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NOTE 3 – RELATED PARTY TRANSACTIONS
Material Supply Agreement
On April 9, 2013, the Company entered into
a material supply agreement (the “the Original MSA”) with Candeo Lava Products Inc. (“Candeo”), which was
amended on March 3, 2014 (the “Amended MSA”). Pursuant to the Amended MSA, Candeo is entitled to purchase material
(“Material”) from the Pisgah Property at a price equal to the greater of $15 per ton and the net sales margin per ton
removed from the Pisgah Property realized as follows: (i) 35% of the net sales margins during the first year of mining; and (ii)
50% of the net sales margins for the subsequent years during the term of the Amended MSA. Under the Amended MSA, Candeo has the
right to remove an Initial Amount of up to 1,000,000 tons of Material from the Pisgah Property and Additional Amounts of 1,000,000
tons each, upon the successful removal of the Initial Amount from the Pisgah Property. Candeo’s right to remove the Additional
Amounts from the Pisgah Property is on the basis that once Candeo has removed the first Additional Amount of the Material from
the Pisgah Property, it shall have the right to remove subsequent Additional Amounts of Material from the Property, so long as
it removes its then current Additional Amount. As such, Candeo’s right to extend the term of the Amended MSA is entirely
based on Candeo’s successful performance of its Material removal commitments under the terms of the Amended MSA.
Under the Amended MSA, Candeo is required
to purchase a minimum of ten thousand (10,000) tons of Material during each of the first three years of the term of the agreement,
all at a purchase price of $15.00 per ton, for a total payment of $150,000 per year in each of the first three years of the Term,
with credit being given by the Company to Candeo for all pre-paid tons of Material that have already been purchased and paid for
under the Original MSA. The Pre-Purchased Material will remain on the Pisgah Property until Candeo commences its production operations
or engages the Company to mine and remove Material on Candeo’s behalf. In the event that Candeo engages the Company to mine
and remove any of the Material, Candeo shall pay all of the Company’s reasonable costs and expenses in conducting such mining
and removal operations plus a fee of 15%. All mining and removal operations on the Pisgah Property will be subject to all necessary
regulatory and other third-party approvals being obtained. The Pre-Purchased Payments will not be refundable to Candeo but shall
be credited against the first Production Payments.
The term of the Amended MSA has been extended
from an initial term of ten (10) years to twenty (20) years (the “Primary Term”) and Candeo has the option to extend
the term for an additional thirty (30) years exercisable at any time with no less than three (3) months written notice prior to
the expiration of the Primary Term, provided that Candeo is not in default under any of the provisions of the Amended MSA and that
the whole of the Initial Amount has been removed from the Property.
Unearned revenues as reflected on the Balance
Sheet are a reflection of amounts received from Candeo based on the Amended MSA.
Compensation
On June 30, 2010, the Company entered into
a consulting agreement, with a Board of Director’s consulting firm, FutureWorth Capital Corp. The terms of the agreement
include annual compensation of $60,000, payable monthly. The Company may elect to satisfy payment in shares of common stock in
lieu of cash at a market value equal to $0.10 above the average closing trading price of the common stock for the preceding five
(5) days from the date of such election. No payments have been made in cash or stock to date. As of December 31, 2018, the Company
owed FutureWorth Capital Corp. $506 (2017 - $506) as included in accounts payable, related parties, for service prior to, and during
the service period under the consulting agreement. The consulting agreement was terminated on February 27, 2013 with Mr. William
Hogan’s resignation from the Board of Directors.
On June 10, 2016, the Company entered into
a consulting agreement, with a consulting firm, For Life Financial. The terms of the agreement include monthly compensation of
$2,100 CAD (approx. $1,560 USD) for managing the Company. On September 10, 2016, the Company amended the agreement to include additional
annual compensation $50,000 USD, payable monthly as the scope of work increased.
Stock-Based Compensation
No new warrants have been issued as of
December 31, 2018.
On December 31, 2017, 650,000 Stock Options
and 800,000 shares were issued as compensation for work done by consultants and directors of the Company. (Note 9)
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