 20,000
Director 4 5/1/2001
(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.
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 2000
PART III
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, 2000,
1999, and 1998, compensation paid by the registrant 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 registrant.
These are the only officers that received compensation in any of these
years. The registrant 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.
Annual Compensation Long Term Compensation
------------------- ------------------------------
Name and All Other
Principal Position Year Salary Bonus Awards Compensation
------------------- ------ ----------- ----- ------ ------------
R. Richard Rice 2000 $ 1,453 0 0 0
Former President 1999 715 0 0 0
1998 4,970 0 0 0
Robert J. Evans 2000 $ 1,245 0 0 0
0Treasurer/ 1998 825 0 0 0
Secretary 1999 1,940 0 0 0
Compensation of Directors: Each director receives $30 for each Board of
Directors or committee meeting that the director attends.
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 2000
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:
Name and address Amount and Nature Percent
Title of Class of Beneficial Owner of Beneficial Ownership of Class
----------------- ---------------------- ------------------------- ---------
Common Stock Terry McConnaughy 56,457 0.72%
Fry Creek
Sandpoint, ID
Common Stock Robert J. Evans 8,000 0.10%
P.O. Box 178
Ponderay, ID 83852
Common Stock Joseph Zinger 1,000 -
Common Stock Wayne Hohman 20,000 0.26%
311 W. Montgomery Place
Post Falls, ID 83849
Common Stock R. Richard Rice 29,000 0.37%
Common Stock Directors and 114,457 1.45%
Executive Officers
as a Group
(c) There are no contractual arrangements known to registrant that may
result in a change in control of registrant.
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, 2000.
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 2000
*******************************************************************************
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/Terry McConnaughy Date: October 30, 2000
Terry McConnaughy
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/Terry McConnaughy President (Principal Executive October 30, 2000
Terry McConnaughy Officer) and Director
/s/Robert J Evans Secretary/Treasurer October 30, 2000
Robert J. Evans (Principal Financial Officer
and Director)
/s/Joseph Zinger Director October 30, 2000
Joseph Zinger
/s/Wayne Hohman Director October 30, 2000
Wayne Hohman
/s/R. Richard Rice Director October 30, 2000
--------------------
R. Richard Rice
<PAGE>
SILVER BUTTE MINING COMPANY
FORM 10-KSB ANNUAL REPORT
August 31, 2000
INDEX TO FINANCIAL STATEMENTS
Page
Number
Balance Sheets (unaudited) August 31, 2000, and 1999 F2
Income Statements (unaudited) for the years ended
August 31, 2000, and 1999 F3
Statements of Cash Flows (unaudited) for the years ended
August 31, 2000, and 1999 F4
Statements of Stockholders' Equity (unaudited) for the years ended
August 31, 2000, and 1999 F5
Notes to Financial Statements (unaudited) for the years ended
August 31, 2000 and 1999 F6 - F9
<PAGE> F-1
SILVER BUTTE MINING COMPANY
BALANCE SHEETS-UNAUDITED
August 31, 2000 and 1999
2000 1999
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 652 $ 1,893
Certificate of deposit for State lease 5,000 5,000
Marketable securities 64,177 64,521
Accounts receivable 839 829
Prepaid expenses 667
------------ ------------
TOTAL CURRENT ASSETS 70,668 72,910
------------ ------------
PROPERTY, PLANT & EQUIPMENT
Properties 3,000 3,000
Equipment and machinery 19,704 19,704
Accumulated depreciation (19,704) (19,704)
------------ ------------
TOTAL Property, Plant, & Equipment 3,000 3,000
------------ ------------
TOTAL ASSETS $ 73,668 $ 75,910
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,400 $ 2,283
------------ ------------
TOTAL CURRENT LIABILITIES 1,400 2,283
SHAREHOLDERS' EQUITY
Capital stock, $.05 par value
per share, 10,000,000 shares
authorized, 7,828.748 shares
issued and outstanding 391,437 391,437
Additional paid-in capital 392,953 392,953
Accumulated deficit (712,122) (710,763)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 72,268 73,627
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 73,668 $ 75,910
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE> F-2
SILVER BUTTE MINING COMPANY
INCOME STATEMENTS-UNAUDITED
For the Years Ended August 31, 2000 and 1999
2000 1999
------------ ------------
REVENUES
Dividend income $ 3,656 $ 3,185
Interest income 2,710 306
Sale of rock 0 504
Miscellaneous other income 0 117
------------ ------------
Total revenue 6,366 4,112
------------ ------------
EXPENSES
Wages and other compensation 2,250 3,810
Professional services 1,619 1,598
Taxes and insurance 216 1,054
Rent 700 646
Office expense 332 287
Miscellaneous 168 849
------------ ------------
Total expenses 5,285 8,244
------------ ------------
LOSS BEFORE INCOME TAXES (1,359) (4,132)
INCOME TAXES - -
------------ ------------
NET INCOME (LOSS) $ (1,359) $ (4,132)
============ ============
Income (Loss) per Share of Common Stock $ NIL $ NIL
============ ============
Outstanding, Basic and Diluted
Weighted Average Number of Common Shares 7,828,748 7,828,748
============ ============
Outstanding, Basic and Diluted
The accompanying notes are an integral part of these financial statements.
<PAGE> F-3
SILVER BUTTE MINING COMPANY
STATEMENT OF CASH FLOWS-UNAUDITED
For the Years Ended August 31, 2000, AND 1999
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (1,359) $ (4,132)
Adjustments to reconcile net income to net
cash used in operating activities:
Decrease (decrease) in payables (883) (376)
Decrease (increase) in prepaid expenses 667 (155)
Decrease (increase) in receivables (10) 261
------------ ------------
Net cash used in
operating activities (1,585) (4,402)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received and reinvested in
marketable securities (3,656) (3,185)
Marketable securities redeemed 4,000 9,000
------------ ------------
Net cash provided by (used in)
investing activities 344 5,815
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES - -
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,241) 1,413
Cash and Cash Equivalents at Beginning of Year 1,893 480
------------ ------------
Cash and Cash Equivalents at End of Year $ 652 $ 1,893
============ ============
Interest expense paid $ - $ -
============ ============
Income taxes paid $ - $ -
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE> F-4
SILVER BUTTE MINING COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY-UNAUDITED
For the Years Ended August 31, 2000, and 1999
Common Stock
------------------------ Additional Accum-
Number Par Paid-in ulated
Of Shares Value Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Balances,
September 1, 2000 7,828,748 $ 391,437 $ 392,953 $ (706,631) $ 77,759
Net loss - - - (4,132) (4,132)
----------- ----------- ----------- ----------- -----------
Balances,
August 31, 1999 7,828,748 391,437 392,953 (710,763) 73,627
Net loss - - - (1,359) (1,359)
----------- ----------- ----------- ----------- -----------
Balances,
August 31, 2000 7,828,748 $ 391,437 $ 392,953 $ (712,122) $ 72,268
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE> F-5
SILVER BUTTE MINING COMPANY
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
August 31, 2000, and 1999
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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in
understanding the Company's financial statements. The financial statements and
notes are representations of the Company's management, which is responsible for
their integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method of
accounting.
USE OF ESTIMATES
------------------
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying of amounts for cash and cash equivalents, certificates of deposit,
marketable securities, accounts receivable, and accounts payable approximate
their fair value.
DERIVATIVE INSTRUMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires that an entity recognized all derivatives as either assets or
liabilities in the consolidated balance sheet and measures those instruments at
fair value.
At August 31, 2000, and 1999, the Company had not engaged in any transactions
that would be considered derivative instruments or hedging activities.
<PAGE> F-6
SILVER BUTTE MINING COMPANY
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
August 31, 2000, and 1999
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
IMPAIRED ASSET POLICY
In March 1995, the Financial Accounting Standards Board issued a statement
(SFAS) No. 121 titled "Accounting for Impairment of Long-lived Assets." In
complying with this standard, the Company reviews its long-lived assets
quarterly to determine if any events or changes in circumstances have transpired
which indicate that the carrying value of its assets may not be recoverable.
The Company does not believe any adjustments are needed to the carrying value of
its assets at August 31, 2000 or 1999.
PLANT PROPERTY, AND EQUIPMENT DEPRECIATION
See notes 4 and 5 regarding real property rights held by the Company. The
Company also holds various items of fully depreciated mining equipment with an
estimated realizable value at August 30, 2000 of $4,000.
COMPENSATED ABSENCES
The Company's compensates its officers and considers them employees. However,
the employees are not entitled to paid vacations or sick leave. Accordingly, as
of August 31, 2000, and 1999, no amount has been recorded as accrued vacation or
sick pay.
INCOME TAXES
Accounting for income taxes is discussed in Note 5.
BASIC AND DILUTED LOSS PER SHARE
Net loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding. Basic and diluted loss
per share were the same, as there were no common stock equivalents outstanding.
RECLASSIFICATIONS
Certain amounts from prior periods have been reclassified to conform with the
current period presentation. This reclassification has resulted in no changes
to the Company's accumulated deficit or net losses presented.
YEAR 2000
The Company, like other firms, could be adversely affected if the computer
systems used by it, or its suppliers or customers do not properly process and
calculate date-released information and data from the period surrounding and
including January 1, 2000. This is commonly known as the "Year 2000" issue.
Additionally, this issue could not impact non-computer systems and devices such
as production equipment.
Management believes that Year 2000 issues should not adversely affect the
ability of its clients and customers to conduct business with the Company. As
of August 31, 2000, the Company has not experienced any significant problems.
Any costs associated with Year 2000 compliance will be expensed when incurred.
<PAGE> F-7
SILVER BUTTE MINING COMPANY
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
August 31, 2000, and 1999
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 "Accounting for certain investments in debt and
equity securities." Unrealizing 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.
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 5.
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 of Idaho in lieu of a conditional
bond to assure the Company's compliance to the terms of the lease.
Note 6. INCOME TAXES
The Company had at August 31, 2000, $301,432 of net operating loss
carryovers for Federal income tax purposes that expire on August 31 of the years
shown below:
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 2014 4,132
2015 1,359
<PAGE> F-8
SILVER BUTTE MINING COMPANY
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
August 31, 2000, and 1999
Note 6. INCOME TAXES (continued)
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." 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.
