NOTES AND LEASES PAYABLE

12 Months Ended

Dec. 31, 2011

NOTE 5 - NOTES AND LEASES PAYABLE

NOTES PAYABLE

Notes payable are detailed in the following schedules as of December 31, 2011 and 2010:

	December 31,			December 31,
	2011			2010

Note payable to legal firm due in monthly installments including interest at 10%. Debt was settled on December 30, 2011. (See Note 11)	$	-0-		$	497,699

Note payable to an insurance company due in monthly installments, including interest at 3%. The note matures in July 2012.		110,648			69,805

Note payable to a company for equipment due in monthly installments, including implied interest of 9.34%. The note matures in July 2014.		152,496			-0-

Convertible debt (PIK Notes), net of applicable discounts, payable to multiple note holders, at an annual interest rate of 10%. The notes mature in December 2018. (See Note 7)		-0-			4,683,624

Total Notes Payable		263,144			5,251,128
Less: Current Portion		(165,375	)		(206,209	)

Total Long-Term Liabilities	$	97,769		$	5,044,919

The following is a schedule by year of the future minimum note payments as of December 31, 2011:

2012	$	165,375
2013		60,063
2014		37,706
Thereafter		-0-
Total Notes Payable	$	263,144

CAPITAL LEASES

The Company is a lessee of certain equipment under capital leases that expire on various dates through March 2012. Terms of the leases call for monthly payments of $1,632 and $3,518 at an implicit interest rate of 9.34% per annum (the incremental borrowing rate). The assets and liabilities under capital leases are recorded at lease inception at the lower of the present value of the minimum lease payments or the fair market value of the related assets. The assets are depreciated over their estimated useful lives.

CAPITAL LEASES-CONTINUED

The following is a schedule by years of the future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2011:

2012	$	11,932
Less: Amount Representing Interest		(205	)
Present Value of Net Minimum Lease Payments	$	11,727

The following is an analysis of the leased property under capital leases by major classes:

	December 31,
Classes of Property	2011			2010
Milling Equipment	$	95,363		$	162,052
Mining Equipment		-0-			197,000
Less: Accumulated Depreciation		(66,282	)		(73,409	)
Total assets under capital lease	$	29,081		$	285,643

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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