Argenta Silver Corp. — Interim / Quarterly Report 2020

Nov 27, 2020

==> picture [432 x 71] intentionally omitted <==

INTERIM FINANCIAL REPORT SEPTEMBER 30, 2020

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3 (3) (a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.

2

BUTTE ENERGY INC. CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION EXPRESSED IN CANADIAN DOLLARS

(UNAUDITED)

	September 30,	September 30,	December 31,	December 31,
		2020		2019
Assets
Current assets
Cash	$	2,152	$	14,013
Amounts receivable		2,827		5,877
Reclamation deposits(Note 4)		96,917		96,129
		101,896		116,019
Total assets	$	101,896	$	116,019
Liabilities
Current liabilities
Amounts payable and accrued liabilities	$	15,691	$	147,080
Provision for environmental liabilities (Note 5)		80,870		80,870
Demand promissory note due to a related party (Note 7(b))		57,640		-
Convertible loan due to a related party (Note 7(c))		381,123		-
Advances due to a relatedparty (Note 7(d))		32,000		-
		567,324		227,950
Long term liabilities
Convertible loan due to a relatedparty (Note 7(c))		-		326,730
Total liabilities		567,324		554,680
Shareholders' deficiency
Share capital (Note 6)		20,612,174		20,612,174
Equity reserve		389,893		389,893
Equity component of convertible loan		92,085		92,085
Deficit	(21,559,580)		(21,532,813)
Total shareholders' deficiency		(465,428)		(438,661)
Total liabilities and sharehodlers' deficiency	$	101,896	$	116,019

Nature and continuance of operations (Note 1) Subsequent events (Note 9)

Approved by the Board of Directors and authorized for issue on November 26, 2020:

"Geir Liland" Director "D. Jeffrey Harder" Director

See accompany notes to unaudited condensed interim financial statements

BUTTE ENERGY INC. CONDENSED INTERIM STATEMENTS OF NET LOSS AND COMPREHENSIVE LOSS

EXPRESSED IN CANADIAN DOLLARS

(UNAUDITED)

	Three	months ended	September 30,	Nine	months ended	September 30,	September 30,
		2020	2019		2020		2019
Expenses
Advisory and consulting	$	7,500	$ -	$	7,500	$	-
Exploration expenses		232	-		232		206
Professional fees		281	-		15,464		66,721
Regulatory and transfer agent		1,550	3,201		9,428		10,828
Rent and office		2,095	526		4,717		1,713
Travel		89	-		89		-
		(11,747)	(3,727)		(37,430)		(79,468)
Finance expense (Note 7(b) and 7(c))		(24,423)	(15,171)		(57,033)		(45,513)
Finance income		122	480		789		1,424
Gainon write offof liabilities		66,907	-		66,907		-
		42,606	(14,691)		10,663		(44,089)
Net income(loss) and comprehensive income(loss)	$	30,859	$ (18,418)	$	(26,767)	$	(123,557)
Basic and diluted income(loss) per share	$	0.00	$ (0.00)	$	(0.00)	$	(0.00)
Weighted average number of common shares
outstanding- basic and diluted	303,066,402		303,006,402	303,066,402		303,066,402

See accompany notes to unaudited condensed interim financial statements

BUTTE ENERGY INC.

CONDENSED INTERIM STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)

EXPRESSED IN CANADIAN DOLLARS (UNAUDITED)

	EXPRESSED IN CANADIAN DOLLARS (UNAUDITED)
	Equity Equity component of Total shareholders' Number Amount reserve convertible loan Deficit equity (deficiency) Share capital
Balance at December 31, 2018 Net loss and comprehensive loss	303,066,402 20,612,174 $ 389,893 $ 92,085 $ (21,361,429) $ (267,277) $ - - - - (123,557) (123,557)
Balance at September 30, 2019 Net loss and comprehensive loss	303,066,402 20,612,174 389,893 92,085 (21,484,986) (390,834) - - - - (47,827) (47,827)
Balance at December 31, 2019 Net loss and comprehensive loss	303,066,402 20,612,174 389,893 92,085 (21,532,813) (438,661) - - - - (26,767) (26,767)
Balance at September 30, 2020	303,066,402 20,612,174 $ 389,893 $ 92,085 $ (21,559,580) $ (465,428) $

See accompany notes to unaudited condensed interim financial statements

BUTTE ENERGY INC. CONDENSED INTERIM STATEMENTS OF CASH FLOW EXPRESSED IN CANADIAN DOLLARS

(UNAUDITED)

	Nine	months ended	September 30,	September 30,
		2020		2019
Operating activities
Net loss	$	(26,767)	$	(123,557)
Items not involving cash:
Finance expense		57,033		45,513
Changes in non-cash working capital items:
Amounts receivable		3,050		(4,581)
Amounts payable and accruedliabilities		(131,389)		72,227
		(98,073)		(10,398)
Investing activities
Increasein reclamationdeposits		(788)		(1,424)
Cashprovided byinvesting activities		(788)		(1,424)
Financing activities
Proceeds from demand promissory note due to a related party (Note
7(b))		55,000		-
Proceedsfromadvances due to arelated party (Note7(d))		32,000		-
		87,000		-
Change in cash		(11,861)		(11,822)
Cash, beginning ofperiod		14,013		31,671
Cash, end ofperiod	$	2,152	$	19,849

See accompany notes to unaudited condensed interim financial statements

Butte Energy Inc. Notes to the Interim Financial Statements September 30, 2020 (Expressed in Canadian dollars) (Unaudited)

1. NATURE OF OPERATIONS AND GOING CONCERN

Butte Energy Inc. (“Butte” or the “Company”) is incorporated under the Business Corporations Act (British Columbia). The Company’s head office and principal address is 500-666 Burrard Street, Vancouver, British Columbia, Canada, V6C 2X8, and its registered address is 1700-666 Burrard Street, Vancouver, British Columbia, Canada, V6C 2X8. The Company lists its common shares on the NEX board of the TSX Venture Exchange under the symbol BEN.H.

The Company had been engaged in the acquisition, exploration and development of petroleum and natural gas reserves in Western Canada. In 2017 the Company sold its last remaining asset and has no active operations other than the completion of reclamation activities on previously abandoned wells. In October 2020, there was a change of control of the Company with a new board and management team appointed. The board of directors have been evaluating potential opportunities, including those outside of the oil and gas industry (Note 9).

These condensed interim financial statements have been prepared assuming the Company will continue as a going concern. The Company has an accumulated deficit of $21,559,580 and a working capital deficiency of $465,428 as at September 30, 2020.

In order to fund future operations or acquisitions, the Company will need to raise additional funds by way of equity or debt. However, there is no assurance that the Company will be able to raise such funds on terms acceptable to it.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

These factors indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the going concern basis of accounting be inappropriate.

2. BASIS OF PRESENTATION

These condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34 Interim Financial Reporting.

7

Butte Energy Inc. Notes to the Interim Financial Statements September 30, 2020 (Expressed in Canadian dollars) (Unaudited)

2. BASIS OF PRESENTATION (Continued)

These condensed interim financial statements follow the same accounting policies and methods of application as the Company’s most recent annual financial statement, and should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2019, which were prepared in accordance with IFRS as issued by the IASB.

3. USE OF MANAGEMENT ESTIMATES AND JUDGMENTS

The timely preparation of the condensed interim financial statements requires that management make estimates and use judgment regarding the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as at the date of the condensed interim financial statements and the reported amounts of revenues and expenses during the period. Actual results may differ from the estimated amounts as future confirming events occur.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the year ended December 31, 2019.

4.

RECLAMATION DEPOSITS

In January 2018, the Company was required to provide a security deposit to the Alberta Energy Regulator in order for the Company to proceed with the finalization of the reclamation on previously abandoned wells. These deposits are refundable upon final acceptance of the reclamation certificates by the Alberta Energy Regulator.

The deposits are held in trust in an interest-bearing bank account. Interest income on the account is recorded in finance income in the statements of operations.

5. PROVISION FOR ENVIRONMENTAL LIABILTIES

The company recorded a provision for the completion of reclamation activities on previously abandoned wells.

There was no activity for nine months ended September 30, 2020 and 2019.

6. SHARE CAPITAL

Authorized share capital consists of an unlimited number of common shares without nominal or par value.

There was no activity for nine months ended September 30, 2020 and 2019.

8

Butte Energy Inc. Notes to the Interim Financial Statements September 30, 2020 (Expressed in Canadian dollars) (Unaudited)

7. RELATED PARTY TRANSACTIONS

(a) Compensation of key management personnel

Key management personnel are those persons have authority and responsibility for planning, directing, and controlling the activities of the Company, directly or indirectly. Senior management personnel include the Company’s executive officers and members of the Board of Directors.

There were no amounts paid to key management personnel for nine months ended September 30, 2020 and 2019.

(b) Demand promissory note due to a related party

On May 7, 2020, the Company borrowed the principal amount of $55,000 from the former majority shareholder, Stone’s Throw Capital Inc. (“Stone’s Throw”), and which bears interest at 12% per annum and is repayable due on demand. Interest expense is included in finance expense in the statements of operations and comprehensive loss.

The promissory note is presented in the financial statements as follows:

		2020		2019
Balance, Janaury 1	$	-	$	-
Proceeds received from issue of demand promissory note		55,000
Finance expense		2,640		-
Balance, Serptember 30	$	57,640	$	-

(c) Convertible loan due to a related party

On January 3, 2018, the Company borrowed the principal amount of $300,000 from Stone’s Throw, which bears interest at 10% per annum and is repayable on the date that is 12 months from the date of issuance. In January 2019, the term of the convertible loan was extended to January 4, 2021 from January 3, 2019.

Subsequent to September 30, 2020, the debt owing on the principal amount and accrued interest was assumed by a third party and settled by the Company (Note 9).

On October 8, 2020, the Company issued 6,000,000 units of the Company at $0.05 per unit, with each unit consisting of one common share and one common share purchase warrant, exercisable at a price of $0.05 until October 8, 2021 to settle $300,000 principal debt. The Company also issued 1,158,900 units of the Company at $0.07 per unit, with each unit consisting of one common share and one common share purchase warrant, exercisable at a price of $0.095 until October 8, 2021 to settle $81,123 of accrued interest (Note 9).

9

Butte Energy Inc. Notes to the Interim Financial Statements September 30, 2020 (Expressed in Canadian dollars) (Unaudited)

7. RELATED PARTY TRANSACTIONS (Continued)

(c) Convertible loan due to a related party (Continued)

The convertible loan has been classified as debt with the residual value allocated to shareholders’ equity. The initial fair value of the liability portion of the convertible loan was determined using a market interest rate of 13% for an equivalent non-convertible loan at the issue date. The liability is subsequently recognized on an amortized cost basis until extinguished on conversion or maturity of the convertible loan. The remainder of the proceeds is allocated to the conversion option and recognized in shareholders’ equity and not subsequently re-measured.

Interest expense is calculated by applying the effective interest rate of 13% to the liability component and is included in finance expense in the statements of operations and comprehensive loss.

The convertible loan is presented in the financial statements as follows:

		2020		2019
Balance, Janaury 1	$	326,730	$	266,046
Finance expense		54,393		45,513
Balance, Serptember 30	$	381,123	$	311,559

As of September 30, 2020, the convertible loan balance has been included as a current liability on the statements of financial position as the convertible loan was settled subsequent to September 30, 2020 (Note 9).

(d) Advance due to a related party

On September 11, 2020, Stone’s Throw advanced $32,000 to the Company. This loan is non-interest bearing and payable on demand.

8. FINANCIAL INSTRUMENTS

Financial Risk Management and Fair Value Measurement

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s financial instruments consist of cash, amounts receivable, reclamation deposits and amounts payable and accrued liabilities, and convertible loans. Their carrying values approximate fair value due to the short-term nature of these instruments. There are no financial instruments carried at fair value.

Financial Instrument Risk Exposure

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board approves and monitors the risk management processes.

10

Butte Energy Inc. Notes to the Interim Financial Statements September 30, 2020 (Expressed in Canadian dollars) (Unaudited)

8. FINANCIAL INSTRUMENTS (Continued)

Credit Risk

Credit risk arises from the potential for non-performance by counterparties of contractual financial obligations. The Company is exposed to credit risk on cash. The Company reduces its credit risk on cash by maintaining its bank account with a large international financial institution. The maximum exposure to credit risk is equal to the carrying value of its cash.

Liquidity Risk

The Company’s cash is invested in bank accounts which are available on demand. As at September 30, 2020, the Company had a working capital deficit of $465,428 and requires additional funding to continue operations for the next twelve months.

Market Risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign currency and price risk.

a) Interest Rate Risk

The Company is nominally exposed to interest rate risk. The Company’s cash earns interest at variable rates. Interest rate exposure is considered to be insignificant.

b) Foreign Currency Risk

The Company is nominally exposed to material currency risk.

• c) Price Risk

The Company is exposed to price risk with respect to equity prices. Equity price risk is defined as the potential adverse impact on the Company’s earnings due to movements in individual equity prices or general movements in the level of the stock market. The Company closely monitors individual equity movements and the stock market to determine the appropriate course of action to be taken by the Company.

9. SUBSEQUENT EVENTS

In October 2020, the Company appointed Geir Liland, Jeffrey Harder and Travis Musgrave to the Company's board of directors. Geir Liland was appointed as the CEO and Joanna Vastardis was appointed as the CFO and Corporate Secretary. Jason Rickert, Steven Parker and Lee Bowles have resigned from the board.

On October 8, 2020, in connection with the foregoing appointments, 11,000,000 stock options were granted to directors, officers, consultants and charitable organizations at a price of $0.10 per share, exercisable until October 8, 2030.

11

Butte Energy Inc. Notes to the Interim Financial Statements September 30, 2020 (Expressed in Canadian dollars) (Unaudited)

9. SUBSEQUENT EVENTS (Continued)

Subsequent to September 30, 2020, the convertible loan due to Stone’s Throw was assumed by a third party (Note 7(c)). On October 8, 2020, the Company issued 6,000,000 units of the Company at $0.05 per unit, with each unit consisting of one common share and one common share purchase warrant, exercisable at a price of $0.05 until October 8, 2021 to settle $300,000 principal debt of the convertible loan (Note 7(c)). The Company also issued 1,158,900 units of the Company at $0.07 per unit, with each unit consisting of one common share and one common share purchase warrant, exercisable at a price of $0.095 until October 8, 2021 to settle $81,123 of accrued interest relating to the debenture (Note 7(c)).

On October 13, 2020, 7,158,900 warrants or all of the issued warrants issued as per above were exercised for proceeds of $410,096.

Subsequent to the warrant exercise and in October 2020, the Company repaid $57,640 of promissory notes and $32,000 of advances owing to Stone’s Throw (Notes 7(b) and 7(d)).

12