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10-Q
2012-09-30
false
GOLDEN PHOENIX MINERALS INC
0001042784
--12-31
Smaller Reporting Company
Yes
No
No
2012
Q3
394651525
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.75in;text-indent:-.75in'><b>NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF FINANCIAL STATEMENT PRESENTATION</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>Golden Phoenix Minerals, Inc. (the “Company” or “Golden Phoenix”) is a mineral exploration and development company specializing in acquiring and consolidating mineral properties with potential production and future growth through exploration discoveries.  The Company’s current growth strategy is focused on the expansion of its operations through the development of mineral properties into joint ventures and royalty mining projects.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The Company was formed in Minnesota on June 2, 1997.  On May 30, 2008, the Company reincorporated in Nevada.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>On April 14, 2011, the Company, through a wholly-owned subsidiary, Ra Minerals, Inc. (“Ra Minerals”), closed the acquisition of 100% of the issued and outstanding shares of Ra Resources Ltd., a corporation incorporated under the laws of the Province of Ontario.  The accompanying condensed consolidated financial statements of the Company include the accounts of the Company and the accounts of Ra Minerals from April 14, 2011 forward.  All intercompany accounts and balances have been eliminated in consolidation.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The interim financial information of the Company as of September 30, 2012 and for the three months and nine months ended September 30, 2012 and 2011 is unaudited, and the balance sheet as of December 31, 2011 is derived from audited financial statements.  The accompanying condensed consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles for interim financial statements.  Accordingly, they omit or condense notes and certain other information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles.  The accounting policies followed for quarterly financial reporting conform with the accounting policies disclosed in Note 2 to the Notes to Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.  In the opinion of management, all adjustments that are necessary for a fair presentation of the financial information for the interim periods reported have been made.  All such adjustments are of a normal recurring nature.  The results of operations for the three months and nine months ended September 30, 2012 are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2012.  The unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>Certain amounts in the condensed consolidated financial statements for the three months and nine months ended September 30, 2011 have been reclassified to conform to the current period presentation.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 2 – GOING CONCERN</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The consolidated financial statements of the Company are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  However, the Company has a history of operating losses since its inception in 1997, and has an accumulated deficit of $61,361,336 and a total stockholders’ deficit of $2,676,086 at September 30, 2012.  A significant portion of these deficits resulted from the Company’s accounting policy of expensing exploration mineral property acquisition costs, including costs expended to acquire interests in joint ventures with mineral properties in the exploration and evaluation stage, due to the uncertainty as to the recoverability of these costs.  The Company’s only source of operating revenues for the past several months has been the occasional rental of drilling equipment.  Currently, none of the Company’s mineral property prospects have proven or probable reserves.  The Company will require additional capital to fund its operations and to pursue mineral property development opportunities with its existing properties and other prospects.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>As more fully described in these Notes to Condensed Consolidated Financial Statements and elsewhere in this quarterly report, the Company currently owns or recently has entered into options and agreements for the acquisition of various mineral properties.  None of these mineral properties currently have proven or probable reserves.  The Company will be required to raise significant additional capital to complete the acquisition of the interests in and further the exploration, evaluation and development of each of these mineral properties.  There can be no assurance that the Company will be successful in raising the required capital or that any of these mineral properties will ultimately attain a successful level of operations.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>In September 2011, the Company entered into a senior, secured gold stream debt facility for up to $15.5 million (the “Gold Stream Facility”), secured by substantially all assets of the Company, with Waterton Global Value, L.P. (“Waterton”).  On January 24, 2012, the Company received a Notice of Default and Acceleration, and subsequently received supplemental Notices of Default, and a Notice of Disposition of Collateral from Waterton under the Gold Stream Facility.  The Company refuted each assertion of default.  Through April 30, 2012, the Company had borrowed an aggregate principal amount of $6,000,000 from the Gold Stream Facility.  On April 30, 2012, the Company’s 30% interest in Mineral Ridge Gold, LLC (the “Mineral Ridge LLC”) was foreclosed upon by Waterton and sold at a public auction, at which the only bidder present was Waterton.  The Company’s interest in the Mineral Ridge LLC was sold to Waterton and indebtedness to Waterton with a total book value of $6,209,912 was extinguished.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>Effective July 23, 2012 and subsequently amended effective July 30, 2012, the Company entered into a Rescission and Release Agreement (the “Rescission Agreement”) with Silver Global, S.A. (“Silver Global”) and Golden Phoenix Panama, S.A. (the “JV Company”) (collectively the “Parties”) whereby the Parties agreed to resolve outstanding disputes and rescind the Definitive Acquisition Agreement entered into on September 16, 2011 to develop the Santa Rosa mining project in Panama.  In accordance with the terms of the Rescission Agreement, Silver Global is to return and pay to the Company a total of $4,100,000 in scheduled payments over twelve months, subject to a discount of $750,000 as consideration for timely payments, and return to the Company for cancellation 25,000,001 shares of the Company’s common stock.  The Company is to transfer its 15% ownership interest in the JV Company to Silver Global via release of the Company’s fifteen (15) shares of JV Company common stock (the “Panama Shares”), to be released in tranches concurrent with the scheduled payments over twelve months.  The Company received the first payment from Silver Global of $350,000; however, there can be no assurance that the Company will receive the remaining payments from Silver Global as scheduled in the Rescission Agreement.  In the event of any default in payment by Silver Global, the Company will maintain any unpaid portion of the Panama Shares.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>Because of the negative impact of recent disputes and litigation on the Company’s fund raising efforts, including the foreclosure and sale of its interest in the Mineral Ridge LLC and the rescission of the joint venture in Panama, capital has generally not been available to continue mineral property exploration and evaluation activities and fund operations in the current year.  There can be no assurance that the Company will be successful in its efforts to obtain financing, or that it will be successful in its efforts to continue to raise capital at favorable rates or at all.  If the Company is unable to raise sufficient capital to pay its obligations, or the Company and its joint venture partners are unable to successfully complete the development of current mineral projects and obtain profitable operations and positive operating cash flows, the Company may be forced to scale back its mineral property acquisition and development plans or to significantly reduce or terminate operations and file for reorganization or liquidation under the bankruptcy laws. These factors together raise doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 3 – </b><b>MINERAL PROPERTIES</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>            As of September 30, 2012, the Company held interests in or had plans to pursue the mineral property opportunities discussed below.  These exploration projects currently do not have proven or probable reserves.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>Nevada Properties and Projects</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b><i>Duff Claims Block, Humboldt County, Nevada</i></b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The Company owns the Duff claims block comprised of 103 mineral claims located along the western flank of the Pine Forest Range, 20 miles south of Denio, Humboldt County, Nevada.  The claims block, which was acquired in 2007, extends from Oakly Canyon south of the Ashdown Mine to the border of the Blue Lake Wilderness Study Area.  Metals historically mined in the general region include gold, molybdenum, copper, tungsten, and antimony.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The major mine feature of the Duff claims is the Adams Mine, which at one time produced silica.  However, there are historical reports that substantial gold was also extracted from the quartz rock.  Gold has also been mined in the Vicksburg, Ashdown, and Cherry Creek canyons to the north, and Leonard Canyon to the south of the Duff claims.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The Company received a notification from an individual claiming overlapping ownership and priority of certain claims comprising the Duff claims block and Adams Mine.  The Company is looking into the facts surrounding the potential dispute.  Although the Company does not anticipate a material change as a result of this matter, the Company may be required to revise its description of its claim holdings or expend additional funds to maintain the interest it currently believes it holds.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The Duff claims block has no historical cost basis to the Company for accounting purposes; therefore, no amounts related to this mineral property are included in the accompanying condensed consolidated financial statements.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b><i>Agreement to Purchase 80% Interest in Vanderbilt and Option to Acquire 80% Interest in Coyote Fault and Coyote Extension Properties, Esmeralda County, Nevada</i></b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>In July 2010, the Company entered into two separate agreements with Mhakari Gold (Nevada), Inc. (“Mhakari”), an Asset Purchase Agreement and an Option Agreement, which provide the Company the ability to acquire an 80% interest in each of the historic Vanderbilt silver/gold mine and Coyote Fault gold and silver project, both in Esmeralda County, Nevada.  Subsequently, in July 2011, we entered into an Option Agreement with Mhakari to acquire an 80% interest in that certain property referred to as the “Coyote Extension” that extends and augments the Coyote Fault property.  The Company entered into an Asset Purchase Agreement to acquire an 80% interest in the Vanderbilt property in consideration for the issuance of 2,000,000 shares of its common stock as well as warrants to purchase a further 2,000,000 shares of its common stock with an exercise price of $0.05 per share exercisable for a period of five years, with a forced conversion at the Company’s option in the event its 200-day volume weighted average price equals $0.15 per share.  The Company obtained its option to acquire an 80% interest in Coyote Fault in consideration for the issuance of 5,000,000 shares of our common stock as well as warrants to purchase a further 5,000,000 shares of its common stock with an exercise price of $0.05 per share exercisable for a period of five years with the same forced conversion feature.  In addition, to earn its 80% interest in each property, the Company is required to expend no less than $150,000 in exploration and development expenditures in the first 12 months on the Coyote Fault property, $350,000 in exploration and development expenditures on the Vanderbilt property over a 48 month period, and a combined minimum of $1,500,000 on both the Coyote Fault and Vanderbilt Properties.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>To exercise its option for the Coyote Extension property, the Company must fulfill certain conditions and make certain payments to Mhakari as follows: (i) upon signing the Option Agreement, $85,000 cash payment, which amount was satisfied through the exercise by Mhakari of 1,700,000 out of the aggregate total 7,000,000 Company common stock purchase warrants held by Mhakari (“Existing Warrants”) at an exercise price of $0.05 per share; (ii) upon signing the Option Agreement, issuance of 1,500,000 shares of the Company’s common stock and warrants to purchase a further 1,500,000 shares of Company common stock at an exercise price of $0.15 per share exercisable for a period of two years, which warrants contain a forced conversion provision in the event the moving average price of a share of the Company’s common stock reaches or exceeds $0.30 for a period of 65 consecutive trading days or more, as quoted by the OTCBB; and (iii) within 48 months of signing the Option Agreement, the Company shall be required to expend no less than an additional $250,000 in exploration and development expenditures on the Coyote Extension (or at the Company’s discretion, on the Coyote Fault or Vanderbilt properties).  Further, Mhakari agreed, within two months of signing the Coyote Extension Agreement, to expend $250,000 in cash to the Company to exercise five million of its remaining warrants to acquire Company shares (the “Warrant Exercise”).  Through September 30, 2012, Mhakari had exercised 3,000,000 warrants.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>Further, upon satisfaction of certain of the above-referenced milestones (namely, issuances of shares, warrants, and initial expenditure obligations), the Company will receive a 51% interest in the properties in the form of a joint venture with Mhakari, such 51% interest to automatically increase to 80% upon satisfaction of the overall exploration and development expenditure obligation.  Although the Company anticipates completing its obligations necessary to finalize the acquisition of an 80% interest in both properties, there can be no assurance that funds will be available or that the Company will consummate the purchase or the option and earn its full 80% interest in each property.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'><u>Vanderbilt</u></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The Vanderbilt property is within 4 miles of the town of Silver Peak, Nevada and highway 265 via Coyote Road.  It is comprised of 44 claims, plus 3 patented claims and is located on the southern flank of Mineral Ridge and is within the Silver Peak Range.  The Vanderbilt property is within the middle of the Walker Lane tectonic belt with the Sierra uplift to the west and the Basin and Range to the east.  Phase I geologic mapping and outcrop sampling (above ground) was completed in October 2010, resulting in average grades of 2.1 g/t gold and 58.6 g/t silver.  Phase II exploration program (below ground) in the old mine workings was commenced during the first quarter of 2011 to help identify drill targets, with an exploratory drill program expected to begin in the near term as funding permits.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'><u>Coyote Fault</u></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The Coyote Fault/Coyote Fault Extension claims are within nine miles of Silver Peak, Nevada and Hwy 265 via Coyote Road.  They are comprised of 110 contiguous claims and are also located in the middle of the Walker Lane tectonic belt with Sierra Block uplift to the west and the Basin and Range to the east.  The property is on the northern flank of Mineral Ridge and is along the eastern edge of the Silver Peak Range.  Phase I geologic mapping and outcrop sampling (above ground) was completed on the Coyote Fault claim group (38 claims) in December, 2010, which identified a new potential gold exploration target. Geological mapping of the Coyote Extension claim group (72 claims) is planned for the near term as funding permits.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>            At September 30, 2012, the Company had only partially met its obligation to expend no less than $150,000 in exploration and development expenditures in the first 12 months on the Coyote Fault property and Mhakari had not completed the Warrant Exercise under the Coyote Extension Agreement.  The Company is in discussion with Mhakari regarding this and other matters.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>Canadian Properties and Projects</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b><i>Northern Champion Property, Ontario, Canada</i></b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The Northern Champion property consists of approximately 880 acres in Griffith and Brougham Townships in the Province of Ontario, Canada (“Northern Champion Property”).  On April 18, 2006, the Company executed a Purchase Agreement with four individuals (collectively, the “Vendors”) to acquire 5 registered claims totaling 22 units on the Northern Champion Property together with a NI 43-101 Technical Report and Feasibility Study describing a molybdenite deposit within the area of the claims.  The agreement reserved a collective 3.3% Net Smelter Return (“NSR”) for the Vendors on the sales of minerals taken from the Northern Champion Property. The Company will have the right of first refusal to purchase 1.65% of said NSR from the Vendors for $1,650,000.  As of February 2007, the Company completed all of its payment obligations under the Purchase Agreement and accordingly now owns 100% of the Northern Champion Property subject to the NSR reserved by the Vendors.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>In the last quarter of 2010 and during 2011, the Company began mapping the geologic surface features and topography of the Northern Champion Property, into a single, regional metric scale map, in preparation to advance this molybdenum property.  Once the mapping is complete and as funding allows, the Company expects to begin Phase II planning for trenching, geochemical sampling and/or drilling of previously identified zones to the east of the current open-cut mine.  An IP (induced polarization) anomaly to the north of the open-cut zone is also expected to be investigated.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b><i>North Williams Township Option Agreement</i></b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>On March 1, 2011, the Company entered into an option agreement with four individuals to acquire a 100% undivided interest in 61 unpatented mining claim units in North Williams Township in the Province of Ontario, Canada.  In order to maintain in force the working right and option granted to it, the Company must make the following payments to the optionors: down payment on signing the option agreement – cash payment of $20,000 and 100,000 shares of the Company’s common stock (which payment was made in March 2011 with a total value of $18,500 assigned to the common shares issued); 12 months from signing – cash payment of $40,000 and 100,000 shares of the Company’s common stock; 24 months from signing – cash payment of $80,000 and 100,000 shares of the Company’s common stock; and 36 months from signing – cash payment of $160,000 and 100,000 shares of the Company’s common stock.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b><i>Shining Tree Properties, Ontario, Canada</i></b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The mineral properties purchased in the Ra Resources acquisition in April 2011 are located within the Shining Tree District in Northern Ontario.  The historic Shining Tree area is currently undergoing a resurgence of exploration where five other companies have been preparing and engaging in drill programs.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>Peru Property Interests</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>During 2011, the Company executed and amended certain agreements pursuant to which the Company will acquire a 100% interest in certain gold and molybdenum properties in Peru, including: the Porvenir tungsten molybdenum stockpile, the Porvenir tungsten molybdenum exploration property (collectively, the “Porvenir Properties”), the Alicia gold exploration area near and abutting Porvenir and two large gold exploration plays in the Pataz District, Group of the Eight and the Tornitos (collectively, the “Gold Properties”) (the Porvenir Properties and Gold Properties are collectively referred to herein as the “Peru Properties”).  The Peru Properties total approximately 6,200 hectares of prospective exploration ground, or approximately 25 square miles.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The Company is currently in the process of finalizing necessary transfer agreements to be filed with Peruvian governmental authorities to affect the transfer and discussing other terms and conditions with the vendor of such Peru Properties.  The Company anticipates finalizing such transfer agreements and related matters in the near term.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>Mina Santa Rosa</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>During the year ended December 31, 2011, extensive efforts were directed toward the acquisition and advancement of the Santa Rosa, Panama project.  The Santa Rosa gold deposit is located near the city of Cañazas in Veraguas Province, Panama, approximately 300 kilometers southwest of Panama City.  On July 9, 2011, the Company entered into a letter of intent with Silver Global, S.A. (“Silver Global”) to acquire an interest in the Santa Rosa gold mine (“Santa Rosa” or “Mina Santa Rosa”).  On September 16, 2011, the Company entered into a Definitive Acquisition Agreement to acquire a 60% interest, with an option to buy an additional 20% interest, in the Santa Rosa gold mine, via ownership in Golden Phoenix Panama S.A. (the “JV Company”), in consideration for $20,500,000 in cash over a period of approximately 12 to 15 months (with the final earn-in to occur upon achieving commercial production) and $4,500,000 in shares of the Company’s common stock (at an agreed upon value of $0.18 per share).  The Company and Silver Global subsequently completed a Joint Venture Operating Agreement and effected transfer of all concessions to JV Company.  The Company made payments in the aggregate amount of $4,500,000 in cash and issued 25,000,001 shares of its common stock in consideration for a 15% interest in the JV Company.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>Effective July 23, 2012 and subsequently amended effective July 30, 2012, the Company entered into a Rescission and Release Agreement (the “Rescission Agreement”) with Silver Global and the JV Company (collectively the “Parties”) whereby the Parties agreed to resolve their disputes and rescind the Definitive Acquisition Agreement.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>            In accordance with the terms of the Rescission Agreement, Silver Global is to return and pay to the Company a total of $4,100,000 in scheduled payments over twelve months, subject to a discount of $750,000 as consideration for timely payments, and return to the Company for cancellation 25,000,001 shares of the Company’s common stock.  The Company is to transfer its 15% ownership interest in the JV Company to Silver Global in tranches concurrent with scheduled payments.  In the event of any default in the scheduled payments, the Company will keep the unpaid portion of the 15% interest.  Further, as part of the Rescission Agreement, all rights and obligations of the parties under the Santa Rosa Acquisition Agreement were immediately terminated, including the extinguishment of the outstanding loan for $500,000 payable to Silver Global.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>            Concurrent with the execution of the Rescission Agreement and the receipt of the first payment by the Company of $350,000 on August 8, 2012, the arbitration proceedings previously filed by the Company against Silver Global and pending before the International Chamber of Commerce were dismissed, without prejudice.  As a result of the $350,000 payment from Silver Global and the extinguishment of the $500,000 note payable, less related bank and legal fees of $6,305, the Company recorded an $843,695 gain on rescission of the joint venture.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>            Subsequent to September 30, 2012, Silver Global returned to the Company the 25,000,001 shares of the Company’s common stock (Note 18).</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>Exploration and evaluation expenses included in the Company’s condensed consolidated statements of operations and comprehensive loss were comprised of expenses incurred for the following exploration mineral properties opportunities:</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <table border="0" cellspacing="0" cellpadding="0" width="564" style='margin-left:41.4pt;border-collapse:collapse'> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="180" colspan="2" valign="bottom" style='width:135.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Three Months Ended September 30,</b></p> </td> <td width="180" colspan="2" valign="bottom" style='width:135.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Nine Months Ended September 30,</b></p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2012</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2011</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2012</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2011</b></p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Mina Santa Rosa</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$                 -</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$  1,250,000</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$       64,516</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$  1,250,000</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Peru Properties</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>1,373,995</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>1,894,721</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Molyco</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>200,000</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Mhakari Properties</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>386,089</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>436,089</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Shining Tree Mining District</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>47,432</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>6,160,727</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>North Williams Township</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>39,055</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Other</p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>84,081</p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>87,555</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>249,767</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>306,058</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Total</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$       84,081</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$  3,145,071</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$     314,283</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$10,286,650</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 4 – ACQUISITION OF RA RESOURCES, LTD</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>On October 6, 2010, the Company entered into a definitive Acquisition Agreement (“Acquisition Agreement”) between the Company, Ra Resources Ltd., a corporation incorporated under the laws of the Province of Ontario (“Ra”) and 2259299 Ontario Inc., a corporation incorporated under the laws of the Province of Ontario and a wholly-owned subsidiary of the Company formed for the purpose of effecting the transactions contemplated by the Acquisition Agreement (“Newco”).  On April 14, 2011, the Company closed the Acquisition Agreement whereby the Company acquired 100% of the outstanding common shares of Ra by way of a “three-cornered amalgamation” in accordance with the Ontario Business Corporations Act (the “Acquisition”).  Based on an agreed upon 3.5 for 1 exchange ratio, the Company issued a total of 32,642,831 shares of its common stock to the Ra shareholders.  Further, the Company assumed and exchanged, based on the 3.5 for 1 exchange ratio, 200,000 issued and outstanding options to acquire common shares of Ra Resources at an exercise price of $0.10 per share, which were canceled in exchange for the issuance by the Company of an aggregate of 700,000 options to acquire shares of Company common stock at an exercise price of approximately $0.03 per share.  As mutually agreed upon by the parties, the Company also issued 3,264,283 shares of its common stock to a non-related third party as a 10% finder’s fee for introducing the Acquisition.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The principal assets of Ra are four gold and base metal properties in the Shining Tree District in Ontario, Canada which are in the exploration stage and have no proven or probable ore reserves.  The Company also assumed certain outstanding obligations of Ra totaling $266,502 related to ongoing maintenance and working capital expenditures during the period between execution of the Acquisition Agreement and its closing.  The accompanying condensed consolidated financial statements of the Company include the accounts of the Company and the accounts of Ra Minerals from April 14, 2011 forward.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 5 – MARKETABLE SECURITIES</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>The Company’s marketable securities consist of 1,250,000 shares of American Mining Corporation common stock (“AMC”) and the 3,000,000 shares of Win-Eldrich Mines Ltd (“WEX”) common stock received in the settlement of a promissory note in October 2011.  The marketable securities are stated at market value, with market value based on market quotes.  The Company has classified these marketable securities as securities held-for-sale in accordance with ASC Topic 320, <i>Investments – Debt and Equity Securities</i>.  Unrealized gains and losses resulting from changes in market value were recorded as other comprehensive income, a component of stockholders’ equity in the Company’s condensed consolidated balance sheet.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>On May 9, 2012, trading of WEX common shares was halted on the Toronto Stock Exchange due to WEX not timely filing its annual report and audited financial statements.  Unless this trading suspension is resolved by WEX and a market for the WEX common shares develops, the ability of the Company to realize the book value of its investment in WEX common shares is uncertain.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>After considering several factors, including the nature of the operations of AMC and WEX, the trading volume of the shares and the number of shares held by the Company, we have concluded that an impairment loss for the marketable securities should be recorded for the quarter ended September 30, 2012, and that the impairment loss is other-than-temporary.  Therefore, we have recorded an impairment loss for the marketable securities of $302,650 for the quarter ended September 30, 2012. </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>In accordance with ASC Topic 820, <i>Fair Value Measurements and Disclosure</i>, the Company categorizes its financial assets and liabilities that it measures on a recurring basis into a three-level fair value hierarchy as defined in the standard.  Marketable securities held at September 30, 2012 are the only financial instruments that the Company currently measures on a recurring basis.  The following table summarizes the Company’s financial assets measured on a recurring basis as of September 30, 2012:</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0" width="86%" style='width:86.26%;margin-left:-30.25pt'> <tr> <td width="32%" valign="top" style='width:32.0%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Description</b></p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Quoted Prices in</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Active Markets for</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Identical Assets (Level 1)</b></p> </td> <td width="23%" valign="top" style='width:23.5%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b> Significant Other</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Observable</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Inputs (Level 2)</b></p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b> Significant</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Unobservable</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Inputs (Level 3)</b></p> </td> </tr> <tr> <td width="32%" valign="top" style='width:32.0%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="23%" valign="top" style='width:23.5%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> </tr> <tr> <td width="32%" valign="top" style='width:32.0%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="23%" valign="top" style='width:23.5%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> </tr> <tr> <td width="32%" valign="top" style='width:32.0%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>Marketable Securities</p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>$ 302,650</p> </td> <td width="23%" valign="top" style='width:23.5%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>$ -</p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>$ -</p> </td> </tr> </table> </div> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>In accordance with ASC Topic 830, <i>Foreign Currency Matters,</i> the increase or decrease in the recorded value of the marketable securities resulting from changes in foreign exchange rates between the Company’s functional currency, the US dollar, and the currency in which the marketable securities are denominated, the Canadian dollar, is recorded as a foreign currency transaction gain or loss in the Company’s consolidated statements of operations.  The foreign currency gain related to these securities was $22,200 for the three months ended September 30, 2012 and the foreign currency loss related to these securities was $48,900 for the nine months ended September 30, 2012.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>NOTE 6 – PROPERTY AND EQUIPMENT</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>                </b>Property and equipment consisted of the following at:</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <table border="0" cellspacing="0" cellpadding="0" style='margin-left:41.4pt;border-collapse:collapse'> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>September 30, 2012</b></p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>December 31, 2011</b></p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Computer equipment</p> </td> <td width="114" valign="top" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$            23,508</p> </td> <td width="108" valign="top" style='width:81.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$           20,772</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Drilling equipment</p> </td> <td width="114" valign="top" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>244,805</p> </td> <td width="108" valign="top" style='width:81.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>346,205</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Vehicles</p> </td> <td width="114" valign="top" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>5,000</p> </td> <td width="108" valign="top" style='width:81.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>29,000</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Support equipment</p> </td> <td width="114" valign="top" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>39,932</p> </td> <td width="108" valign="top" style='width:81.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>39,932</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> Office furniture and equipment</p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>7,459</p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>8,496</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>`</p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>320,704</p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>444,405</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Less accumulated depreciation and amortization</p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>(227,033)</p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>(287,581)</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>  </p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$           93,671</p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$         156,824</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>NOTE 7 – SENIOR SECURED NOTE PAYABLE AND SALE OF INTEREST IN MINERAL RIDGE LLC</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>On September 26, 2011, the Company entered into a Senior Secured Gold Stream Credit Agreement with Waterton Global Value, L.P. (previously defined as “Waterton”), whereby Waterton agreed to advance the Company up to $15,500,000 (the “Commitment Amount”) in five separate tranches (the “Gold Stream Facility”) to further the Company’s acquisition of an interest in the Mina Santa Rosa property.  The Gold Stream Facility was secured by all assets of the Company, including a pledge of the Company’s membership interest in the Mineral Ridge LLC, all as evidenced by that certain Amended and Restated Security Agreement and Amended and Restated Pledge Agreement, each entered into by the parties as of September 26, 2011.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>In accordance with the terms of the Gold Stream Facility, that portion of the Commitment Amount borrowed (at any given time, the amount outstanding referred to as the “Principal Amount”) is payable by the Company to Waterton in monthly payments which were to commence in March 2012 for a period between two and eighteen months depending on the amount borrowed.  The first tranche of funding in the amount of $1,750,000, which included repayment of a $1 million Bridge Loan, closed simultaneous with entering into the Gold Stream Facility.  On November 2, 2011 the Company borrowed $4,250,000 from the second tranche of funding, netting approximately $4,095,000 after payment of fees and expenses.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>Repayments were to commence in March 2012 and, if made in cash, were to be in monthly repayment amounts of $750,000 for each of the first four tranches borrowed.  Upon borrowing tranche five, repayments would have consisted of eight monthly payments of $750,000 and ten monthly payments of $950,000.  Monthly repayment amounts were also to consist of a profit participation amount based on the spot price of gold.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>In connection with the Gold Stream Facility, the Company affirmed Waterton’s option, pursuant to an Amended and Restated Option Agreement, to purchase the Company’s interest in the Mineral Ridge LLC, which option, along with the Company’s grant of a security interest in its ownership of the Mineral Ridge LLC, were simultaneously consented to by Scorpio Gold Corporation, the majority partner at Mineral Ridge.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>On January 24, 2012, the Company received a Notice of Default and Acceleration, and subsequently received supplemental Notices of Default, and a Notice of Disposition of Collateral from Waterton under the Gold Stream Facility.  The Company refuted each initial assertion of default.  Notwithstanding, on April 30, 2012, the Company’s 30% interest in Mineral Ridge Gold, LLC (the “Mineral Ridge LLC”) was foreclosed upon by Waterton and sold at a public auction, at which the only bidder present was Waterton.  The Company’s interest in the Mineral Ridge LLC was sold to Waterton for a credit bid of $9,035,321, which amount is claimed by Waterton as owed by the Company under the Gold Stream Facility, including alleged penalties and interest.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>Through April 30, 2012, the date of the foreclosure and sale, the Company had borrowed $6,000,000 in principal and had accrued interest expense of $209,912.  The total of these amounts, $6,209,912, has been recorded as the sales proceeds for the interest in the Mineral Ridge LLC, resulting in a gain in the same amount recorded in the nine months ended September 30, 2012 since the Company had no book value recorded for its investment in the Mineral Ridge LLC. </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The facts and circumstances surrounding the alleged default that resulted in the foreclosure and sale of the Company’s interest in the Mineral Ridge LLC were matters in dispute and the subject of litigation filed by the Company against Waterton and Scorpio Gold Corporation, a participant in the Mineral Ridge Joint Venture.  On July 11, 2012, the Company announced that it, Waterton, and Scorpio Gold Corporation entered into a settlement agreement to discontinue the litigation and to fully release each other from any claims or possible claims relating to the litigation.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 8 – NOTES PAYABLE</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>            The Company’s notes payable and current portion of long-term debt consists of the following at:</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <table border="0" cellspacing="0" cellpadding="0" width="594" style='width:445.5pt;margin-left:36.9pt;border-collapse:collapse'> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>            </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>September 30, 2012</b></p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>December 31, 2011</b></p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Capital lease payable to Heartland Wisconsin Corp.,    payable at $1,148 per month through May 2013,    secured by equipment</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> $           8,839</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> $         18,088</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Note payable to Komatsu Equipment Company, with    principal payments of $58,486 on June 30, 2008,    $58,486 on June 30, 2009, and $58,485 on June 30, 2010,    with interest at 8%, unsecured</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 175,457</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 175,457</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Convertible note payable to SV, non-interest bearing,    payable September 30, 2012</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 500,000</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 500,000</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Convertible note payable to SV, non-interest bearing,    payable September 30, 2012</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 413,223</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 413,223</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Note payable to Pinnacle, non-interest bearing, payable in    scheduled monthly payments ranging from $15,000 to    $30,000 through August 2012</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 190,000</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 220,000</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Convertible note payable to Pinnacle, non-interest bearing,    payable October 31, 2013</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 250,000</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 250,000</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Note payable to Silver Global, non-interest bearing, payable    January 31, 2012</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> -</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 500,000</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Other</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>-</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>3,730</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Accrued interest payable</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>73,692</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>63,164</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-top:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-top:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Total</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>1,611,211</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>2,143,662</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Less current portion</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>1,361,211</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>1,888,067</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Long-term portion</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$       250,000</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$       255,595</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>The two convertible notes payable to Sala-Valc S.A.C., a Peruvian corporation (“SV”), resulted from an Amendment to Mining Asset Purchase and Strategic Alliance Agreement related to the Peru Properties (Note 3).</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>The two notes payable to Pinnacle Minerals Corporation (“Pinnacle”) resulted from an Amendment to Membership Interest Purchase Agreement whereby the Company purchased Pinnacle’s membership interest in Molyco, LLC, which owns or controls portions of the Peru Properties (Note 3). </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>The note payable to Silver Global, SA, a Panamanian corporation (“Silver Global”), resulted from a loan agreement, amended as of December 30, 2011, whereby Silver Global agreed to loan the Company a portion of the funds paid by the Company to Silver Global to purchase ownership in the Mina Santa Rosa (Note 3).  Such note payable was subsequently extinguished and is no longer an obligation of the Company as a result of the rescission of the Definitive Acquisition Agreement with Silver Global.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 9 – AMOUNTS DUE RELATED PARTIES AND SETTLEMENT AGREEMENT</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>Amounts due to related parties include a note due to Robert P. Martin, Chairman of the Company’s Board of Directors resulting from a debt settlement agreement entered into in April 2010.  The repayment terms of the note were restructured as part of a consulting agreement entered into with Mr. Martin effective September 1, 2011.  The obligation was paid 50% in November 2011, with the remaining 50% payable on or before February 27, 2012 (not yet paid at September 30, 2012).  At September 30, 2012, amounts due related parties totaled $120,821, comprised of note principal of $115,066 and accrued interest payable of $5,755.  At December 31, 2011, amounts due related parties totaled $115,671, comprised of note principal of $115,066 and accrued interest payable of $605.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 10</b><b> – STOCKHOLDERS’ EQUITY</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>The Company authorized 50,000,000 shares of no par value, non-voting convertible preferred stock.  In 1997, the Company’s Board of Directors authorized the designation of a class of preferred stock convertible into ten shares of common stock for each share of preferred stock at a conversion rate of $0.10 per common share for a period of ten years from June 12, 1997.  The Company did not determine any dividend rights, dividend rates, liquidation preferences, redemption provisions, and other rights, preferences, privileges and restrictions.  At the date of this action and as of September 30, 2012 and December 31, 2011, there were no shares of preferred stock outstanding.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>The Company also has authorized 800,000,000 shares of $0.001 par value common stock.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>During the nine months ended September 30, 2012, the Company issued a total of 26,617,377 shares of its common stock, including: 24,136,364 shares for cash of $412,500 ($425,000 less $12,500 in finder’s fees) and 2,481,013 shares issued upon cashless exercise of warrants recorded at par value of $2,481.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>On July 10, 2012, concurrently with the execution of the settlement agreement with Waterton Global Value, L.P. described in Note 15,  the Company completed a private placement with an institutional investor, consisting of the issuance of 6,000,000  warrants, to purchase an equivalent number of shares of the Company’s common stock in consideration for a purchase price of $400,000.  Two million of the warrants will be exercisable for $0.04 per warrant share and the remaining four million warrants exercisable at $0.08 per warrant share.  These warrants are exercisable for a period of five years from date of issuance, through July 10, 2017.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>In April 2012, an investor purchased a warrant for $20,000, entitling the investor to purchase 2,000,000 shares of common stock at an exercise price of $0.04 per share, exercisable for a period of two years.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>            On September 28, 2010, the Company announced that its Board of Directors approved a Stock Repurchase Program, permitting the Company to repurchase up to an aggregate of 20% of its outstanding common stock over the next 12 months.  The repurchases will be made from time to time in the open market at prevailing market prices or in negotiated transactions off the market.  The Stock Repurchase Program may be extended beyond 12 months or shortened by the Board of Directors.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>As of September 30, 2012, the Company had 415,392 shares of its common stock acquired in the Stock Purchase Program that were recorded as treasury shares at a cost of $49,008.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 11 – STOCK WARRANTS</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>A summary of the status of the Company’s stock warrants as of September 30, 2012, and changes during the six months then ended is presented below:</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <table border="0" cellspacing="0" cellpadding="0" width="507" style='width:380.05pt;margin-left:41.4pt;border-collapse:collapse'> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'> </p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Weighted Average</b></p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Shares</b></p> </td> <td width="115" valign="bottom" style='width:86.15pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Exercise Price</b></p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="115" valign="bottom" style='width:86.15pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Outstanding, December 31, 2011</p> </td> <td width="114" valign="bottom" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>40,333,333</p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.14</p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'> </p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.1in'>Granted</p> </td> <td width="114" valign="bottom" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>21,750,000</p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.05</p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.1in'>Canceled / Expired</p> </td> <td width="114" valign="bottom" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>(2,000,000)</p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.06</p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.1in'>Exercised</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>(4,000,000)</p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.03</p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'> </p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Outstanding, vested and exercisable    September 30, 2012</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>56,083,333</p> </td> <td width="115" valign="bottom" style='width:86.15pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.11</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>In January 2012, the Company issued warrants to an investor to purchase a total of 4,000,000 shares of the Company’s common stock in connection with the issuance of common stock for cash.   The investor subsequently exercised the warrants and received 2,481,013 shares of common stock in a cashless exercise. </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>In connection with the issuance of common stock for cash in February 2012, the Company issued a warrant to an investor for the purchase of 2,500,000 shares of common stock at an exercise price of $0.06 per share, exercisable for a period of five years.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>In connection with the issuance of common stock for cash in April 2012, the Company issued a warrant to an investor for the purchase of 4,000,000 shares of common stock at an exercise price of $0.04 per share, exercisable for a period of two years.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>In connection with the issuance of common stock for cash in April 2012, the Company issued a warrant to an investor for the purchase of 2,500,000 shares of common stock at an exercise price of $0.04 per share, exercisable for a period of two years.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>In April 2012, an investor purchased a warrant for $20,000, entitling the investor to purchase 2,000,000 shares of common stock at an exercise price of $0.04 per share, exercisable for a period of two years.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>            During the nine months ended September 30, 2012, the Company issued a consultant warrants to purchase a total of 750,000 shares of the Company’s common stock.  The warrants are exercisable for a period of two years at an exercise price of $0.125 per share.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>In a private placement in July 2012, an investor purchased two five-year warrants for $400,000, entitling the investor to purchase 2,000,000 shares of common stock at an exercise price of $0.04 per share and 4,000,000 shares of common stock at an exercise price of $0.08 per share.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 12</b><b> – STOCK-BASED COMPENSATION</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.75in;text-align:justify;text-indent:-.75in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:justify;text-indent:.5in'>The Company accounts for stock-based compensation in accordance with ASC Topic 718, <i>Compensation – Stock Compensation.</i>  Under the fair value recognition provisions of this standard, stock-based compensation cost is measured at the grant date based on the value of the award granted, using the Black-Scholes option pricing model, and recognized over the period in which the award vests.  The stock-based compensation expense included in general and administrative expenses for the three months ended September 30, 2012 and 2011 was $0 and $187,677, respectively, and $0 and $202,745 for the nine months ended September 30, 2012 and 2011, respectively.  There was no stock compensation expense capitalized during the three months and nine months ended September 30, 2012 and 2011.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>During the nine months ended September 30, 2012, the Company granted to a director stock options to purchase 100,000 shares of the Company’s common stock at an exercise price of $.0149 per share.  The Company estimated the weighted average grant-date fair value of these options at $0.013 per share using the Black-Scholes option pricing model with the following assumptions: </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <table border="0" cellspacing="0" cellpadding="0" style='margin-left:31.5pt;border-collapse:collapse'> <tr> <td width="282" valign="top" style='width:211.5pt;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:4.5pt'>Expected dividend yield</p> </td> <td width="149" valign="top" style='width:112.0pt;padding:0'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>0.00%</p> </td> </tr> <tr> <td width="282" valign="top" style='width:211.5pt;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:4.5pt'>Expected stock price volatility</p> </td> <td width="149" valign="top" style='width:112.0pt;padding:0'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>136.86%</p> </td> </tr> <tr> <td width="282" valign="top" style='width:211.5pt;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:4.5pt'>Risk-free interest rate</p> </td> <td width="149" valign="top" style='width:112.0pt;padding:0'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>.82%</p> </td> </tr> <tr style='height:.2in'> <td width="282" valign="top" style='width:211.5pt;padding:0;height:.2in'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:4.5pt'>Expected life of option</p> </td> <td width="149" valign="top" style='width:112.0pt;padding:0;height:.2in'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:4.5pt'>5.0 years</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The following table summarizes the stock option activity during the nine months ended September 30, 2012:</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="114" valign="top" style='width:85.8pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'><b> Options</b></p> </td> <td width="99" valign="top" style='width:74.1pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Weighted Average Exercise Price</b></p> </td> <td width="104" valign="top" style='width:78.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Weighted Average Remaining Contract Term</b></p> </td> <td width="89" valign="top" style='width:66.6pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'><b> Aggregate Intrinsic Value</b></p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="114" valign="top" style='width:85.8pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="99" valign="top" style='width:74.1pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="104" valign="top" style='width:78.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Outstanding at December 31, 2011</p> </td> <td width="114" valign="top" style='width:85.8pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>8,930,000</p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.11</p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Granted</p> </td> <td width="114" valign="top" style='width:85.8pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>100,000</p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.01</p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Exercised</p> </td> <td width="114" valign="top" style='width:85.8pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>-</p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'> </p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Expired or cancelled</p> </td> <td width="114" valign="top" style='width:85.8pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>(1,180,000)</p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.11</p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="top" style='width:85.8pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Outstanding, vested and exercisable    at September 30, 2012</p> </td> <td width="114" valign="top" style='width:85.8pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 7,850,000</p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'> $   0.11</p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> 3.20</p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> $            -</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $0.01 as of September 30, 2012 which would have been received by the holders of in-the-money options had the option holders exercised their options as of that date.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>As of September 30, 2012, there was no future compensation cost related to non-vested stock-based awards not yet recognized in the condensed consolidated statements of operations.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 13 – EARNINGS (LOSS) PER SHARE</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The computation of basic earnings per common share is based on the weighted average number of shares outstanding during the period.  The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the period plus the weighted average</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>common stock equivalents which would arise from the exercise of stock options, warrants and rights outstanding using the treasury stock method and the average market price per share during the period.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>A reconciliation of the number of shares used in the computation of the Company’s basic and diluted earnings per common share is as follows:</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <table border="0" cellspacing="0" cellpadding="0" width="636" style='margin-left:5.4pt;border-collapse:collapse'> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="186" colspan="2" valign="bottom" style='width:139.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Three Months Ended September 30,</b></p> </td> <td width="180" colspan="2" valign="bottom" style='width:135.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Nine Months Ended September 30,</b></p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="96" valign="bottom" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2012</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2011</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2012</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2011</b></p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Weighted average number of common    shares outstanding</p> </td> <td width="96" valign="top" style='width:1.0in;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> 394,236,133</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> 327,840,504</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> 383,156,011</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> 304,389,948</p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Dilutive effect of:</p> </td> <td width="96" valign="top" style='width:1.0in;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>   Stock options</p> </td> <td width="96" valign="bottom" style='width:1.0in;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>   Warrants</p> </td> <td width="96" valign="bottom" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Weighted average number of common</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>   shares outstanding, assuming dilution </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>394,236,133</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>327,840,504</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>383,156,011</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>304,389,948</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>No stock options and warrants are included in the computation of diluted weighted average number of shares for the three months and nine months ended September 30, 2012 and 2011 because the effect would be anti-dilutive.  At September 30, 2012, the Company had outstanding options and warrants to purchase a total of 63,933,333 common shares of the Company that could have a future dilutive effect on the calculation of earnings per share.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 14 – </b><b>CONSULTING AGREEMENTS</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Thomas Klein</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>On October 4, 2010, the Company entered into a Consulting Agreement effective September 1, 2010 (the “Klein Consulting Agreement”) with Thomas Klein, whereby Mr. Klein is to provide services to the Company in his role as Chief Executive Officer (“CEO”) of the Company.  Mr. Klein was appointed as the Company’s CEO effective as of February 1, 2010.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>As compensation for providing such consulting services in his capacity as CEO, the Company agreed to pay Mr. Klein $165,000 per year as well as provide a $96,250 payment upon signing the Consulting Agreement.  Mr. Klein’s compensation will be reviewed annually by the Company’s Compensation Committee, or by the full Board of Directors serving in such capacity.  The Consulting Agreement has a 2-year term with automatic 1-year renewal periods unless earlier terminated upon notice or for cause as provided in the Consulting Agreement, and allows for Mr. Klein to participate in certain Company incentive and benefit plans.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>Effective July 1, 2011, the Compensation Committee approved an increase in Mr. Klein’s annual compensation to $250,000 per year.  During the quarter ended September 30, 2012, the Board elected not to renew the Klein Consulting Agreement. </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Robert P. Martin</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>Effective as of September 30, 2011, the Company and Mr. Martin, entered into and declared effective a Consulting Agreement dated September 1, 2011, together with an Amendment to Consulting Agreement dated September 28, 2011 (collectively, the “Martin Agreement”).  Pursuant to the terms of the Martin Agreement, in consideration for Mr. Martin’s services as Chairman, he receives a consulting fee of $3,000 per month, accruing from the Effective Date.  The consulting fee will be reviewed by the Compensation Committee of the Company on an annual basis.  For so long as Mr. Martin remains a member of the Company’s Board of Directors (“Board”), he will also be eligible for any compensation program in place for directors.  Currently, the Company’s Board receives a monthly stipend of $1,000.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>Mr. Martin agreed to be bound by certain confidentiality and indemnification provisions, as well as a full and final release of any and all obligations under a prior employment agreement.  The engagement may be terminated at any time, with or without cause and with or without notice.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>J. Roland Vetter</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>On July 1, 2010, the Company entered into a Consulting Agreement (the “Vetter Agreement”) with J. Roland Vetter, whereby Mr. Vetter is to provide services to the Company in his role as Chief Financial Officer (“CFO”) of the Company.  Mr. Vetter was appointed as the Company’s CFO effective as of February 1, 2010.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:justify;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>As compensation for providing such consulting services in his capacity as CFO, the Company agreed to pay Mr. Vetter $2,500 per month as well as provide a $10,000 payment upon signing the Vetter Agreement, such compensation to be reviewed annually by the Company’s Compensation Committee.  The Vetter Agreement has a 2-year term with automatic 1-year renewal periods unless earlier terminated upon notice or for cause as provided in the Vetter Agreement, and allows for Mr. Vetter to participate in certain Company incentive and benefit plans.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:justify;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>Effective July 1, 2011, the Compensation Committee approved an increase in Mr. Vetter’s annual compensation to $96,000 per year.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 15 – LEGAL MATTERS</b></p> <p style='margin-top:12.0pt;margin-right:0in;margin-bottom:12.0pt;margin-left:0in;punctuation-wrap:simple;text-autospace:none;font-weight:bold;margin:0in;margin-bottom:.0001pt'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>On January 24, 2012, the Company received a Notice of Default and Acceleration from Waterton Global Value, L.P. (previously defined as “Waterton”) under that certain Senior Secured Gold Stream Credit Agreement dated September 26, 2011 (see Note 7) between the Company and Waterton (previously defined as the “Gold Stream Facility”) declaring the entire unpaid principal balance, plus fees, interest and costs, in the alleged aggregate amount of $8,311,034, immediately due and payable, and subsequently the Company received supplemental Notices of Default as well as a Notice of Disposition of Collateral (collectively, the “Notices”).  The Company refuted each initial assertion of default.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>On April 30, 2012, the Company’s 30% interest in the Mineral Ridge LLC was foreclosed upon by Waterton and sold at auction.  The Company’s interest in the Mineral Ridge LLC was sold to Waterton for a credit bid of $9,035,321, which amount was claimed by Waterton as owed by the Company under the Gold Stream Facility, including penalties and interest.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>Through April 30, 2012, the date of the foreclosure and sale, the Company had borrowed $6,000,000 in principal, with proceeds used to make payments under the Mina Santa Rosa acquisition agreement, and had accrued interest expense of $209,912.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The facts and circumstances surrounding the alleged default that resulted in the foreclosure and sale of the Company’s interest in the Mineral Ridge LLC were matters in dispute and the subject of a suit filed on March 30, 2012 by the Company in the Second Judicial Court of Nevada in and for the County of Washoe, against Waterton and Scorpio.  On July 11, 2012, the Company announced that it, Waterton, and Scorpio entered into a settlement agreement to discontinue the litigation and to fully release each other from any claims or possible claims relating to the litigation.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>Further, on April 4, 2012, the Company filed a request for arbitration with the International Chamber of Commerce against Silver Global, requesting relief in the form of a declaration of rights of the parties under the Santa Rosa Acquisition Agreement and Trust Agreement, each dated as of September 16, 2011, as well as an injunction against Silver Global taking action to effect the rights, titles and interests of the Company and seeking an award of damages.  It was the Company’s position that there had been no breach of the Santa Rosa Acquisition Agreement.  </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>As further discussed in Note 3, in July 2012, the Company entered into a Rescission and Release Agreement, as amended, with Silver Global and the JV Company (collectively the “Parties”) whereby the Parties agreed to resolve their disputes and rescind the Santa Rosa Acquisition Agreement.  Concurrent with the execution of the Rescission Agreement and the receipt of the first scheduled payment by the Company of $350,000 on August 8, 2012, the arbitration proceedings previously filed by the Company against Silver Global and pending before the International Chamber of Commerce were dismissed, without prejudice.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 16 – SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>            During the nine months ended September 30, 2012 and 2011, the Company made no cash payments for income taxes.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>            During the nine months ended September 30, 2012 and 2011, the Company made cash payments for interest of $35,928 and $3,388, respectively.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>            During the nine months ended September 30, 2012, the Company had the following non-cash financing and investing activities:</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.75in;text-indent:-.25in;punctuation-wrap:hanging'><font style='font-family:Symbol'>·    </font>Increased marketable securities and increased other comprehensive income by $139,200.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.75in;text-indent:-.25in;punctuation-wrap:hanging'><font style='font-family:Symbol'>·    </font>Increased common stock and decreased additional paid-in capital by $2,481.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>During the nine months ended September 30, 2011, the Company had the following non-cash financing and investing activities:</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.75in;text-indent:-.25in;punctuation-wrap:hanging'><font style='font-family:Symbol'>·    </font>Increased additional paid-in capital and decreased amounts due related parties by $187,227.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.75in;text-indent:-.25in;punctuation-wrap:hanging'><font style='font-family:Symbol'>·    </font>Increased common stock by $3,127, increased additional paid-in capital by $184,100 and decreased amounts due related parties by $187,227.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.75in;text-indent:-.25in;punctuation-wrap:hanging'><font style='font-family:Symbol'>·    </font>Increased common stock by $1,600, increased additional paid-in capital by $12,250 and decreased accounts payable by $13,850.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:0in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.75in;text-indent:-.25in;punctuation-wrap:hanging'><font style='font-family:Symbol'>·    </font>Increased common stock and decreased additional paid-in capital by $2,943.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:0in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.75in;text-indent:-.25in;punctuation-wrap:hanging'><font style='font-family:Symbol'>·    </font>Increased common stock by $4,413, increased additional paid-in capital by $90,587 and decreased accrued liabilities by $95,000.</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:0in'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.75in;text-indent:-.25in;punctuation-wrap:hanging'><font style='font-family:Symbol'>·    </font>Decreased common stock by $500, decreased additional paid-in capital by $79,806 and decreased treasury stock by $80,306.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 17 – RECENT ACCOUNTING PRONOUNCEMENTS</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>            There were no new accounting pronouncements issued during the nine months ended September 30, 2012 and through the date of the filing of this report that the Company believes are applicable to or would have a material impact on the consolidated financial statements of the Company.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'><b>NOTE 18 – SUBSEQUENT EVENTS</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Santa Rosa Rescission and Release Agreement</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>            In October 2012, Santa Rosa returned to the Company the 25,000,001 shares of the Company’s common stock pursuant to the Santa Rosa Rescission and Release Agreement (Note 3).  It is the intent of the Company to cancel these outstanding common shares.</p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Sale of Drill Rig</b></p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>In October 2012, the Company sold its drill rig in anticipation of its expectation to utilize contract drilling services to advance its portfolio of mining properties in the U.S. and abroad.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The interim financial information of the Company as of September 30, 2012 and for the three months and nine months ended September 30, 2012 and 2011 is unaudited, and the balance sheet as of December 31, 2011 is derived from audited financial statements.  The accompanying condensed consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles for interim financial statements.  Accordingly, they omit or condense notes and certain other information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles.  The accounting policies followed for quarterly financial reporting conform with the accounting policies disclosed in Note 2 to the Notes to Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.  In the opinion of management, all adjustments that are necessary for a fair presentation of the financial information for the interim periods reported have been made.  All such adjustments are of a normal recurring nature.  The results of operations for the three months and nine months ended September 30, 2012 are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2012.  The unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <table border="0" cellspacing="0" cellpadding="0" width="564" style='margin-left:41.4pt;border-collapse:collapse'> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="180" colspan="2" valign="bottom" style='width:135.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Three Months Ended September 30,</b></p> </td> <td width="180" colspan="2" valign="bottom" style='width:135.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Nine Months Ended September 30,</b></p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2012</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2011</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2012</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2011</b></p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Mina Santa Rosa</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$                 -</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$  1,250,000</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$       64,516</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$  1,250,000</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Peru Properties</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>1,373,995</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>1,894,721</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Molyco</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>200,000</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Mhakari Properties</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>386,089</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>436,089</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Shining Tree Mining District</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>47,432</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>6,160,727</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>North Williams Township</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>39,055</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Other</p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>84,081</p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>87,555</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>249,767</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>306,058</p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> </tr> <tr> <td width="204" valign="top" style='width:153.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Total</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$       84,081</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$  3,145,071</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$     314,283</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>$10,286,650</p> </td> </tr> </table>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <div align="center"> <table border="0" cellspacing="0" cellpadding="0" width="86%" style='width:86.26%;margin-left:-30.25pt'> <tr> <td width="32%" valign="top" style='width:32.0%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Description</b></p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Quoted Prices in</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Active Markets for</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Identical Assets (Level 1)</b></p> </td> <td width="23%" valign="top" style='width:23.5%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b> Significant Other</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Observable</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Inputs (Level 2)</b></p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b> Significant</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Unobservable</b></p> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'><b>Inputs (Level 3)</b></p> </td> </tr> <tr> <td width="32%" valign="top" style='width:32.0%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="23%" valign="top" style='width:23.5%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> </tr> <tr> <td width="32%" valign="top" style='width:32.0%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="23%" valign="top" style='width:23.5%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'> </p> </td> </tr> <tr> <td width="32%" valign="top" style='width:32.0%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>Marketable Securities</p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>$ 302,650</p> </td> <td width="23%" valign="top" style='width:23.5%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>$ -</p> </td> <td width="22%" valign="top" style='width:22.26%;padding:0'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;punctuation-wrap:hanging;text-autospace:ideograph-numeric ideograph-other'>$ -</p> </td> </tr> </table> </div>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <table border="0" cellspacing="0" cellpadding="0" style='margin-left:41.4pt;border-collapse:collapse'> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>September 30, 2012</b></p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>December 31, 2011</b></p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Computer equipment</p> </td> <td width="114" valign="top" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$            23,508</p> </td> <td width="108" valign="top" style='width:81.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$           20,772</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Drilling equipment</p> </td> <td width="114" valign="top" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>244,805</p> </td> <td width="108" valign="top" style='width:81.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>346,205</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Vehicles</p> </td> <td width="114" valign="top" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>5,000</p> </td> <td width="108" valign="top" style='width:81.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>29,000</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Support equipment</p> </td> <td width="114" valign="top" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>39,932</p> </td> <td width="108" valign="top" style='width:81.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>39,932</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> Office furniture and equipment</p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>7,459</p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>8,496</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>`</p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>320,704</p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>444,405</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Less accumulated depreciation and amortization</p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>(227,033)</p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>(287,581)</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>  </p> </td> <td width="114" valign="top" style='width:85.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$           93,671</p> </td> <td width="108" valign="top" style='width:81.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$         156,824</p> </td> </tr> </table>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <table border="0" cellspacing="0" cellpadding="0" width="594" style='width:445.5pt;margin-left:36.9pt;border-collapse:collapse'> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>            </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>September 30, 2012</b></p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>December 31, 2011</b></p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Capital lease payable to Heartland Wisconsin Corp.,    payable at $1,148 per month through May 2013,    secured by equipment</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> $           8,839</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> $         18,088</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Note payable to Komatsu Equipment Company, with    principal payments of $58,486 on June 30, 2008,    $58,486 on June 30, 2009, and $58,485 on June 30, 2010,    with interest at 8%, unsecured</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 175,457</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 175,457</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Convertible note payable to SV, non-interest bearing,    payable September 30, 2012</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 500,000</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 500,000</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Convertible note payable to SV, non-interest bearing,    payable September 30, 2012</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 413,223</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 413,223</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Note payable to Pinnacle, non-interest bearing, payable in    scheduled monthly payments ranging from $15,000 to    $30,000 through August 2012</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 190,000</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 220,000</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Convertible note payable to Pinnacle, non-interest bearing,    payable October 31, 2013</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 250,000</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 250,000</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Note payable to Silver Global, non-interest bearing, payable    January 31, 2012</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> -</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 500,000</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Other</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>-</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>3,730</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Accrued interest payable</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>73,692</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>63,164</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-top:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-top:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Total</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>1,611,211</p> </td> <td width="102" valign="top" style='width:76.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>2,143,662</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Less current portion</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>1,361,211</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>1,888,067</p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> </tr> <tr> <td width="390" valign="top" style='width:292.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Long-term portion</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$       250,000</p> </td> <td width="102" valign="top" style='width:76.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>$       255,595</p> </td> </tr> </table>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <table border="0" cellspacing="0" cellpadding="0" width="507" style='width:380.05pt;margin-left:41.4pt;border-collapse:collapse'> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'> </p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Weighted Average</b></p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Shares</b></p> </td> <td width="115" valign="bottom" style='width:86.15pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Exercise Price</b></p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="115" valign="bottom" style='width:86.15pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Outstanding, December 31, 2011</p> </td> <td width="114" valign="bottom" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>40,333,333</p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.14</p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> </p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'> </p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.1in'>Granted</p> </td> <td width="114" valign="bottom" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>21,750,000</p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.05</p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.1in'>Canceled / Expired</p> </td> <td width="114" valign="bottom" style='width:85.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>(2,000,000)</p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.06</p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-left:.1in'>Exercised</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>(4,000,000)</p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.03</p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="115" valign="bottom" style='width:86.15pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'> </p> </td> </tr> <tr> <td width="278" valign="bottom" style='width:208.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Outstanding, vested and exercisable    September 30, 2012</p> </td> <td width="114" valign="bottom" style='width:85.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>56,083,333</p> </td> <td width="115" valign="bottom" style='width:86.15pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.11</p> </td> </tr> </table>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="114" valign="top" style='width:85.8pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'><b> Options</b></p> </td> <td width="99" valign="top" style='width:74.1pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Weighted Average Exercise Price</b></p> </td> <td width="104" valign="top" style='width:78.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Weighted Average Remaining Contract Term</b></p> </td> <td width="89" valign="top" style='width:66.6pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'><b> Aggregate Intrinsic Value</b></p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="114" valign="top" style='width:85.8pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="99" valign="top" style='width:74.1pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="104" valign="top" style='width:78.0pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Outstanding at December 31, 2011</p> </td> <td width="114" valign="top" style='width:85.8pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>8,930,000</p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.11</p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Granted</p> </td> <td width="114" valign="top" style='width:85.8pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>100,000</p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.01</p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Exercised</p> </td> <td width="114" valign="top" style='width:85.8pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'>-</p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'> </p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Expired or cancelled</p> </td> <td width="114" valign="top" style='width:85.8pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>(1,180,000)</p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'>$   0.11</p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> </td> <td width="114" valign="top" style='width:85.8pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> </p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right;text-indent:.5in'> </p> </td> </tr> <tr> <td width="252" valign="top" style='width:188.7pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Outstanding, vested and exercisable    at September 30, 2012</p> </td> <td width="114" valign="top" style='width:85.8pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;margin-right:.05in;text-align:right'> 7,850,000</p> </td> <td width="99" valign="top" style='width:74.1pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'> $   0.11</p> </td> <td width="104" valign="top" style='width:78.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center;text-indent:.5in'> 3.20</p> </td> <td width="89" valign="top" style='width:66.6pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> $            -</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'> </p> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'>The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $0.01 as of September 30, 2012 which would have been received by the holders of in-the-money options had the option holders exercised their options as of that date.</p>
<!--egx--><p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> <table border="0" cellspacing="0" cellpadding="0" width="636" style='margin-left:5.4pt;border-collapse:collapse'> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="186" colspan="2" valign="bottom" style='width:139.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Three Months Ended September 30,</b></p> </td> <td width="180" colspan="2" valign="bottom" style='width:135.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>Nine Months Ended September 30,</b></p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-indent:.5in'> </p> </td> <td width="96" valign="bottom" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2012</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2011</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2012</b></p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:center'><b>2011</b></p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Weighted average number of common    shares outstanding</p> </td> <td width="96" valign="top" style='width:1.0in;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> 394,236,133</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> 327,840,504</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> 383,156,011</p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> 304,389,948</p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Dilutive effect of:</p> </td> <td width="96" valign="top" style='width:1.0in;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>   Stock options</p> </td> <td width="96" valign="bottom" style='width:1.0in;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>   Warrants</p> </td> <td width="96" valign="bottom" style='width:1.0in;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> <td width="90" valign="bottom" style='width:67.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>-</p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>Weighted average number of common</p> </td> <td width="96" valign="top" style='width:1.0in;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'> </p> </td> </tr> <tr> <td width="270" valign="top" style='width:202.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none'>   shares outstanding, assuming dilution </p> </td> <td width="96" valign="top" style='width:1.0in;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>394,236,133</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>327,840,504</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>383,156,011</p> </td> <td width="90" valign="top" style='width:67.5pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;punctuation-wrap:simple;text-autospace:none;text-align:right'>304,389,948</p> </td> </tr> </table>
-61361336
-2676086
15500000
0.1500
2000000
2000000
exercise price of $0.05 per share exercisable for a period of five years, with a forced conversion at the Company’s option in the event its 200-day volume weighted average price equals $0.15 per share
5000000
5000000
exercise price of $0.05 per share exercisable for a period of five years with the same forced conversion feature
150000
350000
1500000
To exercise its option for the Coyote Extension property, the Company must fulfill certain conditions and make certain payments to Mhakari as follows: (i) upon signing the Option Agreement, $85,000 cash payment, which amount was satisfied through the exercise by Mhakari of 1,700,000 out of the aggregate total 7,000,000 Company common stock purchase warrants held by Mhakari (“Existing Warrants”) at an exercise price of $0.05 per share; (ii) upon signing the Option Agreement, issuance of 1,500,000 shares of the Company’s common stock and warrants to purchase a further 1,500,000 shares of Company common stock at an exercise price of $0.15 per share exercisable for a period of two years, which warrants contain a forced conversion provision in the event the moving average price of a share of the Company’s common stock reaches or exceeds $0.30 for a period of 65 consecutive trading days or more, as quoted by the OTCBB; and (iii) within 48 months of signing the Option Agreement, the Company shall be required to expend no less than an additional $250,000 in exploration and development expenditures on the Coyote Extension (or at the Company’s discretion, on the Coyote Fault or Vanderbilt properties). Further, Mhakari agreed, within two months of signing the Coyote Extension Agreement, to expend $250,000 in cash to the Company to exercise five million of its remaining warrants to acquire Company shares (the “Warrant Exercise”). Through September 30, 2012, Mhakari had exercised 3,000,000 warrants. Further, upon satisfaction of certain of the above-referenced milestones (namely, issuances of shares, warrants, and initial expenditure obligations), the Company will receive a 51% interest in the properties in the form of a joint venture with Mhakari, such 51% interest to automatically increase to 80% upon satisfaction of the overall exploration and development expenditure obligation. Although the Company anticipates completing its obligations necessary to finalize the acquisition of an 80% interest in both properties, there can be no assurance that funds will be available or that the Company will consummate the purchase or the option and earn its full 80% interest in each property.
20000
40000
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5.0 years
8930000
100000
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0.01
394236133
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383156011
304389948
394236133
327840504
383156011
304389948
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1600
12250
13850.
2943
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90587
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500
79806
80306
25000001
0001042784
2012-01-01
2012-09-30
0001042784
2012-11-14
0001042784
2012-07-01
2012-09-30
0001042784
2012-09-30
0001042784
2011-12-31
0001042784
2011-07-01
2011-09-30
0001042784
2011-01-01
2011-09-30
0001042784
2010-12-31
0001042784
2011-09-30
0001042784
2012-07-01
2012-07-31
0001042784
2012-04-01
2012-04-30
0001042784
2011-07-01
2012-09-30
0001042784
2012-04-30
0001042784
2011-04-14
0001042784
2012-06-30
0001042784
2012-02-28
0001042784
2010-09-01
2011-06-30
0001042784
2010-09-01
0001042784
2010-07-01
2011-07-01
0001042784
2010-07-01
0001042784
2012-01-24
0001042784
2012-01-31
iso4217:USD
shares
iso4217:USD
shares
pure
fifteen (15) shares of JV Company common stock
Total value of $18,500 assigned to the common shares issued.
(at an agreed upon value of $0.18 per share)
$0.10 per share
$0.03 per share. Exchanged for 200,000 share at $0.10 per share
10%finder'sfee
($425,000 less $12,500 in finder's fees)
Two million of the warrants will be exercisable for $0.04 per warrant share and the remaining four million warrants exercisable at $0.08 per warrant share. These warrants are exercisable for a period of five years from date of issuance, through July 10, 2017
entitling the investor to purchase 2,000,000 shares of common stock at an exercise price of $0.04 per share, exercisable for a period of two years
Weighted average exercise price of $0.14
Weighted average exercise price of $0.05
Weighted average exercise price of $0.06
Weighted average exercise price of $0.03
Weighted average exercise price of $0.11
Exercise price of $0.06 per share, exercisable for a period of five years
Exercise price of $0.04 per share, exercisable for a period of two years
The warrants are exercisable for a period of two years at an exercise price of $0.125 per share
Weighted average exercise price of &0.01