NOTES PAYABLE IN GOLD

9 Months Ended

Sep. 30, 2022

Notes Payable In Gold

NOTES PAYABLE IN GOLD

6. NOTES PAYABLE IN GOLD

During 2013, the Company issued notes payable in gold 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.

After several amendments to the terms of the note agreements, through the date of the issuance of these financial statements, the gold notes have not been paid and the note holders have not demanded payment or delivery of gold. At September 30, 2022 and December 31, 2021, 266.788 ounces of fine gold was due and deliverable to the holder of the notes.

At September 30, 2022, the Company estimates the fair value of the notes based on the market approach with Level 2 inputs of gold delivery contracts based upon previous contractual delivery dates, using the market price of gold on September 30, 2022 of approximately $1,672 per ounce as quoted on the London PM Fix market or $446,003 in total. The valuation resulted in an decrease in gold notes payable of $38,751 during the three months ended September 30, 2022 and a decrease of $35,777 for the nine months ended September 30, 2022.

At December 31, 2021, the fair value was calculated using the market approach with Level 2 inputs of gold delivery contracts based upon previous contractual delivery dates. At December 31, 2021, the Company had outstanding total notes payable in gold of $481,780.

Interest of $11,789 and $34,146 was expensed during the three and nine months ended September 30, 2022, respectively, and $127,554 is accrued at September 30, 2022 and is included in interest payable. Interest of $10,680 and $30,935 was expensed during the three and nine months ended September 30, 2021, respectively.