Liquidity and Capital Resources:
Since inception to December 31, 2011, we have funded our operations from the sale of securities, issuance of debt and loans from a shareholder.
As of December 31, 2011, our assets totaled $1,821,184, which consisted primarily of mineral rights, land and water rights, and related equipment. Our total liabilities were $4,704,767 which primarily consisted of note payable to a shareholder of $1,223,031, accounts payable and accrued expenses of $1,435,263, notes payable to related parties of $414,606, and promissory notes of $1,244,900. We had an accumulated deficit of $27,185,182 and a working capital deficit of $2,951,205 at December 31, 2011.
On December 2, 2011 $1,000,000 in principal and $91,711 in accrued interest of an unsecured loan from a company owned by the Chief Executive Officer was gifted to a non-affiliate debt holder. Subsequently, $500,000 of the debt was sold to an investor and additional proceeds of $500,000 were loaned by the non-affiliate to the Company.
At December 31, 2011, the balance of the note from a shareholder was $1,331,552 including accrued interest. The note bears interest at the rate of 10% and due on January 2, 2013.
At December 31, 2011, the balance of the note from the non-affiliate was $1,101,903 including accrued interest. The note bears interest at the rate of 12% and due on December 2, 2012. The note and any interest due are convertible into common shares of the Company at a price of $0.02 per share at any time upon demand of the debt holder.
During December 2011, the Company issued 15,590,954 shares of common stock on conversion of a portion of the $500,000 note sold to an investor, in exchange for retiring $140,000 worth of principal. At December 31, 2011, the balance of the note was $135,302 including interest, net of discount. The note is convertible into common shares of the company at a conversion rate of a 45% discount to the daily VWAP price of the common stock based on a five day period prior to the date of conversion, which rate will be subject to certain adjustments. The note bears interest at the rate of 12%, and due on December 2, 2012. The principal if fully converted represents the potential issuance of 50,000,000 shares, limited to a maximum conversion right at any one time to 4.99% of the then outstanding shares of common stock of the company.
