0001052918-12-000521.txt : 20121113 0001052918-12-000521.hdr.sgml : 20121112 20121113144445 ACCESSION NUMBER: 0001052918-12-000521 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20120930 FILED AS OF DATE: 20121113 DATE AS OF CHANGE: 20121113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THUNDER MOUNTAIN GOLD INC CENTRAL INDEX KEY: 0000711034 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 911031075 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08429 FILM NUMBER: 121198201 BUSINESS ADDRESS: STREET 1: 5248 W. CHINDEN CITY: BOISE STATE: ID ZIP: 83714 BUSINESS PHONE: 208-658-1037 MAIL ADDRESS: STREET 1: 5248 W. CHINDEN CITY: BOISE STATE: ID ZIP: 83714 10-Q 1 thmg10qnov1212.htm THUNDER MOUNTAIN GOLD INC FORM 10-Q Thunder Mountain Gold, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2012

OR


¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from                                                    to


Commission File Number:  001-08429

  

[thmg10qnov1212002.gif]


THUNDER MOUNTAIN GOLD, INC.

(Exact name of Registrant as specified in its charter)


Nevada

 

91-1031015

(State or other jurisdiction of incorporation  or  organization)

 

(IRS identification No.)

 

 

 

5248 W. Chinden Blvd

 

 

Boise,  Idaho

 

83714

(Address of Principal Executive Offices)

 

(Zip Code)

 

(208) 658-1037

 (Registrant’s Telephone Number, including Area Code)


(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   x   Yes  ¨  No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x  Yes ¨  No


Indicate by check mark whether the Registrant is  ¨  a large accelerated filer, ¨  an accelerated file, ¨  a non-accelerated filer, or  x  a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act)


Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

 ¨  Yes  x   No


Number of shares of issuer’s common stock outstanding at November 2, 2012:  30,167,549



1





THUNDER MOUNTAIN GOLD INC.

FORM 10-Q


TABLE OF CONTENTS



PART I – Financial Information

3

Item 1.  Financial Statements

3

Item 2.  Management's Discussion and Analysis or Plan of Operation

12

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

22

Item 4.  Controls and Procedures

22

PART II

23

Item 1.  Legal Proceedings.

23

Item 1A. Risk Factors.

23

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

23

Item 3.  Defaults Upon Senior Securities.

23

Item 4.  Mine Safety Disclosures

23

Item 5.  Other Information

23

Item 6.  Exhibits

24

SIGNATURES

25











2




PART I – Financial Information


Item 1.  Financial Statements


Thunder Mountain Gold, Inc.

(An Exploration Stage Company)

Consolidated Balance Sheets

September 30, 2012 and December 31, 2011

 

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

 

 

2012

 

2011

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$        295,366

 

$                83

 

Prepaid expenses and other assets

 

32,697

 

20,389

 

Deferred financing costs

 

-

 

91,283

 

 

Total current assets

 

328,063

 

111,755

 

 

 

 

 

 

 

 

Property, equipment and mining claims:

 

 

 

 

 

South Mountain Mines property

 

357,497

 

357,497

 

Equipment, net of accumulated depreciation

 

4,433

 

10,851

 

Mining leaseholds

 

121,980

 

86,080

 

 

Total property, equipment and mining claims

 

483,910

 

454,428

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

Deferred financing costs, net of accumulated amortization

 

-

 

47,087

 

 

 

 

 

 

 

 

 

 

Total assets

 

$      811,973

 

$      613,270

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and other accrued liabilities

 

$        107,734

 

$        155,125

 

Deferred payroll

 

46,490

 

120,744

 

Note payable - related party

 

-

 

139,786

 

Conversion option liability

 

-

 

48,231

 

Convertible note payable

 

1,000,000

 

-

 

 

Total current liabilities

 

1,154,224

 

463,886

 

 

 

 

 

 

 

 

 

Derivative warrant liabilities

 

483,235

 

510,893

 

 

Total liabilities

 

1,637,459

 

974,779

 

 

 

 

 

 

 

 

Commitments (See Note 4)

 

-

 

-

 

 

 

 

 

 

 

 

Stockholders' equity (deficit):

 

 

 

 

 

Preferred stock; $0.001 par value, 5,000,000

 

 

 

 

 

 

shares authorized; no shares issued or outstanding

 

-

 

-

 

Common stock; $0.001 par value; 200,000,000 shares authorized;

 

 

 

 

 

 

30,167,549 and 28,717,549 shares issued and outstanding, respectively

 

30,168

 

28,718

 

Additional paid-in capital

 

3,643,616

 

3,095,066

 

 

Less:  11,700 shares of treasury stock, at cost

 

(24,200)

 

(24,200)

 

Deficit accumulated prior to 1991

 

(212,793)

 

(212,793)

 

Accumulated deficit during the exploration stage

 

(4,262,277)

 

(3,248,300)

 

 

Total stockholders' equity (deficit)

 

(825,486)

 

(361,509)

 

 

 

Total liabilities and stockholders' equity (deficit)

 

$      811,973

 

$      613,270


The accompanying notes are an integral part of these consolidated financial statements.



3





Thunder Mountain Gold, Inc.

(An Exploration Stage Company)

Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

 

 

 

 

 

 

 

 

 

 

During

 

 

 

 

 

 

 

 

 

 

 

 

 

 Exploration

 

 

 

 

 

 

 

 

 

 

 

 

 

Stage, 1991

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

Through

 

 

 

 

 

September 30,

 

September 30,

 

September 30,

 

 

 

 

 

2012

 

2011

 

2012

 

2011

 

2012

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Royalties, net

 

$              -

 

$             -

 

$                -

 

$             -

 

$    328,500

 

Gain on sale of property and mining claims

 

-

 

-

 

-

 

-

 

2,576,112

 

 

Total revenue

 

-

 

-

 

-

 

-

 

2,904,612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Exploration expenses

 

20,096

 

66,191

 

116,921

 

186,930

 

2,115,807

 

Legal and accounting

 

88,430

 

24,934

 

176,346

 

105,304

 

1,093,602

 

Management and administrative

 

61,135

 

379,861

 

213,020

 

649,326

 

3,169,312

 

Directors' fees and professional services

 

-

 

192,000

 

-

 

237,000

 

923,055

 

Depreciation and depletion

 

2,139

 

3,065

 

6,418

 

9,193

 

143,410

 

 

Total expenses

 

171,800

 

666,051

 

512,705

 

1,187,753

 

7,445,186

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

-

 

-

 

-

 

54

 

283,980

 

Interest expense

 

(21,591)

 

(21,303)

 

(563,529)

 

(54,320)

 

(834,219)

 

Gain (loss) on fair value of

 

 

 

 

 

 

 

 

 

 

 

 

warrant liabilities

 

219,978

 

96,201

 

27,658

 

1,091,221

 

1,320,042

 

Loss on common stock and warrants

 

-

 

(5,355)

 

-

 

(13,282)

 

(271,587)

 

Gain on change in fair value of conversion

 

 

 

 

 

 

 

 

 

 

 

 

option liability

 

-

 

89,091

 

34,599

 

89,091

 

109,399

 

Financing expense

 

-

 

(19,697)

 

-

 

(19,697)

 

(17,945)

 

Gain on sale of securities

 

-

 

-

 

-

 

-

 

166,116

 

Impairment of investments

 

-

 

-

 

-

 

-

 

(52,299)

 

 

Total other income (expense)

 

198,387

-

138,936

 

(501,272)

 

1,093,067

 

703,487

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) before income taxes

 

26,587

 

(527,115)

 

(1,013,977)

 

(94,686)

 

(3,837,087)

 

(Provision) for income taxes

 

-

 

-

 

-

 

-

 

(151,496)

Net income (loss)

 

26,587

 

(527,115)

 

(1,013,977)

 

(94,686)

 

(3,988,583)

 

Treasury stock cancelled

 

-

 

-

 

-

 

-

 

(273,694)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$      26,587

 

$ (527,115)

 

$ (1,013,977)

 

$  (94,686)

 

$(4,262,277)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common

 

 

 

 

 

 

 

 

 

 

 

 share-basic and diluted

 

$            Nil

 

$       (0.02)

 

$          (0.03)

 

$           Nil

 

$        (0.28)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common

 

 

 

 

 

 

 

 

 

 

 

shares outstanding-basic and diluted

 

30,167,549

 

28,218,349

 

29,881,761

 

27,492,795

 

15,401,490











The accompanying notes are an integral part of these consolidated financial statements.



4




Thunder Mountain Gold, Inc.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

 

 

 

During Exploration

 

 

 

 

 

 

Stage, 1991

 

 

Nine Months Ended

 

Through

 

 

September 30,

 

September 30,

 

 

2012

 

2011

 

2012

Cash flows from operating activities:

 

 

 

 

 

 

  Net income (loss)

 

$  (1,013,977)

 

$      (94,686)

 

$        (3,988,583)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

  Depreciation and depletion

 

6,418

 

9,193

 

143,410

  Common stock, warrants and options issued for services

 

10,000

 

552,000

 

815,266

  Adjustment for anti-dilution provisions

 

-

 

-

 

86,084

  Amortization of directors' fees prepaid with common stock

 

-

 

-

 

53,400

  Amortization of deferred financing costs

 

138,370

 

47,087

 

259,515

  Amortization of loan discount

 

395,214

 

-

 

495,086

  Compensation expense for stock issued

 

-

 

-

 

76,500

  Gain on sale of mining claims and other assets

 

-

 

-

 

(2,736,553)

  Impairment loss on securities

 

-

 

-

 

52,335

  Gain on change in fair value of warrant liability

 

(27,658)

 

(1,091,221)

 

(1,320,042)

  Loss on common stock and warrants

 

-

 

13,282

 

271,587

  Gain on change in fair value of conversion option liability

 

(48,231)

 

(89,091)

 

(123,031)

  Financing expense

 

-

 

19,697

 

17,945

Change in:

 

 

 

 

 

 

  Prepaid expenses and other assets

 

(12,308)

 

(6,233)

 

(32,697)

  Receivables

 

-

 

-

 

124,955

  Deferred financing costs

 

-

 

-

 

(28,500)

  Deferred payroll

 

(74,254)

 

-

 

(74,254)

  Accounts payable and other liabilities

 

(47,391)

 

106,319

 

234,910

  Net cash used by operating activities

 

(673,817)

 

(533,653)

 

(5,672,667)

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

  Proceeds from sale of property and mining claims

 

-

 

-

 

5,500,000

  Purchase of Dewey Mining Co. mining claims

 

-

 

-

 

(2,923,888)

  Purchase of investments

 

-

 

-

 

(354,530)

  Purchase of South Mountain Mines

 

-

 

-

 

(357,497)

  Purchase of mining leaseholds

 

(35,900)

 

(3,380)

 

(121,980)

  Purchase of equipment

 

-

 

-

 

(168,577)

  Proceeds from disposition of investments

 

-

 

-

 

642,645

  Proceeds from disposition of equipment

 

-

 

-

 

49,310

  Net cash provided (used) by investing activities

 

(35,900)

 

(3,380)

 

2,265,483

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

  Proceeds from sale of common stock and warrants, net

 

150,000

 

143,335

 

2,400,406

  Proceeds from exercise of stock options and warrants

 

-

 

-

 

508,600

  Acquisition of treasury stock

 

-

 

-

 

(376,755)

  Borrowing on related party note payable

 

5,000

 

145,000

 

576,500

  Payments on related party note payable

 

(150,000)

 

(5,000)

 

(572,000)

  Borrowing on notes payable

 

1,000,000

 

-

 

1,050,000

  Payments on note payable

 

-

 

-

 

(50,000)

  Net cash provided by financing activities

 

1,005,000

 

283,335

 

3,536,751

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

295,283

 

(253,698)

 

129,567

Cash and cash equivalents, beginning of period

 

83

 

298,232

 

165,799

Cash and cash equivalents, end of period

 

$    295,366

 

$      44,534

 

$          295,366

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Stock issued to acquire equipment from related party

 

$                -

 

$                -

 

$              11,850

Stock issued for mining contract

 

$                -

 

$                -

 

$              50,000

Stock issued for payment of accounts payable

 

$                -

 

$                -

 

$              29,250

Stock issued for payments on related party note payable

 

$                -

 

$                -

 

$                4,500

Fair value of warrants issued in private placement classified as liabilities

 

$                -

 

$     198,627

 

$         1,795,587

Note proceeds allocated to conversion option at inception

 

$                -

 

$     123,031

 

$            123,031

Stock issued for deferred compensation

 

$                -

 

$                -

 

$              21,000

Beneficial conversion feature in note payable

 

$     375,000

 

$                -

 

$            375,000


The accompanying notes are an integral part of these consolidated financial statements.



5



Thunder Mountain Gold, Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements




1.

Summary of Significant Accounting Policies and Business Operations


Business Operations


Thunder Mountain Gold, Inc. (“Thunder Mountain” or “the Company”) was originally incorporated under the laws of the State of Idaho on November 9, 1935, under the name of Montgomery Mines, Inc.   In April 1978, the Montgomery Mines Corporation was obtained by a group of the Thunder Mountain property holders and changed its name to Thunder Mountain Gold, Inc., with the primary goal to further develop their holdings in the Thunder Mountain Mining District, located in Valley County, Idaho. Thunder Mountain Gold, Inc. takes its name from the Thunder Mountain Mining District, where its principal lode mining claims were located. For several years, the Company’s activities were restricted to maintaining its property position and exploration activities. During 2005, the Company sold its holdings in the Thunder Mountain Mining District. During 2007, the Company acquired the South Mountain Mines property in southwest Idaho and initiated exploration activities on that property, which continue today.


Basis of Presentation


The unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included.  Operating results for the nine months ended September 30, 2012, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2012.


For further information, refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.


Going Concern


The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. The Company is an exploration stage company and has incurred losses since its inception and does not have sufficient cash at September 30, 2012 to fund normal operations for the next 12 months. The Company has no recurring source of revenue and its ability to continue as a going concern is dependent on the Company’s ability to raise capital to fund its future exploration and working capital requirements. The Company’s plans for the long-term return to and continuation as a going concern include financing the Company’s future operations through sales of its common stock and/or debt and the eventual profitable exploitation of its mining properties. Additionally, the current capital markets and general economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently investigating a number of alternatives for raising additional capital with potential investors, lessees and joint venture partners.


The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis was not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.






6



Thunder Mountain Gold, Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements




1.

Summary of Significant Accounting Policies and Business Operations, continued:


Reclassifications


Certain reclassifications have been made to conform prior year’s data to the current presentation. These reclassifications have no effect on the results of reported operations or stockholders’ equity (deficit).


Income Taxes


The Company recognizes deferred income tax liabilities or assets at the end of each period using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized.  The Company has evaluated all tax positions for open years and has concluded that it has no material unrecognized tax benefits.  Management estimates their effective tax rate for the year ended December 31, 2012 will be 0%.


Fair Value Measures


ASC 820 requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs

when measuring fair value. ASC establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC prioritizes the inputs into three levels that may be used to measure fair value:

 

·

Level 1: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.


·

Level 2: Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.


·

Level 3: Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.


Our financial instruments consist principally of cash, convertible note payable, and warrant liabilities. The table below sets forth our assets and liabilities measured at fair value whether recurring or non-recurring and basis and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category.


 

Balance

September 30, 2012


Balance

December 31, 2011

 

Input

Hierarchy level

Recurring:

 

 

 

 

 

  Cash and cash equivalents

$              295,366

 

$                       83

 

Level 1

  Derivative warrant liabilities

$           (483,235)

 

$           (510,893)

 

Level 2

  Conversion option liability

$                         -

 

$             (48,231)

 

Level 2







7



Thunder Mountain Gold, Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements




1.

Summary of Significant Accounting Policies and Business Operations, continued:


Fair Value Measures, continued


For the derivative warrant liabilities which are measured at fair value on a recurring basis, the Company uses the Black-Scholes valuation model with the following inputs as of September 30, 2012 and December 31, 2011:


 

September 30, 2012

December 31, 2011

Stock price

$0.11

$0.10

Exercise price

$0.203 - $0.305

$0.19 - $.026

Expected term

0.75 - 1.15yrs

0.84 - 1.82 yrs

Estimated volatility

204% - 233%

218% - 250%

Risk-Free interest rate

0.17%

0.12% - 0.25%

Expected dividend yield

-

-


Net Income (Loss) Per Share


The Company is required to have dual presentation of basic earnings per share (“EPS”) and diluted EPS.  Basic EPS is computed as net income (loss) divided by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated based on the weighted average number of common shares outstanding during the

period plus the effect of potentially dilutive common stock equivalents, including warrants to purchase the Company’s common stock.


As of September 30, 2012 and 2011, the remaining potentially dilutive common stock equivalents not included in the calculation of diluted earnings per share as their effect would have been anti-dilutive are:


 

September 30,

September 30,

For periods ended

2012

2011

 

 

 

Convertible debt

12,500,000

848,484

Stock options

2,000,000

2,000,000

Warrants

8,616,271

8,508,271

    Total possible dilution

23,116,271

11,356,755


Accordingly, only basic EPS is presented.


2.

Convertible Note Payable


On April 30, 2012 the Company executed a convertible promissory note payable (“Convertible Note”) to Idaho State Gold Company, LLC (“ISGC”) in the principal amount of $1,000,000.  The note bears interest at the rate of eight percent (8%) per annum.  The due date of the note was the earlier of June 30, 2012 or the date that is fourteen business days following the date on which the parties mutually agree to not enter into a joint venture agreement.  Prior to maturity, the parties verbally agreed to an additional extension of the maturity date.  As of the date of the release of these financial statements, the note is not considered to be in default.  


Under the terms of the note, if ISGC and Company do not negotiate and execute a definitive joint venture agreement and complete their respective initial contributions prior to the maturity date of the Convertible Note, then





8



Thunder Mountain Gold, Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements




2.

Convertible Note Payable, continued:


at the election of ISGC, all or any portion of the outstanding principal and accrued interest can be converted into shares of the Company’s common stock at the conversion price of $.08 USD per share.   Any balance not so converted would be immediately due and payable.  The Convertible Note required that the Company grant ISGC a first priority security interest over all of the Company’s assets


The Company has recognized interest expense related to this note in the amount of $33,781 during the nine months ended September 30, 2012.


The price for the Company’s common stock exceeded the $0.08 conversion price stated in the loan on the day funds were advanced under the loan. Management determined that the favorable exercise price represents a beneficial conversion feature. Using the intrinsic value method at the loan date a total discount of $375,000 was recognized on the loan.  As the initial loan maturity date was June 30, 2012, as of that date the full amount of the discount has been amortized as interest expense.


3.

Stockholders’ Equity


The Company’s common stock is at $0.001 par value with 200,000,000 shares authorized. The Company also has 5,000,000 authorized shares of preferred stock with a par value of $0.001. No preferred shares have been issued.


On January 2, 2012, the Company entered into a subscription agreements with certain individual whereby the company will sell up to 4,000,000 units at US$0.12 per unit.  Each unit consists of one share of common stock, and one-half warrant exercisable for 2 years at $0.20. As of September 30, 2012, the Company has issued 1,250,000 shares under this agreement, and raised gross proceeds of $150,000.


The following is a summary of warrants as of September 30, 2012:


 

Share Equivalent Warrants

Exercise Price

Expiration Date

Warrants:

 

 

 

Warrants issued September 24, 2010

6,683,271

0.30

   September 30, 2013

     Warrants issued June 26, 2011

1,000,000

    0.20

    June 26, 2013

     Warrants issued September 30, 2011

200,000

    0.19

    September 30, 2013

     Warrants issued October 28, 2011

108,000

    0.20

    October 28, 2013

     Warrants issued February 17, 2012

625,000

0.20

    February 17, 2014

Total warrants outstanding at September 30, 2012

8,616,271

$    0.22

 


4.

Commitments


On November 30, 2011, (“Effective Date”) Thunder Mountain Resources, Inc., entered into a mining lease with option to purchase with Richard C. and Carol Ann Fox for the exclusive rights to conduct exploration, feasibility work, development, mining and processing of minerals on certain mining claims in Lemhi County, Idaho.  The initial term is for thirty years and the lease grants successive, additional fifteen year terms so long as the Company is in compliance with the lease.  The Company is obligated to pay advance minimum royalty payments, the first of which was in the amount of $25,000 and was paid upon execution of the lease.  An additional payment of $25,000 was made in the nine months ended September 30, 2012 in accordance with the lease terms.  Additional payments are due as follows:




9



Thunder Mountain Gold, Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements




4.

Commitments, continued:


Amount

 

Due Date

 

 

 

$  50,000

 

On or before the 1st anniversary of the Effective Date

75,000

 

On or before the 2nd anniversary of the Effective Date

100,000

 

On or before the 3rd anniversary of the Effective Date

100,000

 

On or before the 4th anniversary of the Effective Date and each anniversary date thereafter


All advance minimum royalties paid will be credited against any production royalties that accrue.  If no minerals are produced from the premises, the lessor has no obligation to refund the advance minimum royalties.


On March 21, 2011, the Company signed an exploration agreement with Newmont Mining Corporation on the Trout Creek Project that significantly expands the Trout Creek target area. Newmont’s private mineral package added to the Project surrounds the Company’s claim group and consists of about 9,565 acres within a thirty-square mile Area of Influence defined in the agreement.  Under the terms of the agreement, the Company is responsible for conducting the exploration program and is obligated to expend a minimum of $150,000 over the ensuing two years, with additional expenditures possible in future years.  The Company has expended $47,654 on this project to date.


5.

Related Party Transactions


At various times throughout 2011 and January 2012 as approved under Board resolution dated July 11, 2011 (the “Resolution”), Mr. Collord, the Company’s Vice-President and Chief Operations Officer, made loans of various amounts to the Company totaling $155,000 to fund the operational needs of the Company, all of which has been repaid as of September 30, 2012. The Resolution specifies a maturity date of January 7, 2012, subsequently amended to May 31, 2012, and allowed the conversion of any portion of the note at any time into shares of common stock at a price equal to the lower of the last private placement, or the previous 30-day rolling average of the closing price of the stock.  


Management has determined that the conversion option requires separate valuation and bifurcation under ASC 815, and determined fair value using a Black-Scholes valuation model.  The total initial fair value of the conversion options was $126,151 and was separated from the debt host.  At initial recording it was determined that one of the loans’ conversion options had a fair value which exceeded the loan amount by $17,945.  The excess was charged to the statement of operations in 2011 as a financing expense from conversion option. 


On May 31, 2012, the notes were paid in full. Accordingly, the conversion option derivative liability was first marked to fair value at that date using a Black-Scholes valuation model with inputs as per the following table.  As such, a gain on the change in fair value of $18,444 was recorded.  The remaining liability was then eliminated with a charge of $15,000 to additional paid-in capital.


Inputs to the Black-Scholes valuation model as of May 31, 2012:


Stock price

$0.07

Exercise price

$0.10

Expected term

0.0897 (yrs)

Estimated volatility

281.48%

Risk-free interest rate

0.07%

Expected dividend yield

-




10



Thunder Mountain Gold, Inc.

(An Exploration Stage Company)

Notes to Consolidated Financial Statements





6.

Subsequent Events


On November 9, 2012, the Company signed a definitive Joint Venture Agreement (JV) with Idaho State Gold Company, LLC (“ISGC”), Idaho, to advance and develop the South Mountain project through a `Earn-in` arrangement. The JV 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.

 

Upon execution of the JV Agreement on November 9, 2012, the previously executed convertible promissory note, dated April 30, 2012, in the amount of $1,000,000, is terminated. The outstanding principal and accrued interest is deemed a capital contribution by ISGC to the new Joint Venture.







11






Item 2.  Management's Discussion and Analysis or Plan of Operation


FORWARD LOOKING STATEMENTS: The following discussion may contain forward-looking statements that involve a number of risks and uncertainties. Factors that could cause actual results to differ materially include the following: inability to locate property with mineralization, lack of financing for exploration efforts, competition to acquire mining properties; risks inherent in the mining industry, and risk factors that are listed in the Company's reports and registration statements filed with the Securities and Exchange Commission.


Management's discussion and analysis is intended to be read in conjunction with the Company's unaudited financial statements and the integral notes thereto for the quarter ending September 30, 2012. The following statements may be forward-looking in nature and actual results may differ materially.


The following Management’s Discussion and Analysis of Financial Condition and Results of Operation (“MD&A”) is intended to help the reader understand our financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying integral notes (“Notes”) thereto. The following statements may be forward-looking in nature and actual results may differ materially.


The Company employed two full-time, salaried management – E. James Collord and Eric T. Jones – at a reduced salary of $1 per month during the quarter, and was able to meet its immediate financial obligations. The Company maintains its office in the Boise, Idaho area in Garden City. This is the primary headquarters for the South Mountain Project.


South Mountain Project, Owyhee County, Idaho (South Mountain Mines, Inc.)


The Company’s land package at South Mountain consists of a total of approximately 1,158 acres, consisting of (i)  17 patented claims (326 acres) the Company owns outright; (ii) lease on private ranch land (542 acres); and,, (iii)  21 unpatented lode mining claims on BLM managed land (290 acres).  The Company is negotiating for additional private land surrounding the existing land package. We also have applied for leases on Idaho State Lands for approximately 3,100 acres, expected to be finalized during 2012.  All holdings are located in the South Mountain Mining District, Owyhee County, Idaho.


The property is located approximately 70 air miles southwest of Boise, Idaho and approximately 24 miles southeast of Jordan Valley, Oregon. It is accessible by highway 95 driving south to Jordan Valley Oregon, then by traveling southeast approximately 22 miles back into Idaho, via Owyhee County road that is dirt and improved to within 4 miles of the base camp. The last 4 miles up the South Mountain Mine road are unimproved county dirt road. The property is accessible year-round to within 4 miles of the property, where the property is accessible from May thru October without plowing snow. There is power to within 4 miles of the site as well. Power generation by generator is required at this time. The climate is considered high desert. The Company has water rights on the property, and there is a potable spring on the property that once supplied water to the main camp.


A detailed list of the claims is as follows:


Patented land owned by Thunder Mountain Gold. Seventeen (17) patented mining claims totaling 326 acres:


Patent No. 32995 dated September 17, 1900 (Mineral Survey No. 1446)


Illinois

Massachusetts

Michigan

Washington

New York

Maine

Tennessee

Idaho

Oregon

Vermont







12






Patent No. 32996 dated September 17, 1900 (Mineral Survey No. 1447)


Texas

Virginia

Florida

Mississippi

Alabama

 


Patent No. 1237144 dated October 27, 1964 (Mineral Survey No. 3400)


Queen

Kentucky


Unpatented Ground 100% controlled by Thunder Mountain Gold.  Twenty one (21) unpatented mining claims totaling 290 acres:


Claim Name

Owyhee County Instrument No.

BLM: IMC Serial No.

 

 

 

SM-1

262582

192661

SM-2

262578

192662

SM-3

262581

192666

SM-4

262579

192665

SM-5

262580

192669

SM-6

262577

192664

SM-7

262576

192663

SM-8

262575

192670

SM-9

262574

192671

SM-10

262573

192668

SM-11

262572

192672

SM-12

262571

192667

SM-13

262570

192673

SM-14

262569

192674

SM-15

266241

196559

SM-16

266242

196560

SM-17

266243

196561

SM-18

266244

196562

SM-19

266245

196563

SM-20

266246

196564

SM-21

266247

196565


The claim maintenance fees and assessment for these claims is financed by the Company through  sales of unregistered common stock .


The leased private land also includes all surface rights.  There is a 3% net smelter return royalty payable to the landowners.  The parcels are leased for 20 years with the right to renew and the option to purchase outright.  Annual expenses for the leases and claims are as follows:

 

Owner

Agreement Date

Amount

Acres

Lowry

October 10, 2008

$20/acre

$30/acre starting in 7th year

376

Acree

June 20, 2008

$20/acre

$30/acre starting in 7th year

113

Herman

April 23, 2009

$20/acre

$30/acre starting in 7th year

56






13






The historic production peaked during World War II when, base on smelter receipts, the production of direct shipped ore totaled 53,653 tons containing 3,118 ounces of gold, 566,439 ounces of silver, 13,932 pounds of copper, 2,562,318 pounds of lead and 15,593,061 pounds of zinc.  In addition to the direct-ship ore, a flotation mill was constructed and operated during the late-1940s and early-1950s. There is no production information available on the tons, grade and concentrate associated with that phase of the operation, but it is estimated that between 30,000 and 40,000 tons of ore were mined and process based on the estimated tonnage of mill tailings.


South Mountain Mines controlled the patented claims from 1975 to the time the Company purchased the entity in 2007. They conducted extensive exploration work including extending the Sonneman Level by approximately 1,500 feet to intercept the downdip extension of the Texas sulfide mineralization mined on the Laxey Level some 300 feet above the Sonneman.  High grade sulfide mineralization was intercepted on the Sonneman Extension.  In 1985 they did a feasibility study based on polygonal ore blocks exposed in the underground workings and drilling.  This resulted in a historic resource of approximately 470,000 tons containing 23,500 ounces of gold, 3,530,000 ounces of silver, 8,339,000 pounds of copper, 13,157,000 pounds of lead and 91,817,000 lbs of zinc. Although they determined positive economics, the project was shut down and placed into care and maintenance.


In 2008, the Company engaged Kleinfelder West, Inc., a nationwide engineering and consulting firm, to complete a technical report “Resources Data Evaluation, South Mountain Property, South Mountain Mining District, Owyhee County, Idaho”. The technical report was commissioned by Thunder Mountain Resources, Inc. to evaluate all the existing data available on the South Mountain property.  Kleinfelder utilized a panel modeling method using this data to determine potential mineralized material remaining and to make a comparison with the resource determined by South Mountain Mines in the mid-1980s.  


Additional drilling and sampling will be necessary before the resource can be classified as a mineable reserve, but Kleinfelder West’s calculations provided a potential resource number that is consistent with South Mountain Mines’ (Bowes 1985) reserve model.   


During the 2008 field season two core drill holes were drilled to test the downdip extension of the sulfide mineralization in the main mine area, one on the DMEA2 ore shoot and one on the Texas ore shoot.  The DMEA 2 target was successful, with two distinct sulfide zones totaling 30 feet being encountered in an overall altered and mineralized intercept of approximately 73 feet.  The samples over the entire intercept were detail sampled over the entire 73 feet resulting in a total of 34 discrete sample intervals ranging from 0.5 to 3.7 feet.  The samples cut at the Company’s office in Garden City, Idaho and Company personnel delivered the samples to ALS Chemex preparation lab in Elko, Nevada.    The analytical results showed two distinct zones of strong mineralization.


Interval

Weighted Average

Gold

Fire Assay

(ounce per ton)

Silver

Fire Assay

(ounce per ton)

Zinc

(%)

Copper

( %)

Lead

( %)

657 - 669.5

(12.5 feet)


0.066


1.46


7.76


0.276


0.306

687 – 704.5

(17.5 feet)


0.129


1.89


2.18


0.183


0.152


These intercepts are down dip approximately 300 feet below of the DMEA 2 mineralized zone encountered in Sonneman Level tunnel, and 600 feet below the DMEA 2 zone on the Laxey Level tunnel.  The tenor of mineralization the DMEA 2 on the Sonneman is similar to that intercepted in the core hole, including two distinct zones with differing grades.  


The second drill hole, TX-1, was designed to test the Texas Ore Shoot approximately 300 feet down dip of the Sonneman Level.  The small core hole achieved a depth of 1250 feet, but deviated parallel to the bedding and the targeted carbonate horizon was not intercepted.




14





Late in 2009, the Company contracted with Gregory P. Wittman (a Qualified Person under Canadian regulations) of Northwestern Groundwater & Geology to incorporate all the new drill and sampling data into an NI 43-101 Technical Report.  This report was needed as part of the Company’s efforts to obtain a listing on the TSX Venture Exchange in 2010.  The NI 43-101 can be reviewed on the Company`s website at www.thundermountaingold.com, or on www.SEDAR.com.

 

A multi-lithic intrusive breccia outcrop was identified and sampled in 2008 on property leased by the Company.  This large area, approximately one mile long and one-half a mile wide, is located several thousand feet south of the main mine area.  The intrusive breccia is composed of rounded to sub-rounded fragments of altered intrusive rock and silicified fragments of altered schist and marble.  Initial rock chip samples from the outcrop area ranged from 0.49 ppm to 1.70 ppm gold, and follow-up outcrop and float sampling in 2009 yielded gold values ranging from 0.047 ppm to 5.81 ppm.  A first pass orientation soil survey completed in 2008 was conducted near the “discovery’ breccia outcrop at a spacing of 100 feet over a distance of 800 feet east/west and 1,000 feet north/south.  The soil assays ranged from a trace to 0.31 ppm Gold.  Surface mapping indicates that the intrusive breccia covers an area of approximately 5,000 feet x 1,500 feet.

The 2010 drilling focused primarily the breccia gold zone.  Centra Consulting completed the storm water plan needed for the exploration road construction on private land, and it was accepted by the Environmental Protection Agency. Road construction started on August 1, 2010 by Warner Construction and a total of 3.2 miles of access and drill site roads were completed through the end of September.

A campaign of road cut sampling was undertaken on the new roads as they were completed. Three sets of samples were obtained along the cut bank of the road.  Channel samples were taken on 25-foot, 50-foot or 100-foot intervals, depending upon the nature of the material cut by the road with the shorter spaced intervals being taken in areas of bedrock. A total of 197 samples were collected and sent to ALS Chemex labs in Elko, Nevada. A majority of the samples contained anomalous gold values and in addition to confirming the three anomalies identified by soils sampling, the road cuts added a fourth target that yielded a 350-foot long zone that averaged 378 parts per billion gold (0.011 ounce per ton). Follow up sampling on a road immediately adjacent to this zone yielded a 100-foot sample interval that ran 5.91 parts per million gold (0.173 ounce per ton).

Drilling on the intrusive breccia target commenced on October 1, 2010 with a Schramm reverse circulation rig contracted through Drill Tech of Winnemucca, Nevada.  Five widely-spaced holes on the four significant gold anomalies in the intrusive breccia target were completed with the following results:

Intrusive Breccia 2010 Drill Results

Hole Number

Depth (ft)

Average Gold Value (opt) – Entire Hole

Highest Grade 5 ft Interval (opt)

Comments

LO-1

625

0.0034

0.015

All 5 foot intervals had detectable gold. Discovery outcrop area – highly altered intrusive breccia with sulfides.

LO-2

845

0.001

0.016

95% of the intervals had detectable gold.  Highly altered intrusive breccia with sulfides.

LO-3

940

0.0033

0.038

95% of the intervals had detectable gold.  Mixed altered intrusive breccia and skarn; abundant sulfides (15 to 20% locally).  West end of anomaly.

LO-4

500

0.002

0.0086

Entire hole had detectable gold.  Altered intrusive breccia with sulfides.  East end of anomaly.

LO-5

620

0.0037

0.036

Entire hole had detectable gold.  Altered intrusive breccia with sulfides.  East end of anomaly.

Management believes that the “first-pass” drill results from the intrusive breccia target proves the existence of a significant gold system in an intrusive package that is related to the polymetallic mineralization in the carbonate in the historic mine area.  Additional work is planned for 2011, including a draped aeromagnetic, resistivity and IP surveys to isolate potential feeder structures and to evaluate the contact between the metasediments and the gold-bearing intrusive.



15





In addition to the drilling completed in on the Intrusive Breccia target, two reverse circulation drill holes were completed targeting the down dip extension of the polymetallic zones in an effort to confirm continuity of the ore zones to a greater depth.  Vertical drill hole LO 6 was placed to intercept the down dip extension of the DMEA 2 ore shoot exposed on both the Laxey and Sonneman levels of the underground workings, as well as the 2008 core hole drilled by the Company that extended the zone 300 feet down dip of the Sonneman level.  Drillhole LO 6 cut a thick zone of skarn alteration and polymetallic mineralization at 760 feet to 790 feet.  The intercept contained 30 feet of 3.55% zinc, 1.87 ounce per ton silver, and 0.271% copper.  Internal to this zone was 15 feet of 0.060 OPT gold and 20 feet of 0.21% lead.  Importantly, this intercept proves the continuity of the ore zone an additional 115 feet down dip of the 2008 drill hole, or 415 feet below the Sonneman level.  It remains open at depth.

Drill hole LO-7 was placed to test the down dip extension of the Laxey ore zone, the zone that produced a majority of the silver, zinc, copper, lead and gold during the World War II period.  A portion of the ore zone was intercepted approximately 180 feet below the bottom of the Laxey Shaft which mined the zone over an 800-foot length.  This hole intercepted 25 feet (600-625 feet) of 8.56% zinc and 1.15 ounce per ton (opt) silver.  This intercept proves the extension of the Laxey ore zone approximately 120 feet below the maximum depth previously mined when over 51,000 tons of sulfide ore were mined and direct shipped to the Anaconda smelter in Utah.  The grade of this ore mined over the 800 feet of shaft and stope mining was 15% zinc, 10 opt silver, 0.06 opt gold, 2.3% lead and 0.7% copper.  


Management is encouraged by both of these intercepts as they prove the continuation of the replacement sulfide mineralized ore shoots at depth.  Detailed follow-up core drilling will be needed to better define the potential of the ore shoots at depth. The ongoing exploration field work is financed by the Company through  sales of  unregistered common stock . Future work will be funded in the same manner, or through a strategic partnership with another mining company.


This property is without known reserves and the proposed program is exploratory in nature according to Instruction 3 to paragraph (b)(5) of Industry Guide 7. There are currently no permits required for conducting exploration in accordance with the Company`s current board approved exploration plan.


Trout Creek Claim Group, Lander County, Nevada

The Trout Creek pediment exploration target is located in Lander County, Nevada in T.29N. R44E.  The property consists of 60 unpatented mining claims totaling approximately 1,200 acres that are located along the western flank of the Shoshone Range in the Eureka-Battle Mountain mineral trend.


During June 2012 a 189 station ground gravity survey was completed by Magee Geophysical Services LLC over the eastern portion of the Trout Creek joint venture area.  Jim Wright of Wright Geophysical, Inc. interpreted the survey data and formalized it in the accompanying report.  This interpretive report incorporated the relevant geophysical data supplied to Thunder Mountain Gold by Newmont


The purpose of the survey was to assist in determining the depth to bedrock in the target area, and to see if there is any indication of the paleo-channel patterns in the bedrock that would mimic the mineralized trend evident in the lower slopes of the east side of the Shoshone Range.  Both goals were achieved and the target within Section 14 was enhanced significantly.  The Wright report details these findings and makes recommendations.  


Initial drill targets can be placed based on the findings of this survey with the goal of testing the bedrock below the estimated 150m of valley-fill gravel along the trend of the mineralized structure at or near the previously identified major structural intersection in the pediment.


The survey covered a portion of public land Section 24 lode claims controlled by Barrick Gold; permission was granted to conduct the survey by Kevin Creel of Barrick and the raw data covering their claims will be provided to them.




16





All those certain unpatented lode claims situated in Lander County, Nevada, more particularly described as follows below:


Name of Claim

Lander Co. Doc. No.

BLM NMC No.

TC-1

0248677

965652

TC-2

0248678

965653

TC-3

0248679

965654

TC-4

0248680

965655

TC-5

0248681

965656

TC-6

0248682

965657

TC-7

0248683

965658

TC-8

0248684

965659

TC-9

0248685

965660

TC-10

0248686

965661

TC-11

0248687

965662

TC-12

0248688

965663

TC-31

0248707

965682

TC-32

0248708

965683

TC-51

0248727

965702

TC-52

0248728

965703

TC-53

0248729

965704

TC-54

0248730

965705

TC-55

0248731

965706

TC-56

0248732

965707

TC-57

0248733

965708

TC-58

0248734

965709

TC-59

0251576

988946

TC-60

0251577

988947

TC-61

0251578

988948

TC-62

0251579

988949

TC-63

0251580

988950

TC-64

0251581

988951

TC-65

0251582

988952

TC-66

0251583

988953

TC-67

0251584

988954

TC-68

0251585

988955

TC-69

0251586

988956

TC-70

0251587

988957

TC-71

0251588

988958

TC-72

0251589

988959

TC-73

0251590

988960

TC-74

0251591

988961

TC-75

0251592

988962

TC-76

0251593

988963

TC-77

0251594

988964

TC-78

0251595

988965





17






Name of Claim

Lander Co. Doc. No.

BLM NMC No.

TC-79

0251596

988966

TC-80

0251597

988967

TC-81

0251598

988968

TC-82

0251599

988969

TC-83

0251600

988970

TC-84

0251601

988971

TC-85

0251602

988972

TC-86

0251603

988973

TC-87

0251604

988974

TC-88

0251605

988975

TC-89

0251606

988976

TC-90

0251607

988977

TC-91

0251608

988978

TC-92

0251609

988979

TC-93

0251610

988980

TC-94

0251611

988981

TC-95

0251612

988982

TC-96

0251613

988983


The Trout Creek property is located approximately 155 air miles northeast of Reno, Nevada, or approximately 20 miles SW of Battle Mountain, Nevada, in Sections 10, 11, 14, 16, 21, 22, 27; T.29N.; R.44E. Mount Diablo Baseline & Meridian, Lander County, Nevada. Latitude:      40   23’ 36” North, Longitude: 117   00’ 58” West. The property is accessible by traveling south from Battle Mountain Nevada on state highway 305, which is paved. After traveling approximately 20 miles, turn east off the highway on an unimproved public dirt road, and travel approximately 2 miles to the claims. The property is generally accessible year round. There is no power, no water other than seasonal surface precipitation, and there are no improvements on the property.


The 60 unpatented claims are 100% owned by Thunder Mountain Gold, and located along a northwest structural tend which projects into the Battle Mountain mining district to the northwest and into the Goat Ridge window and the Gold Acres, Pipeline, and Cortez area to the southeast.  Northwest trending mineralized structures in the Battle Mountain mining district are characterized by elongated plutons, granodiorite porphyry dikes, magnetic lineaments, and regional alignment of mineralized areas.  The Trout Creek target is located at the intersection of this northwest trending mineral belt and north-south trending extensional structures.


The Trout Creek target is based on a regional gravity anomaly on a well-defined northwest-southeast trending break in the alluvial fill thickness and underlying bedrock.  Previous geophysical work in the 1980s revealed an airborne magnetic anomaly associated with the same structure, and this was further verified and outlined in 2008 by Company personnel using a ground magnetometer. The target is covered by alluvial fan deposits of unknown thickness shed from the adjacent Shoshone Range, a fault block mountain range composed of Paleozoic sediments of both upper and lower plate rocks of the Roberts Mountains thrust. The geophysical anomaly could define a prospective and unexplored target within a well mineralized region.


The ongoing exploration field work, including claim maintenance and assessment, is financed by the Company through sales of unregistered common stock funded by the Company through private placements with accredited investors.  Future work will be funded in the same manner, or through a strategic partnership with another mining company.  The Company is attempting to consolidate the land package to cover a larger area of the positive geophysical target in the pediment by acquiring and/or joint venturing adjoining mineral property. There are currently no environmental permits required for the planned exploration work on the property. In the future, a notice of intent may be required with the Bureau of Land Management.  This property is without known reserves and the proposed program is exploratory in nature according to Instruction 3 to paragraph (b)(5) of Industry Guide 7.




18





Clover Mountain Claim Group, Owyhee County, Idaho


The Company`s Clover Mountain property is located approximately 60 air miles SW of Boise, Idaho and approximately 30 miles SW of Grandview, Idaho in Sections 24, 25; T.8S.; R.1W. , and Sections 19, 30; T.8S.; R.1E. Boise Meridian, Owyhee County, Idaho. Latitude:     42   42’ 34” North Longitude: 116   24’ 10” West


Access to the property is by traveling one mile southeast on paved state highway 78. Take the Mud Flat road to the south, and travel approximately 25 miles on improved dirt road to the property. The property is on the west next to the Mud Flat Road. The landscape is high desert, with sagebrush and no trees. There is no power, no water other than seasonal surface precipitation, and there are no improvements on the property.


LIST of UNPATENTED MINING CLAIMS at Clover Mountain


CLAIM

OWYHEE COUNTY INSTRUMENT #

BLM# / (IMC)

PC-1

259673

190708

PC-2

259672

190709

PC-3

259671

190710

PC-4

259670

190711

PC-5

259669

190712

PC-6

259668

190713

PC-7

259667

190714

PC-8

259666

190715

PC-9

259665

190716

PC-10

259664

190717

PC-11

259663

190718

PC-12

259662

190719

PC-13

259661

190720

PC-14

259660

190721

PC-15

259659

190722

PC-16

259658

190723

PC-17

259657

190724

PC-18

259656

190725

PC-19

259655

190726

PC-20

259654

190727

PC-21

259653

190728

PC-22

259652

190729

PC-23

259651

190730

PC-24

259650

190731

PC-25

259649

190732

PC-26

259648

190733

PC-27

259647

190734

PC-28

259646

190735

PC-29

259645

190736

PC-30

259644

190737

PC-31

259643

190738

PC-32

259642

190739

PC-33

259641

190740

PC-34

259640

190741

PC-35

259639

190742

PC-36

259638

190743

PC-37

259637

190744

PC-38

259636

190745

PC-39

259635

190746

PC-40

259634

190747




19





These Claims are 100% owned by Thunder Mountain Gold Inc.


A geologic reconnaissance program in the fall of 2006 identified anomalous gold, silver, and other base metals in rock chips and soils at Clover Mountain.  In February 2007 the Company located the Clover Mountain claim group consisting of 40 unpatented lode mining claims totaling approximately 800 acres.  Mineralization appears to be associated with stockwork veining in a granitic stock which has been intruded by northeast and northwest-trending rhyolitic dikes.  The property is overlain by locally silicified rhyolitic tuff.


Follow-up rock chip sampling within the area of the anomaly has identified quartz veining with gold values ranging from 3.6 part per million (ppm) to 16.5 ppm.  A soil sample program consisting of 215 samples was conducted on 200’x 200’ grid spacing which defined two northeast tending soil anomalies with gold values ranging from 0.020 ppm to 0.873 ppm Au.  The gold anomalies are approximately 1,000’ in length and approximately 300’ in width. The gold anomalies are associated with northeast trending structures with accompanying quartz stockwork veining in an exposure of Cretaceous/Tertiary granite.  A 2,500’ base metal soil anomaly is observed trending northwest proximal to rhyolite and rhyodacitic dikes which intrude the granitic stock. No significant work was completed on the claim group in 2010, but additional field work is warranted in the future that may include backhoe trenching and sampling in the significantly anomalous area followed by exploration drilling.  


During brief field work in 2010, the presence of visible free gold was noted by panning in the area of the strong soil anomaly. The ongoing exploration field work, including claim maintenance and assessment fees, is funded by the Company through private placements with accredited investors. Future work will be funded in the same manner, or through a strategic partnership with another mining company.


There are currently no environmental permits required for the planned exploration work on the property. In the future, a notice of intent or plan of operations may be required with the Bureau of Land Management.  This property is without known reserves and the proposed program is exploratory in nature according to Instruction 3 to paragraph (b)(5) of Industry Guide 7.


Results of Operations:


The Company had no revenues and no production for the three months ended September 30, 2012 and 2011. Expenses for the three months ended September 30, 2012 decreased by $494,251 or 74%, compared with $666,051 for the three months ended September 30, 2011. The decrease is a result of lower management and administrative expenses while the company focused on financing and joint venture activities for the South Mountain Joint Venture. Exploration expense for the quarter decreased to $20,096, as management focused on financing, and the completion of the South Mountain Joint Venture with Idaho State Gold Co. Management and administrative expenses decreased by $318,726 or 84% to $61,135 for the quarter. There were no director`s fees during the quarter. The Company experienced professional fees during the quarter (legal and accounting) of $88,430, which is an increase of $63,496 or 255% over the same period one year ago for the quarter ended September 30, 2011. This mainly from legal fees associated with the South Mountain Joint Venture Agreement, and an increase in audit fees.


Total other income for the three months ended September 30, 2012 was $198,387, an increase of $59,45 or 43% from total other income of $138,936 over the same period as last year. The increase in other income is primarily due to the gain recognized on the fair value of the warrant liability recorded on the balance sheet during the third quarter of 2012.


Liquidity and Capital Resources:


On September 30, 2012, the Company had total current liabilities of $1,154,224. Current liabilities increased by $690,338 compared to current liabilities of $463,886 at year end December 31, 2011 primarily due to the promissory note related to the South Mountain Joint Venture, which is due to convert to cash once the South Mountain JV is finalized.

 

Total liabilities increased during the quarter due to an increase from the promissory note above, and in the fair value of the stock purchase warrants issued in private placements completed during 2010 and 2011. The Company has accounted for the warrants as derivative instruments which have been valued using a Black Scholes fair value model. The Company recognized a long-term liability of $483,235 related to the warrants at the date of issuance, and has



20





recognized a gain of $27,658 on the warrants during the nine months ended September 30, 2012, as a result of a increase in fair value of the warrants between December 31, 2011, and the nine months period ended September 30, 2012.


For the nine month period ended September 30, 2012, net cash used by operating activities was $673,817, consisting of our year to date net loss of $1,013,977, less non non-cash expenses for depreciation, amortization of deferred financing costs, changes in the fair value of the warrant liability and accounts payable and other accrued liabilities.  This compares with $533,653 used by operating activities for the nine months ended September 30, 2011. Cash flows from investing activities used $35,900 related to the purchase of mining claims, and $1,005,000 was provided by financing activities for the nine month period ended September 30, 2012.  


We are an exploration stage company and have incurred losses since our inception.  The notes to our financial statements for the year ended December 31, 2011, together with the opinion of our independent auditors included “going concern” explanatory paragraphs.  


Management actions in addressing the “going concern”:


Management believes that the Company currently has cash sufficient to support an exploration program as outlined in Managements Discussion & Analysis above based on the following:


·

As of September 30, 2012, the Company currently has $295,366 of cash in our bank accounts, which is sufficient to fund non-exploration activities and administrative expenses for the next three months while additional financing is put in place.

·

On June 26, 2011, the Company sold 1,000,000 units in a private placement to accredited investors. The units were priced at Cdn $0.17 per unit, and consisted of one share of common stock, and one full warrant to purchase a full share of common stock at Cdn$0.20 for two years. If the Company’s stock closes above Cdn$0.25 for a five consecutive days, then the Company has the right to force the holder to exercise the warrants.

·

On September 30, 2011, the Company sold 200,000 units in a private placement to accredited investors. The units were priced at Cdn $0.17 per unit, and consisted of one share of common stock, and one full warrant to purchase a full share of common stock at Cdn$0.20 for two years. If the Company’s stock closes above Cdn$0.25 for a five consecutive days, then the Company has the right to force the holder to exercise the warrants.

·

Management and the Board have not undertaken plans or commitments that exceed the cash available to the Company.  We do not include in this consideration any additional investment funds mentioned above.

·

Management will manage expenses of all types so as to not exceed the on-hand cash resources of the Company at any point in time, now or in the future.


Management is committed to proper management and spending restraint such that the Company is believed to be able to weather current disruptions in investment markets and continue to attract investment dollars in coming months and years.  


The Company’s future liquidity and capital requirements will depend on many factors, including timing, cost and progress of its exploration efforts, evaluation of, and decisions with respect to, its strategic alternatives, and costs associated with the regulatory approvals. Additional financing may be required to meet our exploration and corporate expenses incurred during the next 12 months.


The Company owns outright the South Mountain Mine property in Owyhee County, Idaho that consists of 17 patented mining claims totaling approximately 326 acres, for which Management has recorded the property in the Company’s financial statements for $357,497.


The Company owns outright three 4-wheel drive vehicles that are used for exploration and project work, as well as miscellaneous field equipment and office furniture. It also leases office space in Garden City, Idaho.



21






Item 3.  Quantitative and Qualitative Disclosures about Market Risk


Not required for smaller reporting companies.


Item 4.  Controls and Procedures


Evaluation of Disclosure Controls and Procedures


At the end of the period covered by this report, an evaluation was carried out under the supervision of, and with the participation of, the Company’s Management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) of the Securities and Exchange Act of 1934, as amended).



Changes in Internal Controls over Financial Reporting


During the quarter covered by this report, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.



22





PART II


Item 1.  Legal Proceedings.

None.

Item 1A. Risk Factors.


Not required for smaller reporting companies.


Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.


On February 12, 2012, the Company initiated a Non-Brokered Private Placement to accredited investors in Europe, the U.S., and such other jurisdictions as may be agreed to by the Company, for up to 8.3M Units at US$0.12 per Unit. Each Unit consists of one share of THMG/THM common stock, and one-half share purchase warrant - to purchase the common stock at $0.20 per share, valid for 12 months after the close of the financing.


The net proceeds of the Offering shall be used primarily to complete the acquisition of the Iron Creek Cobalt Gold project, initiation of the exploration on the Thunder Mountain Gold/Newmont Mining Trout Creek Joint Venture, and general corporate purposes for the completion of the Green River Energy merger.


The Company shall obtain any regulatory approval and any other consents that may be required to permit the Offering, including the approval of the TSX Venture Exchange. The securities offered hereby have not and will not be registered under the United States Securities Act of 1933 (the “1933 Act”) and may not be offered or sold in the United States or to U.S. persons (as defined in Regulation S under the 1933 Act) unless the securities have been registered under the 1933 Act, or are otherwise exempt from such registration.


Item 3.  Defaults Upon Senior Securities.


None.


Item 4.  Mine Safety Disclosures


Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities.


During the quarter ended March 31, 2012, the Company did not have any operating mines and therefore had no such specified health and safety violations, orders or citations, related assessments or legal actions, mining-related fatalities, or similar events in relation to the Company’s United States operations requiring disclosure pursuant to Section 1503(a) of the Dodd-Frank Act.


Item 5.  Other Information


None.




23






Item 6.  Exhibits


(a)

Documents which are filed as a part of this report:


Exhibits:

31.1 – Certification Required by Rule 13a-14(a) or Rule 15d-14(a). Collord

31.2 – Certification Required by Rule 13a-14(a) or Rule 15d-14(a). Jones

32.1 – Certification required by Rule 13a-14(a) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Collord

32.2 – Certification required by Rule 13a-14(a) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. Jones


101*

The following financial information from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 formatted in Extensible Business Reporting Language (XBRL): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows, and (v) Notes to Financial Statements

_____________________

*

In accordance with Rule 406T of Regulation S-T, the XBRL information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.




24






SIGNATURES


Pursuant to the requirements of Section 13 or 15(b) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf of the undersigned, thereunto duly authorized.


THUNDER MOUNTAIN GOLD, INC.



By /s/ Eric T. Jones                                              

Eric T. Jones

President and Chief Executive Officer

Date: November 13, 2012


Pursuant to the requirements of the Securities Act of 1934 this report signed below by the following person on behalf of the Registrant and in the capacities on the date indicated.


      

 

By /s/ R. Llee Chapman                                       

R. Llee Chapman

Chief Financial Officer

Date: November 13, 2012










25


EX-31 2 ex31a.htm CERTIFICATION Exhibit 31

Exhibit 31.1


CERTIFICATION


I, Eric T. Jones, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Thunder Mountain Gold, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 13, 2012



By:   /s/ Eric T. Jones                              

         President, Director and Chief Executive Officer


A signed original of this written statement has been provided to the registrant and will be retained by the registrant to be furnished to the Securities and Exchange Commission or its staff upon request.




EX-31 3 ex31b.htm CERTIFICATION Exhibit 31

Exhibit 31.1


CERTIFICATION


I, R. Llee Chapman, certify that:

1.

I have reviewed this quarterly report on Form 10Q of Thunder Mountain Gold, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  November 13, 2012


         /s/ R. Llee Chapman

By  ____________________________________

R. Llee Chapman

Chief Financial Officer


A signed original of this written statement has been provided to the registrant and will be retained by the registrant to be furnished to the Securities and Exchange Commission or its staff upon request.




EX-32 4 ex32a.htm CERTIFICATION Exhibit 32

Exhibit 32.1


CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of Thunder Mountain Gold Inc, (the "Company") on Form 10-Q for the period ending September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Eric T. Jones, President, Director and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



        /s/ Eric T. Jones

By  __________________________________

Eric T. Jones

President, Director and Chief Executive Officer

Date:  November 13, 2012














EX-32 5 ex32b.htm CERTIFICATION Exhibit 32





Exhibit 32.2


CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of Thunder Mountain Gold Inc, (the "Company") on Form 10-Q for the period ending September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, R. Llee Chapman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



       /s/ R. Llee Chapman

By  ____________________________________

R. Llee Chapman

Chief Financial Officer

Date:  November 13, 2012













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(&#147;Thunder Mountain&#148; or &#147;the Company&#148;) was originally incorporated under the laws of the State of Idaho on November 9, 1935, under the name of Montgomery Mines, Inc.&#160;&#160; In April 1978, the Montgomery Mines Corporation was obtained by a group of the Thunder Mountain property holders and changed its name to Thunder Mountain Gold, Inc., with the primary goal to further develop their holdings in the Thunder Mountain Mining District, located in Valley County, Idaho. Thunder Mountain Gold, Inc. takes its name from the Thunder Mountain Mining District, where its principal lode mining claims were located. For several years, the Company&#146;s activities were restricted to maintaining its property position and exploration activities. During 2005, the Company sold its holdings in the Thunder Mountain Mining District. During 2007, the Company acquired the South Mountain Mines property in southwest Idaho and initiated exploration activities on that property, which continue today.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'><u>Basis of Presentation</u></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'>The unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company&#146;s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included.&#160; Operating results for the nine months ended September 30, 2012, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2012.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'>For further information, refer to the financial statements and footnotes thereto in the Company&#146;s Annual Report on Form 10-K for the year ended December 31, 2011.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'><u>Going Concern</u></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. The Company is an exploration stage company and has incurred losses since its inception and does not have sufficient cash at September 30, 2012 to fund normal operations for the next 12 months. The Company has no recurring source of revenue and its ability to continue as a going concern is dependent on the Company&#146;s ability to raise capital to fund its future exploration and working capital requirements. The Company&#146;s plans for the long-term return to and continuation as a going concern include financing the Company&#146;s future operations through sales of its common stock and/or debt and the eventual profitable exploitation of its mining properties. Additionally, the current capital markets and general economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial doubt about the Company&#146;s ability to continue as a going concern. The Company is currently investigating a number of alternatives for raising additional capital with potential investors, lessees and joint venture partners. </p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis was not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'><u>Reclassifications</u></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Certain reclassifications have been made to conform prior year&#146;s data to the current presentation. These reclassifications have no effect on the results of reported operations or stockholders&#146; equity (deficit).</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'><u>Income Taxes</u></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>The Company recognizes deferred income tax liabilities or assets at the end of each period using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized.&#160; The Company has evaluated all tax positions for open years and has concluded that it has no material unrecognized tax benefits.&#160; Management estimates their effective tax rate for the year ended December 31, 2012 will be 0%.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;line-height:13.0pt'><u>Fair Value Measures</u></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>ASC 820 requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>when measuring fair value. ASC establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument&#146;s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC prioritizes the inputs into three levels that may be used to measure fair value:</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>Level 1: &#160;&#160;&#160;Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>Level 2: &#160;&#160;&#160;Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>Level 3: &#160;&#160;&#160;Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.</p> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>Our financial instruments consist principally of cash, convertible note payable, and warrant liabilities. The table below sets forth our assets and liabilities measured at fair value whether recurring or non-recurring and basis and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category. </p> <p style='margin:0in;margin-bottom:.0001pt;line-height:12.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;line-height:12.0pt'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt'>&#160;</p> </td> <td width="150" valign="top" style='width:112.5pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>9/30/2012</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> </td> <td width="138" valign="top" style='width:103.5pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>12/31/2011</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;line-height:11.0pt'>Input Hierarchy level</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>Recurring:</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>&nbsp;</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="top" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>&nbsp;</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>&nbsp;</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>&#160; Cash and cash equivalents</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>295,366</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="bottom" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>83</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>Level 1</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>&#160; Derivative warrant liabilities</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>(483,235) </p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="bottom" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;margin-left:0in;text-align:right'>(510,893)</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>Level 2</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>&#160; Conversion option liability</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>--</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="bottom" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;margin-left:0in;text-align:right'>(48,231)</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>Level 2</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>For the derivative warrant liabilities which are measured at fair value on a recurring basis, the Company uses the Black-Scholes valuation model with the following inputs as of September 30, 2012 and December 31, 2011:</p> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> <td width="140" style='width:105.05pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>1/1/2012 to 9/30/2012</p> </td> <td width="153" valign="top" style='width:114.85pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>1/1/2011 to 12/31/2011</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&#160;Stock price</p> </td> <td width="140" valign="top" style='width:105.05pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.11</p> </td> <td width="153" valign="top" style='width:114.85pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.10</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Exercise price</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.203 - $0.305</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.19 - $.026</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Expected term </p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.75 - 1.15 yrs</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.84 - 1.82 yrs</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Estimated volatility</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>204% - 233%</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>218% - 250%</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Risk-Free interest rate</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.17%</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.12% - 0.25%</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Expected dividend yield</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>-</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>-</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'><u><font lang="X-NONE">Net Income (Loss) Per Share</font></u></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'><font lang="X-NONE">The Company is required to have dual presentation of basic earnings per share (&#147;EPS&#148;) and diluted EPS.&#160; Basic EPS is computed as net income (loss) divided by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated based on the weighted average number of common shares outstanding during the </font></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>period plus the effect of potentially dilutive common stock equivalents, including warrants to purchase the Company&#146;s common stock.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'>As of September 30, 2012 and 2011, the remaining potentially dilutive common stock equivalents not included in the calculation of diluted earnings per share as their effect would have been anti-dilutive are:</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" width="679" style='width:509.4pt;border-collapse:collapse'> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>&nbsp;</p> </td> <td width="185" valign="top" style='width:138.9pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>1/1/2012 to 9/30/2012</b></p> </td> <td width="176" valign="top" style='width:132.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>1/1/2011 to 9/30/2011</b></p> </td> </tr> <tr style='height:9.4pt'> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> </td> <td width="185" valign="bottom" style='width:138.9pt;border:none;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="176" valign="bottom" style='width:132.0pt;border:none;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> </tr> <tr style='height:9.4pt'> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Convertible debt</p> </td> <td width="185" valign="bottom" style='width:138.9pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>12,500,000</p> </td> <td width="176" valign="bottom" style='width:132.0pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>848,484</p> </td> </tr> <tr> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Stock options</p> </td> <td width="185" valign="bottom" style='width:138.9pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>2,000,000</p> </td> <td width="176" valign="bottom" style='width:132.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>2,000,000</p> </td> </tr> <tr> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Warrants</p> </td> <td width="185" valign="bottom" style='width:138.9pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>8,616,271</p> </td> <td width="176" valign="bottom" style='width:132.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>8,508,271</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><b>Total possible dilution</b></p> </td> <td width="185" valign="bottom" style='width:138.9pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'><b>23,116,271</b></p> </td> <td width="176" valign="bottom" style='width:132.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'><b>11,356,755</b></p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'><font lang="X-NONE">Accordingly, only basic EPS is presented.</font></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'><b>2. &#160;&#160;&#160;&#160;&#160;&#160;&#160; Convertible Note Payable</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt'>On April 30, 2012 the Company executed a convertible promissory note payable to Idaho State Gold Company, LLC (&#147;ISGC&#148;) in the principal amount of $1,000,000.&#160; The note bears interest at the rate of eight percent (8%) per annum.&#160; The due date of the note was the earlier of June 30, 2012 or the date that is fourteen business days following the date on which the parties mutually agree to not enter into a joint venture agreement.&#160; Prior to maturity, the parties verbally agreed to an additional extension of the maturity date.&nbsp; As of the date of the release of these financial statements, the note is not considered to be in default.&#160; </p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Under the terms of the note, if ISGC and Company do not negotiate and execute a definitive joint venture agreement and complete their respective initial contributions prior to the maturity date of the Convertible Note, then at the election of ISGC, all or any portion of the outstanding principal and accrued interest can be converted into shares of the Company&#146;s common stock at the conversion price of $.08 USD per share.&#160; Any balance not so converted would be immediately due and payable.&#160; The convertible note required that the Company grant ISGC a first priority security interest over all of the Company&#146;s assets</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>The Company has recognized interest expense related to this note in the amount of $33,781 during the nine months ended September 30, 2012. </p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>The price for the Company&#146;s common stock exceeded the $0.08 conversion price stated in the loan on the day funds were advanced under the loan. Management determined that the favorable exercise price represents a beneficial conversion feature. Using the intrinsic value method at the loan date a total discount of $375,000 was recognized on the loan. &#160;As the initial loan maturity date was June 30, 2012, as of that date the full amount of the discount has been amortized as interest expense.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'><b>3. &#160;&#160;&#160;&#160;&#160;&#160;&#160; Stockholders&#146; Equity</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>The Company&#146;s common stock is at $0.001 par value with 200,000,000 shares authorized. The Company also has 5,000,000 authorized shares of preferred stock with a par value of $0.001. No preferred shares have been issued.</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt'>On January 2, 2012, the Company entered into a subscription agreements with certain individual whereby the company will sell up to 4,000,000 units at US$0.12 per unit.&#160; Each unit consists of one share of common stock, and one-half warrant exercisable for 2 years at $0.20. &#160;As of September 30, 2012, the Company has issued 1,250,000 shares under this agreement, and raised gross proceeds of $150,000.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt'>The following is a summary of warrants as of September 30, 2012:</p> <p style='margin:0in;margin-bottom:.0001pt;line-height:12.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;line-height:12.0pt'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="297" valign="bottom" style='width:222.75pt;padding:.75pt .75pt .75pt .75pt'> <p style='margin:0in;margin-bottom:.0001pt'>&#160;</p> </td> <td width="72" valign="bottom" style='width:.75in;border:none;border-bottom:solid black 1.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b> Share Equivalent Warrants </b></p> </td> <td width="75" valign="bottom" style='width:56.25pt;border:none;border-bottom:solid black 1.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Exercise Price</b></p> </td> <td width="186" valign="bottom" style='width:139.5pt;border:none;border-bottom:solid black 1.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>Expiration Date</b></p> </td> </tr> <tr> <td width="297" valign="bottom" style='width:222.75pt;padding:.75pt .75pt .75pt .75pt'> <p style='margin:0in;margin-bottom:.0001pt'><b>Warrants:</b></p> </td> <td width="72" valign="bottom" style='width:.75in;padding:.75pt .75pt .75pt .75pt'> <p style='margin:0in;margin-bottom:.0001pt'>&#160;</p> </td> <td width="75" valign="bottom" style='width:56.25pt;padding:.75pt .75pt .75pt .75pt'> <p style='margin:0in;margin-bottom:.0001pt'>&#160;</p> </td> <td width="186" valign="bottom" style='width:139.5pt;padding:.75pt .75pt .75pt .75pt'> <p style='margin:0in;margin-bottom:.0001pt'>&#160;</p> </td> </tr> <tr> <td width="297" valign="bottom" style='width:222.75pt;padding:.75pt .75pt .75pt .75pt'> <p style='margin:0in;margin-bottom:.0001pt'>Warrants issued September 24, 2010</p> </td> <td width="72" valign="bottom" style='width:.75in;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>6,683,271</p> </td> <td width="75" valign="bottom" style='width:56.25pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>0.30</p> </td> <td width="186" valign="bottom" style='width:139.5pt;padding:.75pt .75pt .75pt .75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>September 30, 2013</p> </td> </tr> <tr style='height:12.75pt'> <td width="297" valign="bottom" style='width:222.75pt;padding:.75pt .75pt .75pt .75pt;height:12.75pt'> <p style='margin:0in;margin-bottom:.0001pt'>Warrants issued June 26, 2011</p> </td> <td width="72" valign="bottom" style='width:.75in;padding:.75pt .75pt .75pt .75pt;height:12.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>1,000,000</p> </td> <td width="75" valign="bottom" style='width:56.25pt;padding:.75pt .75pt .75pt .75pt;height:12.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>0.20</p> </td> <td width="186" valign="bottom" style='width:139.5pt;padding:.75pt .75pt .75pt .75pt;height:12.75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>June 26, 2013</p> </td> </tr> <tr style='height:12.95pt'> <td width="297" valign="bottom" style='width:222.75pt;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p style='margin:0in;margin-bottom:.0001pt'>Warrants issued September 30, 2011</p> </td> <td width="72" valign="bottom" style='width:.75in;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>200,000</p> </td> <td width="75" valign="bottom" style='width:56.25pt;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>0.19</p> </td> <td width="186" valign="bottom" style='width:139.5pt;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>September 30, 2013</p> </td> </tr> <tr style='height:12.95pt'> <td width="297" valign="bottom" style='width:222.75pt;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p style='margin:0in;margin-bottom:.0001pt'>Warrants issued October 28, 2011</p> </td> <td width="72" valign="bottom" style='width:.75in;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>108,000</p> </td> <td width="75" valign="bottom" style='width:56.25pt;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>0.20</p> </td> <td width="186" valign="bottom" style='width:139.5pt;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>October 28, 2013</p> </td> </tr> <tr style='height:12.95pt'> <td width="297" valign="bottom" style='width:222.75pt;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p style='margin:0in;margin-bottom:.0001pt'>Warrants issued February 17, 2012</p> </td> <td width="72" valign="bottom" style='width:.75in;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>625,000</p> </td> <td width="75" valign="bottom" style='width:56.25pt;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>0.20</p> </td> <td width="186" valign="bottom" style='width:139.5pt;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>February 17, 2014</p> </td> </tr> <tr style='height:12.95pt'> <td width="297" valign="bottom" style='width:222.75pt;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p style='margin:0in;margin-bottom:.0001pt'>Total warrants outstanding at September 30, 2012 </p> </td> <td width="72" valign="bottom" style='width:.75in;border-top:solid windowtext 1.0pt;border-left:none;border-bottom:double windowtext 1.5pt;border-right:none;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>8,616,271</p> </td> <td width="75" valign="bottom" style='width:56.25pt;border-top:solid windowtext 1.0pt;border-left:none;border-bottom:double windowtext 1.5pt;border-right:none;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>0.22</p> </td> <td width="186" valign="bottom" style='width:139.5pt;padding:.75pt .75pt .75pt .75pt;height:12.95pt'> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> </td> </tr> </table> <p style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;margin-left:0in;line-height:13.0pt'>&nbsp;</p> <p style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;margin-left:0in;line-height:13.0pt'>&nbsp;</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt'><b>4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Commitments </b></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>On November 30, 2011, (&#147;Effective Date&#148;) Thunder Mountain Resources, Inc., entered into a mining lease with option to purchase with Richard C. and Carol Ann Fox for the exclusive rights to conduct exploration, feasibility work, development, mining and processing of minerals on certain mining claims in Lemhi County, Idaho.&#160; The initial term is for thirty years and the lease grants successive, additional fifteen year terms so long as the Company is in compliance with the lease.&#160; The Company is obligated to pay advance minimum royalty payments, the first of which was in the amount of $25,000 and was paid upon execution of the lease.&#160; An additional payment of $25,000 was made in the nine months ended September 30, 2012 in accordance with the lease terms.&#160; Additional payments are due as follows:</p> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="121" valign="top" style='width:90.55pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>Amount</p> </td> <td width="31" valign="top" style='width:23.3pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>Due Date</p> </td> </tr> <tr> <td width="121" valign="top" style='width:90.55pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>&nbsp;</p> </td> <td width="31" valign="top" style='width:23.3pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>&nbsp;</p> </td> </tr> <tr> <td width="121" valign="top" style='width:90.55pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>$&#160; 50,000</p> </td> <td width="31" valign="top" style='width:23.3pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>On or before the 1<sup>st</sup> anniversary of the Effective Date</p> </td> </tr> <tr> <td width="121" valign="top" style='width:90.55pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>75,000</p> </td> <td width="31" valign="top" style='width:23.3pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>On or before the 2nd anniversary of the Effective Date</p> </td> </tr> <tr> <td width="121" valign="top" style='width:90.55pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>100,000</p> </td> <td width="31" valign="top" style='width:23.3pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>On or before the 3rd anniversary of the Effective Date</p> </td> </tr> <tr> <td width="121" valign="top" style='width:90.55pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>100,000</p> </td> <td width="31" valign="top" style='width:23.3pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>On or before the 4<sup>th</sup> anniversary of the Effective Date and each anniversary date thereafter</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>All advance minimum royalties paid will be credited against any production royalties that accrue.&#160; If no minerals are produced from the premises, the lessor has no obligation to refund the advance minimum royalties.</p> <p style='margin:0in;margin-bottom:.0001pt;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;line-height:13.0pt'>On March 21, 2011, the Company signed an exploration agreement with Newmont Mining Corporation on the Trout Creek Project that significantly expands the Trout Creek target area. Newmont&#146;s private mineral package added to the Project surrounds the Company&#146;s claim group and consists of about 9,565 acres within a thirty-square mile Area of Influence defined in the agreement.&#160; Under the terms of the agreement, the Company is responsible for conducting the exploration program and is obligated to expend a minimum of $150,000 over the ensuing two years, with additional expenditures possible in future years.&#160; The Company has expended $13,270 on this project to date.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>On March 21, 2011, the Company signed an exploration agreement with Newmont Mining Corporation on the Trout Creek Project that significantly expands the Trout Creek target area. Newmont&#146;s private mineral package added to the Project surrounds the Company&#146;s claim group and consists of about 9,565 acres within a thirty-square mile Area of Influence defined in the agreement.&#160; Under the terms of the agreement, the Company is responsible for conducting the exploration program and is obligated to expend a minimum of $150,000 over the ensuing two years, with additional expenditures possible in future years.&#160; The Company has expended $47,654 on this project to date.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'><b>5. &#160;&#160;&#160;&#160;&#160;&#160;&#160; Related Party Transactions</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;line-height:13.0pt'>At various times throughout 2011 and January 2012 as approved under Board resolution dated July 11, 2011 (the &#147;Resolution&#148;), Mr. Collord, the Company&#146;s Vice-President and Chief Operations Officer, made loans of various amounts to the Company totaling $155,000 to fund the operational needs of the Company, $150,000 of which has been repaid, leaving a loan balance of $5,000 as of June 30, 2012. The Resolution specifies a maturity date of January 7, 2012, subsequently amended to May 31, 2012, and allowed the conversion of any portion of the note at any time into shares of common stock at a price equal to the lower of the last private placement, or the previous 30-day rolling average of the closing price of the stock.&#160; </p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>Management has determined that the conversion option requires separate valuation and bifurcation under ASC 815, and determined fair value using a Black-Scholes valuation model. &nbsp;The total initial fair value of the conversion options was $126,151 and was separated from the debt host.&nbsp; At initial recording it was determined that one of the loans&#146; conversion options had a fair value which exceeded the loan amount by $17,945.&nbsp; The excess was charged to the statement of operations in 2011 as a financing expense from conversion option.&nbsp; </p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;line-height:13.0pt'>On May 31, 2012, the notes were paid in full. Accordingly, the conversion option derivative liability was first marked to fair value at that date using a Black-Scholes valuation model with inputs as per the following table.&#160; As such, a gain on the change in fair value of $18,444 was recorded.&#160; The remaining liability was then eliminated with a charge of $15,000 to additional paid-in capital.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Inputs to the Black-Scholes valuation model as of May 31, 2012:</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>&nbsp;</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Stock price</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>$0.07</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Exercise price</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>$0.10</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Expected term</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>0.0897 (yrs)</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Estimated volatility</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>281.48%</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Risk-free interest rate</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>0.07%</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Expected dividend yield</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>0</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><b>6. &#160;&#160;&#160;&#160;&#160;&#160;&#160; Subsequent Events</b></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>On November 9, 2012, the Company signed a definitive Joint Venture Agreement (JV) with Idaho State Gold Company, LLC (&#147;ISGC&#148;), Idaho, to advance and develop the South Mountain project through a `Earn-in` arrangement. The JV 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. </p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>Upon execution of the JV Agreement on November 9, 2012, the previously executed convertible promissory note, dated April 30, 2012, in the amount of $1,000,000, is terminated. The outstanding principal and accrued interest is deemed a capital contribution by ISGC to the new Joint Venture. </p> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'><u>Income Taxes</u></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>The Company recognizes deferred income tax liabilities or assets at the end of each period using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized.&#160; The Company has evaluated all tax positions for open years and has concluded that it has no material unrecognized tax benefits.&#160; Management estimates their effective tax rate for the year ended December 31, 2012 will be 0%.</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;line-height:13.0pt'><u>Fair Value Measures</u></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>ASC 820 requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>when measuring fair value. ASC establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument&#146;s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC prioritizes the inputs into three levels that may be used to measure fair value:</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>Level 1: &#160;&#160;&#160;Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>Level 2: &#160;&#160;&#160;Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:13.0pt'>Level 3: &#160;&#160;&#160;Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.</p> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>Our financial instruments consist principally of cash, convertible note payable, and warrant liabilities. The table below sets forth our assets and liabilities measured at fair value whether recurring or non-recurring and basis and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category. </p> <p style='margin:0in;margin-bottom:.0001pt;line-height:12.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;line-height:12.0pt'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt'>&#160;</p> </td> <td width="150" valign="top" style='width:112.5pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>9/30/2012</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> </td> <td width="138" valign="top" style='width:103.5pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>12/31/2011</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;line-height:11.0pt'>Input Hierarchy level</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>Recurring:</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>&nbsp;</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="top" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>&nbsp;</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>&nbsp;</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>&#160; Cash and cash equivalents</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>295,366</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="bottom" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>83</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>Level 1</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>&#160; Derivative warrant liabilities</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>(483,235) </p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="bottom" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;margin-left:0in;text-align:right'>(510,893)</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>Level 2</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>&#160; Conversion option liability</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>--</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="bottom" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;margin-left:0in;text-align:right'>(48,231)</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>Level 2</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>For the derivative warrant liabilities which are measured at fair value on a recurring basis, the Company uses the Black-Scholes valuation model with the following inputs as of September 30, 2012 and December 31, 2011:</p> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> <td width="140" style='width:105.05pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>1/1/2012 to 9/30/2012</p> </td> <td width="153" valign="top" style='width:114.85pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>1/1/2011 to 12/31/2011</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&#160;Stock price</p> </td> <td width="140" valign="top" style='width:105.05pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.11</p> </td> <td width="153" valign="top" style='width:114.85pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.10</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Exercise price</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.203 - $0.305</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.19 - $.026</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Expected term </p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.75 - 1.15 yrs</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.84 - 1.82 yrs</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Estimated volatility</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>204% - 233%</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>218% - 250%</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Risk-Free interest rate</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.17%</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.12% - 0.25%</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Expected dividend yield</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>-</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>-</p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'><u><font lang="X-NONE">Net Income (Loss) Per Share</font></u></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'><font lang="X-NONE">The Company is required to have dual presentation of basic earnings per share (&#147;EPS&#148;) and diluted EPS.&#160; Basic EPS is computed as net income (loss) divided by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated based on the weighted average number of common shares outstanding during the </font></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>period plus the effect of potentially dilutive common stock equivalents, including warrants to purchase the Company&#146;s common stock.</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'>As of September 30, 2012 and 2011, the remaining potentially dilutive common stock equivalents not included in the calculation of diluted earnings per share as their effect would have been anti-dilutive are:</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" width="679" style='width:509.4pt;border-collapse:collapse'> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>&nbsp;</p> </td> <td width="185" valign="top" style='width:138.9pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>1/1/2012 to 9/30/2012</b></p> </td> <td width="176" valign="top" style='width:132.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>1/1/2011 to 9/30/2011</b></p> </td> </tr> <tr style='height:9.4pt'> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> </td> <td width="185" valign="bottom" style='width:138.9pt;border:none;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="176" valign="bottom" style='width:132.0pt;border:none;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> </tr> <tr style='height:9.4pt'> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Convertible debt</p> </td> <td width="185" valign="bottom" style='width:138.9pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>12,500,000</p> </td> <td width="176" valign="bottom" style='width:132.0pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>848,484</p> </td> </tr> <tr> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Stock options</p> </td> <td width="185" valign="bottom" style='width:138.9pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>2,000,000</p> </td> <td width="176" valign="bottom" style='width:132.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>2,000,000</p> </td> </tr> <tr> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Warrants</p> </td> <td width="185" valign="bottom" style='width:138.9pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>8,616,271</p> </td> <td width="176" valign="bottom" style='width:132.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>8,508,271</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><b>Total possible dilution</b></p> </td> <td width="185" valign="bottom" style='width:138.9pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'><b>23,116,271</b></p> </td> <td width="176" valign="bottom" style='width:132.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'><b>11,356,755</b></p> </td> </tr> </table> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'><font lang="X-NONE">Accordingly, only basic EPS is presented.</font></p> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;line-height:12.0pt'>&nbsp;</p> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;line-height:12.0pt'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt'>&#160;</p> </td> <td width="150" valign="top" style='width:112.5pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>9/30/2012</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> </td> <td width="138" valign="top" style='width:103.5pt;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>12/31/2011</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;border:none;border-bottom:solid black 1.0pt;padding:0in 6.75pt 0in 6.75pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;line-height:11.0pt'>Input Hierarchy level</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>Recurring:</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>&nbsp;</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="top" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>&nbsp;</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>&nbsp;</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>&#160; Cash and cash equivalents</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>295,366</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="bottom" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>83</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>Level 1</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>&#160; Derivative warrant liabilities</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>(483,235) </p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="bottom" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;margin-left:0in;text-align:right'>(510,893)</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>Level 2</p> </td> </tr> <tr> <td width="206" valign="top" style='width:154.2pt;padding:0in 6.75pt 0in 6.75pt'> <p style='margin:0in;margin-bottom:.0001pt;line-height:11.0pt'>&#160; Conversion option liability</p> </td> <td width="150" valign="top" style='width:112.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>--</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="138" valign="bottom" style='width:103.5pt;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;margin-left:0in;text-align:right'>(48,231)</p> </td> <td width="12" valign="top" style='width:9.0pt;padding:.75pt .75pt .75pt .75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="144" valign="top" style='width:1.5in;padding:0in 6.75pt 0in 6.75pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;line-height:11.0pt'>Level 2</p> </td> </tr> </table> <!--egx--><p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&nbsp;</p> </td> <td width="140" style='width:105.05pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>1/1/2012 to 9/30/2012</p> </td> <td width="153" valign="top" style='width:114.85pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>1/1/2011 to 12/31/2011</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>&#160;Stock price</p> </td> <td width="140" valign="top" style='width:105.05pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.11</p> </td> <td width="153" valign="top" style='width:114.85pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.10</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Exercise price</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.203 - $0.305</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>$0.19 - $.026</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Expected term </p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.75 - 1.15 yrs</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.84 - 1.82 yrs</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Estimated volatility</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>204% - 233%</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>218% - 250%</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Risk-Free interest rate</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.17%</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>0.12% - 0.25%</p> </td> </tr> <tr> <td width="422" valign="top" style='width:316.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-autospace:none'>Expected dividend yield</p> </td> <td width="140" valign="top" style='width:105.05pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>-</p> </td> <td width="153" valign="top" style='width:114.85pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>-</p> </td> </tr> </table> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" width="679" style='width:509.4pt;border-collapse:collapse'> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'>&nbsp;</p> </td> <td width="185" valign="top" style='width:138.9pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>1/1/2012 to 9/30/2012</b></p> </td> <td width="176" valign="top" style='width:132.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center'><b>1/1/2011 to 9/30/2011</b></p> </td> </tr> <tr style='height:9.4pt'> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> </td> <td width="185" valign="bottom" style='width:138.9pt;border:none;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> <td width="176" valign="bottom" style='width:132.0pt;border:none;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>&nbsp;</p> </td> </tr> <tr style='height:9.4pt'> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Convertible debt</p> </td> <td width="185" valign="bottom" style='width:138.9pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>12,500,000</p> </td> <td width="176" valign="bottom" style='width:132.0pt;padding:0in 5.4pt 0in 5.4pt;height:9.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>848,484</p> </td> </tr> <tr> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Stock options</p> </td> <td width="185" valign="bottom" style='width:138.9pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>2,000,000</p> </td> <td width="176" valign="bottom" style='width:132.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>2,000,000</p> </td> </tr> <tr> <td width="318" valign="bottom" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt'>Warrants</p> </td> <td width="185" valign="bottom" style='width:138.9pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>8,616,271</p> </td> <td width="176" valign="bottom" style='width:132.0pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'>8,508,271</p> </td> </tr> <tr> <td width="318" valign="top" style='width:238.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify'><b>Total possible dilution</b></p> </td> <td width="185" valign="bottom" style='width:138.9pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'><b>23,116,271</b></p> </td> <td width="176" valign="bottom" style='width:132.0pt;border:none;border-bottom:double windowtext 1.5pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right'><b>11,356,755</b></p> </td> </tr> </table> <!--egx--><p style='margin:0in;margin-bottom:.0001pt'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="121" valign="top" style='width:90.55pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>Amount</p> </td> <td width="31" valign="top" style='width:23.3pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;border:none;border-bottom:solid windowtext 1.0pt;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>Due Date</p> </td> </tr> <tr> <td width="121" valign="top" style='width:90.55pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>&nbsp;</p> </td> <td width="31" valign="top" style='width:23.3pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;border:none;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin:0in;margin-bottom:.0001pt;text-align:center;text-autospace:none'>&nbsp;</p> </td> </tr> <tr> <td width="121" valign="top" style='width:90.55pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>$&#160; 50,000</p> </td> <td width="31" valign="top" style='width:23.3pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>On or before the 1<sup>st</sup> anniversary of the Effective Date</p> </td> </tr> <tr> <td width="121" valign="top" style='width:90.55pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>75,000</p> </td> <td width="31" valign="top" style='width:23.3pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>On or before the 2nd anniversary of the Effective Date</p> </td> </tr> <tr> <td width="121" valign="top" style='width:90.55pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>100,000</p> </td> <td width="31" valign="top" style='width:23.3pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>On or before the 3rd anniversary of the Effective Date</p> </td> </tr> <tr> <td width="121" valign="top" style='width:90.55pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>100,000</p> </td> <td width="31" valign="top" style='width:23.3pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> </td> <td width="366" valign="top" style='width:274.5pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>On or before the 4<sup>th</sup> anniversary of the Effective Date and each anniversary date thereafter</p> </td> </tr> </table> <!--egx--><p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" style='border-collapse:collapse'> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>&nbsp;</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>&nbsp;</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Stock price</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>$0.07</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Exercise price</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>$0.10</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Expected term</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>0.0897 (yrs)</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Estimated volatility</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>281.48%</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Risk-free interest rate</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>0.07%</p> </td> </tr> <tr> <td width="463" valign="top" style='width:347.4pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin:0in;margin-bottom:.0001pt;text-align:justify;text-autospace:none'>Expected dividend yield</p> </td> <td width="172" valign="bottom" style='width:129.2pt;padding:0in 5.4pt 0in 5.4pt'> <p align="right" style='margin:0in;margin-bottom:.0001pt;text-align:right;text-autospace:none'>0</p> </td> </tr> </table> Business Operations Thunder Mountain Gold, Inc. (&#147;Thunder Mountain&#148; or &#147;the Company&#148;) was originally incorporated under the laws of the State of Idaho on November 9, 1935, under the name of Montgomery Mines, Inc. In April 1978, the Montgomery Mines Corporation was obtained by a group of the Thunder Mountain property holders and changed its name to Thunder Mountain Gold, Inc., with the primary goal to further develop their holdings in the Thunder Mountain Mining District, located in Valley County, Idaho. Thunder Mountain Gold, Inc. takes its name from the Thunder Mountain Mining District, where its principal lode mining claims were located. For several years, the Company&#146;s activities were restricted to maintaining its property position and exploration activities. During 2005, the Company sold its holdings in the Thunder Mountain Mining District. During 2007, the Company acquired the South Mountain Mines property in southwest Idaho and initiated exploration activities on that property, which continue today. Basis of Presentation The unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company&#146;s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included. Operating results for the nine months ended September 30, 2012, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2012. For further information, refer to the financial statements and footnotes thereto in the Company&#146;s Annual Report on Form 10-K for the year ended December 31, 2011. Going Concern The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. The Company is an exploration stage company and has incurred losses since its inception and does not have sufficient cash at September 30, 2012 to fund normal operations for the next 12 months. The Company has no recurring source of revenue and its ability to continue as a going concern is dependent on the Company&#146;s ability to raise capital to fund its future exploration and working capital requirements. The Company&#146;s plans for the long-term return to and continuation as a going concern include financing the Company&#146;s future operations through sales of its common stock and/or debt and the eventual profitable exploitation of its mining properties. Additionally, the current capital markets and general economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial doubt about the Company&#146;s ability to continue as a going concern. The Company is currently investigating a number of alternatives for raising additional capital with potential investors, lessees and joint venture partners. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis was not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used. Reclassifications Certain reclassifications have been made to conform prior year&#146;s data to the current presentation. These reclassifications have no effect on the results of reported operations or stockholders&#146; equity (deficit). 295366 83 483235 510893 48231 12500000 848484 2000000 2000000 8616271 8508271 23116271 11356755 On April 30, 2012 the Company executed a convertible promissory note payable to Idaho State Gold Company, LLC 1000000 0.0800 The due date of the note was the earlier of June 30, 2012 or the date that is fourteen business days following the date on which the parties mutually agree to not enter into a joint venture agreement. Prior to maturity, the parties verbally agreed to an additional extension of the maturity date. As of the date of the release of these financial statements, the note is not considered to be in default. Under the terms of the note, if ISGC and Company do not negotiate and execute a definitive joint venture agreement and complete their respective initial contributions prior to the maturity date of the Convertible Note, then at the election of ISGC, all or any portion of the outstanding principal and accrued interest can be converted into shares of the Company&#146;s common stock at the conversion price of $.08 USD per share. Company&#146;s common stock .08 33781 375000 0.001 200000000 5000000 0.001 0 4000000 1250000 6683271 0.30 2013-09-30 1000000 0.20 2013-06-26 200000 0.19 2013-09-30 108000 0.20 2013-10-28 625000 0.20 2014-02-17 8616271 0.22 On November 30, 2011, (&#147;Effective Date&#148;) Thunder Mountain Resources, Inc., entered into a mining lease with option to purchase with Richard C. and Carol Ann Fox for the exclusive rights to conduct exploration, feasibility work, development, mining and processing of minerals on certain mining claims in Lemhi County, Idaho. The initial term is for thirty years and the lease grants successive, additional fifteen year terms so long as the Company is in compliance with the lease. 13270 On March 21, 2011, the Company signed an exploration agreement with Newmont Mining Corporation on the Trout Creek Project that significantly expands the Trout Creek target area. 150000 At various times throughout 2011 and January 2012 as approved under Board resolution dated July 11, 2011 (the &#147;Resolution&#148;), Mr. Collord, the Company&#146;s Vice-President and Chief Operations Officer, made loans of various amounts to the Company totaling $155,000 to fund the operational needs of the Company, $150,000 of which has been repaid, leaving a loan balance of $5,000 as of June 30, 2012. 5000 2012-05-31 0000711034 2012-01-01 2012-09-30 0000711034 2012-11-02 0000711034 2012-09-30 0000711034 2011-12-31 0000711034 2012-07-01 2012-09-30 0000711034 2011-07-01 2011-09-30 0000711034 2011-01-01 2011-09-30 0000711034 1991-01-01 2012-09-30 0000711034 2010-12-31 0000711034 1990-12-31 0000711034 2011-09-30 0000711034 us-gaap:FairValueInputsLevel1Member 2012-09-30 0000711034 us-gaap:FairValueInputsLevel1Member 2011-12-31 0000711034 us-gaap:FairValueInputsLevel2Member 2012-09-30 0000711034 us-gaap:FairValueInputsLevel2Member 2011-12-31 0000711034 us-gaap:FairValueInputsLevel3Member 2011-12-31 0000711034 us-gaap:StockOptionMember 2012-01-01 2012-09-30 0000711034 us-gaap:StockOptionMember 2011-01-01 2011-09-30 0000711034 us-gaap:WarrantMember 2012-01-01 2012-09-30 0000711034 us-gaap:WarrantMember 2011-01-01 2011-09-30 0000711034 2010-09-24 0000711034 2011-06-26 0000711034 2011-10-28 0000711034 2012-02-17 shares iso4217:USD iso4217:USD shares pure See Note 4. EX-101.SCH 8 thmg-20120930.xsd 000160 - Disclosure - 1. Summary of Significant Accounting Policies and Business Operations: Fair Value Measures: Schedule of Product Warranty Liability (Tables) link:presentationLink link:definitionLink link:calculationLink 000220 - Disclosure - 1. Summary of Significant Accounting Policies and Business Operations: Fair Value Measures: Schedule of Product Warranty Liability (Details) link:presentationLink link:definitionLink link:calculationLink 000100 - Disclosure - 5. Related Party Transactions link:presentationLink link:definitionLink link:calculationLink 000040 - Statement - Thunder Mountain Gold, Inc. (An Exploration Stage Company) Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) link:presentationLink link:definitionLink link:calculationLink 000150 - Disclosure - 1. Summary of Significant Accounting Policies and Business Operations: Fair Value Measures: Fair Value, Measurement Inputs, Disclosure (Tables) link:presentationLink link:definitionLink link:calculationLink 000280 - Disclosure - 5. Related Party Transactions: Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Details) link:presentationLink link:definitionLink link:calculationLink 000020 - Statement - Thunder Mountain Gold, Inc. (An Exploration Stage Company)Consolidated Balance September 30, 2012 (unaudited) and December 31, 2011 link:presentationLink link:definitionLink link:calculationLink 000190 - Disclosure - 5. Related Party Transactions: Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Tables) link:presentationLink link:definitionLink link:calculationLink 000070 - Disclosure - 2. Convertible Note Payable link:presentationLink link:definitionLink link:calculationLink 000250 - Disclosure - 3. 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4. Commitments (Details) (USD $)
9 Months Ended
Sep. 30, 2012
Long-term Purchase Commitment, Description On November 30, 2011, (“Effective Date”) Thunder Mountain Resources, Inc., entered into a mining lease with option to purchase with Richard C. and Carol Ann Fox for the exclusive rights to conduct exploration, feasibility work, development, mining and processing of minerals on certain mining claims in Lemhi County, Idaho.
Long-term Purchase Commitment, Time Period The initial term is for thirty years and the lease grants successive, additional fifteen year terms so long as the Company is in compliance with the lease.
Supply Commitment, Description On March 21, 2011, the Company signed an exploration agreement with Newmont Mining Corporation on the Trout Creek Project that significantly expands the Trout Creek target area.
Supply Commitment, Remaining Minimum Amount Committed $ 150,000
Supply commitment, expended to date $ 13,270
XML 15 R9.htm IDEA: XBRL DOCUMENT v2.4.0.6
4. Commitments
9 Months Ended
Sep. 30, 2012
Notes  
4. Commitments

4.         Commitments

 

On November 30, 2011, (“Effective Date”) Thunder Mountain Resources, Inc., entered into a mining lease with option to purchase with Richard C. and Carol Ann Fox for the exclusive rights to conduct exploration, feasibility work, development, mining and processing of minerals on certain mining claims in Lemhi County, Idaho.  The initial term is for thirty years and the lease grants successive, additional fifteen year terms so long as the Company is in compliance with the lease.  The Company is obligated to pay advance minimum royalty payments, the first of which was in the amount of $25,000 and was paid upon execution of the lease.  An additional payment of $25,000 was made in the nine months ended September 30, 2012 in accordance with the lease terms.  Additional payments are due as follows:

 

 

Amount

 

Due Date

 

 

 

$  50,000

 

On or before the 1st anniversary of the Effective Date

75,000

 

On or before the 2nd anniversary of the Effective Date

100,000

 

On or before the 3rd anniversary of the Effective Date

100,000

 

On or before the 4th anniversary of the Effective Date and each anniversary date thereafter

 

 

All advance minimum royalties paid will be credited against any production royalties that accrue.  If no minerals are produced from the premises, the lessor has no obligation to refund the advance minimum royalties.

 

On March 21, 2011, the Company signed an exploration agreement with Newmont Mining Corporation on the Trout Creek Project that significantly expands the Trout Creek target area. Newmont’s private mineral package added to the Project surrounds the Company’s claim group and consists of about 9,565 acres within a thirty-square mile Area of Influence defined in the agreement.  Under the terms of the agreement, the Company is responsible for conducting the exploration program and is obligated to expend a minimum of $150,000 over the ensuing two years, with additional expenditures possible in future years.  The Company has expended $13,270 on this project to date.

 

 

On March 21, 2011, the Company signed an exploration agreement with Newmont Mining Corporation on the Trout Creek Project that significantly expands the Trout Creek target area. Newmont’s private mineral package added to the Project surrounds the Company’s claim group and consists of about 9,565 acres within a thirty-square mile Area of Influence defined in the agreement.  Under the terms of the agreement, the Company is responsible for conducting the exploration program and is obligated to expend a minimum of $150,000 over the ensuing two years, with additional expenditures possible in future years.  The Company has expended $47,654 on this project to date.

 

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3. Stockholders' Equity
9 Months Ended
Sep. 30, 2012
Notes  
3. Stockholders' Equity

 

3.         Stockholders’ Equity

 

The Company’s common stock is at $0.001 par value with 200,000,000 shares authorized. The Company also has 5,000,000 authorized shares of preferred stock with a par value of $0.001. No preferred shares have been issued.

 

On January 2, 2012, the Company entered into a subscription agreements with certain individual whereby the company will sell up to 4,000,000 units at US$0.12 per unit.  Each unit consists of one share of common stock, and one-half warrant exercisable for 2 years at $0.20.  As of September 30, 2012, the Company has issued 1,250,000 shares under this agreement, and raised gross proceeds of $150,000.

 

 

The following is a summary of warrants as of September 30, 2012:

 

 

 

Share Equivalent Warrants

Exercise Price

Expiration Date

Warrants:

 

 

 

Warrants issued September 24, 2010

6,683,271

0.30

September 30, 2013

Warrants issued June 26, 2011

1,000,000

0.20

June 26, 2013

Warrants issued September 30, 2011

200,000

0.19

September 30, 2013

Warrants issued October 28, 2011

108,000

0.20

October 28, 2013

Warrants issued February 17, 2012

625,000

0.20

February 17, 2014

Total warrants outstanding at September 30, 2012

8,616,271

0.22

 

 

 

XML 18 R2.htm IDEA: XBRL DOCUMENT v2.4.0.6
Thunder Mountain Gold, Inc. (An Exploration Stage Company)Consolidated Balance September 30, 2012 (unaudited) and December 31, 2011 (USD $)
Sep. 30, 2012
Dec. 31, 2011
Current assets:    
Cash and cash equivalents $ 295,366 $ 83
Prepaid expenses and other assets 32,697 20,389
Deferred financing costs   91,283
Total current assets 328,063 111,755
Property, equipment and mining claims:    
South Mountain Mines property 357,497 357,497
Equipment, net of accumulated depreciation 4,433 10,851
Mining leaseholds 121,980 86,080
Total property, equipment and mining claims 483,910 454,428
Other assets:    
Deferred financing costs, net of accumulated amortization   47,087
Total assets 811,973 613,270
Current liabilities:    
Accounts payable and other accrued liabilities 107,734 155,125
Deferred payroll 46,490 120,744
Note payable - related party   139,786
Conversion option liability   48,231
Convertible note payable 1,000,000  
Total current liabilities 1,154,224 463,886
Derivative warrant liabilities 483,235 510,893
Total liabilities 1,637,459 974,779
Commitments 0 [1]  
Stockholders' equity (deficit):    
Preferred stock 0 0
Common stock 30,168 28,718
Additional paid-in capital 3,643,616 3,095,066
Less: 11,700 shares of treasury stock, at cost (24,200) (24,200)
Deficit accumulated prior to 1991 (212,793) (212,793)
Accumulated deficit during the exploration stage (4,262,277) (3,248,300)
Total stockholders' equity (deficit) (825,486) (361,509)
Total liabilities and stockholders' equity (deficit) $ 811,973 $ 613,270
[1] See Note 4.
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1. Summary of Significant Accounting Policies and Business Operations
9 Months Ended
Sep. 30, 2012
Notes  
1. Summary of Significant Accounting Policies and Business Operations

 

1.         Summary of Significant Accounting Policies and Business Operations

 

Business Operations

 

Thunder Mountain Gold, Inc. (“Thunder Mountain” or “the Company”) was originally incorporated under the laws of the State of Idaho on November 9, 1935, under the name of Montgomery Mines, Inc.   In April 1978, the Montgomery Mines Corporation was obtained by a group of the Thunder Mountain property holders and changed its name to Thunder Mountain Gold, Inc., with the primary goal to further develop their holdings in the Thunder Mountain Mining District, located in Valley County, Idaho. Thunder Mountain Gold, Inc. takes its name from the Thunder Mountain Mining District, where its principal lode mining claims were located. For several years, the Company’s activities were restricted to maintaining its property position and exploration activities. During 2005, the Company sold its holdings in the Thunder Mountain Mining District. During 2007, the Company acquired the South Mountain Mines property in southwest Idaho and initiated exploration activities on that property, which continue today.

 

Basis of Presentation

 

The unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included.  Operating results for the nine months ended September 30, 2012, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2012.

 

For further information, refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. The Company is an exploration stage company and has incurred losses since its inception and does not have sufficient cash at September 30, 2012 to fund normal operations for the next 12 months. The Company has no recurring source of revenue and its ability to continue as a going concern is dependent on the Company’s ability to raise capital to fund its future exploration and working capital requirements. The Company’s plans for the long-term return to and continuation as a going concern include financing the Company’s future operations through sales of its common stock and/or debt and the eventual profitable exploitation of its mining properties. Additionally, the current capital markets and general economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently investigating a number of alternatives for raising additional capital with potential investors, lessees and joint venture partners.

 

The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis was not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.

 

Reclassifications

 

Certain reclassifications have been made to conform prior year’s data to the current presentation. These reclassifications have no effect on the results of reported operations or stockholders’ equity (deficit).

 

Income Taxes

 

The Company recognizes deferred income tax liabilities or assets at the end of each period using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized.  The Company has evaluated all tax positions for open years and has concluded that it has no material unrecognized tax benefits.  Management estimates their effective tax rate for the year ended December 31, 2012 will be 0%.

 

Fair Value Measures

 

ASC 820 requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs

when measuring fair value. ASC establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1:    Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2:    Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3:    Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

Our financial instruments consist principally of cash, convertible note payable, and warrant liabilities. The table below sets forth our assets and liabilities measured at fair value whether recurring or non-recurring and basis and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category.

 

 

 

9/30/2012

 

12/31/2011

 

Input Hierarchy level

Recurring:

 

 

 

 

 

  Cash and cash equivalents

295,366

 

83

 

Level 1

  Derivative warrant liabilities

(483,235)

 

(510,893)

 

Level 2

  Conversion option liability

--

 

(48,231)

 

Level 2

 

 

For the derivative warrant liabilities which are measured at fair value on a recurring basis, the Company uses the Black-Scholes valuation model with the following inputs as of September 30, 2012 and December 31, 2011:

 

 

 

1/1/2012 to 9/30/2012

1/1/2011 to 12/31/2011

 Stock price

$0.11

$0.10

Exercise price

$0.203 - $0.305

$0.19 - $.026

Expected term

0.75 - 1.15 yrs

0.84 - 1.82 yrs

Estimated volatility

204% - 233%

218% - 250%

Risk-Free interest rate

0.17%

0.12% - 0.25%

Expected dividend yield

-

-

 

 

Net Income (Loss) Per Share

 

The Company is required to have dual presentation of basic earnings per share (“EPS”) and diluted EPS.  Basic EPS is computed as net income (loss) divided by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated based on the weighted average number of common shares outstanding during the

period plus the effect of potentially dilutive common stock equivalents, including warrants to purchase the Company’s common stock.

 

As of September 30, 2012 and 2011, the remaining potentially dilutive common stock equivalents not included in the calculation of diluted earnings per share as their effect would have been anti-dilutive are:

 

 

 

1/1/2012 to 9/30/2012

1/1/2011 to 9/30/2011

 

 

 

Convertible debt

12,500,000

848,484

Stock options

2,000,000

2,000,000

Warrants

8,616,271

8,508,271

Total possible dilution

23,116,271

11,356,755

 

Accordingly, only basic EPS is presented.

 

 

 

XML 21 R22.htm IDEA: XBRL DOCUMENT v2.4.0.6
1. Summary of Significant Accounting Policies and Business Operations: Net Income (loss) Per Share: Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) (USD $)
9 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Convertible debt $ 12,500,000 $ 848,484
Antidilutive Shares Outstanding 23,116,271 11,356,755
Stock Option
   
Dilutive Securities, Effect on Basic Earnings Per Share 2,000,000 2,000,000
Warrant
   
Dilutive Securities, Effect on Basic Earnings Per Share $ 8,616,271 $ 8,508,271
XML 22 R24.htm IDEA: XBRL DOCUMENT v2.4.0.6
3. Stockholders' Equity (Details) (USD $)
Sep. 30, 2012
Feb. 17, 2012
Dec. 31, 2011
Oct. 28, 2011
Sep. 30, 2011
Jun. 26, 2011
Sep. 24, 2010
Common Stock, Par Value $ 0.001   $ 0.001        
Common Stock, Shares Authorized 200,000,000   200,000,000        
Preferred Stock, Shares Authorized 5,000,000   5,000,000        
Preferred Stock, Par Value $ 0.001   $ 0.001        
Preferred Stock, Shares Issued 0   0        
Capital Units, Authorized 4,000,000            
Capital Units, Outstanding 1,250,000            
Class of Warrant or Right, Number of Securities Called by Warrants or Rights   625,000   108,000 200,000 1,000,000 6,683,271
Class of Warrant or Right, Exercise Price of Warrants or Rights 0.22 0.20   0.20 0.19 0.20 0.30
Class of Warrant or Right, Expiration Date   Feb. 17, 2014   Oct. 28, 2013 Sep. 30, 2013 Jun. 26, 2013 Sep. 30, 2013
Class of Warrant or Right, Outstanding 8,616,271            
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XML 24 R7.htm IDEA: XBRL DOCUMENT v2.4.0.6
2. Convertible Note Payable
9 Months Ended
Sep. 30, 2012
Notes  
2. Convertible Note Payable

2.         Convertible Note Payable

 

On April 30, 2012 the Company executed a convertible promissory note payable to Idaho State Gold Company, LLC (“ISGC”) in the principal amount of $1,000,000.  The note bears interest at the rate of eight percent (8%) per annum.  The due date of the note was the earlier of June 30, 2012 or the date that is fourteen business days following the date on which the parties mutually agree to not enter into a joint venture agreement.  Prior to maturity, the parties verbally agreed to an additional extension of the maturity date.  As of the date of the release of these financial statements, the note is not considered to be in default. 

 

Under the terms of the note, if ISGC and Company do not negotiate and execute a definitive joint venture agreement and complete their respective initial contributions prior to the maturity date of the Convertible Note, then at the election of ISGC, all or any portion of the outstanding principal and accrued interest can be converted into shares of the Company’s common stock at the conversion price of $.08 USD per share.  Any balance not so converted would be immediately due and payable.  The convertible note required that the Company grant ISGC a first priority security interest over all of the Company’s assets

 

The Company has recognized interest expense related to this note in the amount of $33,781 during the nine months ended September 30, 2012.

 

The price for the Company’s common stock exceeded the $0.08 conversion price stated in the loan on the day funds were advanced under the loan. Management determined that the favorable exercise price represents a beneficial conversion feature. Using the intrinsic value method at the loan date a total discount of $375,000 was recognized on the loan.  As the initial loan maturity date was June 30, 2012, as of that date the full amount of the discount has been amortized as interest expense.

 

XML 25 R3.htm IDEA: XBRL DOCUMENT v2.4.0.6
Statement of Financial Position - Parenthetical (USD $)
Sep. 30, 2012
Dec. 31, 2011
Preferred Stock, Par Value $ 0.001 $ 0.001
Preferred Stock, Shares Authorized 5,000,000 5,000,000
Preferred Stock, Shares Issued 0 0
Preferred Stock, Shares Outstanding 0 0
Common Stock, Par Value $ 0.001 $ 0.001
Common Stock, Shares Authorized 200,000,000 200,000,000
Common Stock, Shares Issued 30,167,549 28,717,549
Common Stock, Shares Outstanding 30,167,549 28,717,549
Treasury Stock, Shares Outstanding 11,700 11,700
Treasury Stock, Value $ (24,200) $ (24,200)
XML 26 R17.htm IDEA: XBRL DOCUMENT v2.4.0.6
1. Summary of Significant Accounting Policies and Business Operations: Net Income (loss) Per Share: Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Tables)
9 Months Ended
Sep. 30, 2012
Tables/Schedules  
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

 

 

1/1/2012 to 9/30/2012

1/1/2011 to 9/30/2011

 

 

 

Convertible debt

12,500,000

848,484

Stock options

2,000,000

2,000,000

Warrants

8,616,271

8,508,271

Total possible dilution

23,116,271

11,356,755

XML 27 R1.htm IDEA: XBRL DOCUMENT v2.4.0.6
Document and Entity Information
9 Months Ended
Sep. 30, 2012
Nov. 02, 2012
Document and Entity Information    
Entity Registrant Name Thunder Mountain Gold Inc  
Document Type 10-Q  
Document Period End Date Sep. 30, 2012  
Amendment Flag false  
Entity Central Index Key 0000711034  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Well-known Seasoned Issuer No  
Document Fiscal Year Focus 2012  
Document Fiscal Period Focus Q3  
Entity Common Stock, Shares Outstanding   30,167,549
XML 28 R18.htm IDEA: XBRL DOCUMENT v2.4.0.6
4. Commitments: Long-term Purchase Commitment (Tables)
9 Months Ended
Sep. 30, 2012
Tables/Schedules  
Long-term Purchase Commitment

 

Amount

 

Due Date

 

 

 

$  50,000

 

On or before the 1st anniversary of the Effective Date

75,000

 

On or before the 2nd anniversary of the Effective Date

100,000

 

On or before the 3rd anniversary of the Effective Date

100,000

 

On or before the 4th anniversary of the Effective Date and each anniversary date thereafter

XML 29 R4.htm IDEA: XBRL DOCUMENT v2.4.0.6
Thunder Mountain Gold, Inc. (An Exploration Stage Company) Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (USD $)
3 Months Ended 9 Months Ended 261 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Revenue:          
Royalties, net         $ 328,500
Gain on sale of property and mining claims         2,576,112
Total revenue         2,904,612
Expenses:          
Exploration expenses 20,096 66,191 116,921 186,930 2,115,807
Legal and accounting 88,430 24,934 176,346 105,304 1,093,602
Management and administrative 61,135 379,861 213,020 649,326 3,169,312
Directors' fees and professional services   192,000   237,000 923,055
Depreciation and depletion 2,139 3,065 6,418 9,193 143,410
Total expenses 171,800 666,051 512,705 1,187,753 7,445,186
Other income (expense):          
Interest and dividend income       54 283,980
Interest expense (21,591) (21,303) (563,529) (54,320) (834,219)
Gain (loss) on fair value of warrant liabilities 219,978 96,201 27,658 1,091,221 1,320,042
Loss on common stock and warrants   (5,355)   (13,282) (271,587)
Gain on change in fair value of conversion option liability   89,091 34,599 89,091 109,399
Financing expense   (19,697)   (19,697) (17,945)
Gain on sale of securities         166,116
Impairment of investments         (52,299)
Total other income (expense) 198,387   138,936 (501,272) 1,093,067
Net income (loss) before income taxes 26,587 (527,115) (1,013,977) (94,686) (3,837,087)
(Provision) for income taxes         (151,496)
Net income (loss) 26,587 (527,115) (1,013,977) (94,686) (3,988,583)
Treasury stock cancelled         (273,694)
Comprehensive income (loss) $ 26,587 $ (527,115) $ (1,013,977) $ (94,686) $ (4,262,277)
Net income (loss) per common share-basic and diluted $ 0.00 $ (0.02) $ (0.03) $ 0.00 $ (0.28)
Weighted average common shares outstanding-basic and diluted 30,167,549 28,218,349 29,881,761 27,492,795 15,401,490
XML 30 R12.htm IDEA: XBRL DOCUMENT v2.4.0.6
1. Summary of Significant Accounting Policies and Business Operations: Income Taxes (Policies)
9 Months Ended
Sep. 30, 2012
Policies  
Income Taxes

Income Taxes

 

The Company recognizes deferred income tax liabilities or assets at the end of each period using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized.  The Company has evaluated all tax positions for open years and has concluded that it has no material unrecognized tax benefits.  Management estimates their effective tax rate for the year ended December 31, 2012 will be 0%.

XML 31 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
6. Subsequent Events
9 Months Ended
Sep. 30, 2012
Notes  
6. Subsequent Events

6.         Subsequent Events

 

On November 9, 2012, the Company signed a definitive Joint Venture Agreement (JV) with Idaho State Gold Company, LLC (“ISGC”), Idaho, to advance and develop the South Mountain project through a `Earn-in` arrangement. The JV 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.

 

Upon execution of the JV Agreement on November 9, 2012, the previously executed convertible promissory note, dated April 30, 2012, in the amount of $1,000,000, is terminated. The outstanding principal and accrued interest is deemed a capital contribution by ISGC to the new Joint Venture.

 

XML 32 R23.htm IDEA: XBRL DOCUMENT v2.4.0.6
2. Convertible Note Payable (Details) (USD $)
9 Months Ended
Sep. 30, 2012
Debt Instrument, Description On April 30, 2012 the Company executed a convertible promissory note payable to Idaho State Gold Company, LLC
Debt Instrument, Face Amount $ 1,000,000
Debt Instrument, Interest Rate, Stated Percentage 8.00%
Debt Instrument, Maturity Date, Description The due date of the note was the earlier of June 30, 2012 or the date that is fourteen business days following the date on which the parties mutually agree to not enter into a joint venture agreement. Prior to maturity, the parties verbally agreed to an additional extension of the maturity date. As of the date of the release of these financial statements, the note is not considered to be in default.
Debt Instrument, Convertible, Terms of Conversion Feature Under the terms of the note, if ISGC and Company do not negotiate and execute a definitive joint venture agreement and complete their respective initial contributions prior to the maturity date of the Convertible Note, then at the election of ISGC, all or any portion of the outstanding principal and accrued interest can be converted into shares of the Company’s common stock at the conversion price of $.08 USD per share.
Debt Instrument, Convertible, Type of Equity Security Company’s common stock
Debt Instrument, Convertible, Conversion Price $ 0.08
Interest Expense, Debt 33,781
Amortization of Debt Discount (Premium) $ 375,000
XML 33 R19.htm IDEA: XBRL DOCUMENT v2.4.0.6
5. Related Party Transactions: Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Tables)
9 Months Ended
Sep. 30, 2012
Tables/Schedules  
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

 

 

 

Stock price

$0.07

Exercise price

$0.10

Expected term

0.0897 (yrs)

Estimated volatility

281.48%

Risk-free interest rate

0.07%

Expected dividend yield

0

XML 34 R15.htm IDEA: XBRL DOCUMENT v2.4.0.6
1. Summary of Significant Accounting Policies and Business Operations: Fair Value Measures: Fair Value, Measurement Inputs, Disclosure (Tables)
9 Months Ended
Sep. 30, 2012
Tables/Schedules  
Fair Value, Measurement Inputs, Disclosure

 

 

9/30/2012

 

12/31/2011

 

Input Hierarchy level

Recurring:

 

 

 

 

 

  Cash and cash equivalents

295,366

 

83

 

Level 1

  Derivative warrant liabilities

(483,235)

 

(510,893)

 

Level 2

  Conversion option liability

--

 

(48,231)

 

Level 2

XML 35 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
1. Summary of Significant Accounting Policies and Business Operations: Fair Value Measures (Policies)
9 Months Ended
Sep. 30, 2012
Policies  
Fair Value Measures

Fair Value Measures

 

ASC 820 requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs

when measuring fair value. ASC establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC prioritizes the inputs into three levels that may be used to measure fair value:

 

Level 1:    Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2:    Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3:    Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

Our financial instruments consist principally of cash, convertible note payable, and warrant liabilities. The table below sets forth our assets and liabilities measured at fair value whether recurring or non-recurring and basis and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category.

 

 

 

9/30/2012

 

12/31/2011

 

Input Hierarchy level

Recurring:

 

 

 

 

 

  Cash and cash equivalents

295,366

 

83

 

Level 1

  Derivative warrant liabilities

(483,235)

 

(510,893)

 

Level 2

  Conversion option liability

--

 

(48,231)

 

Level 2

 

 

For the derivative warrant liabilities which are measured at fair value on a recurring basis, the Company uses the Black-Scholes valuation model with the following inputs as of September 30, 2012 and December 31, 2011:

 

 

 

1/1/2012 to 9/30/2012

1/1/2011 to 12/31/2011

 Stock price

$0.11

$0.10

Exercise price

$0.203 - $0.305

$0.19 - $.026

Expected term

0.75 - 1.15 yrs

0.84 - 1.82 yrs

Estimated volatility

204% - 233%

218% - 250%

Risk-Free interest rate

0.17%

0.12% - 0.25%

Expected dividend yield

-

-

 

XML 36 R14.htm IDEA: XBRL DOCUMENT v2.4.0.6
1. Summary of Significant Accounting Policies and Business Operations: Net Income (loss) Per Share (Policies)
9 Months Ended
Sep. 30, 2012
Policies  
Net Income (loss) Per Share

Net Income (Loss) Per Share

 

The Company is required to have dual presentation of basic earnings per share (“EPS”) and diluted EPS.  Basic EPS is computed as net income (loss) divided by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated based on the weighted average number of common shares outstanding during the

period plus the effect of potentially dilutive common stock equivalents, including warrants to purchase the Company’s common stock.

 

As of September 30, 2012 and 2011, the remaining potentially dilutive common stock equivalents not included in the calculation of diluted earnings per share as their effect would have been anti-dilutive are:

 

 

 

1/1/2012 to 9/30/2012

1/1/2011 to 9/30/2011

 

 

 

Convertible debt

12,500,000

848,484

Stock options

2,000,000

2,000,000

Warrants

8,616,271

8,508,271

Total possible dilution

23,116,271

11,356,755

 

Accordingly, only basic EPS is presented.

 

XML 37 R16.htm IDEA: XBRL DOCUMENT v2.4.0.6
1. Summary of Significant Accounting Policies and Business Operations: Fair Value Measures: Schedule of Product Warranty Liability (Tables)
9 Months Ended
Sep. 30, 2012
Tables/Schedules  
Schedule of Product Warranty Liability

 

 

1/1/2012 to 9/30/2012

1/1/2011 to 12/31/2011

 Stock price

$0.11

$0.10

Exercise price

$0.203 - $0.305

$0.19 - $.026

Expected term

0.75 - 1.15 yrs

0.84 - 1.82 yrs

Estimated volatility

204% - 233%

218% - 250%

Risk-Free interest rate

0.17%

0.12% - 0.25%

Expected dividend yield

-

-

XML 38 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
1. Summary of Significant Accounting Policies and Business Operations: Fair Value Measures: Fair Value, Measurement Inputs, Disclosure (Details) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Fair Value, Inputs, Level 1
   
Cash and Cash Equivalents, Fair Value Disclosure $ 295,366 $ 83
Fair Value, Inputs, Level 2
   
Derivative Financial Instruments, Liabilities, Fair Value Disclosure (483,235) (510,893)
Fair Value, Inputs, Level 3
   
Other Liabilities, Fair Value Disclosure   $ (48,231)
XML 39 R26.htm IDEA: XBRL DOCUMENT v2.4.0.6
5. Related Party Transactions (Details) (USD $)
9 Months Ended
Sep. 30, 2012
Related Party Transaction, Description of Transaction At various times throughout 2011 and January 2012 as approved under Board resolution dated July 11, 2011 (the “Resolution”), Mr. Collord, the Company’s Vice-President and Chief Operations Officer, made loans of various amounts to the Company totaling $155,000 to fund the operational needs of the Company, $150,000 of which has been repaid, leaving a loan balance of $5,000 as of June 30, 2012.
Due to Related Parties, Current $ 5,000
Related Party Transaction, Date May 31, 2012
XML 40 R5.htm IDEA: XBRL DOCUMENT v2.4.0.6
Thunder Mountain Gold, Inc. (An Exploration Stage Company) Consolidated Statements of Cash Flows (Unaudited) (USD $)
9 Months Ended 261 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Cash flows from operating activities:      
Net income (loss) $ (1,013,977) $ (94,686) $ (3,988,583)
Adjustments to reconcile net income (loss) to net cash used in operating activities:      
Depreciation and depletion 6,418 9,193 143,410
Common stock, warrants and options issued for services 10,000 552,000 815,266
Adjustment for anti-dilution provisions     86,084
Amortization of directors' fees prepaid with common stock     53,400
Amortization of deferred financing costs 138,370 47,087 259,515
Amortization of loan discount 395,214   495,086
Compensation expense for stock issued     76,500
Gain on sale of mining claims and other assets     (2,736,553)
Impairment loss on securities     52,335
Gain on change in fair value of warrant liability (27,658) (1,091,221) (1,320,042)
Loss on common stock and warrants   13,282 271,587
Gain on change in fair value of conversion option liability (48,231) (89,091) (123,031)
Financing expense   19,697 17,945
Change in:      
Prepaid expenses and other assets (12,308) (6,233) (32,697)
Receivables     124,955
Deferred financing costs     (28,500)
Deferred payroll (74,254)   (74,254)
Accounts payable and other liabilities (47,391) 106,319 234,910
Net cash used by operating activities (673,817) (533,653) (5,672,667)
Cash flows from investing activities:      
Proceeds from sale of property and mining claims     5,500,000
Purchase of Dewey Mining Co. mining claims     (2,923,888)
Purchase of investments     (354,530)
Purchase of South Mountain Mines     (357,497)
Purchase of mining leaseholds (35,900) (3,380) (121,980)
Purchase of equipment     (168,577)
Proceeds from disposition of investments     642,645
Proceeds from disposition of equipment     49,310
Net cash provided (used) by investing activities (35,900) (3,380) 2,265,483
Proceeds from sale of common stock and warrants, net 150,000 143,335 2,400,406
Proceeds from exercise of stock options and warrants     508,600
Acquisition of treasury stock     (376,755)
Borrowing on related party note payable 5,000 145,000 576,500
Payments on related party note payable (150,000) (5,000) (572,000)
Borrowing on notes payable 1,000,000   1,050,000
Payments on note payable     (50,000)
Net cash provided by financing activities 1,005,000 283,335 3,536,751
Net increase (decrease) in cash and cash equivalents 295,283 (253,698) 129,567
Cash and cash equivalents, beginning of period 83 298,232 165,799
Cash and cash equivalents, end of period 295,366 44,534 295,366
Supplemental disclosures of cash flow information:      
Stock issued to acquire equipment from related party     11,850
Stock issued for mining contract     50,000
Stock issued for payment of accounts payable     29,250
Stock issued for payments on related party note payable     4,500
Fair value of warrants issued in private placement classified as liabilities   198,627 1,795,587
Note proceeds allocated to conversion option at inception   123,031 123,031
Stock issued for deferred compensation     21,000
Beneficial conversion feature in note payable $ 375,000   $ 375,000
XML 41 R10.htm IDEA: XBRL DOCUMENT v2.4.0.6
5. Related Party Transactions
9 Months Ended
Sep. 30, 2012
Notes  
5. Related Party Transactions

 

5.         Related Party Transactions

 

 

At various times throughout 2011 and January 2012 as approved under Board resolution dated July 11, 2011 (the “Resolution”), Mr. Collord, the Company’s Vice-President and Chief Operations Officer, made loans of various amounts to the Company totaling $155,000 to fund the operational needs of the Company, $150,000 of which has been repaid, leaving a loan balance of $5,000 as of June 30, 2012. The Resolution specifies a maturity date of January 7, 2012, subsequently amended to May 31, 2012, and allowed the conversion of any portion of the note at any time into shares of common stock at a price equal to the lower of the last private placement, or the previous 30-day rolling average of the closing price of the stock. 

 

Management has determined that the conversion option requires separate valuation and bifurcation under ASC 815, and determined fair value using a Black-Scholes valuation model.  The total initial fair value of the conversion options was $126,151 and was separated from the debt host.  At initial recording it was determined that one of the loans’ conversion options had a fair value which exceeded the loan amount by $17,945.  The excess was charged to the statement of operations in 2011 as a financing expense from conversion option. 

 

On May 31, 2012, the notes were paid in full. Accordingly, the conversion option derivative liability was first marked to fair value at that date using a Black-Scholes valuation model with inputs as per the following table.  As such, a gain on the change in fair value of $18,444 was recorded.  The remaining liability was then eliminated with a charge of $15,000 to additional paid-in capital.

 

Inputs to the Black-Scholes valuation model as of May 31, 2012:

 

 

 

Stock price

$0.07

Exercise price

$0.10

Expected term

0.0897 (yrs)

Estimated volatility

281.48%

Risk-free interest rate

0.07%

Expected dividend yield

0

 

 

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1. Summary of Significant Accounting Policies and Business Operations (Details)
9 Months Ended
Sep. 30, 2012
Business Operations Business Operations Thunder Mountain Gold, Inc. (“Thunder Mountain” or “the Company”) was originally incorporated under the laws of the State of Idaho on November 9, 1935, under the name of Montgomery Mines, Inc. In April 1978, the Montgomery Mines Corporation was obtained by a group of the Thunder Mountain property holders and changed its name to Thunder Mountain Gold, Inc., with the primary goal to further develop their holdings in the Thunder Mountain Mining District, located in Valley County, Idaho. Thunder Mountain Gold, Inc. takes its name from the Thunder Mountain Mining District, where its principal lode mining claims were located. For several years, the Company’s activities were restricted to maintaining its property position and exploration activities. During 2005, the Company sold its holdings in the Thunder Mountain Mining District. During 2007, the Company acquired the South Mountain Mines property in southwest Idaho and initiated exploration activities on that property, which continue today.
Basis of Accounting Basis of Presentation The unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included. Operating results for the nine months ended September 30, 2012, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2012. For further information, refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.
Going Concern Going Concern The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. The Company is an exploration stage company and has incurred losses since its inception and does not have sufficient cash at September 30, 2012 to fund normal operations for the next 12 months. The Company has no recurring source of revenue and its ability to continue as a going concern is dependent on the Company’s ability to raise capital to fund its future exploration and working capital requirements. The Company’s plans for the long-term return to and continuation as a going concern include financing the Company’s future operations through sales of its common stock and/or debt and the eventual profitable exploitation of its mining properties. Additionally, the current capital markets and general economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently investigating a number of alternatives for raising additional capital with potential investors, lessees and joint venture partners. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis was not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.
Reclassifications Reclassifications Certain reclassifications have been made to conform prior year’s data to the current presentation. These reclassifications have no effect on the results of reported operations or stockholders’ equity (deficit).