7. Debt

12 Months Ended

Dec. 31, 2013

Debt

7. Debt

The following table sets forth the outstanding indebtedness of the Company at the date indicated. Inter-company transactions have been eliminated in the consolidated balance sheet:

Description	Total Due at December 31, 2013		Total Due at December 31, 2012
Related party notes
LV Ventures	$	1,385	$	–
Suprafin, Ltd.		1,082		785,929
Robert Dickey		–		540,000
Bass Energy		–		500,000
Total related party notes payable	$	2,467	$	1,825,929
Notes payable
Banco de Chile Loan	$	–	$	45,541
Walker River Investments		–		270,988
Land Purchase Balance		351,183		367,763
Total notes payable	$	351,183	$	684,292
Convertible notes, net
Magna Group LLC	$	–	$	205,589
July 2013 Convertible Notes, net		50,113		–
Total convertible notes	$	50,113	$	205,589

From February 2012 through December 31, 2013, Suprafin, Ltd. (“Suprafin”) provided the Company a total of $3,747,764 in non-interest bearing unsecured demand loans to enable Bluestone to pay the balance of the purchase price for the Sulfatos Acquisition and for working capital purposes. Zirk de Maison (formerly Engelbrecht), a member of the Board of Directors until February 13, 2014, and formerly the Chief Executive Officer, of the Company, is the owner of Suprafin. In April 2012 Suprafin assigned $570,988 of the loans to Walker River Investments, Corp (“Walker”) and in December 2012 Suprafin assigned an additional $250,000 of the loans to Walker which the Company was informed of in May 2013. In March 2013 Suprafin agreed to cancel $100,000 of these loans in exchange for 181,000 shares of common stock. In May 2012, Suprafin agreed to cancel $429,000 of these loans in exchange for 100,000 shares of Series A Preferred Stock. In May 2013 Suprafin agreed to cancel an additional $420,000 of these loans in exchange for 42,000 shares of Preferred Series A Stock at $10 per share. In October 2013 Suprafin agreed to cancel an additional $110,000 of these loans in exchange for 22,000 shares of Preferred Series A Stock at $5 per share. On November 13, 2013 the Board of Directors of the Company approved that as a condition to closing a financing transaction, all related party debt would be converted into stock of the Company. $280,640 of Suprafin’s debt was converted into 17,540 shares of Preferred Series A Stock at $16 per share. As of December 31, 2013, the Company had repaid $1,583,964 of these loans, and the outstanding balance of these loans was $1,082. $576,295 represented the additional advances made by and $198,500 of payments made to Suprafin, Ltd. during the year ended December 31, 2013.

In December 2012, Walker sold $300,000 of their loans to Magna Group LLC (“Magna”) in three increments of $100,000 each, and the Company issued to Magna a series of convertible notes (the “Magna Notes”) for the principal amount which bear interest at the rate of 8% per annum. These Magna Notes are convertible into stock of the Company at a discount of 37.5% from the lowest Trading Price the day prior to the execution of the Magna Notes and contain a one-time price reset which allows Magna to take a 37.5% discount from the lowest trading price on the day prior to the day the investor chooses to exercise the reset. We evaluated original issue discount feature derived from the conversion option of this note as of December 31, 2012 and deemed it to be $180,000. Magna chose to convert $100,000 as of December 31, 2012 which represented a $160,000 value with the debt discount of these Magna Notes into 177,714 shares of Common Stock.

In January and February 2013, Walker sold an additional $270,988 of their loans to Magna in two increments of $125,000 and $145,988, and the Company issued to Magna a series of convertible Magna Notes for the principal amount which bear interest at the rate of 8% per annum. These Magna Notes were convertible into stock of the Company at a discount of 37.5% from the lowest Trading Price the day prior to the execution of the Magna Notes and contain a one-time price reset which allows Magna to take a 37.5% discount from the lowest trading price on the day prior to the day the investor choses to exercise the reset. We evaluated original issue discount feature derived from the conversion option of this note and it was deemed to be $157,259.

In February and March 2013, Magna chose to convert the remaining $200,000 which represented a $322,141 value with the debt discount and $2,141 interest of these Magna Notes into 604,357 shares of Common Stock with a fair value of $414,944 resulting in loss on debt settlement of $92,803.

On March 26, 2013, Magna chose to convert $65,000 of the $125,000 loan, which represented a $104,000 value with the debt discount, into 179,311 shares of Common Stock which were fair valued at $104,000. On April 25, 2013, Magna chose to convert the remaining $60,000 of the $125,000 loan, which represented a $96,100 value with the debt discount, into 208,696 shares of Common Stock fair valued at 102,261 representing a loss on settlement of $6,052.

On June 7, 2013 Walker sold an additional $250,000 of their loans to Magna and the Company and Magna agreed to cancel all outstanding prior Magna Notes (which had a principal balance due of $145,988 and interest due of $6,390) in exchange for a new Magna Note which was issued to Magna for the principal amount of $402,378. This new Magna Note is convertible into stock of the Company at a discount of 35% from the lowest Trading Price the five (5) days prior to the execution of the Magna Note and contain six price resets which allows Magna to take a 35% discount from the lowest trading price on the day prior to the day the investor chooses to exercise the reset. We evaluated original issue discount feature derived from the conversion option of this note and noted an additional $137,015.

From July through September 2013 Magna chose to convert $152,378 of this Magna Note, which represented a $235,892 value with the debt discount, into 1,027,506 shares of Common Stock fair valued at $265,435, resulting in a loss on settlement of $29,543.

In October and November 2013 Magna chose to convert $50,000 of this Magna Note, which represented a $77,403 value with the debt discount, into 404,858 shares of Common Stock valued at $91,093, representing a loss on settlement of $13,690.

In December 2013 the Company elected to repay the outstanding balance of the Magna Note in cash. The Company requested an accounting of the balance due from Magna who calculated the balance due as $279,264 which included $200,000 in principal, $14,818 in interest and $64,446 in prepayment premium, recorded by the Company as interest expense. This balance was paid as calculated by Magna and the remaining unamortized debt discount was amortized in full resulting in a gain of $108,245. The outstanding balance to Magna was $0 as of December 31, 2013.

From September through December 2012, the Company borrowed a total of $1,040,000 for working capital purposes from Robert Dickey, currently a member of the Board of Directors and Bass Energy. Bill Hlavin, currently a member of the Board of Directors is the owner of Bass Energy. In May 2013 Robert Dickey agreed to cancel $300,000 of his loans in exchange for 30,000 shares of Preferred Series A Stock at $10 per share leaving a balance due of $740,000, $500,000 to Bass Energy and $240,000 to Robert Dickey. On October 1, 2013 Bass Energy and Robert Dickey both agreed to convert $70,000 of each of their debt into 14,000 shares of Preferred Series A Stock at $5 per share for a total of 28,000 shares. On November 13, 2013 the Board of Directors of the Company approved that as a condition to closing a financing transaction, all related party debt would be converted into stock of the Company. The remaining $170,000 of Robert Dickey’s debt was converted into 10,625 shares of Preferred Series A Stock at $16 per share and the remaining $430,000 of Bass Energy’s debt was converted into 26,875 shares of Preferred Series A Stock at $16 per share. The outstanding balance due to Robert Dickey and Bass Energy was $0 as of December 31, 2013.

In November 2013, the Company borrowed a total of $1,385 for working capital purposes from LV Ventures, Inc.. William Farley, currently our Chief Executive Officer and a member of the Board of Directors, is the owner of LV Ventures, Inc. The outstanding balance due to LV Ventures, Inc. at December 31, 2013 was $1,385.

In July 2013 the Company borrowed a total of $69,000 in Convertible Notes payable to unrelated third parties for working capital purposes. These Convertible Notes bear interest at the rate of 8% per annum and are redeemable in 18 months or convertible after six months into shares of the Company’s Common Stock at a price equal to 60% of the average of the variable weighted average price for the 10 trading days prior to the date of conversion. The Company accrued $2,119 in interest expense for the year ended December 31, 2013 for these Convertible Notes. The balance due with accrued interest payable on these Convertible Notes as of December 31, 2013 was $71,119. We have evaluated the original issue discount feature derived from the conversion option of these Convertible Notes upon their issuance and deemed it to be $39,474. As of December 31, 2013, we recognized $9,258 in amortized debt discount related to these notes. The amount was recorded as interest expense. The balance due under these Convertible Notes, including original issue discount and accrued interest of $2,119, was $50,113, net of unamortized debt discount of $21,006 as of December 31, 2013.

In April 2012, Sulfatos borrowed $40,500,223 CLP, or approximately $79,454 US dollars, from Banco de Chile for working capital purposes. This loan bears interest at the rate of 13.43% per annum and was due on March 31, 2013. Monthly payments of principal and interest in the amount of $7,343,229 CLP, or approximately $15,608 US dollars, commenced on October 1, 2012. As of September 30, 2013, the outstanding balance of this loan had been paid in full. The Company paid $3,559,151 CLP, or approximately $7,532 US dollars in interest expense related to these notes.

Defaulted Senior Notes

As of December 31, 2013 Sulfatos owed $183,935,738 CLP, or approximately $351,183 US dollars, for the last two payments of the land acquired in the first quarter of 2011. This debt was in default at December 31, 2013. There is no default rate on the note. In June 2014 the debt was renegotiated and is no longer in default. See Note 12 – Subsequent Events.