NOTE 10 - SECURED CONVERTIBLE DEBENTURE

6 Months Ended

Jun. 30, 2011

NOTE 10 – SECURED CONVERTIBLE DEBENTURE

In May 2010, the Company issued a 9% Secured Convertible Debenture for $20,000 to Tangiers Investors, LP in connection with the Securities Purchase agreement. This debenture matured on December 23, 2010. The Company did not receive the cash proceeds from such issuance of this debenture and accordingly, the Company recorded deferred financing cost of $20,000 and will be amortized over the term of the note. Such deferred financing cost of $20,000 was amortized during fiscal 2010. The Company is currently in negotiation with the note holder to pay off this convertible debt.

The Company had the right to prepay any portion of the principal amount at 150% of such amount along with the accrued interest. This debenture including interest shall be convertible into shares of the Company's common stock at the lower of $0.01 per share or a price of 70% of the average of the two lowest volume weighted average price determined on the then current trading market for ten trading days prior to conversion at the option of the holder. On August 5, 2010, the Company entered into an amendment agreement with the debenture holder whereby the debenture shall be convertible at a fixed conversion price $0.005 per share.

Additionally, in December 2010, the Company issued a 9% Secured Convertible Debenture for $20,000 to Tangiers Investors, LP. This debenture matures on September 15, 2011. The Company may prepay any portion of the principal amount at 150% of such amount along with the accrued interest. This debenture including interest shall be convertible into shares of the Company's common stock at the lower of $0.05 per share or a price of 70% of the average of the two lowest volume weighted average price determined on the then current trading market for ten trading days prior to conversion at the option of the holder. In March 2011, the Company entered into an amendment agreement with the debenture holder whereby this debenture shall be convertible at a fixed conversion price $0.005 per share.

In accordance with ASC 470-20-25, the convertible debentures were considered to have an embedded beneficial conversion feature (BCF) because the effective conversion price was less than the fair value of the Company's common stock. These convertible debentures were fully convertible at the issuance date, therefore the portion of proceeds allocated to the convertible debentures of $40,000 was determined to be the value of the beneficial conversion feature and was recorded as a debt discount and is being amortized over the term of this debenture.

Additionally, the Company evaluated whether or not the convertible debt contains embedded conversion options, which meet the definition of derivatives under ASC 815-15 "Accounting for Derivative Instruments and Hedging Activities" and related interpretations. The Company concluded that since these convertible debts currently have a fixed conversion price of $0.005, the convertible debts are not considered a derivative.

At June 30, 2011, and December 31, 2010, convertible debentures consisted of the following:

	June 30, 2011			December 31, 2010
Secured convertible debentures	$	40,000		$	40,000
Less: Debt discount		(5,620	)		(18,832	)
	$	34,380		$	21,168

During the three and six months ended June 30, 2011, amortization of debt discount amounted to $6,569 and $13.212, respectively. As of June 30, 2011 and December 31, 2010, accrued interest on these debentures amounted to $3.130 and $1,234, respectively.