OTHER CURRENT LIABILITIES

9 Months Ended

Sep. 30, 2013

OTHER CURRENT LIABILITIES [Text Block]

6.      OTHER CURRENT LIABILITIES

On June 24, 2013, the Company issued a promissory note to a related party of the Company in the aggregate principal amount of up to $238,411. The sum of $128,411 was advanced on June 24, 2013 – of that amount, $28,411 was applied to repay in full the principal and accrued interest outstanding under a previously-issued promissory note held by the lender, and the balance of $100,000 was allocated to working capital. The remaining $110,000 in principal was advanced under the promissory note in July 2013 and used for working capital purposes. The promissory note matures on June 24, 2014 and bears an interest rate of 20% per annum. In connection with this financing, the Company issued 953,644 common stock purchase warrants to the lender, each exercisable for a period of three years to purchase one share of the Company’s common stock at an exercise price of $0.02. Due to its de minimis nature, the value of the warrant in the amount of $13,246 was expensed as interest expense during the nine months ended September 30, 2013 within the condensed consolidated statements of operations.

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% Note Holders”), to evidence the Company’s promise to repay to the 20% Note holders 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% Note Holder on July 30, 2012, in the principal amount of $25,000 and bearing interest at the rate of 15% 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% per annum, on July 30, 2012, in the principal amount of $6,250 and bearing interest at the rate of 15% per annum, and on July 31, 2012, in the principal amount of $6,250 and bearing interest at the rate of 15% 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 $50,000 and bearing interest at the rate of 10% per annum; and (ii) as to the balance of $12,500, for general working capital purposes.

On July 26, 2013, the Company received $200,000 as an advance royalty payment from Texas Canyon, the producer of decorative rock and aggregate from the Company’s waste rock, in exchange for future royalties on 173,913.04 tons of material, in consideration of a $0.35 per ton discount. The deferred revenue will be amortized to miscellaneous income as Texas Canyon sells the aggregate to a third party.