IRONCLAD ENCRYPTION (IRNC) 10-Q 2010 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                             to                          

Commission file number:    000-53662

BUTTE HIGHLANDS MINING COMPANY

(Exact name of registrant as specified in its charter)

Delaware	81-0409475
(State or other jurisdiction of incorporation  or organization)	(I.R.S. Employer Identification No.)
P.O.  Box 99, Liberty Lake, WA	99019
(Address of principal executive offices)	(Zip Code)

(509) 979-3053

(Issuer's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filings for the past 90 days.   YESx  NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨(Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  

Yesx No¨

APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  According to our Transfer Agent, at November 10, 2010, there were 1,317,948 shares of Class A Common Stock and 1,663,941 shares of Class B Common Stock issued and outstanding.

1

BUTTE HIGHLANDS MINING COMPANY

(A Development Stage Company)

TABLE OF CONTENTS

2

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

BUTTE HIGHLANDS MINING COMPANY
(A Development Stage Company)
BALANCE SHEETS
						September 30		December 31
						2010		2009
						(unaudited)
ASSETS
	CURRENT ASSETS
		Cash and cash equivalents			$	264,545	$	202,496
		Accrued interest				1,109		1,109
		Refund receivable				-		19,478
				Total Current Assets		265,654		223,083
	PROPERTY AND EQUIPMENT
		Equipment				4,338		4,338
		Less: accumulated depreciation				(4,240)		(4,159)
				Total Property and Equipment		98		179
	OTHER ASSETS
		Investments				35,100		116,640
				Total Other Assets		35,100		116,640
	TOTAL ASSETS				$	300,852	$	339,902
LIABILITIES AND STOCKHOLDERS' EQUITY
	CURRENT LIABILITIES
		Accounts payable			$	394	$	1,875
				Total Current Liabilities		394		1,875
	COMMITMENTS AND CONTINGENCIES					-		-
	STOCKHOLDERS' EQUITY
		Common stock, Class A, $0.01 par value
			23,292,907 shares authorized; 1,317,948
			shares issued and outstanding, respectively			13,179		13,179
		Common stock, Class B, $0.01 par value
			1,707,093 shares authorized; 1,663,941
			shares issued and outstanding, respectively			16,640		16,640
		Additional paid-in capital				242,632		242,632
		Accumulated income prior to development stage				476,706		476,706
		Accumulated deficit during development stage				(469,699)		(477,010)
		Other comprehensive income				21,000		65,880
			Total Stockholders' Equity			300,458		338,027
	TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY				$	300,852	$	339,902

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

3

BUTTE HIGHLANDS MINING COMPANY
(A Development Stage Company)
STATEMENTS OF OPERATION
												Period from	Period from
												May 18, 2007	May 18, 2007
												(Inception of	(Inception of
				Three Months Ended				Nine Months Ended				Development Stage)	Development Stage)
				September 30				September 30				to September 30,	to December 31,
				2010		2009		2010		2009		2010	2009
				(unaudited)		(unaudited)		(unaudited)		(unaudited)		(unaudited)
MINERAL LEASE REVENUES			$	-	$	-	$	-	$	-	$	-	0
OPERATING EXPENSES
	Professional fees			5,405		7,307		33,924		36,085		139,083	105,159
	Depreciation			27		129		81		333		1,196	1,115
	Officers & directors fees			-		-		-		-		2,000	2,000
	General and administrative			327		355		2,840		2,211		26,453	23,613
		TOTAL OPERATING EXPENSES		5,759		7,791		36,845		38,629		168,732	131,887
INCOME (LOSS) FROM OPERATIONS				(5,759)		(7,791)		(36,845)		(38,629)		(168,732)	(131,887)
OTHER INCOME (EXPENSES)
	Interest income			24		34		76		834		7,834	7,758
	Interest expense			-		-		-		-		(553)	(553)
	Other income			-		-		740		-		740	-
	Other expense			-		-		(459)		-		(459)
	Other than temporary impairment of investment			-		-		-		-		(165,240)	(165,240)
	Gain on sale of investment			12,874		-		43,799		-		43,799	-
		TOTAL OTHER INCOME (EXPENSES)		12,898		34		44,156		834		(113,879)	(158,035)
INCOME (LOSS) BEFORE TAXES				7,139		(7,757)		7,311		(37,795)		(282,611)	(289,922)
INCOME TAXES
	Income tax benefit			-		-		-		-		(15,501)	(15,501)
	Tax expense			-		-		-		-		(171,587)	(171,587)
				-		-		-		-		(187,088)	(187,088)
NET INCOME (LOSS)			$	7,139	$	(7,757)	$	7,311	$	(37,795)	$	(469,699)	(477,010)
OTHER COMPREHENSIVE INCOME (LOSS)
	Unrealized gain (loss) on available for sale securities			6,900		41,040		(1,610)		28,080		64,270	65,880
COMPREHENSIVE INCOME(LOSS)				14,039		33,283		5,701		(9,715)		(405,429)	(411,130)
	NET LOSS PER COMMON SHARE,
		BASIC AND DILUTED	$	nil	$	0.01	$	nil	$	nil
	WEIGHTED AVERAGE NUMBER OF
		COMMON STOCK SHARES
		OUTSTANDING, BASIC AND DILUTED		2,981,889		2,981,889		2,981,889		2,981,889

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

4

BUTTE HIGHLANDS MINING COMPANY
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
								Period from
								May 18, 2007
								(Inception of
				Nine Months Ended				Development Stage)
				September 30				to September 30
			2010		2009			2010
			(unaudited)		(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss)		$	7,311	$	(37,795)	$	(469,699)
	Adjustments to reconcile net income (loss) to net cash
		provided (used) by operating activities:
		Depreciation		81		332		1,196
		Gain on sale of investments		(43,799)		-		(43,799)
		Other than temporary impairment of investment		-		-		165,240
	Changes in assets and liabilities:
		Decrease (increase) in prepaid expense		-		-		961
		Decrease (increase) in deferred tax asset		-		-		50,830
		Decrease (increase) in interest receivable		-		-		(1,109)
		Decrease (increase) in refund receivable		19,478		-		-
		Increase (decrease) in accounts payable		(1,481)		(3,835)		395
		Net cash used by operating activities		(18,410)		(41,298)		(295,985)
CASH FLOWS FROM INVESTING ACTIVITIES:
	Cash paid for equipment purchased			-		-		(543)
	Cash received for mining claims			-		-		405,000
	Cash received for sale of investment			80,459				80,459
		Net cash used by investing activities		80,459		-		484,916
CASH FLOWS FROM FINANCING ACTIVITIES:
	Cash received from sale of common stock			-		-		35,000
		Net cash used by financing activities		-		-		35,000
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS				62,049		(41,298)		223,931
Cash, beginning of period				202,496		237,043		40,614
Cash, end of period			$	264,545	$	195,745	$	264,545
				-
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid			$	-	$	-
Income taxes paid			$	-	$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Investment received for mining claims			$	-	$	-	$	216,000

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

5

BUTTE HIGHLANDS MINING COMPANY

(A Development Stage Company)

CONDENSED NOTES TO THE INTERIM FINANCIAL STATEMENTS

September 30, 2010

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Butte Highlands Mining Company (hereinafter “Butte” or “the Company”) was incorporated in May 1929 under the laws of the State of Delaware for the purpose of exploring and mining the Butte Highland’s (Only Chance) Mine, south of Butte, Montana.  The Company was reorganized in October 1996 for the purpose of acquiring and developing mineral properties.  As of the date of reorganization, stockholders representing approximately 76% of the outstanding capital stock could not be located.  In order to obtain the quorum necessary for the special meetings, the Company obtained an order from the Superior Court of Spokane County, Washington appointing a trustee for the benefit of those stockholders which could not be located.  

As of May 17, 2007 the Company had disposed of all of its historical mineral properties or claims, and has reentered the development stage.  The Board of Directors intends to seek out an appropriate business opportunity and has not limited its search to any particular industry. Management believes it can identify opportunities in several sectors and will proceed with the appropriate diligence to create value for the shareholders. Operations are primarily conducted from the Company headquarters in Spokane, Washington.

The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements.  These unaudited interim financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2009.  In the opinion of management, the unaudited interim financial statements furnished herein includes all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.  Operating results for the nine month period ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending Decem ber 31, 2010.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Butte Highlands Mining Company 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 accounting principles generally accepted in the United States and have been consistently applied in the preparation of the financial statements.

Recent Accounting Pronouncements

In February 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2010-09,Subsequent Events (Topic 855):Amendments to Certain Recognition and Disclosure Requirements.  This Update amends to Subtopic 855-10, Subsequent Events – Overall, to require SEC filers to evaluate subsequent events through the date that the financial statements are issued.

Marketable Securities

The Company accounts for marketable securities as required by ASC 320Investments – Debt & Equity Topic of the FASB Accounting Standards Codification.  At acquisition, an entity shall classify debt securities and equity securities into one of the following three categories

6

BUTTE HIGHLANDS MINING COMPANY

(A Development Stage Company)

CONDENSED NOTES TO THE INTERIM FINANCIAL STATEMENTS

September 30, 2010

Held to Maturity – the positive intent and ability to hold to maturity. Amounts are reported at amortized cost, adjusted for amortization of premiums and accretion of discounts.

Trading Securities – bought principally for purpose of selling them in the near term. Amounts are reported at fair value, with unrealized gains and losses included in earnings.

Available for Sale – not classified in one of the above categories. Amounts are reported at fair value, with unrealized gains and losses excluded from earnings and reported separately as a component of stockholders’ equity.

At this time, the Company holds securities classified as available for sale. See “Note 3, Investments” for further details.

Property and Equipment

Fixed assets are recorded at cost.  Depreciation is provided using the straight line method over the estimated useful lives of the assets.  Maintenance and repairs are charged to expense as incurred.  Major renewals and betterments are capitalized.  When items of property and equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations.  Depreciation expense for the periods ended September 30, 2010 and 2009 was $81 and $333, respectively.

Fair Value of Financial Instruments

The Company's financial instruments as defined by FASB ASC 825-10-50, include cash, receivables, accounts payable and accrued expenses.  All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at September 30, 2010.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements.  FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1.  Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3.  Unobservable inputs in which there is little of no market data, which require the reporting entity to develop its own assumptions.

The Company measures its investments at fair value on a recurring basis. See Note 3.

7

BUTTE HIGHLANDS MINING COMPANY

(A Development Stage Company)

CONDENSED NOTES TO THE INTERIM FINANCIAL STATEMENTS

September 30, 2010

The following table represents our assets by level measured at fair value on a recurring basis at September 30, 2010.

Description	Level 1		Level 2		Level 3
Assets
Investments	$	35,100	$	-	$	-

Provision for Taxes

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25Income Taxes – Recognition.  Under the approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end.  A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by ASC 740-10-25-5 to allow recognition of such an asset. See Note 5.

NOTE 3 - INVESTMENTS

The Company holds securities classified as available for sale. Amounts are reported at fair value, with unrealized gains and losses excluded from earnings and reported separately as a component of stockholders’ equity. The cost of securities sold is based on the specific identification method; realized gains and losses resulting from such sales are included in investment income.

Investment securities are reviewed for impairment in accordance with ASC 320-10 Investments - Debt and Equity Securities. We periodically review our investments for indications of other than temporary impairment considering many factors, including the extent and duration to which a security's fair value has been less than its cost, overall economic and market conditions, and the financial condition and specific prospects for the issuer. Impairment of investment securities results in a charge to income when a market decline below cost is other than temporary.

Unrealized gains and losses are recorded on the income statement as other comprehensive income (loss) and also on the balance sheet as other comprehensive income. The Company recognized an unrealized gain for the period ended June 30, 2010 of $25,850 and an unrealized loss for the period ended June 30, 2009 of $178,200.

The following summarizes the securities available for sale at June 30, 2010:

	# of				Market
Security	Shares		Cost		Value
Timberline Resources	30,000	$	14,100	$	35,100

The fair value of securities is determined by quoted market prices.  

8

BUTTE HIGHLANDS MINING COMPANY

(A Development Stage Company)

CONDENSED NOTES TO THE INTERIM FINANCIAL STATEMENTS

September 30, 2010

NOTE 4 – RELATED PARTY TRANSACTIONS

The Company utilized office facilities provided by its president.  The value of the office facilities provided by the Company’s president is nominal and immaterial to the financial statements.

NOTE 5 – INCOME TAXES

Income taxes are provided based upon the liability method of accounting pursuant to ASC 740-10-25Income Taxes – Recognition.  Under this approach, deferred income taxes are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end.  A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more likely than not” standard imposed by ASC 740-10-25-5.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes.

Significant components of the deferred tax assets for the periods ended September 30, 2010 and December 31, 2009 are as follows:

	September 30, 2010	December 31, 2009
Net operating loss carryforwards	-	-
Unrealized loss on investments	-	56,182
Deferred tax asset	-	56,182
Valuation allowance for deferred asset	-	(56,182)
Net deferred tax asset	-	-

At September 30, 2010, the Company has net operating loss carryforwards of approximately $0. The change in the allowance account from December 31, 2009 to June 30, 2010 was $56,182.

NOTE 6 – SUBSEQUENT EVENTS

For the period ended September 30, 2010, there were no recognizable or non recognizable subsequent events.  Subsequent events have been evaluated through the date the financial statements were issued.

9

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement

Some sections of this management’s discussion and analysis of our financial condition and results of operations may contain forward-looking statements.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions that are not statements of historical facts.  This document and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance.  The words “believe,” “expect,” “anticipate,” “intends,” “estimates,” “forecast,” “project” and similar expressions identify forward-looking statements.  The forward-looking statements in this document are based upon various assumptions, and although we believe that these assumptions were reason able when made, these statements are not guarantees of future performance and are subject to certain risks and uncertainties, some of which are beyond our control, and are difficult to predict.  Actual results could differ materially from those expressed in forward-looking statements.   Readers are cautioned not to place undue reliance on any forward-looking statements, which reflect management’s view only as of the date of this report.

Business of Butte Highlands Mining Company

Butte Highlands Mining Company (hereinafter “Butte,” “We” or “the Company”) was incorporated in May 1929 under the laws of the State of Delaware for the purpose of exploring and mining the Butte Highland’s (Only Chance) Mine, south of Butte, Montana. The Company is inactive, having sold the last of its mining claims in 2007.

We intend to acquire an interest in a business seeking the perceived advantages of a publicly registered corporation.  We will not restrict our search to any specific business or industry, and We may participate in a business venture of virtually any kind or nature. The Company may seek a business opportunity with an entity which has recently commenced operations, wishes to utilize the public marketplace in order to raise additional capital to expand into new products or markets, develop a new product or service, or for other corporate purposes.  The Company may acquire assets and/or establish subsidiaries in various businesses, or acquire existing businesses as subsidiaries.  Business opportunities may be available in many different industries at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.

Management of the Company, while not experienced in matters relating to the new direction of the Company, will rely primarily upon their own efforts to accomplish the business purposes.  The Company does not anticipate a significant change in the number of employees during the next 12 months. It is not anticipated that any outside consultants or advisors, other than the Company's legal counsel, will be utilized to effectuate its business purposes described herein. During the next twelve months, the Company expects to be able to satisfy its cash requirements, and does not foresee the need to raise additional capital during this period.

Effective July 6, 2009 the Company’s Class A Common Stock was registered under the Securities Exchange Act of 1934.  Effective April 29, 2010, our Class A Common Stock was listed for quotation on the OTC Bulletin Board.  Our trading symbol is “BTHI”

Result of Operations for period ended September 30, 2010 compared to the period ended September 30, 2009

During the three and nine month periods ended September 30, 2010, the Company had a net income of $7,139 and $7,311 respectively compared to net loss of $7,757  and a net loss of $37,795 during the three month and nine month periods ended September 30, 2009.  This represents an increase of net income in the amount of $14,896 and $45,106 over the respective three and nine month periods ended September 30, 2009. This increased income is due to primarily to a gain on the sale of investments.

Total operating expenses decreased to $5,759 during the three month period ended September 30, 2010 from $7,791 for the comparable period ended September 30, 2009.  The decrease is primarily due to lower professional fees.

Liquidity and Capital Resources

The Company’s working capital at September 30, 2010 was $265,260 compared to working capital of $221,208 at December 31, 2009. Working capital increased primarily due to the gain on the sale of investments.

Net cash used in operating activities was $18,410 during the nine month period ended September 30, 2010 compared with $41,298 during the nine month period ended September 30, 2009.

Cash flow from investing activities was $88,459 during the nine month period ended September 30, 2010 compared to $0 during the nine month period ended September 30, 2009.

Cash flow from financing activities was $0 during the nine month period ended September 30, 2010 compared with $0 during the nine month period ended September 30, 2009.

As a result, cash increased by $62,049 during the nine month period ended September 30, 2010. The Company had cash of $264,545 as of September 30, 2010. It will not be necessary for the Company to raise additional capital to continue its business activities in 2010.

Off-Balance Sheet Arrangements

There are no preliminary agreements or understandings between the Company and its officers and directors or affiliates or lending institutions with respect to any loan agreements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Smaller reporting companies are not required to provide this information.

ITEM 4.  CONTROLS AND PROCEDURES

a)  Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the chief executive officer and the chief financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and

communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were not effective in recording, processing, summarizing, and reporting information required to be disclosed, within the time periods specified in the Commission’s rules and forms, and that such information was accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

b)   Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the period ended September 30, 2010 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. REMOVED AND RESERVED

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS (filed with this report)

Exhibit 31.1 -

Certification required by Rule 13a-14(a) or Rule 15d-14(a)

Exhibit 31.2 -

Certification required by Rule 13a-14(a) or Rule 15d-14(a)

Exhibit 32.1 -

Certification required by Rule 13a-14(b) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

Exhibit 32.2 -

Certification required by Rule 13a-14(b) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BUTTE HIGHLANDS MINING COMPANY

By:      /s/ Paul Hatfield                                        

Paul Hatfield, President and Director

Date:  November 19, 2010  

By         /s/Paul Hatfield                                          

Paul Hatfield, Principal Accounting Officer

Date:  November 19, 2010