6. Notes Payable in Gold	9 Months Ended
Sep. 30, 2017
Notes
6. Notes Payable in Gold	6. NOTES PAYABLE IN GOLD During 2013, the Company issued notes in principal amounts totaling $820,000, less a discount of $205,000, for net proceeds of $615,000. Under the terms of the notes, the Company agreed to deliver gold to the holders at the lesser of $1,350 per ounce of fine gold or a 25% discount to market price as calculated on the contract date and specify delivery of gold in November 2014. The notes payable in gold contracts initially contained standard terms regarding delivery and receipt of gold and payment of delivery costs. On November 30, 2014 and 2015, the Company renegotiated terms with the holders. A default condition arising from the non-delivery of the gold was alleviated by agreements with the other three note holders to extend the delivery dates of gold with the following significant terms: Ten percent (10%) of the required quantity of gold under the contract, prior to amendment one in 2014, which was originally due on the delivery date of November 30, 2014, was delivered on November 30, 2015. In lieu of gold, the Company could elect to satisfy the delivery of the deliverable required quantity by paying, an amount equal to the deliverable required quantity times the greater of the original purchase price or the index price for the day preceding the date of payment. The Company agreed to pay interest on the value of the delayed delivery required quantity at an annual non-compounding percentage rate of 8% payable quarterly with any remaining interest due and payable on the delivery date. If the delivery date index price on November 30, 2016 is less than the original purchase price, an additional adjusted required amount shall be delivered by December 31, 2016. On November 30, 2016, the Company again renegotiated terms with the holders. A default condition arising from the non-delivery of the gold in 2016 was alleviated by agreements with the three note holders to extend the delivery date of gold to November 30, 2017, with the following terms: Ten percent (10%) of the required quantity of gold under the contract, prior to amendment one in 2014 and amendment two in 2015, which was originally due on the delivery date of November 30, 2014, was delivered on November 30, 2016. In lieu of gold, the Company could elect to satisfy the delivery of the deliverable required quantity by paying, an amount equal to the deliverable required quantity times the greater of the original purchase price or the index price for the day preceding the date of payment. The Company agreed to pay interest on the value of the delayed delivery required quantity at an annual non-compounding percentage rate of 9% payable quarterly with any remaining interest due and payable on the delivery date. If the delivery date index price on November 30, 2017 is less than the original purchase price, an additional adjusted required amount shall be delivered by December 31, 2017. As newly amended, the gold to be delivered will not likely be produced from the Company’s property. In addition, history has shown that the Company may satisfy the debt through cash payment instead of gold ounces for payment. Due to these provisions, the amended contracts are accounted for as derivatives requiring their value to be adjusted to fair value each period end. For the nine-months ended September 30, 2017, the Company recorded a change in the fair value of $24,932, based on a forward gold contract price of $1,275 per ounce. At September 30, 2017 and December 31, 2016, the Company had outstanding total notes payable in gold of $437,193 and $412,261, respectively, representing 342.788 ounces of fine gold deliverable at November 30, 2017.

6. Notes Payable in Gold

9 Months Ended

Sep. 30, 2017

6. NOTES PAYABLE IN GOLD

During 2013, the Company issued notes in principal amounts totaling $820,000, less a discount of $205,000, for net proceeds of $615,000. Under the terms of the notes, the Company agreed to deliver gold to the holders at the lesser of $1,350 per ounce of fine gold or a 25% discount to market price as calculated on the contract date and specify delivery of gold in November 2014. The notes payable in gold contracts initially contained standard terms regarding delivery and receipt of gold and payment of delivery costs.

On November 30, 2014 and 2015, the Company renegotiated terms with the holders. A default condition arising from the non-delivery of the gold was alleviated by agreements with the other three note holders to extend the delivery dates of gold with the following significant terms:

Ten percent (10%) of the required quantity of gold under the contract, prior to amendment one in 2014, which was originally due on the delivery date of November 30, 2014, was delivered on November 30, 2015. In lieu of gold, the Company could elect to satisfy the delivery of the deliverable required quantity by paying, an amount equal to the deliverable required quantity times the greater of the original purchase price or the index price for the day preceding the date of payment.
The Company agreed to pay interest on the value of the delayed delivery required quantity at an annual non-compounding percentage rate of 8% payable quarterly with any remaining interest due and payable on the delivery date.
If the delivery date index price on November 30, 2016 is less than the original purchase price, an additional adjusted required amount shall be delivered by December 31, 2016.

On November 30, 2016, the Company again renegotiated terms with the holders. A default condition arising from the non-delivery of the gold in 2016 was alleviated by agreements with the three note holders to extend the delivery date of gold to November 30, 2017, with the following terms:

Ten percent (10%) of the required quantity of gold under the contract, prior to amendment one in 2014 and amendment two in 2015, which was originally due on the delivery date of November 30, 2014, was delivered on November 30, 2016. In lieu of gold, the Company could elect to satisfy the delivery of the deliverable required quantity by paying, an amount equal to the deliverable required quantity times the greater of the original purchase price or the index price for the day preceding the date of payment.
The Company agreed to pay interest on the value of the delayed delivery required quantity at an annual non-compounding percentage rate of 9% payable quarterly with any remaining interest due and payable on the delivery date.
If the delivery date index price on November 30, 2017 is less than the original purchase price, an additional adjusted required amount shall be delivered by December 31, 2017.

As newly amended, the gold to be delivered will not likely be produced from the Company’s property. In addition, history has shown that the Company may satisfy the debt through cash payment instead of gold ounces for payment. Due to these provisions, the amended contracts are accounted for as derivatives requiring their value to be adjusted to fair value each period end. For the nine-months ended September 30, 2017, the Company recorded a change in the fair value of $24,932, based on a forward gold contract price of $1,275 per ounce.

At September 30, 2017 and December 31, 2016, the Company had outstanding total notes payable in gold of $437,193 and $412,261, respectively, representing 342.788 ounces of fine gold deliverable at November 30, 2017.