SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2013

SUBSEQUENT EVENTS [Text Block]

15.    SUBSEQUENT EVENTS

On July 18, 2013, the Company issued the following convertible promissory notes in the aggregate principal amount of $222,100 :

(a)	Two convertible promissory notes (the “20% Notes”) were issued to two existing arm’s-length creditors of the Company (the “20% Noteholders”), to evidence the Company’s promise to repay to the 20% Noteholders an aggregate of $57,252, together with interest at a rate of 20% per annum on the unpaid balance of the principal;
(b)	A convertible promissory note (the “Hirsch Note”) was issued to Ronald Hirsch, the Chair of the Company’s Board of Directors, to evidence the Company’s promise to repay Mr. Hirsch the sum of $89,581, together with interest at a rate of 10% per annum on the unpaid balance of the principal; and
(c)	A convertible promissory note (the “Seymour Note” and together with the Hirsch Note the “10% Notes”) was issued to Stephen Seymour, a member of the Company’s Board of Directors, to evidence the Company’s promise to repay Mr. Seymour the sum of $75,267, together with interest at a rate of 10% per annum on the unpaid balance of the principal.

Each of the 20% Notes will become due and payable on the earlier of January 14, 2014 and the closing of a financing transaction by the Company for gross proceeds in excess of $20,000,000.

Each of the 10% Notes will become due and payable on the earlier of July 18, 2016 and the closing of a financing transaction by the Company for gross proceeds in excess of $20,000,000.

The 20% Notes and the 10% Notes may be prepaid at any time without penalty.

The outstanding principal under each 20% Note, and the accrued and unpaid interest thereon, is convertible at the option of the holder, in whole and not in part, into shares of the Company’s common stock at the conversion price equal to $0.02 per common share.

The outstanding principal under each 10% Note, and the accrued and unpaid interest thereon, is convertible at the option of the holder, in whole and not in part, into shares of the Company’s common stock at the conversion price equal to $0.04 per common share.

The principal amount of $28,626 advanced under each 20% Note was applied to pay in full the outstanding principal amount and accrued interest under an existing convertible promissory note issued by the Company to each 20% Noteholder on July 30, 2012, in the principal amount of $25,000 and bearing interest at the rate of 15.0% per annum.

The principal amount of $89,581 under the Hirsch Note was advanced for the purposes of: (i) application by the Company of $77,081 to payment in full of the outstanding principal amount and accrued interest under the convertible promissory notes issued by the Company to Mr. Hirsch on December 29, 2010, in the principal amount of $50,000 and bearing interest at the rate of 10.0% per annum, on July 30, 2012, in the principal amount of $6,250 and bearing interest at the rate of 15.0% per annum, and on July 31, 2012, in the principal amount of $6,250 and bearing interest at the rate of 15.0% per annum; and (ii) as to the balance of $12,500, for general working capital purposes.

The principal amount under the Seymour Note was advanced for the purposes of: (i) application by the Company of $62,767 to payment in full of the outstanding principal amount and accrued interest under the convertible promissory note issued by the Company to Mr. Seymour on December 29, 2010, in the principal amount of US$50,000 and bearing interest at the rate of 10.0% per annum; and (ii) as to the balance of $12,500, for general working capital purposes.

On July 26, 2013 a holder of a 20% Note converted $28,752 of outstanding principal and accrued and unpaid interest into 1,437,582 shares of the Company, at a conversion price of $0.02 per share.

On July 29, 2013 the Company received $200,000 in advance royalty payment from Texas Canyon, the producer of decorative rock and aggregate from the Company’s waste rock, in exchange for a discount of $0.35 per ton for 173,913.04 tons of future royalties. The deferred revenue will be amortized to miscellaneous income as Texas Canyon sells the aggregate to a third party.