10-Q 1 northbay10q093014.htm 10-Q northbay10q093014.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
 

 
FORM 10-Q 
 

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

For the quarterly period ended September 30, 2014

or

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

For the transition period from ___________ to __________
 
Commission file number 000-54213
 
NORTH BAY RESOURCES INC.
(Exact name of registrant as specified in its charter)

Delaware
83-0402389
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
 
2120 Bethel Road
Lansdale, Pennsylvania 19446
 (Address of principal executive offices)

 (215) 661-1100
 (Issuer’s telephone number, including area code)
 
_______________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o  
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o                                                      Accelerated filer o   
Non-accelerated filer o                                                        Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 608,090,023 shares of Common Stock as of November 10, 2014. 
 
 
NORTH BAY RESOURCES INC.
(AN EXPLORATION STAGE COMPANY)
 
TABLE OF CONTENTS
 
PART I.  FINANCIAL INFORMATION
Page
     
Item 1.
3
     
Item 2.
29
     
Item 3.
39
     
Item 4.
39
     
PART II.  OTHER INFORMATION.
 
     
Item 1.
41
     
Item 1A.
41
     
Item 2.
41
     
Item 3.
42
     
Item 4.
42
     
Item 5.
42
     
Item 6.
42
     
43
     
44
 
 
PART I.  FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
NORTH BAY RESOURCES INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2014 AND DECEMBER 31, 2013
 
   
Sept 30, 2014
   
Dec 31, 2013
 
             
ASSETS
           
Current Assets
           
Cash
 
$
163,350
   
$
133,873
 
Accounts Receivable
   
30,000
     
-
 
Deferred Financing Costs, net
   
62,653
     
22,966
 
Available For Sale Securities
   
78,913
     
22,500
 
Total Current Assets
   
334,916
     
179,339
 
                 
Other Assets
               
Certificates of Deposit
   
173,122
     
172,880
 
Prepaid Expenses
   
57,373
     
57,373
 
Mining Claims – Unproved
   
1,795,780
     
1,797,488
 
Property, Plant & Equipment, net of accumulated depreciation
   
524,356
     
608,038
 
Reclamation Bond – Fraser River
   
5,000
     
5,000
 
Total Other Assets
   
2,555,631
     
2,640,779
 
TOTAL ASSETS
 
$
2,890,547
   
$
2,820,118
 
                 
LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)
               
Liabilities
               
Current Liabilities
               
Accounts Payable
 
$
37,918
   
$
41,611
 
Accrued Expenses - Related Party
   
922,474
     
820,474
 
Accrued Interest
   
170,194
     
101,366
 
Convertible notes payable (net of discounts of $661,359 and $264,389, respectively)
   
1,178,993
     
836,858
 
Advance Gold Sales (net of discounts of $0 and $4,289, respectively)
   
-
     
195,711
 
Derivative Liabilities – Convertible Debt
   
964,137
     
696,648
 
Derivative Liabilities – Advances on Gold
   
-
     
22,223
 
Note Payable – Ruby Mine Mortgage
   
473,259
     
627,101
 
Note Payable - Equipment
   
9,509
     
41,687
 
Total Current Liabilities
   
3,756,484
     
3,383,679
 
                 
Long-Term Liabilities
               
Note Payable – Ruby Mine Mortgage, net of current portion
   
1,218,471
     
1,205,537
 
Note Payable – Equipment, net of current portion
   
19,017
     
-
 
Asset Retirement Obligation
   
4,833
     
6,158
 
Total Long-Term Liabilities
   
1,242,321
     
1,211,695
 
Total Liabilities
 
$
4,998,805
   
$
4,595,374
 
                 
Commitment & Contingencies
               
Common shares subject to redemption, stated at estimated redemption value, 0 and 10,217,468 shares outstanding at September 30, 2014 and December 31, 2013, respectively
   
-
     
667,758
 
Total Commitment & Contingencies
 
$
-
   
$
667,758
 
                 
Stockholders’ Equity (Deficit)
               
Preferred stock, Series I, $0.001 par value, 100 shares authorized, 100 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively
   
-
     
-
 
                 
Convertible Preferred stock, Series A, $0.001 par value, 8,000,000 shares authorized, 4,000,000 and 4,000,000 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively
   
4,000
     
4,000
 
                 
Common stock, $0.001 par value, 500,000,000 shares authorized, 281,617,618 and 127,897,079 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively
   
281,617
     
127,898
 
Additional Paid-In Capital
   
15,104,688
     
12,962,791
 
Accumulated Other Comprehensive Income
   
(46,137
)
   
(2,550
Stock Payable
   
19,440
     
-
 
Deficit Accumulated During Exploration Stage
   
(17,471,866
)
   
(15,535,153
)
Total Stockholders’ Equity (Deficit)
   
(2,108,258
)
   
(2,443,014
TOTAL LIABILITIES, COMMITMENTS & CONTINGENCIES, & STOCKHOLDERS’ EQUITY (DEFICIT)
 
$
2,890,547
   
$
2,820,118
 
 
The accompanying notes are an integral part of these financial statements. 
 
 
NORTH BAY RESOURCES INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTH PERIODS ENDING
SEPTEMBER 30, 2014 AND 2013
 
   
3 months ended
September 30, 2014
   
3 months ended
September 30, 2013
   
9 months ended
September 30, 2014
   
9 months ended
September 30, 2013
 
                         
Revenues
                       
Gold Sales
 
$
6,602
   
$
-
   
$
6,602
   
$
-
 
Gross Profit
   
6,602
     
-
     
6,602
     
-
 
                                 
Operating Expenses
                               
Commissions & Consulting Fees
   
-
     
-
     
-
     
4,800
 
General & Administrative Costs
   
86,188
     
161,057
     
257,612
     
322,785
 
Mining Property Costs
   
484,642
     
272,617
     
1,170,747
     
499,157
 
Depreciation Expense
   
28,786
     
25,520
     
82,682
     
73,640
 
Impairment Expense
   
-
     
-
     
-
     
-
 
Accretion Expense
   
117
     
87
     
383
     
250
 
Professional Services
   
26,710
     
19,336
     
127,189
     
85,606
 
Total Operating Expenses
   
626,443
     
478,617
     
1,638,613
     
986,238
 
Net Operating Loss
   
(626,443
)
   
(478,617
)
   
(1,638,613
)
   
(986,238
)
Other Income (Expenses)
                               
Gain on Mineral Claim Sales
   
2,000
     
166,675
     
2,000
     
280,174
 
Other Income from Mineral Claims
   
200,000
     
-
     
200,000
     
-
 
Interest Income
   
1,370
     
147
     
6,242
     
391
 
Interest Expense
   
(392,567
)
   
(121,620
)
   
(1,017,569
)
   
(527,520
)
Gain/Loss on Derivative Liability
   
(29,050
)
   
432,026
     
523,528
     
(144,614
)
Loss on Conversion of Debt
   
-
     
-
     
-
     
-
 
Loss on Equity Modification
   
-
     
-
     
-
     
-
 
Bad Debt Expense
   
-
     
-
     
-
     
-
 
Loss on Settlement
   
(38,630
)
   
-
     
(71,103
)
   
-
 
Other Expense
   
-
     
-
     
-
     
-
 
Other Income
   
-
     
-
     
52,203
     
1,094
 
Realized Gain (Loss) on Investment
   
-
     
-
     
-
     
-
 
Net Other Income (Expenses)
   
(256,877
)
   
477,228
     
(304,699
)
   
(390,475
)
      Loss From Continuing Operations
   
(883,320
)
   
(1,389
)
   
(1,943,312
)
   
(1,376,713
)
      Loss From Discontinued Operations
   
-
     
-
     
-
     
-
 
Net Loss
   
(876,718
)
   
(1,389
)
   
(1,936,710
)
   
(1,376,713
)
    Accretion of Discount on Redeemable Common Stock
   
-
     
(37,645
)
   
-
     
(52,346
)
    Excess Cash Received Compared to Redeemable Amount of Stock
   
-
     
-
     
-
     
-
 
    Interest on Redeemable Common Stock
   
-
     
(14,655
)
   
(29,288
)
   
(35,953
)
Net Loss Attributable to Common Shareholders
   
(876,718
)
   
(53,689
)
   
(1,965,998
)
   
(1,465,012
)
      Unrealized (Loss)/Gain on Available For Sale Securities
   
(43,587
)
   
27,500
     
(43,587
)
   
29,950
 
Total Comprehensive Loss
   
(920,305
)
   
(26,189
)
   
(2,009,585
)
   
(1,435,062
)
                                 
WEIGHTED AVG NUMBER OF SHARES OUTSTANDING (Basic)
   
225,880,262
     
114,243,164
     
182,103,134
     
110,463,873
 
 Basic Net Loss per Share
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.01
)
 
$
(0.01
)
WEIGHTED AVG NUMBER OF SHARES OUTSTANDING (Diluted)
   
225,880,262
     
114,243,164
     
182,103,134
     
110,463,873
 
 Diluted Net Loss per Share
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.01
)
 
$
(0.01
)
 
The accompanying notes are an integral part of these financial statements.
 
 
 
NORTH BAY RESOURCES INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD
JANUARY 1, 2013 THROUGH SEPTEMBER 30, 2014
 
   
Preferred Stock
   
Common Stock
                                         
   
Series A
Shares
   
Series G
Shares
   
Series I
Shares
   
Series A
Amount
   
Series G
Amount
   
Series I
Amount
   
Shares
   
Amount
   
Additional
 Paid-In
Capital
   
Stock
Payable
   
Accumulated
Deficit
   
Accumulated
OCI
   
Total
Stockholders’
Deficit
 
Balance at 12/31/2012
(restated)
   
4,000,000
     
-
     
100
   
$
4,000
   
$
-
   
$
-
     
97,485,130
   
$
97,485
   
$
11,805,636
   
$
-
   
$
(13,475,848
)
 
$
(12,500
)
 
$
(1,581,227
)
Common Stock issued for cash
   
-
     
-
     
-
     
-
     
-
     
-
     
13,564,152
     
13,564
     
445,736
     
-
     
-
     
-
     
459,300
 
Common Stock issued for convertible debt conversion
   
-
     
-
     
-
     
-
     
-
     
-
     
11,229,545
     
11,230
     
272,691
     
-
     
-
     
-
     
283,921
 
Common Stock issued for services
   
-
     
-
     
-
     
-
     
-
     
-
     
191,724
     
192
     
9,071
     
-
     
-
     
-
     
9,263
 
Common Stock issued for directors compensation
   
-
     
-
     
-
     
-
     
-
     
-
     
277,778
     
278
     
9,722
     
-
     
-
     
-
     
10,000
 
Common Stock issued for deferred compensation
   
-
     
-
     
-
     
-
     
-
     
-
     
5,000,000
     
5,000
     
175,000
     
-
     
-
     
-
     
180,000
 
Common Stock issued for deferred financing costs
   
-
     
-
     
-
     
-
     
-
     
-
     
148,750
     
149
     
6,332
     
-
     
-
     
-
     
6,481
 
Mark to market AFS securities
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
9,950
     
9,950
 
Settlement of Derivative Liability
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
256,472
     
-
     
-
     
-
     
256,472
 
Loss on Equity Modification
   
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
85,399
     
-
     
-
     
-
     
85,399
 
Accretion of discount on redeemable common stock
   
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
(52,346
)
   
-
     
-
     
-
     
(52,346
)
Interest on redeemable common stock
   
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
(50,922
)
   
-
     
-
     
-
     
(50,922
Net loss for period
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(2,059,305
   
-
     
(2,059,305
)
Balance at 12/31/2013
   
4,000,000
     
-
     
100
   
$
4,000
   
$
-
   
$
-
     
127,897,079
   
$
127,898
   
$
12,962,791
   
$
-
   
 $
(15,535,153
 
$
(2,550
 
$
(2,443,014
Common Stock issued for cash
   
-
     
-
     
-
     
-
     
-
     
-
     
72,975,807
     
72,975
     
669,324
     
-
     
-
     
-
     
742,299
 
Common Stock issued for convertible debt conversion
   
-
     
-
     
-
     
-
     
-
     
-
     
70,059,047
     
70,059
     
525,587
     
-
     
-
     
-
     
595,646
 
Common Stock issued for services
   
-
     
-
     
-
     
-
     
-
     
-
     
100,000
     
100
     
2,600
     
-
     
-
     
-
     
2,700
 
Common Stock issued for deferred financing costs
   
-
     
-
     
-
     
-
     
-
     
-
     
368,217
     
368
     
9,942
     
-
     
-
     
-
     
10,310
 
Mezzanine shares no longer deemed temporary
   
-
     
-
     
-
     
-
     
-
     
-
     
10,217,468
     
10,217
     
686,829
     
-
     
-
     
-
     
697,046
 
Stock payable for deferred financing costs
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
19,440
     
-
     
-
     
19,440
 
Mark to market AFS securities
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(43,587
)    
(43,587
)
Settlement of Derivative Liability - Gold
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
2,223
     
-
     
-
     
-
     
2,223
 
Settlement of Derivative Liability – Convertible Debt
   
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
274,680
     
-
     
-
     
-
     
274,680
 
Interest on redeemable common stock
   
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
 -
     
(29,288
)
   
-
     
-
     
-
     
(29,288
Net loss for period
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(1,936,710
   
-
     
(1,936,710
)
Balance at 9/30/2014
   
4,000,000
     
-
     
100
   
$
4,000
   
$
-
   
$
-
     
281,617,618
   
$
281,617
   
$
15,104,688
   
$
19,440
   
 $
(17,471,866
 
$
(46,137
 
$
(2,108,258
 
The accompanying notes are an integral part of these financial statements.
 
 
 
NORTH BAY RESOURCES INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDINGSEPTEMBER 30, 2014 AND 2013
 
   
9 Months Ended
September 30, 2014
   
9 Months Ended
September 30, 2013
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net Loss
 
$
(1,936,710
)
 
$
(1,376,713
)
Adjustments to reconcile Net Loss to net cash used in operations:
               
Gain on sale of claims
   
-
     
(225,174
)
Gain on sale of claims – non-cash
   
-
     
(55,000
)
Common Stock issued for services
   
2,700
     
-
 
Loss on conversion of debt and deferred compensation
   
71,109
     
-
 
Amortization of discount on debt
   
758,077
     
216,436
 
Amortization of deferred financing cost
   
75,492
     
20,231
 
Amortization of gold advances discount
   
4,289
     
9,546
 
Change in derivative liability
   
(523,528
)
   
144,614
 
Depreciation Expense
   
82,682
     
73,640
 
Accretion Expense
   
383
     
250
 
Extension Expense for Ruby mortgage
   
-
     
160,000
 
Changes in operating assets and liabilities:
               
Accounts receivable
   
(30,000
   
-
 
Other assets
   
(241
   
(3,316
Accrued expenses – related party
   
102,000
     
99,906
 
Accrued interest
   
95,619
     
-
 
Accrued expenses
   
(20,000
   
33,810
 
Accounts Payable
   
(3,696
   
(13,001
Net Cash Used in Operating Activities
   
(1,321,824
)
   
(914,771
)
CASH FLOWS FROM INVESTING ACTIVITIES
               
Proceeds from Fixed Asset Disposal
   
1,000
     
-
 
Investment received for claim sales
   
(100,000
   
-
 
Cash received from sales of claims
   
-
     
215,339
 
Net Cash Provided by/Used in Investing Activities
   
(99,000
   
215,339
 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from sale of redeemable common stock
   
-
     
197,000
 
Proceeds from sale of common stock
   
742,300
     
75,500
 
Advances - Gold
   
(200,000
)
   
200,000
 
Cash paid for deferred financing costs
   
(85,430
   
(16,650
)
Debt Repayments
   
(154,069
   
(178,110
)
Borrowings on convertible debt
   
1,147,500
     
431,097
 
Net Cash Provided by Financing Activities
   
1,450,301
     
708,837
 
Net cash increase (decrease) for period
   
29,477
     
9,405
 
Cash at beginning of period
   
133,873
     
42,008
 
Cash at end of period
   
163,350
     
51,413
 
Supplementary Cash Flow Information:
               
Cash Paid for Interest
 
$
25,000
   
-
 
Non-Cash Investing & Financing Activities:
               
Revision to Asset Retirement Obligation
 
$
1,708
   
$
-
 
Common stock issued for conversion of convertible debt
 
$
551,035
   
$
161,413
 
Equipment acquired with note payable
 
$
-
   
$
56,071
 
Common stock owed for deferred financing costs
 
$
19,440
   
$
-
 
Common Stock issued for deferred financing costs
 
$
10,310
   
$
-
 
Debt discount due to derivative liability
 
$
1,065,697
   
$
188,713
 
Settlement of Derivative liability
 
$
274,680
   
$
150,568
 
Settlement of gold derivative
 
$
2,223
   
$
-
 
Discount on gold advance
 
$
-
   
$
22,223
 
Accretion of Discount on Redeemable Common Stock
 
$
-
   
$
52,346
 
Interest on Redeemable Common Stock
 
$
29,288
   
$
35,953
 
Mezzanine shares returned to CS/APIC
 
$
697,046
   
$
-
 
Unrealized gain/loss  on AFS
 
$
43,587
   
$
29,950
 
 
The accompanying notes are an integral part of these financial statements.
 
 
NORTH BAY RESOURCES INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1             GENERAL ORGANIZATION AND BUSINESS

The Company was incorporated in the State of Delaware on June 18, 2004 under the name Ultimate Jukebox, Inc.  On September 4, 2004, Ultimate Jukebox, Inc. merged with NetMusic Corporation, and subsequently changed the Company name to NetMusic Entertainment Corporation.  On March 10, 2006, the Company ceased digital media distribution operations, began operations as a natural resources company, and changed the Company name to Enterayon, Inc.  On January 15, 2008, the Company merged with and assumed the name of its wholly-owned subsidiary, North Bay Resources Inc.  As a result of the merger, Enterayon, Inc. was effectively dissolved, leaving North Bay Resources Inc. as the remaining company.

The Company’s business plan is based on the Generative Business Model, which is designed to leverage our mining properties and mineral claims into near-term income streams even during the earliest stages of exploration. This is accomplished by entering into sales, joint-venture, and/or option contracts with other mining companies, for which the Company generates income through payments in cash, stock, and other consideration.
 
The Generative Business Model is our short term plan to leverage properties until funding is adequate to implement our long term plan. The Company’s long term plan is to locate and extract gold and silver from current exploration stage properties. This will be done through utilizing joint-ventures and other funding that is available to develop properties until they reach the production stage. Once in the production stage, the Company plans on extracting gold, silver, and other profitable by-products, and selling them to smelters. The Company has not currently begun this stage of the business plan. 
 
NOTE 2             GOING CONCERN
 
These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated modest revenues since inception and has never paid any dividends and is unlikely to pay dividends. The Company has accumulated losses since inception equal to $17,470,217 as of September 30, 2014. These factors raise substantial doubt regarding the ability of the Company to continue as a going concern. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations and to determine the existence, discovery and successful exploration of economically recoverable reserves in its resource properties, confirmation of the Company’s interests in the underlying properties, and the attainment of profitable operations. The Company has had very little operating history to date. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
 
NOTE 3             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Reclassifications
 
Certain prior period amounts have been reclassified to conform to the current period presentation. There was no material effect to the consolidated financial statements as result of these reclassifications.
 
Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Ruby Gold, Inc. All significant inter-company accounts and transactions have been eliminated in consolidation
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
 
 
Cash and Cash Equivalents
 
The Company considers all highly liquid debt instruments and other short-term investments with a maturity of three months or less, when purchased, to be cash equivalents. There were no cash equivalents at September 30, 2014 and December 31, 2013. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal Deposit Insurance Corporation up to $250,000.
 
Reclamation Bonds
 
The Company holds its reclamation bonds on the Ruby Mine in the form of one-year Certificates of Deposit that automatically rollover annually on their anniversary dates.  These funds are held in reserve to guarantee the Company's Asset Retirement Obligation.
 
Marketable Securities
 
The Company accounts for its marketable securities, which are available for sale, in accordance with Financial Accounting Standards Board (“FASB”) guidance regarding accounting for certain investments in debt and equity securities, which requires that available-for-sale and trading securities be carried at fair value. Unrealized gains and losses deemed to be temporary on available-for-sale securities are reported as other comprehensive income (“OCI”) within shareholders’ deficit. Realized gains and losses and declines in value deemed to be other than temporary on available-for-sale securities are included in “(Gain) loss on short- and long-term investments” and “Other income” on our statements of operations. Trading gains and losses also are included in “(Gain) loss on short-term and long-term investments.” Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available. The cost basis for realized gains and losses on available-for-sale securities is determined on a specific identification basis. We classify our available-for-sale securities as short- or long-term based upon management’s intent and ability to hold these investments. In addition, throughout 2009, the FASB issued various authoritative guidance and enhanced disclosures regarding fair value measurements and impairments of securities which helps in determining fair value when the volume and level of activity for the asset or liability have significantly decreased and in identifying transactions that are not orderly.
 
Revenue Recognition
 
The company has recognized no mining revenue to date. In the future mining revenue will be recognized according to the policy described below.
 
Revenue is recognized when the following conditions are met:
 
(a)  persuasive evidence of an arrangement to purchase exists;
(b) the price is fixed or determinable;
(c) the product has been delivered; and
(d) collection of the sales price is reasonably assured.
 
Under the terms of concentrate sales contracts with third-party smelters, final prices for the gold, silver, zinc, copper and lead in the concentrate are set based on the prevailing spot market metal prices on a specified future date based on the date that the concentrate is delivered to the smelter. The Company records revenues under these contracts based on forward prices at the time of delivery, which is when transfer of legal title to concentrate passes to the third-party smelters. The terms of the contracts result in differences between the recorded estimated price at delivery and the final settlement price. These differences are adjusted through revenue at each subsequent financial statement date.
 
Mineral Property Costs
 
Mineral property acquisition costs are capitalized upon acquisition. Mineral property exploration and improvement costs are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven or probable reserves, the costs incurred to develop and improve such property are capitalized. To date the Company has not established any proven or probable reserves on its mineral properties.
 
The Company reviews long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the review indicates that the carrying amount of the asset may not be recoverable, the potential impairment is measured based on a projected discounted cash flow method using a discount rate that is considered to be commensurate with the risk inherent in the Company's current business model. For purposes of recognition and measurement of an impairment loss, a long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets.
 
 
Purchase Options for Mining Property
 
Costs associated with acquisitions related to purchase options for mining properties are capitalized when the costs are incurred in accordance with ASC 340.10. The costs are carried at the amount paid and transferred to the appropriate asset account if the option is exercised. If it is determined that the Company will not exercise the option, the option is expensed.
 
Deferred Gains
 
Deposits on pending sales of mineral claims are classified as deferred gains until the transaction has been completed.  
 
Asset Retirement Obligation
 
The FASB standard on accounting for asset retirement obligation requires that the fair value of the liability for asset retirement costs be recognized in an entity’s balance sheet, as both a liability and an increase in the carrying values of such assets, in the periods in which such liabilities can be reasonably estimated. The present value of the estimated future asset retirement obligation (“ARO”), as of the date of acquisition or the date at which mining commences is capitalized as part of the costs of mineral assets and recorded with an offsetting liability. The asset retirement costs are depleted over the production life of the mineral assets on a unit-of-production basis.
 
The ARO is recorded at fair value and accretion expense is recognized as the discounted liability is accreted to its expected settlement value. The fair value of the ARO liability is measured by using expected future cash outflows discounted at the Company’s credit adjusted risk free interest rate.
 
Amounts incurred to settle plugging and abandonment obligations that are either less than or greater than amounts accrued are recorded as a gain or loss in current operations.  Revisions to previous estimates, such as the estimated cost to remediate and abandon a mine may require adjustments to the ARO and are capitalized as part of the costs of mineral assets.
 
Income Taxes
 
The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities, and are measured using enacted tax rates that will be in effect when the differences are expected to reverse.
 
The Company adopted the provisions of the FASB interpretation related to accounting for uncertainty in income taxes, which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertainty in income tax positions.  The Company believes it does not have any uncertain tax positions taken or expected to be taken in its income tax returns.
 
Fair Value of Financial Instruments
 
The Company adopted the FASB standard related to fair value measurement at inception. The standard defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows.
 
 
Level 1. Observable inputs such as quoted prices in active markets;
 
 
Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
 
 
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
 
 
The Company values its derivative instruments related to embedded conversion features and warrants from the issuance of convertible debentures in accordance with the Level 3 guidelines. For the nine month period ended September 30, 2014, the following table reconciles the beginning and ending balances for financial instruments that are recognized at fair value in these consolidated financial statements. The fair value of embedded conversion features that have floating conversion features and tainted common stock equivalents (warrants and convertible debt) are estimated using a Binomial Lattice model. The key inputs to this valuation model as of September 30, 2014, were: Volatility of 148% - 156%, inherent term of instruments equal to the remaining contractual term, quoted closing stock prices on valuation dates, and various settlement scenarios and probability percentages summing to 100%.
 
   
Balance at
December 31, 2013
   
New
Issuances
   
Settlements
   
Changes in
Fair Values
   
Balance at
September 30,
2014
 
Level 3 –
                             
Derivative liabilities from:
                             
Conversion features – embedded derivative
 
$
156,761
   
$
1,024,855
   
$
(274,680
)
 
$
(217,151
)
 
$
689,785
 
Conversion features – tainted equity
   
391,686
     
229,339
     
-
     
(349,294
)
   
271,731
 
Warrants – tainted equity
   
148,201
     
-
     
-
     
(145,580
)
   
2,621
 
   
$
696,648
   
$
1,254,194
   
$
(274,680
)
 
$
(712,025
)
 
$
964,137
 
 
Changes in the unobservable input values would likely cause material changes in the fair value of the Company’s Level 3 financial instruments. The significant unobservable input used in the fair value measurement is the estimation for probability percentages assigned to future expected settlement possibilities. A significant increase (decrease) in this distribution of percentages would result in a higher (lower) fair value measurement.
 
The following table presents assets and liabilities that were measured and recognized at fair value as of December 31, 2013 and the year then ended on a recurring basis:
 
                   
Total
 
                   
Unrealized
 
Description
 
Level 1
   
Level 2
 
Level 3
   
Gain
 
Available For Sale Securities
 
$
22,500
   
$
       -
   
$
-
   
$
2,500
 
 Totals
 
$
22,500
   
$
       -
   
$
-
   
$
2,500
 
 
                   
Total
 
                   
Unrealized
 
Description
 
Level 1
   
Level 2
 
Level 3
   
Loss
 
Derivate Liability – Advances on Gold
 
$
-
   
$
22,223 
   
$
-
   
$
22,223
 
 Totals
 
$
-
   
$
22,223 
   
$
-
   
$
22,223
 
 
The following table presents assets that were measured and recognized at fair value as of September 30, 2014:
 
                   
Total
 
                   
Unrealized
 
Description
 
Level 1
   
Level 2
 
Level 3
   
Loss
 
Available For Sale Securities
 
$
78,913
   
$
       -
   
$
-
   
$
46,137
 
 Totals
 
$
78,913
   
$
       -
   
$
-
   
$
46,137
 
 
                   
Total
 
                   
Unrealized
 
Description
 
Level 1
   
Level 2
 
Level 3
   
Loss
 
Derivate Liability – Advances on Gold
 
$
-
   
$
-
   
$
-
   
$
-
 
 Totals
 
$
-
   
$
-
   
$
-
   
$
-
 
 
 
The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of September 30, 2014 and December 31, 2013:

   
Fair Value Measurements at September 30, 2014
 
   
Level 1
   
Level 2
   
Level 3
 
Assets
                 
Cash
 
$
163,350
   
$
-
   
$
-
 
Certificates of Deposit
   
173,122
                 
Total assets
   
336,472
     
-
     
-
 
Liabilities
                       
Advance Gold Sales
   
-
     
-
     
-
 
Convertible notes
   
-
     
1,178,993
     
-
 
Note payable, Ruby
   
-
     
1,691,730
     
-
 
Notes payable, equipment
   
-
     
28,526
     
-
 
Total liabilities
   
-
     
2,899,249
     
-
 
   
$
336,472
   
$
(2,899,249
)
 
$
-
 

   
Fair Value Measurements at December 31, 2013
 
   
Level 1
   
Level 2
   
Level 3
 
Assets
                 
Cash
 
$
133,873
   
$
-
   
$
-
 
Certificates of Deposit
   
172,880
                 
Total assets
   
306,753
     
-
     
-
 
Liabilities
                       
Advance Gold Sales
   
-
     
195,711
     
-
 
Convertible notes
   
-
     
836,858
     
-
 
Note payable, Ruby
   
-
     
1,832,638
     
-
 
Notes payable, equipment
   
-
     
41,687
     
-
 
Total liabilities
   
-
     
2,906,894
     
-
 
   
$
306,753
   
$
(2,906,894
)
 
$
-
 
 
The fair values of our debts are deemed to approximate book value, and are considered Level 2 inputs as defined by ASC Topic 820-10-35.
 
There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the nine months ended September 30, 2014 or the year ended December 31, 2013.
 
The Company had no other assets or liabilities valued at fair value on a recurring or non-recurring basis as of September 30, 2014 or the year ended December 31, 2013.
 
Stock Based Compensation
 
Beginning January 1, 2006, the Company adopted the FASB standard related to stock based compensation. The standard requires all share-based payments to employees (which includes non-employee Directors), including employee stock options, warrants and restricted stock, be measured at the fair value of the award and expensed over the requisite service period (generally the vesting period). The fair value of common stock options or warrants granted to employees is estimated at the date of grant using the Black-Scholes option pricing model by using the historical volatility of the Company. The calculation also takes into account the common stock fair market value at the grant date, the exercise price, the expected life of the common stock option or warrant, the dividend yield and the risk-free interest rate.
 
The Company from time to time may issue stock options, warrants and restricted stock to acquire goods or services from third parties. Restricted stock, options or warrants issued to other than employees or directors are recorded on the basis of their fair value, which is measured as of the date required by the Emerging Issues Task Force guidance related to accounting for equity instruments issued to non-employees. In accordance with this guidance, the options or warrants are valued using the Black-Scholes option pricing model on the basis of the market price of the underlying equity instrument on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance, is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period.   As of September 30, 2014 and December 31, 2013, no options or warrants related to compensation have been issued, and none are outstanding.
 
 
Beneficial Conversion Feature
 
From time to time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force guidance on beneficial conversion features. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with this guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method.  
 
Deferred Financing Costs
 
Deferred financing costs include debt issuance costs primarily incurred by the Company as part of Convertible Note transactions. These amounts are capitalized to Deferred Financing Costs and amortized over the term of the note. Amortization is provided on a straight-line basis over the terms of the respective debt instruments to which the costs relate and is included in interest expense.  The difference between the straight line and effective interest methods is immaterial due to the short term nature of the convertible notes.
 
Accounting for Derivative Instruments
 
All derivatives have been recorded on the balance sheet at fair value based on the lattice model calculation. These derivatives, including embedded derivatives in the Company’s convertible notes which have floating conversion prices based on changes to the quoted price of the Company’s common stock and common stock equivalents tainted as a result of the derivative, are separately valued and accounted for on the Company’s balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.
 
Lattice Valuation Model
 
The Company valued the conversion features in their convertible notes and tainted warrants using a lattice valuation model, with the assistance of a valuation consultant. The lattice model values these instruments based on a probability weighted discounted cash flow model. The Company uses the model to develop a set of potential scenarios. Probabilities of each scenario occurring during the remaining term of the instruments are determined based on conversion prices relative to current stock prices, historic volatility, and estimates on investor behavior. These probabilities are used to create a cash flow projection over the term of the instruments and determine the probability that the projected cash flow will be achieved. A discounted weighted average cash flow for each scenario is then calculated and compared to the discounted cash flow of the instruments without the compound embedded derivative in order to determine a value for the compound embedded derivative.
 
Income/Loss Per Share of Common Stock
 
Basic net loss per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share includes additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive for the periods presented.  As of September 30, 2014 and 2013, there were 283,970,101 and 52,852,098 common stock equivalents outstanding, respectively.
 
The following is a reconciliation of the computation for basic and diluted EPS for the nine months ended September 30, 2014 and 2013, respectively:
 
   
September 30, 2014
   
September 30, 2013
 
Net Loss attributable to common shareholders
 
$
(1,936,710
)
 
$
(1,465,012
)
Weighted-average common shares Outstanding (Basic)
   
182,103,134
     
110,463,873
 
Weighted-average common stock Equivalents
   
283,970,101
     
52,852,098
 
Deduction of stock Equivalents not included due to net loss
   
(283,970,101
)
   
(52,852,098
)
Weighted-average common shares Outstanding (Diluted)
   
182,103,134
     
110,463,873
 
Basic and Diluted Net Gain (Loss) per Share
 
$
(0.01
)
 
$
(0.01
)
 
 
Property, Plant and Equipment
 
Property, plant and equipment are stated at cost less accumulated depreciation. The cost of property, plant and equipment is depreciated using the straight-line method over the estimated useful life of the asset - periods of approximately 18 - 28 years for buildings, 3 - 10 years for machinery and equipment and 3 - 5 years for vehicles. Long-lived assets are reviewed for impairment whenever in management's judgment conditions indicate a possible loss. Such impairment tests compare estimated undiscounted cash flows to the recorded value of the asset. If an impairment is indicated, the asset is written down to its fair value or, if fair value is not readily determinable, an estimated fair value is used based on discounted cash flows. Fully depreciated assets are retained in property, plant and equipment and accumulated depreciation accounts until they are removed from service. In case of disposals of assets, the assets and related accumulated depreciation are removed from the accounts, and the net amounts after proceeds from disposal are credited or charged to income.
 
Recently Issued Accounting Standards

In June 2014, the FASB issued ASU 2014-10, "Development Stage Entities". The amendments in this update remove the definition of a development stage entity from the Master Glossary of the ASC thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. The amendments in this update are applied retrospectively. The Company elected early adoption of ASU 2014-10. The adoption of ASU 2014-10 removed the development stage entity financial reporting requirements from the Company.

In July 2013, the FASB issued ASU No. 2013-11 Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit when a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU No. 2013-11”). This pronouncement provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This pronouncement is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2013. The provisions of ASU No. 2013-11 did not have a material impact on to the Company’s condensed consolidated financial statements.

In February 2013, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which added new disclosure requirements for items reclassified out of accumulated other comprehensive income. The update required entities to disclose additional information about reclassification adjustments, including changes in accumulated other comprehensive income balances by component and significant items reclassified out of accumulated other comprehensive income. The update became effective for us in the first quarter of 2013. This update had no material impact on our financial statements.

NOTE 4             AVAILABLE FOR SALE SECURITIES
 
On October 24, 2012, the Company entered into an agreement on its Willa property with Caribou King Resources Ltd. ("Caribou", or “CKR”), a Canadian issuer listed on the TSX Venture Exchange.  Under the terms of Agreement, Caribou may earn up to a 100% interest in the Willa Claims by making aggregate payments to North Bay of USD $232,500 in cash and issuing 1,000,000 shares of Caribou common stock.  Of the aggregate payments, $7,500 in cash and 500,000 shares are due upon receipt of regulatory acceptance of the agreement by the TSX Venture Exchange.  Subsequent to TSX approval in November, 2012, and pursuant to the agreement, the Company received 500,000 shares of CKR stock. These shares were valued at $25,050 based upon the closing price of CKR stock on the date the shares were issued. As of September 30, 2014 and December 31, 2013, the market value of these shares was $5,500 and $22,500, respectively.  We consider the unrealized net loss as temporary due to the short length of time the market price for these securities has been below its value on the acquisition date.
 
On July 18, 2014, the Company executed a mineral property option agreement (the "Agreement") with Ximen Mining Corp. ("Ximen"), a Canadian issuer listed on the TSX Venture Exchange,  pursuant to which Ximen may earn up to a 100% interest in the Company's “Brett West” and “Bouleau Creek” mineral claims (the “Brett West Claims”) in southeastern British Columbia.  Under the terms of Agreement, Ximen may earn up to a 100% interest in the Brett West Claims by making aggregate payments to North Bay of USD $600,000, consisting of $300,000 in cash and issuing $300,000 in shares of Ximen common stock.  Of the aggregate payments, $100,000 in cash and $100,000 in stock are due upon receipt of regulatory acceptance of the agreement by the TSX Venture Exchange, and equal payments of $50,000 cash and $50,000 in shares of Ximen stock are each due upon the 1st, 2nd, 3rd, and 4th 6-month anniversaries of the Agreement. Subsequent to TSX approval on September 5, 2014, and pursuant to the agreement, the Company received $70,000 of the $100,000 cash consideration due on closing and received $20,000 of the balance due subsequent to September 30, 2014, which was accounted for as accounts receivable as of September 30, 2014. As of September 30, 2014 the Company also received 217,391 shares of Ximen stock. These shares were valued at $100,000 based upon the closing price of Ximen stock on the date the shares were issued. As of September 30, 2014 and December 31, 2013, the market value of these shares was $73,413 and $0, respectively.  We consider the unrealized net loss as temporary due to the short length of time the market price for these securities has been below its value on the acquisition date.
 

 NOTE 5            RUBY MINE ACQUISITION
 
On September 27, 2010, the Company executed an option-to-purchase agreement with Ruby Development Company (“RDC”), a California partnership, for the acquisition of the Ruby Mine (the “Ruby”) in Sierra County, California. The purchase price is $2,500,000.
 
On June 1, 2011, the Company exercised its option to purchase the Ruby Mine and made a final option payment of $85,000 to open escrow.  On July 1, 2011, escrow was closed and the acquisition of the Ruby Mine was completed. During the preceding option period and as of the closing date, the Company has made payments totaling $510,000 to RDC, consisting of $360,000 cash and 10,000,000 shares of common stock valued at $150,000.  These payments were credited towards the purchase price, thereby reducing the outstanding principal due to $1,990,000.  The mortgage is to be paid in full by December 30, 2015 pursuant to amendments to the agreement executed on December 12, 2012, March 28, 2013, and November 19, 2013.  The seller has also been granted 10 million 5-year warrants exercisable at 2 cents, 2 million 5-year warrants exercisable at 9 cents, 2 million 5-year warrants exercisable at 10 cents, and 4 million 5-year warrants exercisable at 4 cents.  Pursuant to the aforementioned amendment dated November 19, 2013, the term of all of the outstanding warrants issued to the seller has been extended to December 30, 2018.

On the transaction closing date of July 1, 2011, the Company issued a promissory note to RDC for $1,990,000 plus 3% interest per annum.  The note, as amended, is due on or before December 30, 2015, and currently accrues interest at 6% per annum.  As of September 30, 2014 and December 31, 2013, the outstanding balance due on the note is $1,691,730 and $1,832,638, respectively.

Upon the close of the transaction and the transfer of title, as previously set forth in the purchase agreement, the Company acquired all of the real and personal property associated with the Ruby Gold Mine, all of the shares of Ruby Gold, Inc., a private California corporation, and $171,618 in reclamation bonds securing the permits at the Ruby Mine. Subsequent to the close of the transaction, Ruby Gold, Inc. became a wholly-owned subsidiary of North Bay Resources Inc.  The Company has also assumed the reclamation liabilities on the Ruby Mine, for which reclamation bonds are pledged.  In addition, a $2,500 liability from a pre-existing shareholder loan that was outstanding as of the closing date has been extinguished as of the close of escrow.

All costs related to the acquisition of the property have been capitalized when incurred. All other costs have been expensed when incurred.
 
NOTE 6             PROPERTY, PLANT, EQUIPMENT AND MINERAL CLAIM ASSETS

 As of September 30, 2014 and December 31, 2013, components of property, plant, and equipment and mineral assets were as follows:
 
   
September 30,
   
December 31,
 
   
2014
   
2013
 
             
Buildings
 
$
558,885
   
$
558,885
 
Machinery and equipment
   
137,820
     
138,820
 
Vehicles
   
281,602
     
281,602
 
Total property, plant and equipment
   
978,307
     
979,307
 
                 
Less: accumulated impairment (1)
   
(124,343
)
   
(124,343
)
Less: accumulated depreciation(2)
   
(329,608
)
   
(246,926
)
                 
Property, plant and equipment, net
 
$
524,356
   
$
608,038
 
 
   
September 30,
   
December 31,
 
   
2014
   
2013
 
             
Mining claims
 
$
1,792,660
   
$
1,792,660
 
Asset retirement costs
   
3,120
     
4,828
 
Total mineral claim assets
   
1,795,780
     
1,797,488
 
Less: accumulated depletion(2)
   
-
     
-
 
                 
Mining claims, net
 
$
1,795,780
   
$
1,797,488
 
 
(1) Following the acquisition of the Ruby Mine on July 1, 2011, an evaluation of the equipment inventory determined that some equipment was obsolete and/or otherwise not in compliance with safety regulations, resulting in an impairment deduction of $124,343.
 
(2) Depreciation expense totaled $82,682 and $73,640 for the nine months ended September 30, 2014 and 2013, respectively. Depletion expense totaled $0 and $0 for the nine months ended September 30, 2014 and 2013, respectively.
 
 
NOTE 7             DEBT

On July 1, 2011, upon the acquisition of the Ruby Mine, the Company issued a promissory note to Ruby Development Company (“RDC”) for $1,990,000 plus 3% interest per annum.  The note, as amended, is due on or before December 30, 2015.  Monthly payments are $10,000 per month during Q1, 2012, $15,000 per month during Q2, 2012, and $20,000 per month from July 1, 2013 through December 2015. Pursuant to an amendment executed on March 28, 2013, the interest rate on the note was increased to 6% as of April 1, 2013, and $160,000 was added to the principal. Pursuant to an amendment executed on November 19, 2013, mortgage payments through December 2015 are set at $20,000 due on the 1st day of each month, and an additional $40,000 due by the 20th day of each month, for aggregate monthly payments of $60,000 per month. As of September 30, 2014, the outstanding balance due on the note is $1,691,730.
 
On December 29, 2011, the Company entered into two agreements ("the Agreements") with Tangiers Investors LP, ("Tangiers") pursuant to which the Company received two $25,000 loans from Tangiers.  As the Agreement specifies, loan proceeds will only be used towards expenses related to the Ruby Mine Project.  The Agreement is structured as a $25,000 Promissory Note (the “Promissory Note”), and a $25,000 Convertible Promissory Note (the “Convertible Note”). The Promissory Note, as amended, has a maturity date of twenty four (24) months from the Effective Date, and an interest rate on the unpaid principal balance equal to 9.9% per year.  The Company shall make cash payments to Tangiers every two (2) weeks beginning January 1, 2012, at a minimum of $2,500 against the principal and accrued interest until the Promissory Note has been satisfied. The Company has further authorized Tangiers to debit this amount directly from any drawdowns made on Company’s existing Equity Line of Credit (“ELOC”) with Tangiers.  As further consideration, Tangiers shall be entitled to 250,000 5-year warrants to purchase 250,000 shares of our common stock at an exercise price of $0.115 per share. The value of these warrants was calculated via the Black-Scholes model and was calculated at $20,568. This value was recorded as a discount on the related note payable. The $25,000 Convertible Note is convertible into common stock, in whole or in part, at any time and from time to time before maturity at the option of the holder at a fixed price of $0.08 per share, which was the closing market share price on the Effective Date. Due to the conversion price being equal to the closing share price on the grant date no beneficial conversion feature resulted from this issuance. The Note accrues interest at a rate equal to 9.9% per year.  The Agreement further specifies that there shall be no penalty for prepayment of either the Promissory Note or the Convertible Note. During the years ended December 31, 2013 and 2012, $0 and $20,568 of the discount was amortized, respectively, and the discount has been fully amortized as of December 31, 2013.  As of December 31, 2013, the outstanding balance due on the Note is $29,970, which includes $4,970 in accrued interest. Repayment of this note has been waived by the lender until November 15, 2014. As of September 30, 2014, the outstanding balance due on the Note is $31,822, which includes $6,822 in accrued interest.

On February 2, 2012, the Company entered into two Convertible Promissory Note Agreements ("the Notes", or individually, the “Note”) with Tangiers Investors LP, ("Tangiers") pursuant to which the Company received an aggregate of $100,000 ($50,000 per Note) as a loan from Tangiers.  Each Note, as amended, has a term of twenty four (24) months.  Each Note accrues interest at a rate equal to 9.9% per year, and is convertible into common stock, in whole or in part, at any time and from time to time before maturity at the option of the holder at a fixed price of $0.08 per share.  As further consideration, Tangiers shall be entitled to 500,000 5-year warrants exercisable at $0.13.  The Notes further specify that there shall be no penalty for prepayment. The beneficial conversion feature resulting from the discounted conversion price compared to market price was valued on the date of grant to be $78,296 on the note, and $21,704 on the warrants. The warrants were valued using the Black-Scholes valuation model. This value was recorded as a discount on debt and offset to additional paid in capital. The discount was fully amortized as of December 31, 2012.  As of December 31, 2013, the outstanding balance due on the Note is $118,932, which includes $18,932 in accrued interest. Repayment of this note has been waived by the lender until November 15, 2014. As of September 30, 2014, the outstanding balance due on the Note is $126,357, which includes $26,357 in accrued interest.

On March 15, 2012, the Company entered into two Convertible Promissory Note Agreements ("the Notes", or individually, the “Note”) with Tangiers Investors LP, ("Tangiers") pursuant to which the Company received an aggregate of $75,000 ($37,500 per Note) as a loan from Tangiers.  Each Note, as amended, has a term of twenty four (24) months.  Each Note accrues interest at a rate equal to 9.9% per year, and is convertible into common stock, in whole or in part, at any time and from time to time before maturity at the option of the holder at a fixed price of $0.09 per share.  As further consideration, Tangiers shall be entitled to 500,000 5-year warrants exercisable at $0.09.  The Notes further specify that there shall be no penalty for prepayment.  The beneficial conversion feature resulting from the discounted conversion price compared to market price was valued on the date of grant to be $34,896 on the note, and $40,104 on the warrants. The warrants were valued using the Black-Scholes valuation model. This value was recorded as a discount on debt and offset to additional paid in capital.  The discount was fully amortized as of September 30, 2014. Repayment of this note has been waived by the lender until November 15, 2014. As of September 30, 2014, the outstanding balance due on the Note is $93,913, which includes $18,913 in accrued interest.
 
 
On May 16, 2012, the Company entered into a Convertible Promissory Note Agreement ("the Note") with Tangiers Investors LP, ("Tangiers") pursuant to which the Company received $50,000 as a loan from Tangiers.  The Note, as amended, has a term of twenty four (24)  months, accrues interest at a rate equal to 9.9% per year, and is convertible into common stock, in whole or in part, at any time and from time to time before maturity at the option of the holder at a fixed price of $0.06 per share.  As further consideration, Tangiers shall be entitled to 150,000 5-year warrants exercisable at $0.07.  The Note further specifies that there shall be no penalty for prepayment.  The beneficial conversion feature resulting from the discounted conversion price compared to market price was valued on the date of grant to be $16,241 on the note, and $9,393 on the warrants. The warrants were valued using the Black-Scholes valuation model. This value was recorded as a discount on debt and offset to additional paid in capital.  The discount was fully amortized as of September 30, 2014. Repayment of this note has been waived by the lender until November 15, 2014. As of September 30, 2014, the outstanding balance due on the Note is $61,786, which includes $11,786 in accrued interest.
 
On May 30, 2012, the Company entered into a Convertible Promissory Note Agreement ("the Note") with Tangiers Investors LP, ("Tangiers") pursuant to which the Company received $25,000 as a loan from Tangiers.  The Note, as amended, has a term of twenty four (24) months, accrues interest at a rate equal to 9.9% per year, and is convertible into common stock, in whole or in part, at any time and from time to time before maturity at the option of the holder at a fixed price of $0.06 per share.  As further consideration, Tangiers shall be entitled to 150,000 5-year warrants exercisable at $0.06.  The Note further specifies that there shall be no penalty for prepayment.  The beneficial conversion feature resulting from the discounted conversion price compared to market price was valued on the date of grant to be $10,988 on the note, and $9,380 on the warrants. The warrants were valued using the Black-Scholes valuation model. This value was recorded as a discount on debt and offset to additional paid in capital.  The discount was fully amortized as of September 30, 2014.  Repayment of this note has been waived by the lender until November 15, 2014. As of September 30, 2014, the outstanding balance due on the Note is $30,789, which includes $5,789 in accrued interest.
 
On June 19, 2012, the Company entered into a Convertible Promissory Note Agreement ("the Note") with Tangiers Investors LP, ("Tangiers") pursuant to which the Company received $100,000 as a loan from Tangiers.  The Note, as amended, has a term of twenty four (24) months, accrues interest at a rate equal to 7% per year, and is convertible into common stock, in whole or in part, at any time and from time to time before maturity at the option of the holder at a fixed price of 2 cents.  As further consideration, Tangiers shall be entitled to 750,000 5-year warrants exercisable at $0.07, and 750,000 5-year warrants exercisable at $0.14.  The Note further specifies that there shall be no penalty for prepayment.  The beneficial conversion feature resulting from the discounted conversion price compared to market price was valued on the date of grant to be $58,048 on the note, and $41,952 on the warrants. The warrants were valued using the Black-Scholes valuation model. This value was recorded as a discount on debt and offset to additional paid in capital.  Amortization expense during the nine months ended September 30, 2014 was $17,365. Repayment of this note has been waived by the lender until November 15, 2014. As of September 30, 2014, the outstanding balance due on the Note is $115,990, which includes $15,990 in accrued interest.
 
On July 11, 2012, the Company issued a $550,000 Promissory Note ("the Note") to JMJ Financial, ("JMJ", or “the Lender”).  The Principal Sum due to the Lender shall be prorated based on the consideration actually paid by the Lender, plus an approximate 10% Original Issue Discount ("OID") that is prorated based on the consideration actually paid by the Lender as well as any other interest or fees, such that the Company is only required to repay the amount funded and the Company is not required to repay any unfunded portion of the Note.  The Note has a maturity date of twelve (12) months from the Effective Date.  If the Note is repaid within ninety (90) days of the Effective Date, the interest rate shall be zero percent (0%).  Should the Note still be outstanding after 90 days, a one-time 5% interest rate will be applied.  In addition, the Lender has the right, at any time 90 days after the Effective Date, at its election, to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company. The Conversion Price is the lesser of $0.10 or 70% of the average of the two lowest closing prices in the 25 trading days previous to the conversion. The consideration received as of December 31, 2012 is $115,000. Due to the floating conversion price this note had an embedded derivative. The debt discount resulting from the derivative was valued on the date of grant to be $111,517 on the note. This value was recorded as a discount on debt and offset to derivative liability. In addition there was a $11,500 discount as a result of the principal owed ($126,500) exceeding the cash received ($115,000).  This resulted in a total discount of $123,017.  Amortization of the discount was $64,710 for the twelve months ended December 31, 2013.   During the twelve month period ended December 31, 2013 an additional $235,000 was drawn down from this facility, plus $27,550 in OID. The debt discounts resulting from the derivatives on each draw date was valued on the date of grants to be a cumulative value of $228,713 on the notes as of December 31, 2013. Amortization of the discount was $169,424 as of December 31, 2013. During the twelve month period ended December 31, 2013, stock conversions reduced the outstanding balance of principal and accrued interest due by $283,920, and the Company issued an aggregate of 11,229,544 common shares with the conversions, which was consistent with the note agreement, and therefore no gain or loss was recognized on the conversions. Amortization for the nine month period ended September 30, 2014 was $49,068. During the nine month period ended September 30, 2014, stock conversions reduced the outstanding balance of principal and accrued interest due by $133,860, and the Company issued an aggregate of 15,709,495 common shares for the conversions, which was consistent with the note agreement, and therefore no gain or loss was recognized on the conversions. As of September 30, 2014, the outstanding balance due on the Note is $97,508, which includes $5,085 in accrued interest.
 
 
On October 2, 2012, the Company issued a $750,000 Promissory Note ("the Note") to Tangiers Investors, LP ("Tangiers", or “the Lender”).  The consideration will be received by the Company in tranches of $50,000 no less than bi-weekly, by mutual consent.  The Principal Sum due to the Lender shall be prorated based on the consideration actually paid by the Lender plus any accrued interest, such that the Company is only required to repay the amount funded and the Company is not required to repay any unfunded portion of the Note. The Note has a maturity date of twenty four (24) months from the Effective Date of each tranche.  The Note shall accrue interest at a rate of 7% per annum on each $50,000 tranche independently from other tranches.  Unless repaid in cash, the Lender shall have the right to convert all or part of the outstanding and unpaid Principal Sum and accrued interest into shares of fully paid and non-assessable shares of common stock at a fixed price of $0.02 per share In addition, upon conversion, 125,000 5-year warrants for each $50,000 in Consideration received shall be issued, at an exercise price of 125% of the Conversion Price of each tranche, as applicable.  There is no penalty for prepayment, with prepayment subject to the consent of the Lender.  As of September 30, 2014, the Company has drawn $421,098 from this facility.  As of December 31, 2013, the outstanding balance due on this Note is $419,674 which includes $23,577 in accrued interest. Amortization for the nine month period ended September 30, 2014 was $16,336. As of September 30, 2014, the outstanding balance due on the Note is $466,934, which includes $47,637 in accrued interest.
 
On September 26, 2013, the Company acquired a Case 580SM Backhoe for the purchase price of $56,071.  This purchase was financed as a 36 month note with CNH Capital America LLC at an interest rate of 8.49%.  A $10,000 initial payment was made on October 1, 2013, with 36 payments scheduled at $1,462 per month.  As of December 31, 2013, the principal balance due on this note was $41,687 plus $1,114 in accrued interest. As of September 30, 2014, the principal balance due on this note was $28,526 plus $3,073 in accrued interest.
 
On October 1, 2013, the Company issued a $280,000 Secured Convertible Promissory Note ("the Typenex Note", or the “Note”) to Typenex Co-Investment, LLC ("Typenex").  The Note carries a $25,000 original issue discount (the “OID”), as well as $5,000 in transaction fees. The interest rate on the Note is 10% per annum. The Note has a maturity date of thirteen (13) months from the Effective Date, and has a fixed conversion price of $0.08 if converted by the holder.  The Note is self-amortizing, such that it may be repaid in cash in eight (8) monthly installments of $35,000 plus accrued interest beginning 180 days from the Effective Date.  In lieu of cash payments, the Company may elect to convert the note to shares at 70% of the arithmetic average of the two (2) lowest VWAPs of the shares of Common Stock during the twenty (20) consecutive Trading Day period immediately preceding the date of such conversion.  No conversion can occur prior to 180 days from the Effective Date.  In addition, the Company retains the option of pre-paying the Note at any time at an amount equal to 125% of the outstanding principal and the accrued and unpaid interest.  The initial tranche received from this transaction was $125,000. The debt discount due to the tainted equity valuation and “OID” was $125,000 and $30,000, respectively. The second tranche of $125,000 was received on January 31, 2014, and as of September 30, 2014 a debt discount of $280,000 was recorded. Amortization on the debt discount was $85,929 during the nine month period ended September 30, 2014.  During the nine month period ended September 30, 2014, stock conversions reduced the outstanding balance of principal and accrued interest due by $222,989, and the Company issued an aggregate of 28,283,280 common shares for the conversions, which was consistent with the note agreement, and therefore no gain or loss was recognized on the conversions. As of September 30, 2014, the principal balance due on this note was $104,025, which includes $8,262 in accrued interest.

On October 7, 2013, the Company issued a $56,500 Promissory Note ("the LG Note", or the "Note") to LG Capital Funding LLC ("LG", or “the Lender”).  The Principal Sum due to the Lender includes a 10% Original Issue Discount ("OID") plus $1,500 in transaction fees payable to the Lender. The Note has a maturity date of nine (9) months from the Effective Date.  If the Note is repaid within ninety (90) days of the Effective Date, the interest rate shall be zero percent (0%).  Should the Note still be outstanding after 90 days, a one-time 5% interest rate will be applied.  Unless the Note is prepaid in cash, the Lender has the right at its election to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Registrant. The Conversion Price is the lesser of $0.10 or 70% of the average of the two lowest closing prices in the 25 trading days previous to the conversion.  The consideration received as of December 31, 2013 is $50,000. Due to the floating conversion price this note had an embedded derivative. The debt discount resulting from the derivative was valued on the date of grant to be $55,758 on the note. This value was recorded as a discount on debt and offset to derivative liability. In addition there was a $6,500 discount as a result of the principal owed ($56,500) exceeding the cash received ($50,000).  This resulted in a total discount limited to the Note principal of $56,500.   As of December 31, 2013, the outstanding balance due on this Note is $56,500.  On April 8, 2014, the outstanding balance due on this note of $56,500 in principal plus $2,285 in accrued interest was fully converted to 4,154,411 shares of common stock, and the Note has paid in full and retired.
 
   
On January 31, 2014, the Company issued two $50,000 Convertible Redeemable Notes ("the Note", or collectively “the Notes”) to GEL Properties, LLC ("GEL", or “the Lender”).  Each Note carries a 10% original issue discount (the “OID”), such that the outstanding balance upon the issuance of each Note is $55,000. Each Note has a maturity date of twelve (12) months from the Effective Date, and accrues interest at 5% per annum.   The Notes may be converted to shares of Common Stock of the Company at a conversion price of 70% of the arithmetic average of the two (2) lowest VWAPs (volume weighted average price) of the shares of Common Stock during the twenty-five (25) consecutive Trading Day period immediately preceding the date of such conversion.  No conversion can occur prior to 180 days from the Effective Date.  As of September 30, 2014, only one of these notes has been funded, such that the initial tranche received from this transaction was $50,000, less $2,500 in legal fees, and a commission paid to Carter Terry & Company, a registered broker-dealer, consisting of $4,000 in cash. Due to the floating conversion price this note had an embedded derivative. The debt discount resulting from the derivative was valued on the date of grant to be $52,129 on the note. This value was recorded as a discount on debt and offset to derivative liability. Amortization of the discount was $54,159 for the nine month period ended September 30, 2014. During the three month period ended September 30, 2014, stock conversions reduced the outstanding balance of principal and accrued interest due by $38,500, and the Company issued an aggregate of 10,817,127 common shares for the conversions, which was consistent with the note agreement, and therefore no gain or loss was recognized on the conversions. As of September 30, 2014, the principal balance due on this note was $16,500, which includes $1,818 in accrued interest. 
 
On February 3, 2014, the Company issued two $30,000 Convertible Redeemable Notes ("the LG Note", or collectively “the Notes”) to LG Capital Funding, LLC ("LG", or “the Lender”).  Each LG Note carries a 10% original issue discount (the “OID”), such that the outstanding balance upon the issuance of each LG Note is $33,000. Each LG Note has a maturity date of nine (9) months from the Effective Date, and accrues interest at 5% per annum.   The Notes may be converted to shares of Common Stock of the Company at a conversion price of 70% of the arithmetic average of the two (2) lowest VWAPs (volume weighted average price) of the shares of Common Stock during the twenty-five (25) consecutive Trading Day period immediately preceding the date of such conversion.  No conversion can occur prior to 180 days from the Effective Date.  As of September 30, 2014, both of these notes have been funded, such that the total amount received from this transaction was $60,000, less $3,000 in legal fees, and a commission paid to Carter Terry & Company, a registered broker-dealer, consisting of $4,800 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $32,280 on the note. This value was recorded as a discount on debt and offset to derivative liability. Amortization of the discount was $27,727 for the nine month period ended September 30, 2014. As of September 30, 2014, the principal balance due on this note was $68,210, which includes $2,210 in accrued interest.
 
On March 13, 2014, the Company issued a $35,000 Convertible Redeemable Note (the “Note”) to LG Capital Funding LLC ("LG", or “the Lender”).  The Principal Sum due to the Lender includes a 10% Original Issue Discount ("OID") plus $1,750 in transaction fees.  The Note has a maturity date of nine (9) months from the Effective Date, and accrues interest at 5% per annum. Unless the Note prepaid in cash, the Lender has the right at its election to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company. The Note may be converted to shares of Common Stock of the Registrant at a conversion price of 70% of the arithmetic average of the two (2) lowest VWAPs (volume weighted average price) of the shares of Common Stock during the twenty-five (25) consecutive Trading Day period immediately preceding the date of such conversion.  No conversion can occur prior to 180 days from the Effective Date. In connection with this transaction, a commission has been paid to Carter Terry & Company, a registered broker-dealer, consisting of $2,800 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $31,453 on the note. This value was recorded as a discount on debt and offset to derivative liability. Amortization of the discount was $27,103 for the nine month period ended September 30, 2014. As of September 30, 2014, the principal balance due on this note was $39,551, which includes $1,051 in accrued interest.
 
On March 13, 2014, the Company issued a $30,000 Convertible Redeemable Note (the “Note”) to Union Capital LLC ("Union", or “the Lender”).  The Principal Sum due to the Lender includes a 10% Original Issue Discount ("OID") plus $1,500 in transaction fees.  The Note has a maturity date of twelve (12) months from the Effective Date, and accrues interest at 5% per annum. Unless the Note prepaid in cash, the Lender has the right at its election to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company. The Note may be converted to shares of Common Stock of the Registrant at a conversion price of 70% of the arithmetic average of the two (2) lowest VWAPs (volume weighted average price) of the shares of Common Stock during the twenty-five (25) consecutive Trading Day period immediately preceding the date of such conversion.  No conversion can occur prior to 180 days from the Effective Date. In connection with this transaction, a commission has been paid to Carter Terry & Company, a registered broker-dealer, consisting of $2,400 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $29,074 on the note. This value was recorded as a discount on debt and offset to derivative liability. Amortization of the discount was $17,575 for the nine month period ended September 30, 2014.  During the three month period ended September 30, 2014, stock conversions reduced the outstanding balance of principal and accrued interest due by $13,062, and the Company issued an aggregate of 4,999,496 common shares for the conversions, which was consistent with the note agreement, and therefore no gain or loss was recognized on the conversions. As of September 30, 2014, the principal balance due on this note was $20,275, which includes $566 in accrued interest.
 
 
On March 27, 2014, the Company issued a $50,000 Convertible Promissory Note (the “Note”) to Beaufort Capital Partners LLC ("Beaufort", or “the Lender”).  The Principal Sum due to the Lender includes a 10% Original Issue Discount ("OID").  The Note has a maturity date of six (6) months from the Effective Date, and accrues interest at 5% per annum. Unless the Note prepaid in cash, the Lender has the right at its election to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company. The Note may be converted to shares of Common Stock of the Registrant at a conversion price of 70% of the arithmetic average of the two (2) lowest VWAPs (volume weighted average price) of the shares of Common Stock during the twenty-five (25) consecutive Trading Day period immediately preceding the date of such conversion.  No conversion can occur prior to 180 days from the Effective Date. In connection with this transaction, a commission has been paid to Carter Terry & Company, a registered broker-dealer, consisting of $4,000 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $52,808 on the note. This value was recorded as a discount on debt and offset to derivative liability. In addition there was a $5,000 discount as a result of the principal owed ($55,000) exceeding the cash received ($50,000).  This resulted in a total discount limited to the Note principal of $55,000 including amortization of $31,870 as of September 30, 2014.  During the nine month period ended September 30, 2014, stock conversions reduced the outstanding balance of principal and accrued interest due by $6,500, and the Company issued an aggregate of 3,095,238 common shares for the conversions, which was consistent with the note agreement, and therefore no gain or loss was recognized on the conversions. As of September 30, 2014, the principal balance due on this note was $48,523, which includes $23 in accrued interest.

On April 10, 2014, the Company issued a $44,000 Convertible Promissory Note (the “Note”) to Caesar Capital Group, LLC ("Caesar", or “the Lender”).  The Principal Sum due to the Lender includes a 10% Original Issue Discount ("OID").  The Note has a maturity date of twelve (12) months from the Effective Date, and accrues interest at 8% per annum. Unless the Note is prepaid in cash, the Lender has the right at its election upon maturity of the Note to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Registrant. The Note may be converted to shares of Common Stock of the Registrant at a conversion price of 70% of the lowest VWAP (volume weighted average price) of the shares of Common Stock during the five (5) consecutive Trading Day period immediately preceding the date of such conversion.  In connection with this transaction, a commission has been paid to Meyers and Associates, a registered broker-dealer, consisting of $4,000 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $39,830 on the note. This value was recorded as a discount on debt and offset to derivative liability. In addition there was a $4,000 discount as a result of the principal owed ($44,000) exceeding the cash received ($40,000).  This resulted in a total discount to the Note principal of $43,830 including amortization of $20,711 as of September 30, 2014.  As of September 30, 2014, the principal balance due on this note was $45,562, which includes $1,668 in accrued interest.

On April 21, 2014, the Company issued a $55,000 Convertible Promissory Note (the “Note”) to WHC Capital, LLC ("WHC", or “the Lender”).  The Principal Sum due to the Lender includes a 10% Original Issue Discount ("OID").  The Note has a maturity date of twelve (12) months from the Effective Date, and accrues interest at 8% per annum. Unless the Note prepaid in cash, the Lender has the right at its election to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company. The Note may be converted to shares of Common Stock of the Registrant at a conversion price of 70% of the arithmetic average of the two (2) lowest VWAPs (volume weighted average price) of the shares of Common Stock during the twenty-five (25) consecutive Trading Day period immediately preceding the date of such conversion.  No conversion can occur prior to 180 days from the Effective Date. In connection with this transaction, a commission has been paid to Carter Terry & Company, a registered broker-dealer, consisting of $4,000 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $48,112 on the note. This value was recorded as a discount on debt and offset to derivative liability. In addition there was a $5,000 discount as a result of the principal owed ($55,000) exceeding the cash received ($50,000).  This resulted in a total discount to the Note principal of $53,112 including amortization of $23,788 as of September 30, 2014.  As of September 30, 2014, the principal balance due on this note was $57,028, which includes $2,028 in accrued interest.
 
On May 8, 2014, the Company issued a $280,000 Secured Convertible Promissory Note ("the Typenex Note", or the “Note”) to Typenex Co-Investment, LLC ("Typenex").  The Note carries a $25,000 original issue discount (the “OID”), as well as $5,000 in transaction fees. The interest rate on the Note is 10% per annum. The Note has a maturity date of thirteen (13) months from the Effective Date.  The Note is self-amortizing, such that it may be repaid in cash in eight (8) monthly installments of $35,000 plus accrued interest.  In lieu of cash payments, the Company may elect to convert the note to shares at 70% of the arithmetic average of the two (2) lowest VWAPs of the shares of Common Stock during the twenty (20) consecutive Trading Day period immediately preceding the date of such conversion.  In addition, the Company retains the option of pre-paying the Note at any time at an amount equal to 125% of the outstanding principal and the accrued and unpaid interest.  The initial tranche received from this transaction was $50,000. A second tranche of $50,000 was received on June 9, 2014, and a third tranche of $50,000 was received on August 8, 2014. In connection with this transaction, a commission has been paid to Carter Terry & Company, a registered broker-dealer, consisting of $8,000 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $60,147 on the first tranche, and $52,713 for the second tranche. This value was recorded as a discount on debt and offset to derivative liability. In addition there was a $16,500 discount as a result of the principal owed ($165,000) exceeding the cash received ($100,000).  This resulted in a total discount limited to the Note principal of $170,000 including amortization of $41,403 as of September 30, 2014.  As of September 30, 2014, the principal balance due on this note was $174,845, which includes $4,845 in accrued interest.
 

On May 9, 2014, the Company issued $34,000 Convertible Redeemable Notes ("the LG Note", or collectively “the Notes”) to LG Capital Funding, LLC ("LG", or “the Lender”).  The LG Note carries a 10% original issue discount (the “OID”), such that the outstanding balance upon issuance is $37,400. The LG Note has a maturity date of twelve (12) months from the Effective Date, and accrues interest at 5% per annum.   The Notes may be converted to shares of Common Stock of the Registrant at a conversion price of 70% of the arithmetic average of the two (2) lowest VWAPs (volume weighted average price) of the shares of Common Stock during the twenty-five (25) consecutive Trading Day period immediately preceding the date of such conversion.  No conversion can occur prior to 180 days from the Effective Date.  The initial tranche received from this transaction was $34,000, less $2,000 in legal fees, and a commission paid to Carter Terry & Company, a registered broker-dealer, consisting of $2,270 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $32,024 on the note. This value was recorded as a discount on debt and offset to derivative liability. In addition there was a $3,400 discount as a result of the principal owed ($37,400) exceeding the cash received ($34,000).  This resulted in a total discount limited to the Note principal of $35,424 including amortization of $13,975 as of September 30, 2014.  As of September 30, 2014, the principal balance due was $38,177, which includes $777 in accrued interest.

On July 14, 2014, the Company issued a $250,000 Convertible Promissory Note (the “Note”) to JSJ Investments Inc. ("JSJ", or “the Lender”).   The Note has a maturity date of six (6) months from the Effective Date, and accrues interest at 10% per annum. The Principal Sum due to the Lender shall be prorated based on the consideration actually paid by the Lender, as well as any other interest or fees, such that the Registrant is only required to repay the amount funded and the Registrant is not required to repay any unfunded portion of the Note.  The initial tranche received from this transaction was $100,000. Unless the Note is prepaid in cash within 120 days of the effective date, the Lender has the right at its election upon maturity of the Note to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Registrant. The Conversion Price is at a 42% discount to the average of the three lowest volume weighted average prices (VWAP) on the previous twenty (20) trading days to the date of Conversion, or 42% discount to the average of the three lowest VWAPs on the previous twenty (20) trading days that would be obtained if the conversion were to be made on the date that the Note was executed. In connection with this transaction, a commission has been paid to Carter Terry & Company, a registered broker-dealer, consisting of $8,000 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $100,000 on the note. This value was recorded as a discount on debt and offset to derivative liability. This resulted in a total discount limited to the Note principal of $100,000 including amortization of $42,391 as of September 30, 2014.  As of September 30, 2014, the principal balance due was $102,137, which includes $2,137 in accrued interest.
 
On August 6, 2014, the Company issued a $98,500 Convertible Promissory Note ("the Note") to KBM Worldwide, Inc. ("KBM", or “the Lender”).  The interest rate on the Note is 8% per annum, and the Note has a maturity date of nine (9) months from the Effective Date. The Note carries a $13,000 original issue discount (the “OID”), as well as $3,500 in transaction fees, such that the consideration received by the Registrant is $82,000.  The Company retains the option of pre-paying the Note at an amount equal to 110% of the outstanding principal and the accrued and unpaid interest within 30 days of the effective date, increasing at 5% per month to a maximum of 135% by the 6th month. Unless the Note is repaid in cash within 180 days, the Lender has the right to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company. The Conversion Price is at a 25% discount to the average of the two lowest closing prices on the previous twenty (20) trading days prior to the date of Conversion. In connection with this transaction, a commission has been paid to Carter Terry & Company, a registered broker-dealer, consisting of $6,560 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $97,603 on the note. This value was recorded as a discount on debt and offset to derivative liability. In addition there was a $16,500 discount as a result of the principal owed ($98,500) exceeding the cash received ($82,000).  This resulted in a total discount limited to the Note principal of $98,500 including amortization of $19,844 as of September 30, 2014.  As of September 30, 2014, the principal balance due was $99,687, which includes $1,187 in accrued interest.

On August 7, 2014, the Company issued a $125,000 Convertible Promissory Note ("the Note") to RLS Premiere Financial LLC ("RSL", or “the Lender”).  The interest rate on the Note is 5% per annum, and the Note has a maturity date of twelve (12) months from the Effective Date. The Principal Sum due to the Lender shall be prorated based on the consideration actually paid by the Lender, as well as any other interest or fees, such that the Company is only required to repay the amount funded and the Registrant is not required to repay any unfunded portion of the Note.  The initial tranche received from this transaction was $20,000. The Company retains the option of pre-paying the Note at an amount equal to 135% of the outstanding principal and the accrued and unpaid interest. Unless the Note is repaid in cash within 180 days, the Lender has the right to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company. The Conversion Price is at a 20% discount to the average of the two lowest volume weighted average prices (VWAP) on the previous fifteen (15) trading days to the date of Conversion. The debt discount resulting from the derivative was valued on the date of grant to be $20,000 on the note. This value was recorded as a discount on debt and offset to derivative liability. This resulted in a total discount limited to the Note principal of $20,000 including amortization of $2,959 as of September 30, 2014.  As of September 30, 2014, the principal balance due was $20,249, which includes $249 in accrued interest.
 
 
On September 3, 2014, the Company issued a $550,000 Promissory Note ("the Note") to JMJ Financial, ("JMJ", or “the Lender”).  The Principal Sum due to the Lender shall be prorated based on the consideration actually paid by the Lender, plus an approximate 10% Original Issue Discount ("OID") that is prorated based on the consideration actually paid by the Lender, a 3% Closing and Due Diligence Fee, as well as any other interest or fees, such that the Company is only required to repay the amount funded and the Company is not required to repay any unfunded portion of the Note.  The Note has a maturity date of twenty four (24) months from the Effective Date.  If the Note is repaid within ninety (90) days of the Effective Date, the interest rate shall be zero percent (0%).  Should the Note still be outstanding after 90 days, a one-time 5% interest rate will be applied.  In addition, the Lender has the right, at any time after the Effective Date, at its election, to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company. The Conversion Price is the lesser of $0.10 or 70% of the average of the two lowest closing prices in the 25 trading days previous to the conversion.  The initial consideration received as of the date of this report is $75,000.  In connection with this transaction, a commission has been paid to Meyers and Associates, a registered broker-dealer, consisting of $5,250 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $77,569 on the note. This value was recorded as a discount on debt and offset to derivative liability. In addition there was a $7,500 discount as a result of the principal owed ($82,500) exceeding the cash received ($75,000).  This resulted in a total discount limited to the Note principal of $84,750 including amortization of $3,130 as of September 30, 2014.  As of September 30, 2014, the principal balance due was $82,500, which includes $0 in accrued interest.

On September 3, 2014, the Company issued a $53,000 Convertible Promissory Note ("the KBM Note") to KBM Worldwide, Inc. ("KBM", or “the Lender”).  The interest rate on the KBM Note is 8% per annum, and the KBM Note has a maturity date of twelve (12) months from the Effective Date. The KBM Note carries a $5,000 original issue discount (the “OID”), as well as $3,000 in transaction fees, such that the purchase price is $48,000, and the net consideration received by the Company is $45,000.  The Company retains the option of pre-paying the KBM Note at an amount equal to 110% of the outstanding principal and the accrued and unpaid interest within 30 days of the effective date, increasing at 5% per month to a maximum of 135% by the 6th month. Unless the KBM Note is repaid in cash within 180 days, the Lender has the right to convert all or part of the outstanding and unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company. The Conversion Price is at a 25% discount to the average of the two lowest closing prices on the previous twenty (20) trading days prior to the date of Conversion. In connection with this transaction, a commission has been paid to Carter Terry & Company, a registered broker-dealer, consisting of $3,600 in cash. The debt discount resulting from the derivative was valued on the date of grant to be $50,373 on the note. This value was recorded as a discount on debt and offset to derivative liability. This value was recorded as a discount on debt and offset to derivative liability. In addition there was a $8,000 discount as a result of the principal owed ($53,000) exceeding the cash received ($45,000).  This resulted in a total discount limited to the Note principal of $55,000 including amortization of $3,899 as of September 30, 2014.  As of September 30, 2014, the principal balance due was $53,331, which includes $331 in accrued interest.

The following table summarizes all of the Convertible Notes outstanding as of September 30, 2014 and December 31, 2013:
 
   
September 30,
2014
   
December 31,
2013
 
Mortgage payable – Ruby Mine
 
$
1,691,730
   
$
1,832,638
 
Secured note payable with annual interest rate of 8%
   
28,526
     
41,687
 
Discount on note payable
   
-
     
-
 
Net note payable
   
1,720,256
     
1,874,325
 
Convertible notes:
               
Secured convertible notes payable with annual interest rate of 10%
   
220,000
     
155,000
 
Unsecured convertible notes payable with annual interest rate of 10%
   
195,279
     
-
 
Unsecured convertible notes payable with annual interest rate of 9.9%
   
275,000
     
275,000
 
Unsecured convertible notes payable with annual interest rate of 8%
   
298,500
     
-
 
Unsecured convertible notes payable with annual interest rate of 7%
   
519,298
     
496,097
 
Unsecured convertible notes payable with annual interest rate of 5%
   
332,275
     
175,050
 
Discount on debt from derivative valuation
   
(661,359
)
   
(264,389
Total convertible notes
   
1,178,993
     
836,858