Proposed Initial Operating Transaction

6 Months Ended

Jun. 30, 2011

Note 2 - Proposed Initial Operating Transaction

In connection with the commencement of the Company’s business plan, on April 4, 2011, the Company, through RM, entered into an Equipment Lease Agreement ( the “Lease Agreement”) and a Loan Agreement, as amended on May 13, 2011, further amended on June 23, 2011 and restated on August 4, 2011, see Note 8, Subsequent Events ( the “Loan Agreement”), and collectively with the Lease Agreement, the “Financing Agreements”) with Reginaldo Luiz De Almeida Ferreira-ME (the “Mine Operator”).

Pursuant to the Loan Agreement, RM committed to lend to the Mine Operator approximately $8,631,000, of which $353,000 of the proceeds is to be used by the Lessee for the construction of a new ore processing plant, $778,000 is to be used for working capital and the remaining $7,500,000 for the Mine Operator’s benefit.

Pursuant to the Loan Agreement, the payments were to be disbursed as follows:

$4,131,000 on or before July 15, 2011;

$2,500,000 within six months of the execution of the Loan Agreement; and

	·	$2,000,000 within twelve months of the execution of the Loan Agreement.

	·	a late fee of $300,000, which is being paid to extend the loan agreement an additional thirty (30) days past the date due of June 15, 2011 and will be paid at the same time that the first installment above is made.

The loan will be for a term of ten years, unless otherwise terminated in accordance with its terms. Pursuant to the Loan Agreement, on the earlier of the date that the Mine Operator commences production of ore or 90 days after the funds are initially disbursed, the Mine Operator shall begin making monthly interest payments equal to 20% of the net income from ore production from certain specified properties. The principal balance of the loan is due at maturity.

Pursuant to the Lease Agreement, RM agreed to lease certain specified pieces of mining equipment valued at approximately $5,370,000 to the Mine Operator for a term of ten years. The lease term will be automatically extended for one year unless either of the parties provides 90 days written notice of its intention not to extend the term. Under the Lease Agreement, the Mine Operator is obligated to make monthly lease payments equal to 30% of the net income from ore production from certain specified properties.

Pursuant to the Financing Agreements, the obligations of the Mine Operator will be secured by certain ore deposits and 50% of the net income from ore production during the term of the agreements. In addition, at the end of the second year of the term of the respective agreements, provided the Mine Operator has satisfied certain audit and financial conditions, RM has committed to cancelling the loan and contributing the leased equipment to a new company to be formed with the Mine Operator in exchange for a 50% interest in the net income from the ore produced on the specified properties.

In addition, the Financing Agreements provide that RM is subject to penalty payments in an amount equal to 20% of the disbursement amount, in the case of the Loan Agreement, or 20% of the prior month’s lease payment, in the case of the Lease Agreement, for failure to perform its obligations under the respective agreements.

The Company’s ability to perform its obligations under the Financing Agreements is dependent upon its ability to obtain sufficient debt or equity financing in a timely manner and in an amount sufficient to enable the Company to meet its contractual obligations. There can be no assurances that the Company will be able to obtain such funding when needed, or that such funding, if available, will be obtainable on terms acceptable to the Company.

RESOURCE HOLDINGS, INC. 10-Q/A