5.         Subsequent Events

On March 20, 2012, the Company signed a non-binding Letter of Intent (LOI) with Idaho State Gold Company, LLC (“ISGC”), Idaho, to advance and develop the South Mountain project through a Joint Venture arrangement. The LOI was approved by the Company`s Board. Under the initial terms of the LOI, ISGC will commit to spending up to eighteen million dollars ($18,000,000), in stages, to move the Company`s South Mountain Project through feasibility and into production. The final agreement has not yet been signed.

On April 30, 2012 the Company executed a convertible promissory note in the amount of $1,000,000. Pursuant to section 3 of the Joint Venture Proposal, the Company issued a Convertible Promissory Note (the “Convertible Note”)   ISGC is also a shareholder of the Company, and G. Peter Parsley, a director on the Company’s board and shareholder of the Company,  and is employed by ISGC. The Company received $1,000,000 at Closing on May 1, 2012. The issuance and sale of the Convertible Note is subject to the approval of the Toronto Stock Exchange Venture Listing. Other stipulations are as follows:

·         Pursuant to the Joint Venture Proposal, ISGC purchased a Convertible Note in the principal amount of US$1,000,000. The Convertible Note bears interest at eight percent (8%) per annum, and matures at the earlier of the following dates: (i) June 30, 2012; or  (ii) 14 business days after the date the Company and ISGC have agreed not to enter into a Joint Venture Agreement. The Company may prepay the Convertible Note only with the consent of ISGC.

·         If ISGC and Company negotiate and execute a definitive joint venture agreement and complete their respective initial contributions prior to the maturity date of the Convertible Note, then the outstanding principal and accrued interest is deemed a capital contribution by ISGC to the new Joint Venture. 

·         If ISGC and the Company do not execute a definitive joint venture agreement and complete their respective initial contributions prior to the maturity date of the Convertible Note, then (i) at the election of the ISGC, all or any portion of the outstanding principal and accrued interest under the Convertible Note can be converted into shares of the Company’s Common Stock at  the Conversion Price  of $0.08 per share; and (ii) any balance owed under the Convertible Note that is not converted by ISGC will then become immediately due and payable.  There are no registration rights granted to ISGC under the terms and conditions of the Convertible Note.

·         The entire unpaid principal sum of this Note, together with all accrued and unpaid interest thereon, shall become immediately due and payable upon the occurrence of: (i) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company; or (ii) the Company shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. The Convertible Note requires that the Company grant ISGC a first priority security interest over all of the Company’s assets.