NOTE 14 – SUBSEQUENT EVENTS

Note Payable – CAT Equipment

In November 2016, five pieces of mining equipment financed by CAT Financial were repossessed by CAT. The equipment had an original cost of $1,500,888 and accumulated depreciation of $339,487, for a net carrying value of $1,161,402. The note payable due to CAT at the time of disposition was $960,585. On July 31, 2017, a new agreement was made with Wheeler Machinery and CAT financial for the return of four pieces of this equipment. While the equipment will temporarily remain in the possession of Wheeler Machinery, a new payment schedule was agreed upon which requires 10 equal payments of $39,934 beginning in October 2017. As of August 27, 2018, seven of those payments have been made. The loss on impairment of equipment in the amount of $147,214 was recognized in the 4^th quarter of 2016. In the event the terms of the new agreement are not met, freight and interest penalties may be assessed and there could be a payment due to CAT for these fees and for the deficit on the return of the equipment. Management has not made an estimate of this additional loss, if any.

Note Payable – Wheeler Machinery

In November 2015, a rental agreement for crushing equipment was entered into with Wheeler Machinery. Effective June 6, 2018, an agreement to convert the rental equipment to a purchase contract in the amount of $273,067 and payment of seven equal monthly payments of $39,009 was finalized. As of August 27, 2018, two of the seven monthly payments had been made. At the conclusion of the seven payments, the crushing equipment will be owned by the Company.

Convertible Debt – Related Parties

The Company failed to make interest payments required under the convertible notes (see Note 7) for all quarters beginning April 2016 through the current date. As a result, the Company was in default of the convertible notes. As per the terms of the Investment Agreement (Note 10), DMRJ Group was informed of this default and it stated that it had no intent to declare an event of default under the Investment Agreement, as amended. In addition, as per the terms of the notes, 300,000 penalty shares for both 2017 and 2016 were issued to the convertible debt holders for failure to pay the convertible notes in November of 2017 and 2016.

On February 28, 2018, the terms were changed for the 15% convertible promissory notes, convertible at $0.70 per share, to two of the Company’s minority shareholders. The notes, for a total due of $600,000 were amended changing the interest rate from 15% to 10% effective March 1, 2018 and allowing for accrued interest to be payable in full on May 31, 2019. The amendment further waives the default provision in the notes for past due interest.

On August 7, 2017, the convertible debt holders agreed to fund an additional aggregate of $500,000 under similar terms. These funds were to be used to sustain minimum operations of the Company until resolution of the DMRJ Group debt with the trustees. On February 28, 2018, both of these notes were amended to allow for the maturity date and the payment date for accrued interest to be changed to May 31, 2019.

On July 3, 2018, a short-term loan of $100,000 was received from one of the two convertible debt holders. Terms are 10% interest and a 2% loan initiation fee. This loan has not yet been paid.

Note Payable – Related Party

In the third quarter of 2016, control of the management of DMRJ Group, (a Platinum Partners related entity), was given to court appointed trustees of the two major funds of Platinum Partners. The Company was working towards a reorganization and recapitalization with the trustees of the two major funds and finalized an agreement which closed on March 8, 2018. This agreement discharged all of the debt owed by the Company to DMRJ Group (Note 10) and its related affiliates and returned all of their equity to the Company in exchange for $625,000. The debt and equity were retired and cancelled by the Company. The owners of the convertible debt agreed to fund this payment in full, and to agree to certain concessions on their outstanding notes with the Company, in exchange for 4,500,000 shares of the Company’s Common Stock. All signatures from the court appointed trustees, and funding by the Company, were received and the agreement was finalized on March 8, 2018.

Revenue

On July 6, 2018, the Company negotiated an arrangement for a one-time sale of gold concentrate and silver byproduct to H & H Metals. On July 6, 2018, proceeds of $68,785 were received which represents an advance against a future sale of metals, estimated at 90% of the value of the gold, and silver byproduct.

Stock Offering

On February 28, 2018, the Company entered into a Stock Purchase Agreement with each of the two convertible debt holders pursuant to which the Company received $312,500 from each holder in exchange for the issuance to each of the convertible debt holders 2,250,000 shares of the Company’s Common Stock and various loan concessions on existing convertible debt.

A stock offering was initiated on February 23, 2018 for sale of common stock shares at $0.40 per share, to raise up to $1,600,000. The offering expired on June 30, 2018. At June 30, 2018 a total of 2,125,000 shares of stock have been issued and funds of $850,000 have been raised through this offering, with proceeds used for working capital in a limited re-opening of the mining operations.

Stock Plan

Effective February 23, 2018, the Board approved and adopted the 2018 Stock Incentive Plan (the “2018 Plan”) pursuant to which 2,400,000 shares of the Company’s Common Stock were authorized. Shares issued under this plan will fully vest upon issuance. The aggregate Fair Market Value of the Common stock becoming exercisable for the first time during any calendar year shall not exceed $100,000 per optionee.

On February 23, 2018, the Board approved the grant of an aggregate of 2,400,000 options under the 2018 Plan exercisable at $0.40 per share which expire February 23, 2023 in the amounts and to the following:

	●	Rick Havenstrite – 1,000,000 options;

	●	Howard Crosby – 1,000,000 options;

	●	John Ryan – 200,000 options; and

	●	Linde Havenstrite – 200,000 options.