SCOTTSDALE FACILITY AGREEMENT

12 Months Ended

Apr. 30, 2014

SCOTTSDALE FACILITY AGREEMENT [Text Block]

2. SCOTTSDALE FACILITY AGREEMENT

On April 16, 2014, the Company entered into an agreement with GJS Capital Corp. (the "Creditor"). Under the terms of the Agreement, the Creditor has agreed to loan the Company $150,000 (the “Principal”), which has already been advanced. The loan bears interest at a rate of 6% per annum, compounded annually and has a maturity date of August 31, 2014 (the “Maturity Date").

At any time prior to the Maturity Date, the Creditor may elect to receive units (each a “Unit") in exchange for any portion of the Principal outstanding on the basis of one Unit for each $0.05 of indebtedness converted (the “Unit Conversion Option"). Each Unit consists of one share of our common stock and one warrant to purchase an additional share of our common stock at a price of $0.10 per share for a period of two years from the date of issuance. If the Creditor exercises the Unit Conversion Option, any interest that accrued on the portion of the Principal that was converted shall be forgiven.

If the Creditor exercises the Unit Conversion Option, the Creditor will receive a net profits interest (the “Net Profits Interest”) an any future profits received by Company that are derived from our process for the recovery of precious metals from coal ash and other materials (the “Technology”) at a basis of 1% of our net profits for every $10,000 of converted Principal. The Net Profits Interest will terminate when the Creditor receives eight times the amount of converted Principal.

In addition, if the Creditor exercises the Unit Conversion Option, the Company will use best efforts to ensure that a director nominated by the Creditor is appointed to the Company’s Board of Directors. If the Creditor does nominate such director, the Company will be allowed to nominate and appoint an additional director to the Company’s Board of Directors.

The Creditor has agreed to form a joint venture with the Company for the purpose of constructing and operating a processing plant at the Scottsdale facility, an existing facility, utilizing the Company’s licensed Technology. Under the agreement, the Creditor and the Company shall form a limited liability company (“Newco”) to operate the Joint Venture, and ownership of Newco would be split equally between the Creditor and the Company. In addition, the Creditor would advance $250,000 plus up to 15% for contingencies, a total of $287,500, to Newco to fund the initial construction and operation costs of the Newco. These advances are not expected to be paid back to the Creditor.

The Company has been operating in the Scottsdale facility in the prior years using the same technology licensed by the Company. As of April 30, 2014 and through the filing date of the Form 10-K, the Company and the Creditor have not established a limited liability corporation in accordance with the agreement. The equipment used in the Scottsdale facility, lease agreements for the Scottsdale facility, and other supplies purchased and costs incurred by the Scottsdale facility were incurred by the Company and are legal obligation of the Company. As of April 30, 2014, no bank account has been established for the joint venture and as a result the Company has paid all expenses related to the Scottsdale facility directly via the Company’s bank accounts. Funding under the joint venture been deposited by the Company into bank accounts owned by the Company. As of April 30, 2014, the Creditor funded a total of $163,654. As of April 30, 2014 and through the date of the filing date of the Form 10-K, the Company has not agreed to contribute any of the assets related to the Scottsdale facility to the joint venture. Based upon the aforementioned, the Company has accounted for the funds received totaling $163,654 as contributed capital since in substance, the Creditor has secured future revenue of the Scottsdale facility operations with such funds.