U.S.UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON,Washington, D.C. 20549

FORM 10-K10 – K

(Mark One)

For Fiscal Year Ended: the fiscal year endedDecember 31, 20112012

OR

For the transition period from ______________________ to ______________________

Commission file number: 333-149850File Number:000-54645

EASTERN RESOURCES, INC.

(Exact name of registrant as specified in its charter)

Issuer'sRegistrant’s telephone number:number, including area code(917) 687-6623(303) 893-2334

Securities registered underpursuant to Section 12(b) of the Act:None

Securities registered underpursuant to Section 12(g) of the Act:None        Common Stock, $0.001 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Ruleby rule 405 of the Securities Act.

Yes¨ Nox

Indicate by check markcheckmark if the registrant is not required to file reports pursuant to section 13 or 15(d) of the Exchange Act from their obligations under those Sections. Yes¨ Nox

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.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. Yesx 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). Yes¨x No¨

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes x  No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulationregistration S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant'sthe registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Partpart III of this Form 10-K or any amendment to this Form 10-K.x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of the “large accelerated filer,” “accelerate“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.   (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ Nox

As of June 30, 2011,2012, there were 20,629,000198,550,000 shares of the registrant's common stock, par value $0.00001,$0.001, issued and outstanding. Of these, 9,123,00018,550,000 shares were held by non-affiliates of the registrant. The aggregate market value of securities held by non-affiliates was $0$17,662,500 as registrant’s common stock does not presently trade.

DOCUMENTS INCORPORATED BY REFERENCE

None.None

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

Except for historical information, this reportThis Current Report contains forward-looking statements, within the meaning of federal securities laws. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussedwithout limitation, in the sections “Business,captioned “Description of Business,” “Risk Factors”Factors,” and “Management’s Discussion and Analysis of Financial Condition and ResultsPlan of Operations.Operations,” You should carefully reviewand elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to exploration programs, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.

In addition to the specific statements referenced above and the factors identified under “Item 1A. Risk Factors” in this Current Report below, other uncertainties that could affect the accuracy of our forward-looking statements include:

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, insufficient cash flows and resulting illiquidity, our inability to expand our business, government regulations, lack of diversification, volatility in the price of gold, zinc, silver, lead and copper, increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this AnnualReport appears in the section captioned “Risk Factors” and elsewhere in this Report.

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise.

Readers should read this Report in conjunction with the discussion under the caption “Risk Factors,” our financial statements and the related notes thereto in this Report, and in other documents which we may file from time to time with the Securities and Exchange Commission. YouCommission (the “SEC”). 

EXPLANATORY NOTE

We were incorporated as Eastern Resources, Inc., in Delaware on March 15, 2007.  Prior to the Merger (as defined below), our business was to engage in the acquisition, production and distribution of independent films.

As used in this Current Report, unless otherwise stated or the context clearly indicates otherwise, the term “ESRI” refers to Eastern Resources, Inc., before giving effect to the Merger, the term “MTMI” refers to Montana Tunnels Mining, Inc., a Delaware corporation, the term “EGI” refers to Elkhorn Goldfields, Inc., a Montana corporation, and the terms “Company,” “we,” “us,” and “our” refer to Eastern Resources, Inc., and its wholly-owned subsidiaries, including MTMI and EGI, after giving effect to the Merger.

On April 6, 2012, (i) MTMI Acquisition Corp., a Delaware corporation formed on February 27, 2012 and a wholly-owned subsidiary of ESRI (“MTMI Acquisition Sub”), merged with and into MTMI, a wholly-owned subsidiary of Elkhorn Goldfields LLC, a Delaware limited liability company (“EGLLC”), with MTMI as the surviving corporation and (ii) EGI Acquisition Corp., a Montana corporation formed on February 27, 2012 and a wholly-owned subsidiary of ESRI (“EGI Acquisition Sub”), merged with and into EGI, a wholly-owned subsidiary of EGLLC, with EGI as the surviving corporation (collectively, the “Merger”). As a result of the Merger and the Split-Off (as defined below), ESRI discontinued its pre-Merger business and acquired the business of MTMI and EGI, and will continue the existing business operations of MTMI and EGI as a publicly-traded company under the name Eastern Resources, Inc.

As a result of the Merger, EGLLC became the parent of the Company holding 180,000,000 shares of our Common Stock and 10,000,000 shares of our Series A Preferred Stock.

PART I

ITEM 1. BUSINESS.

Overview

Montana Tunnels Mining, Inc., a Delaware corporation (“MTMI”), was formed in 1998 to own and operate the Montana Tunnels gold-zinc-silver-lead open pit mining operation (the “Montana Tunnels Mine”). The Montana Tunnels Mine has been in operation since 1987. Elkhorn Goldfields, Inc., a Montana corporation (“EGI”), was formed in 1998 and owns the Elkhorn Project, which includes the Golden Dream Mine – a planned gold-copper underground mining operation (“Golden Dream Mine”). Prior to the Merger, MTMI and EGI were wholly-owned subsidiaries of Elkhorn Goldfields, LLC, a Delaware limited liability company (“EGLLC”). EGLLC is a mining holding company and is owned by the private equity investment funds that are cautionedmanaged by Black Diamond Financial Group LLC, a Delaware limited liability company (“Black Diamond”).

Ownership Structure

Black Diamond is owned and managed by Patrick Imeson and Eric Altman and is the manager of Black Diamond Holdings, LLC (“BDH”). In addition to their roles, through Black Diamond, in managing BDH, Messrs. Imeson and Altman also serve as board members, advisors, officers and, occasionally, as employees of the companies that are owned by BDH. Black Diamond receives a management fee from BDH and is entitled to a percentage of BDH’s distributions after BDH’s investors receive the return of their invested capital.

BDH is owned by about 40 accredited investors, primarily investment funds. Approximately 53% of BDH is owned by Michael Feinberg either directly or through trusts, family members or his partnership with Patrick Imeson in MFPI Partners, LLC, a Delaware limited liability company whose sole members are Michael Feinberg and Patrick Imeson (“MFPI”). Additionally, Patrick Imeson and Eric Altman own about 5% of BDH.

EGLLC is currently greater than 99% owned by BDH, however convertible debt and warrant holders have the right to convert or exercise warrant rights into approximately 25% of EGLLC. Prior to the Merger, EGLLC owned 100% of EGI and MTMI and had no other operating activities. EGLLC’s officers consisted of Patrick Imeson, Eric Altman and Robert Trenaman. After the Merger, EGLLC owns 180,000,000 shares of Common Stock and 10,000,000 shares of Series A Preferred Stock of the Company, and the officers of EGLLC include only Patrick Imeson and Eric Altman.

EGLLC was formed to provide oversight, direction and financing for the mining companies that BDH invested in. Now that the ownership of MTMI and EGI has been transferred to us, EGLLC has determined that it will not initiate any additional operating activities. This will avoid conflict with us being that Black Diamond has been the manager of EGLLC and has now signed a management services agreement with us (discussed below). EGLLC will use the proceeds received from the dividends on our Series A Preferred Stock or sale of our Common Stock and Series A Preferred Stock to place undue reliancepay its trade payables, accrued interest and debt obligations. Once this is completed, EGLLC expects to distribute its holdings of our Common Stock and Series A Preferred Stock to its members and to dissolve EGLLC as a legal entity. The dissolution of EGLLC will not impact the relationship between the Company and its operating subsidiaries, MTMI and EGI. However, dissolution of EGLLC may impact our beneficial ownership. As indicated in the notes to the beneficial ownership table on page 63 of this Current Report, Michael Feinberg, one of our directors, indirectly beneficially owns approximately fifty percent (50%) of the membership interests in EGLLC while Patrick Imeson, our Chief Executive Officer and Chairman, indirectly beneficially owns approximately three and one-half percent (3.5%) of the membership interests in EGLLC. The majority of the remaining interests in EGLLC is held by investment funds through BDH. Upon dissolution of EGLLC, these beneficial owners will become direct owners of our Capital Stock.

Furthermore, of the convertible debt and warrants that may convert and be exercised into approximately 25% of EGLLC, 40% of those securities are owned by MFPI, 32% are owned by other investors that directly or indirectly own BDH and 28% are owned by investors that have no affiliation with BDH.

Certain of the Secured Lenders (defined below) that are also indirect holders of BDH are either direct or indirect holders of some of these conversion rights. These Secured Lenders hold conversion rights, either directly or indirectly, by an exchange provision included in their loans to MFPI whereby the Secured Lenders have the option to exchange the loans to MFPI for the convertible debt held by MFPI issued by EGLLC. These rights would provide the Secured Lenders the rights to convert and exchange into 17% of EGLLC. Both the direct and indirect obligations are reflected in the Push-Down Debt, Interest, and Redeemable Obligation disclosures in the financial statements of the Company.

The Secured Lenders consist of eight groups, either as individuals or through trusts that they control. Upon conversion and exercise of their exchange rights in MFPI, each of the eight groups would have a beneficial ownership of less than 4% of the Company, except for Jane B. Vilas who would own approximately 10.79% of EGLLC, and, thus approximately 9.8% of the Common Stock and 10.79% of the Series A Preferred Stock of the Company, through trusts and partnerships that she controls or may beneficially own.

Corporate History

Pegasus Gold Inc., a Province of British Columbia corporation (“Pegasus”), had operations in Montana, Nevada and Australia. Pegasus commenced operations at the Montana Tunnels Mine in 1987. In January 1998, due to struggling mine operations external to the Montana Tunnels Mine, Pegasus was unable to service approximately $238 million in debt and filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Under the reorganization plan, Pegasus incorporated a holding company named Apollo Gold Inc., a Delaware corporation, and Apollo Gold Inc. became the owner/operator of the Montana Tunnels Mine.

During the second quarter of 2002, Apollo Gold Inc. was acquired by a Toronto Stock Exchange listed company – Nevoro Gold Inc. – which, upon closing of the acquisition, changed its name to Apollo Gold Corporation (“Apollo”) and traded publicly on the forward-lookingToronto Stock Exchange as such.

On July 28, 2006, EGLLC earned a 50% interest in the Montana Tunnels Mine and related assets by providing $14,250,000 to establish a joint venture with Apollo to remediate the “L” Pit and put the Montana Tunnels Mine back into production. Montana Tunnels Mine is an open pit mine. Each pit expansion shell is named in alphanumeric order. The “L” Pit was the south and west wall layback. Before that was the “K” Pit which was the east wall layback.

In July 2006, EGLLC established, and owned 100% of, Elkhorn Tunnels, LLC to facilitate the joint venture with Apollo. The “L” pit was completed mining in November 2008. In June 2009, Apollo advised EGLLC that it intended to market its position in the joint venture. EGLLC optioned to purchase Apollo’s interest which it exercised in the fall of 2009 and paid $250,000 as the first installment on the purchase. In February 2010, EGLLC and Apollo renegotiated the form of payment and the terms of the purchase of Apollo’s 50% interest in MTMI was modified to include the $250,000 cash already paid plus an assignment to Apollo of EGLLC’s interest in a certain loan and mortgage on a property owned by an unrelated mining company. Elkhorn Tunnels, LLC was dissolved following EGLLC’s completion of its acquisition of the remaining interest in MTMI.

EGI is the owner and operator of the Golden Dream Mine located at 2725-A Elkhorn Road, Boulder, Montana. The mine is located near the historic town of Elkhorn which dates back to the 1870s. The Golden Dream Mine is located about 15 air miles south east of the Montana Tunnels Mine and the over-the-road distance between the mines is approximately 35 miles. EGI was purchased by Calim Private Equity, LLC from Elkhorn Gold Mining Corporation, a Canadian corporation, in October 2000. Calim Private Equity, LLC, a private equity company, later created EGLLC and assigned its 100% interest in EGI to EGLLC.

Significant Developments

On April 6, 2012, ESRI, MTMI Acquisition Sub, EGI Acquisition Sub, MTMI, EGI and EGLLC entered into the Merger Agreement, which closed on the same date, and pursuant to which (i) MTMI Acquisition Sub merged with and into MTMI with MTMI as the surviving corporation and (ii) EGI Acquisition Sub merged with and into EGI with EGI as the surviving corporation. MTMI and EGI became wholly-owned subsidiaries of ESRI.

Pursuant to the Merger, the Company ceased to engage in the acquisition, production and distribution of independent films and acquired the business of MTMI and EGI to engage in exploration and production activities in the precious metals mining industry, as a publicly-traded company under the name Eastern Resources, Inc.  

At the closing of the Merger, (i) each of the 100 shares of MTMI’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into 45,000,000 shares of common stock, par value $0.001 per share (“Common Stock”), and 5,000,000 shares of Series A preferred stock, par value $0.001 per share (“Series A Preferred Stock” and, together with the Common Stock, the “Capital Stock”), of the Company and (ii) each of the 100 shares of EGI’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into 45,000,000 shares of Common Stock and 5,000,000 shares of Series A Preferred Stock. As a result, an aggregate of 90,000,000 shares of our Common Stock 10,000,000 shares of our Series A Preferred Stock were issued to EGLLC, as the sole stockholder of each of MTMI and EGI. MTMI and EGI did not have any stock options or warrants to purchase shares of their capital stock outstanding at the time of the Merger.

The Merger Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing conditions. Breaches of the representations and warranties will be subject to customary indemnification provisions, subject to specified aggregate limits of liability.

The Merger was treated as a recapitalization of the Company for financial accounting purposes. MTMI and EGI will be considered the acquirers for accounting purposes, and the historical financial statements of ESRI before the Merger will be replaced with the historical combined financial statements of MTMI and EGI before the Merger in all future filings with the SEC.

The parties took all actions necessary to ensure that the Merger was treated as a tax-free exchange under Section 368(a) of the Internal Revenue Code of 1986, as amended.

The issuance of shares of Common Stock and Series A Preferred Stock to holders of MTMI’s and EGI’s capital stock in connection with the Merger was not registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act, which speak onlyexempts transactions by an issuer not involving any public offering, and Regulation D promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.

As a result of the Merger, EGLLC became the parent of the Company holding 180,000,000 shares of our Common Stock and 10,000,000 shares of our Series A Preferred Stock.

Accounting Treatment; Change of Control

The Merger was accounted for as a “reverse merger,” and MTMI and EGI were deemed to be the acquirers in the reverse merger. Consequently, the assets and liabilities and the historical operations that were reflected in the financial statements prior to the Merger are those of MTMI and EGI and were recorded at the historical cost basis of MTMI and EGI, and the consolidated financial statements after completion of the Merger include the assets and liabilities of MTMI and EGI, historical operations of MTMI and EGI and operations of the Company and its subsidiaries from the closing date of the Merger. As a result of the issuance of the shares of Common Stock and Series A Preferred Stock pursuant to the Merger, a change in control of the Company occurred as of the date of consummation of the Merger. 

The Company continues to be a “smaller reporting company,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), following the Merger.

Property Interests and Mining Claims

Montana Tunnels Mine

MTMI is an integrated mining company which is seeking to recommence mining and milling operations at the Montana Tunnels Mine. Currently, MTMI’s operations are limited to care and maintenance functions. MTMI’s staff engineers, in association with outside independent mining consultants, have designed a mine plan around the “M” Pit deposit of the Montana Tunnels Mine incorporating a proven reserve of 27.6 million tons and a probable reserve of 10.1 million tons (a ton is equal to 2,000 pounds) of ore (the “M” Pit Mine Plan”), as documented in the Montana Tunnels Technical Report dated November 2010 (the “Nov. 2010 MTTR”). Table 21.3 M-Pit Production Schedule below:

Expected Activity for Nine Year M-Pit Deposit Life of Mine

(Subject to financing, the anticipated startup of development is scheduled for autumn 2013, with completion of the M-Pit Mine Plan scheduled for autumn 2021.)

Source: Montana Tunnels Technical Report – Table 21.3 (page 113)

Aerial view of the existing open pit Mine at the Montana Tunnels Site.

History of the Montana Tunnels Mine

To a large extent, mining activity developed and settled much of Montana during the 1860s and 1870s, including the historic “Wickes-Corbin” silver district in which the current Montana Tunnels Mine is centrally located. The Wickes-Corbin district thrived from the 1860s into the early 1890s, at which time the U.S. Government repealed the Sherman Silver Purchase Act (1893) sending silver prices plummeting and spelling the eventual demise of many silver producing mining camps, including the Wickes-Corbin camp.

In the early 1980s, with the price of silver trading at $50 per ounce on the LME, many historic silver camps were re-examined employing modern exploration techniques. It was during this report. We undertake no obligation to publicly release any revisionsperiod that the Montana Tunnels deposit – a named derived from the boring of two exploratory tunnels driven into the deposit in the early 1900s – was discovered. By 1986 Pegasus had commenced development of the Montana Tunnels Mine and construction of a 15,000 ton per day milling facility.

View of the Montana Tunnels Milling Facility, Crushing Facility and Administrative offices.

The open pit mine is located to the forward-looking statements or reflect events or circumstances after the datetop and left of this document.photograph.

Since the commencement of production at Montana Tunnels Mine in early 1987, the mine has produced, under its previous owners, 99.6 million tons of ore containing 1.7 million ounces of gold, 30.9 million ounces of silver, 551,400 tons of zinc and 202,800 tons of lead, as reported through public filings of the parent companies. All metals mined at the Montana Tunnels Mine were sold prior to 2010.

The table below sets forth the Montana Tunnels Mine production history from 1987 to 2009.

Montana Tunnels Technical Report - November 2010

Table 1.1 Montana Tunnels Production History (Page 2)

The deposit type to be exploited at the Montana Tunnels Mine is precious and base metal mineralization (gold, silver, zinc and lead) occurring as disseminated and veined sulfides internal to a volcanic diatreme. Through the mining and treatment of the Montana Tunnels deposit, the mine will produce (i) gold, (ii) silver, (iii) zinc and (iv) lead. Minor amounts of other metals are also contained within the deposit but not of marketable quantities.

Cross section cartoon depicting the Montana Tunnels deposit showing current Pit development.

OPERATIONS SUMMARY

Mission. MTMI is an integrated mining company focused on the exploration, development and mineral extraction of the Montana Tunnels Mine. MTMI has produced gold, silver, zinc and lead from the Montana Tunnels Mine starting in 1987. Although we believe that extracting the remaining deposit will be more than ample to provide sufficient mineral resources to establish a mine plan to continue profitable mining and milling operations on the current target at Montana Tunnels Mine for approximately 9 years, there is no guarantee that the Montana Tunnels Mine operation will ever be profitable.

The Operations. Upon the planned recommencing of operations, the Montana Tunnels Mine will be a fully integrated open-pit mine and concentrating facility. The goal in any successful metal mining operation is to take a lower concentration of metals per ton of rock – raw ore – and upgrade the valuable metal content per ton – while minimizing the loss of that metal content – thereby improving, or “concentrating” the value per ton.

This process is generally done in three steps – (1) mining, (2) beneficiation (concentration) and (3) smelting.

1.            Planned Mining Operations at the Montana Tunnels Mine.There will be four distinct stages to planned production mining at the Montana Tunnels Mine upon recommencement of mining operations – (i) drilling, (ii) blasting, (iii) loading and (iv) hauling.

2.            Beneficiation Operations at Montana Tunnels. Beneficiation is the act of crushing and separating ore into valuable substances by any of a variety of techniques so that metal can be recovered at a profit. Montana Tunnels Mine beneficiation plant is rated at 15,000 tons per day and consists of three distinct stages – (i) crushing, (ii) grinding and (iii) flotation & filtration.

The ground ore material/slurry from the ball mill would be pumped to the gravity circuit where gravity cyclones(funnel-shaped devices that separate particles entering the funnel by density), Knelson concentrators(machines that utilize the principles of a centrifuge to enhance gravitational force experienced by feed particles to effect separation based on particle density), sluices (troughs with riffles in the bottom that provide a lodging place for heavy or dense material such as gold)and separating tables would work to separate the coarse gold-silver particles from the slurry. This gold-silver concentrated product would be smelted onsite to produce doré bullion bars or flats.

Material passes from the gravity circuit to hyrocyclones where it is once again separated. The oversized material from this separation would report back to the ball mill for further grinding while the fine slurry or pulp material would be pumped to the lead flotation circuit to commence the flotation and filtration process.

Montana Tunnels Semi-Autogenous Mill (left) and Ball Mill (right).

The process for concentrating the minerals occurs as the mineralized pulp enters the first in this series of tanks. Upon planned recommencement of operations it is at this point that two reagents – a frothing reagent and a collecting reagent – are added to the pulp. These reagents would create the conditions within the tanks to compel the lead and lead-associated minerals to attach to “bubbles” created by the frothing reagent mixed with air from the air blower. These mineral-ladened bubbles would be collected through this series of cells, cleaned, thickened and filtered using a drum filter to make a final lead concentrate. Historically, the Montana Tunnels Mine lead concentrates would contain 50% to 55% lead, 2.0 to 3.5 ounces per ton gold and 20 to 50 ounces per ton silver. Moisture content has been between 8% and 10%.

After the pulp exits the final lead cell, reagents would again be introduced to the pulp which would activate the zinc minerals to attach to bubbles. As with the lead circuit, these zinc-ladened bubbles would be collected, cleaned, thickened and filtered – this time using a pressure filter – to make a final zinc concentrate. The Montana Tunnels Mine final zinc concentrate traditionally have contained 52% to 56% zinc, 0.1 to 0.3 ounces per ton gold, 5 to 20 ounces per ton silver with a moisture content of between 8% and 10%.

Finally, with this pulp denuded of minerals it would be pumped toa designed approved and built area for storing the treated waste fraction of an ore or the “Tailings Impoundment Area” for eventual reclamation.

Schematic of planned Montana Tunnels beneficiation operations

3.            Smelting and Refining of the Montana Tunnels Mine Products. We project that for the Life of Mine of the “M” Pit deposit, annual production of lead concentrate will be 16,000 tons and annual production of zinc concentrate will be approximately 46,000 tons, based upon historical production and the Nov. 2010 MTTR. Smelting of these concentrates has traditionally been carried out at a smelter facility in Trail, British Columbia, Canada which is owned by mining conglomerate Teck Corp. While we anticipate competitively shopping for alternative smelter facilities, we have identified Teck Corp. as the best situated smelting facility for the Montana Tunnels Mine.

From the Montana Tunnels Mine, it is planned that lead and zinc concentrates would be loaded separately into over-the-road haul trucks and delivered to railheads near Helena, Montana. From there, the concentrate products are planned to be delivered to Teck Corp.’s lead and zinc smelter approximately 400 miles via rail from Helena, Montana where they would be smelted and refined into saleable lead and zinc products. MTMI currently does not have a smelter contract with Teck Corp. or any other smelter.

A third product that would be planned on being produced from the Montana Tunnels Mine is gold doréflats (a mold of semi-pure alloy consisting of gold and silver created at the mine site). Historically, between 8% and 12% of the gold recovered at Montana Tunnels has reported to the gravity circuit and has been smelted onsite intodoréflats. In the past, thesedoréflats have been refined into gold bars by Johnson Matthey Inc.’s refining facility in Salt Lake City, Utah.

Montana Tunnels Mine “M” Pit Expansion

In December 2008, Montana Tunnels Mine was placed into a care and maintenance operational mode at the completion of the “L” Pit permit. The newly permitted “M” Pit will be an expansion of the existing “L” Pit to enable the Company to continue to mine an additional 37.8 million tons of ore as an extension to the same ore body that has been previously mined since the inception of the Montana Tunnels Mine operation. The expansion plan will “layback” or expand the perimeter of the current pit making it wider, and making an additional 7.0 years of ore available to be mined from the bottom of the expanded pit.

We have completed ore-delineation drilling beneath the current pit elevation and have identified proven reserves and probable reserves of the “M” Pit expansion as detailed separately in the table below:

Proven Reserves and Probable Reserves

Montana Tunnels Technical Report

Montana Tunnels Mining, Inc.

Gold and Silver grades in ounces per ton, Lead and Zinc grades as percentage mineral content.

In 2004, MTMI commenced the process of permitting the “M” Pit expansion by filing a major amendment to the Montana Tunnels Operating Permit #00113 to expand the open pit and process ores from the “M” Pit mine design. An updated Environmental Impact Statement was completed and Records of Decisions to mine and process the “M” Pit were finally received in November 2008, subject to the addition of approximately $16 million to the current $18 million of reclamation bonds pledged by MTMI with the Montana Department of Environmental Quality (“MDEQ”). The reclamation bond can be in the form of cash, surety bond, letter of credit, company-owned land or a combination of any of these subject to the approval of the MDEQ.

The “M” Pit Mine Plan calls for an 18 to 24 month period of pit expansion development in which 53 million tons of waste rock will be removed to access the ore below the waste rock. The “M” Pit Mine Plan is contingent on the Company obtaining the capital required to begin the expansion development. The Company will seek to obtain funding from debt and the capital markets. If the Company is unable to secure acceptable terms from these markets the expansion development will begin only when the cash flow from the Golden Dream Mine (discussed below) can support the capital needs of the Plan.

Although we believeexpect that some fringe ores will be encountered during the pit expansion, this ore will be stockpiled during the pit expansion phase. Only after primary ores are being mined from the pit on a continuous and sufficient basis to maintain continuous operation of the concentrator, will ore processing through the concentrator begin. It is planned that this will occur approximately 18 to 20 months after commencement of “M” Pit expansion development. Cash flow is expected to begin the month after the concentration mill is restarted.

Currently, MTMI has eight staff individuals working at the mine site conducting care and maintenance of the mine. This team also supports operations at the Golden Dream Mine (see discussion below). These individuals occupy the key positions in management, engineering, environmental, human resources and accounting. Upon financing, MTMI will quickly increase the number of full-time hourly employees to approximately 160 and 190 individuals. Being within commuting distance from Montana’s capital city – Helena – and the major mining communities of Butte and Whitehall should allow for a quick filling of these hourly positions. In August 2006, when MTMI re-commenced operations, it took approximately 4 weeks to hire 125 qualified mine equipment operators and mechanics. In August 2006, the unemployment rate in Montana was 3.3%. As of December 2012, unemployment in Montana was approximately 5.6%, according to the United States Department of Labor, Bureau of Labor Statistics.

The existing Montana Tunnels Mine mining equipment has been in use since the early-to-mid 1990s and, as such, now is prone to maintenance costs and associated downtime. We plan to use the existing mining fleet at Montana Tunnels Mine augmented with new equipment as it becomes available. The existing and new planned equipment are listed in the tables below:

Existing Montana Tunnels Mining Equipment

New Equipment planned for Montana Tunnels Mine “M” Pit expansion

As described above under the beneficiation section, the existing Montana Tunnels Mine concentrating and processing facility equipment consists of a number of components used in the crushing, grinding, flotation and filtration of gold, zinc, silver, lead and copper ores. In April 2009, the MTMI concentrator was turned off in a systematic way over a period of three weeks to ensure that recommencement of the facility would be seamless. All components of the MTMI concentrating facility are intact and the only piece of equipment contemplated to be replaced is the zinc pressure filter. Replacement of this component will be carried out in conjunction with the restart of the MTMI concentrating facility.

The Montana Tunnels Mine operation has been through several phases of exploration, development and production since the mid-1980s. Through this quarter century of operational experience, our management team has acquired the skills and knowledge to accurately plan and project development and operations timelines and costs.

The operational and cost components with the greatest influence relate to: (i) grade of the ore; (ii) mill recoveries; (iii) development and mining costs; and (iv) smelting and outside treatment costs. The grade of Montana Tunnels Mine “M” Pit has been delineated to standards employing defined requirements as set by the mining industry.

Historical – 1988 through 2009 – Montana Tunnels Mine mill recoveries for each of the payable metals are compiled in the table below (mill recovery is a calculation showing the percentage of recovered metals by analyzing the grade of pre-processed rock (heads) and comparing that with the grade of the same post-processed rock (tails)):

Montana Tunnels Mine Historical Mill Recoveries (1988 through 2009)

MTMI’s engineering and management staff have projected development and operating costs combining a mix of the planned new equipment and existing equipment applying each particular piece of equipment’s operating specifications.

Over the 20-plus years of operations at Montana Tunnels Mine, various smelting and outside treatment options have been explored and utilized. Because of its relative proximity and its smelter payment terms, the most appropriate smelter for Montana Tunnels’ zinc and lead concentrates, found to date, is Teck Corp.’s Trail, B.C. Smelter. World benchmark smelter treatment charges are established annually between miners and smelters for both zinc and lead concentrates.

The Elkhorn Project and Golden Dream Mine

The Golden Dream Mine lies within the boundaries of EGI’s Elkhorn Project approximately 35 road miles to the south-east of the Montana Tunnels Mine. The Elkhorn Project consists of a collection of patented and unpatented mineral claims totaling approximately 4,500 acres.

Similar to the area in which the Montana Tunnels Mine is located, the area in which the Golden Dream Mine is located was extensively explored and settled during the 1870s through the 1890s. The present ghost town of Elkhorn, which lays just outside the Elkhorn Project property boundaries, once boosted a population in excess of 2,000 people in the 1880s. The major operating mine during this period was the Elkhorn Mine, a silver-lead mine, but several smaller silver, gold and copper mines were also being worked in the area. By 1894, the town’s population had diminished to 600 people and mining activity – due in large part to the collapse in silver prices – steadily declined through the 1890s.

During the early 1980s reconnaissance exploration started on the Elkhorn Project. Over the next decade extensive core drilling, analysis, planning and design work was carried out by Gold Fields Corp. (NYSE: GFI) and Santa Fe Pacific Gold Corp (“Santa Fe”) on the Elkhorn Project. In 1997 Newmont Corp (NYSE: NEM) acquired Santa Fe thereby creating the opportunity for EGI to acquire the Elkhorn Project.

At the time EGI acquired the Elkhorn Project from Newmont in 1998, exploration work and reports completed by Santa Fe Pacific Gold Corporation had reported mineralized material containing 1.653 million ounces of gold located within four deposits on the Elkhorn Project – Carmody, Gold Hill, East Butte and Golden Dream. Currently, no proven reserve exists on any claim within Elkhorn Project and all work being carried out by the Company is exploratory in nature.

During EGI’s ownership of the Elkhorn Project it has focused its ore delineation drilling, analysis, design, planning and permitting on the Golden Dream deposit. EGI staff engineers have outlined in an internal feasibility study of the Golden Dream deposit a probable underground mineral reserve of 1.17 million tons containing 258,000 ounces of gold and 8.3 million pounds of copper and designed a Mine Plan around this probable reserve as depicted below in computer-generated Mine Plan model.

Computerized schematic of the proposed Golden Dream Mine showing planned tunnels (green shaded tick bands) and actual drill holes.
The colored blocks represent estimated mineral deposits but do not represent actual location of grade minerals.

Unlike the Montana Tunnels Mine, the Golden Dream Mine is an underground mine with tunnels being approximately 14 feet high and 14 feet wide. The solid green bands in the above computer model represent the tunnels accessing the initial ore and the various other ore levels. It will be through these tunnels that the expectations reflectedmined ore will be transported to the surface and then transported by haul trucks to the Montana Tunnels Mill Facility for processing (once the Montana Tunnels Mill Facility is up and running). We note that the colored blocks representing mineral deposits in the computer model above are only estimates, based on our exploratory information, and do not represent the actual location or grade of minerals expected to be found in this mine. Prior to the restart of the Montana Tunnels Mine Facility the ore may be shipped to other regional mills for processing.

Production mining is planned to be undertaken using two different methods – cut-and-fill and sub-level stopping. The cut-and-fill method is planned to be utilized on the upper levels of the Golden Dream Mine which are more oxidized or weathered.

Although the cut-and-fill method of mining is more expensive on a per ton basis, it is used in mining situations where waste rock, or country rock, around the ore to be mined is weaker and subject to falling in and diluting the ore. In the cut-and-fill mining method, ore is mined or “cut” along strike by driving a tunnel to remove the ore. This “cut” is then backfilled with cemented “fill” and another cut in the ore is driven alongside or above the cemented fill. The cemented backfill provides additional support to the country rock. Utilizing this mining method in the oxidized portions of the Golden Dream Mine should reduce dilution to the ore and provide a stable pillar that will not collapse or subside as the deeper sub-level areas are opened and mined.

As the mine reaches a depth below the first 150 feet of ore, the country rock turns from an oxidized, or weathered, material to a more solid, competent rock. At this point it is planned that production mining will move from the cut-and-fill method to a sub-level stopping method. In the sub-level mining method, two drifts are driven, one at the top and one at the bottom of a block of ore 45 to 60 feet thick. Holes can then be drilled between the two levels and loaded with explosives and the ore blasted out. The mined out areas remaining from this procedure would be backfilled with loose rock or cemented backfill, if needed, for ground support.

The broken ore from either method of mining would be planned to be loaded into underground haul trucks and transported to the surface where it will be transferred into 30 ton covered over-the-road haul trucks and transported to the Montana Tunnels Mill Facility for processing (once the Montana Tunnels Mill Facility is up and running). Prior to the restart of the Montana Tunnels Mine Facility the ore may be shipped to other regional mills for processing.

Whereas in an open-pit operation the general goal is to move material for the lowest cost per ton – a bulk mining exercise – the general goal in an underground operation is to move fewer tons of material with the highest grade – an ore control exercise. Using the geologic model determined by core drilling analysis, staff engineers and geologists completed a production model and associated financial pro-forma employing capital and operating costs, mill recoveries and outside smelting and refining charges.

The current Golden Dream Mine Plan extends only to a depth of approximately 850 feet below surface. Drill intercepts by the prior owners of the Elkhorn Project have intersected ore grade mineralization on the Golden Dream deposit to depths of 1,400 feet below surface. EGI has also completed drilling and analysis laterally along the Golden Dream Mine deposit mineralized structure with encouraging results.

In addition to the mineralization in and around the Golden Dream Mine deposit, EGI and the property’s predecessors have completed drilling on the other mineralized deposits on the Elkhorn Project, namely Gold Hill, East Butte, and Carmody. The current Elkhorn Project probable reserves are outlined in the table below:

Golden Dream Project Underground Development

During the third quarter of 2011, EGI commenced development of the Golden Dream deposit. As of April 1^st, 2013, EGI has developed approximately 650 feet of 14’ X 14’ main underground access tunnel and 350 feet of 12’ X 12’ underground ore access tunnel to reach a specific level of the ore body. We are currently working on completing underground and surface water treatment and disposal infrastructure pursuant to our Operating Permit and, upon completion of this work and subject to financing we will recommence development of the next stage at the decline into the lower level ore zones.

Golden Dream Main Access Decline (September 2011) during the development stage

Company’s Two-Boom Jumbo working in 6500 level ore access ramp at Golden Dream Deposit (November 2011) during
the development stage

Trench being completed for Golden Dream water disposal (January 2012). During the development stage

Golden Dream Main Access Decline and Mine shop buildings in background

Golden Dream Mine plant and equipment.

The Golden Dream operation, which is fully permitted and bonded for mining operations of between 500 and 1,000 tons per day, commenced an exploration decline in July, 2011. The current operation consists of a Caterpillar 800 KW diesel power generator set (s/n DWB00131) which provides power to the underground and surface facilities. An electric 990 CFM EPE200 Compressor (s/n FF2606U06048) provides compressed air for drilling and other mine and surface functions (air pumps, cleaning drill holes, etc.). Fresh air is supplied via a 40 Horsepower electric fan.

The decline is supported by an Oldenburg Cannon diesel/electric two boom Jumbo Drill (s/n 202760) and two Load-Haul-Dumps (Wagner ST-3.5 s/n DAO4P0755 and Eimco 903 (4 yard) s/n 903-0364). Additional support for bolting and screening is supplied by a Minecat 100 LPC Tractor with mancarrier/loader (s/n 1F100E6201). A 26 ton Tamrock EDJ-426/30 underground Truck (s/n 1470) allows for material to be removed from the workings to the surface waste dump areas.

The surface is supported by a Caterpillar IT38 front-end loader with forks (s/n 7B500825) as well as any other required surface equipment (excavators, graders and plows) which is provided by the Montana Tunnels Mine operation.

Pursuant to the Operating Permit, water from the underground workings is treated for both nitrates – through a “component-constructed” bio-reactor – and for arsenic – through a Bayoxide E33 Media Arsenic Treatment Plant. Treated water discharging from these forward-looking statementstreatment centers is allowed to leach into the ground, pursuant to our permit, along leach lines.

The Golden Dream has back-up/emergency power supplied by a Caterpillar XQ225 Generator Set (s/n 8JJ00370), back-up/emergency compressed air supplied by a Sullair 375 CFM Compressor (s/n 004-135353). Jackleg drills can be placed into service if the Jumbo goes down for any length of time. All equipment is either owned outright by the Company or is being rented with a purchase option.

DESCRIPTION OF PROPERTIES

Montana Tunnels Mine, Jefferson City, Montana

The Montana Tunnels Mine is an open pit poly-metallic mine located about five miles west of Jefferson City, Montana and operated between 1987 and 2009. The mine is located in the historic “Wickes-Corbin” mining district in Section 8 of Township 7 North, Range 4 West, with approximate latitude of 46° 22’ and longitude 112° 8’. The administrative offices are located at 270 Montana Tunnels Road, Jefferson City, Montana. Electrical power to the mine site is supplied by Montana Power via overhead power lines. Typical power demand during planned operations is 10,000Kw.

The total land area controlled by the Montana Tunnels Mine is 9,293 acres consisting of 2,404 acres of wholly or partially owned Patented Mineral Claims¹, 45 acres of leased Patented Mineral Claims, 2,584 acres of fee land, and 4,260 acres of Unpatented Mineral Claims.

The area encompassed in MTMI’s M-Pit Permit Boundary and outlying facilities is 2,385 acres of which greater than 90% is privately owned by MTMI. Within this Permit Boundary 332 acres are designated for the M-Pit Mine open-pit area and perimeter of which greater than 99% is overlain by private property wholly owned by MTMI. Within the M-Pit Mine open-pit area lays one 0.3 acre Unpatented Mineral Claim (MF-1) and three leased Patented Mineral Claims (Mineral Survey numbers 6758, 6634 and 6640).The leases were entered into in March, 2004 requiring the Company to pay the annual real estate taxes; In addition, the Company is obligated to annual payments to the lessor. The lease has no expiration date as long as the lessor is not in default of the lease, which is the current status. The three leased Patented Mineral Claims carry a 4.5% Net Smelter royalty but overlie minor amounts of mineralization and insignificant royalty payments are anticipated when this area is eventually mined.

In October and November, 2008 MTMI was granted positive Records of Decisions by the lead government regulating agencies – the Montana Department of Environmental Quality ("MDEQ") and the Bureau of Land Management (“BLM”) – approving a major amendment – the M-Pit Expansion Plan – to Operating Permit #00113, subject to the placement of a Reclamation Bond pursuant to the approved Mining and Reclamation Plan.

Elkhorn Project – The Golden Dream Mine, Boulder, Montana

The Elkhorn Project consists of four known gold and gold-copper mineral deposits which we are planning to operate using underground mining methods. The property is located 22 miles southeast of Helena, Montana and occupies portions of Sections 9, 10, 11, 14, 15 and 16 in Township 6 North, Range 3 West with approximate latitude of 45° 15’ and longitude of 111° 55’. The administrative offices are located at 2725-A Elkhorn Road, Boulder, Montana. Electrical power to the mine is currently supplied via 800 Kw generator set.

The Elkhorn Project consists of 236 Unpatented Mineral Claims encompassing approximately 4,000 acres and 35 wholly or partially owned Patented Mineral Claims encompassing an additional 573 acres.

In 2007 EGI applied for a Mine Operating Permit to allow for the extraction of between 500 and 1,000 tons per day from an underground mine located on its 100% owned Golden Dream Mineral Claim (US Mineral Survey #7176). The Company’s application sought a Mine Permit boundary consisting of 382.5 acres of Patented Mineral Claims surrounding the Golden Dream Claim. Approximately 40% of the Patented Mineral Claims contained within the Mine Permit boundary are subject to a Mining Lease Agreement with Mt. Heagan Development Inc. whereby EGI leases the Mineral Claims from Mt. Heagan subject to a “3% Net Return royalty from any ores, mineral or other products removed” from the Mineral Claims covered under the terms of the Agreement. EGI pays to Mt. Heagan an “advanced minimum royalty” of $5,000 per month which is “creditable and recoupable” against any production royalty payments. The remaining 60% of the Patented Mineral Claims contained within the Mine Permit Boundary are 100% owned by EGI.

In July, 2008 the Company was granted an Operating Permit by the lead government regulating agency, Montana Department of Environmental Quality (“MDEQ”), subject to the placement of a Reclamation Bond pursuant to the approved Mining and Reclamation Plan.  In November 2011, upon EGI posting the necessary Reclamation Bond in the amount of $591,474, the MDEQ approved the Golden Dream Operating Permit #00173.

Employees

As of December 31, 2012, we had 11 full-time employees, one full time consultant, and one part-time employee, including our executive officers. We believe the relationship we have with our employees is good. In 2013 we anticipate the need to hire additional technical, mining and administrative personnel. Although demand for quality staff is high in the mining industry, we believe we will be able to fill these positions in a timely manner.

Compliance with Government and Environmental Regulation

The Company’s mining, processing operations and exploration activities are subject to various laws and regulations governing the protection of the environment (federal regulator is the Bureau of Land Management (“BLM”) and state regulator is the MDEQ, exploration (BLM and MDEQ), mine safety, development and production (federal regulator is the Mine Safety and Health Administration (“MSHA”), exports, taxes, labor standards, occupational health (MSHA), waste disposal (BLM and MDEQ), toxic substances, water rights (federal regulator is the Department of Natural Resources and Conservation (“DNRC”), explosives (federal regulator is the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) and other matters. New laws and regulations, amendments to existing laws and regulations or more stringent implementation of existing laws and regulations could have a material adverse impact on the Company, increase costs, cause a reduction in levels of, or suspension of, production and/or delay or prevent the development of new mining properties.

The Company believes it is currently in compliance in all material respects with all applicable environmental laws and regulations. Such compliance requires significant expenditures and increases mine development and operating costs. Mining is subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production. Environmental liability may result from mining activities conducted by others prior to the Company’s ownership of a property. To the extent the Company is subject to uninsured environmental liabilities, the payment of such liabilities would reduce the Company’s otherwise available earnings and could have a material adverse effect on the Company. Should the Company be unable to fully fund the cost of remedying an environmental problem, it might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy, which could have a material adverse effect on the Company. In addition, the Company does not have coverage for certain environmental losses and other risks as such coverage cannot be purchased at a commercially reasonable cost.

Licenses and Permits

The Company’s operations require licenses and permits from various governmental authorities. The Company believes it holds all material licenses and permits required under applicable laws and regulations and believes it is presently complying in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its properties, commence construction or operation of mining facilities and properties under exploration or development or to maintain continued operations that economically justify the cost.

Competition

Because the life of a mine is limited by its mineral reserves, the Company is continually seeking to replace and expand its reserves through the exploration of existing properties as well as through acquisitions of interests in new properties or of interests in companies which own such properties. The Company encounters competition from other mining companies in connection with the acquisition of properties and with the engaging and maintaining of qualified industry experienced personnel. This competition may increase the cost of acquiring suitable properties and retaining qualified industry experienced personnel.

ITEM 1A. RISK FACTORS.

Our business is to engage in exploration and production activities in the precious minerals mining industry, which is a highly speculative activity. An investment in our securities involves a high degree of risk. You should not invest in our securities if you cannot afford to lose your entire investment. In deciding whether you should invest in our securities, you should carefully consider the following information together with all of the other information contained in this Current Report. Any of the following risk factors can cause our business, prospects, financial condition or results of operations to suffer and you to lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS AND FINANCIAL CONDITION

Estimates of mineralized material are based on reasonableinterpretation and assumptions thereand may yield less mineral production under actual conditions than is currently estimated.

There are numerous uncertainties inherent in estimating quantities of mineralized material such as gold, zinc, lead, copper and silver, including many factors beyond our control and no assurance can be given that the recovery of mineralized material will be realized. In general, estimates of mineralized material are based upon a number of risksfactors and uncertainties that could cause actual results to differ materially from such forward-looking statements.

All references in this Form 10-K toassumptions made as of the “Company,” “Eastern,” “we,” “us” or “our” are to Eastern Resources, Inc. and its wholly owned subsidiary, Buzz Kill, Inc.

PART Idate on which the estimates were determined, including:

Until mineralized material is actually mined and processed, it must be considered an estimate only.  These estimates are imprecise and depend on geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable.  We were formed ascannot assure you that these mineralized material estimates will be accurate or that this mineralized material can be mined or processed profitably.  Any material changes in estimates of mineralized material will affect the economic viability of placing a Delaware corporation on March 15, 2007 for the purpose of producing full length independent feature films. Since inception, we have been engaged in the production of our first independent, full-length feature film entitledBuzzKill. We are currently engaged in efforts to secure appropriate distribution for this film.

Business Strategy

Our plan of operations is to create and produce independent films that appeal to demographically diverse groups. We plan to acquire unique properties, both dramatic and factual, from a broad spectrum of independent writers, directors, and producers. Each project will become an independent production company created as a subsidiary of Eastern Resources, Inc. We plan to fund the projects and acquire and maintain ownership of the films with the goal of building a film library with rights to DVD, book and other reproductive media for sale to the public.

The Film Industry in General

The film industry includes about 9,000 companies with combined annual revenue of $50 billion. Large companies include Walt Disney, Sony Pictures, MGM, Paramount, Twentieth Century Fox, Universal and Warner Brothers. These “studios” are generally part of larger media companies. The industry is highly concentrated as the 50 largest companies account for approximately 80 percent of industry revenue. There are also independent production companies, and a large number of companies that provide services to the industry, including creative talent, equipment, technical expertise, and various technicalproperty into production and distribution services.

The film making business may broadly be segmented into three phases: Pre-production (or Design Phase), Production and Post-production. Pre-production is the planning phase, which includes budgeting, casting, finding the right location, set and costume design and construction, and scheduling. Production is the actual making of the film. The number of people involved in the production phase can vary from a few, for a documentary film, to hundreds, for a large studio feature film. It is during this phase that the actual filming is done. Post-production activities take place in editing rooms and recording studios, where the film is shaped into its final form.

Generally, even before the film starts production, marketing personnel develop the marketing strategy for the release. They estimate the demand for the film and the audience to whom it will appeal, develop an advertising plan, and decide where and when to release the work. Advertising workers, or unit publicists, write press releases and short biographies of actors and directors for newspapers and magazines. They may also set up interviews or television appearances for the stars or director to promote the film. Sales representatives sell the finished product. Many production companies hire staff or independent companies to distribute, lease and sell their films to theater owners and television networks.

The Rise of Independent Film

While independent films have been around for decades, dating back to B-movies and poverty-row production companies, it was not until the late 1980’s that independent films entered into the forefront of our movie culture. Over the last 20 years, we believe that there has been a significant shift in American film-going audiences toward edgier, foreign and more non-traditional stories and storytelling, indicated by the record-breaking box office sales of notable independent films, such asY Tu Mamá Tabién,Monsoon Wedding,Kissing Jessica Stein andAdaptation. Box office returns for independent films in 2004-2008 were at an unprecedented high and have continued to rise, claiming an increasing market share and representing approximately 35% of total 2009 domestic box office revenue. Each of the top 10 specialized films in 2004 grossed more than $10 million, and the trend continued in 2005 and 2006 with such titles asCrash,Little Miss Sunshine andThank You For Smoking. The most remarkable recent example of the potential success of independent film is the 2009 sleeper mega-hit, “Paranormal Activity”, which cost $15,000 to produce and has grossed in excess of $150 million in worldwide box office. This figure does not include future earning potential via ancillary distribution windows. Not surprisingly,Paranormal Activity 2 is already in development, slated for a 2012 release. Moreover, encouraged by the film’s colossal success, Paramount Pictures launched a new arm devoted solely to producing micro-budget films with a production ceiling of $100,000. A more conventional example of potential independent film success is the 2009 Sam Rockwell vehicle, “Moon”, which more than recouped its $5 million production cost solely through domestic box office returns.

It is known throughout the industry that studio financed films must recoup four to seven times their costs before they show a profit. While any investment is a risk, we believe that the potentialproperty’s return on a low-budget independent film is far greater than many expensive studio-produced films.My Big Fat Greek Wedding was made for $5 million and had a box-office gross of over $200 million.Swingers, the critically acclaimed independent hit was made in 1996 for $250,000 and was purchased by Miramax for $5 million.Kissing Jessica Stein was made for less than $1 million and grossed over $7 million at the box office. The 2006 Sundance Film Festival sawLittle Miss Sunshine (Oscar nominee for Best Picture) purchased for a reported $10.5 million by Fox Searchlight. The 2009 romantic comedy500 Days of Summer was made for $7.5 million and earned over $32 million in domestic box office alone. In 2007, 2008 and 2009, the Sundance Film Festival reported a number of films garnishing multi-million dollar distribution deals, and the last year’s 2010 Sundance Film Festival reported at least ten major domestic acquisitions, includingThe Kids Are Alright (Focus Features) for $5 million,Buried (Lionsgate) for $3.2 million,Twelve (Hanover House) for $2 million andHesher (Newmarket) for $1 million. The recently completed 2011 Sundance Film Festival saw 38 films pick up distribution. The financial and critical success of independent films continued in 2010 with films like:Blue Valentine with a budget of $1 million and a worldwide gross of $8.92 million;The Kids Are All Right grossed over $25 million and was made for a reported $4 million; andWinter’s Bone was made for $2 million and grossed over $6 million worldwide.

These numbers and the growing number of major award nominations received by independent films, including 2010 Oscar nominations for such films asPrecious,The Hurt Locker,An Education,The Last Station andA Single Man, and 2011 Oscar nominations forThe Kids are all Right, Blue Valentine and Winter’s Bone, to name a few, show that quality independent films are often significantly more lucrative than the Hollywood blockbusters into which studios pour tens of millions of dollars. Since the expensive studio paradigm is proving increasingly more problematic from an economic standpoint, the demand for independent production and acquisition is on a steady rise. The solid performances of these specialized films have given studios the financial incentive to make and distribute more lower-budget movies.

Currently, worldwide box office totals exceed $29 billion. Yearly domestic totals rose steadily through the 1990’s and into the 2000’s, starting at about $4 billion in 1990 and finishing 2009 at over $10 billion. 2010 word-wide box office receipts finished at a record $30 billion. The film industry has also shown remarkable durability and proved to be essentially recession proof as evidenced by the box office returns for 1987, 1991, 2001 and 2009, when, despite a general economic downturn, box office receipts continued to grow.The New York Times recently reported how film investment has turned into a “conservative” investment during the economic downturn.

We believe that independent films are the fastest growing segment of the motion picture business and are experiencing a growth record expected to continue through the decade. The market continues to be responsive and rewards cost-effective motion pictures made on smaller budgets. The breakout success of the films, like those listed below, show that quality, well crafted films, made with intelligence and originality, will find audiences despite their modest budgets.

Moreover, the development of new, digital distribution channels, such as Internet, mobile and cable/satellite video on demand, has fundamentally shifted the way content is distributed and consumed in the U.S. and around the world. Internet-based video viewing software, new server and media storage systems, multiplatform video on demand, multimedia gaming consoles and wireless video delivery now allow for cost effective, immediate, mass distribution of filmed entertainment programming. Because audiences can view content at any time from virtually any digital pipeline, these new distributors are aggressively competing for consumer viewing (and dollars) through diversity, exclusivity and volume of quality product offerings. The result is a competitive, long-tail supply and demand environment that currently favors the content producer.

The levels of success achieved by the independent films identified below are extremely rare for both independent and major studio releases. Major distribution deals for independent films are extremely rare to non-existent, except at major film festivals.capital.  There can be no assurance that minerals recovered in small scale metallurgical tests will be recovered at production scale.

We may have difficulty meeting our filmscurrent and future capital requirements.

Our management and our board of directors monitor our overall costs and expenses and, if necessary, adjust our programs and planned expenditures in an attempt to ensure we have sufficient operating capital.We continue to evaluate our costs and planned expenditures for our on-going development and care and maintenance efforts at our mineral properties. We raised in excess of $10 million during our 2011 fiscal year, and $760,000 in our 2012 fiscal year, from that certain Minerals Product Receivables Purchase Agreement dated as of April 15, 2011 between EGI, EGLLC and BDH. In February through April 2012, we raised an additional $1.9 million in bridge financing. However, the continued development and care and maintenance of our mineral properties will achieverequire significant amounts of additional capital.  As a result, we may need to explore raising additional capital during fiscal 2013 and beyond so that we can continue to fully fund our planned activities.  Our ability to obtain this financing will depend upon, among other things, the same levelsprice of profitability,gold and the industry’s perception of its future price. The extraordinary conditions in the global financial and capital markets have currently limited the availability of this funding.  Therefore, availability of funding is dependent largely upon factors outside of our control, and cannot be accurately predicted. If the disruptions in the global financial and capital markets continue, debt or equity financing may not be available to us on acceptable terms, if at all.

Independently Produced Pictures

Sources: www.boxofficemojo.com  If we are unable to fund future operations by way of financing, including public or private offerings of equity or debt securities, our business, financial condition and www.imdb.com.exploration activities will be adversely impacted.

ExpandingThe outstanding debt instruments of our largest shareholder (EGLLC) and its affiliate (MFPI) contains restrictive covenants relating to our operations.

Pursuant to secured mortgages encumbering all of the assets and property of EGI and MTMI, the secured lenders to our largest shareholder, EGLLC, and its affiliate, MFPI, imposed restrictions on us that affect our ability to incur additional debt. Further, the Tri-Party Agreement by and among EGLLC, the Secured Lenders and the Company requires us to comply with various financial covenants set forth in Existingthe mortgages encumbering all of the assets and New Marketsproperty of EGI and MTMI. A breach of the covenants could result in an acceleration of the debt obligations of EGLLC and MFPI and if a waiver or modification is not agreed upon with the Secured Lenders, our ability to continue as a going concern would be affected and the Secured Lenders would be able to foreclose on the assets and property of EGI and MTMI as provided for in the loan reinstatement and modification agreement by and among EGLLC and the Secured Lenders.

The volatility of the price of gold, zinc, lead, copper or silver could adversely affect our future operations and, if warranted, our ability to develop our properties.

The potential for profitability of our operations, the value of our properties and our ability to raise funding to conduct continued exploration and development, if warranted, are directly related to the market prices of gold, zinc, lead, copper, silver and other precious metals.  The prices of such metals fluctuate widely and are affected by numerous factors beyond our control, including interest rates, expectations for inflation, speculation, currency values (in particular the strength of the U.S. dollar), global and regional demand, political and economic conditions and production costs in major metal producing regions of the world. The price of gold may also have a significant influence on the market price of our common stock and the value of our properties.  Our decision to put a mine into production and to commit the funds necessary for that purpose must be made long before the first revenue from production would be received.  A decrease in the prices of gold, zinc, lead, copper or silver may prevent our property from being economically mined or result in the write-off of assets whose value is impaired as a result of lower gold, zinc, lead, copper or silver prices.  The prices of gold, zinc, lead, copper and silver is affected by numerous factors beyond our control, including inflation, fluctuation of the United States dollar and foreign currencies, global and regional demand, the sale of gold, zinc, lead, copper and silver by central banks, and the political and economic conditions of major gold and silver producing countries throughout the world.  

The volatility in gold, silver and copper prices is illustrated by the following table, which sets forth for each of the past five calendar years, the average annual market prices in U.S. dollars per ounce of gold and silver, based on the daily London P.M. fixing, and per pound of copper, based on the Mundi Index:

The volatility of mineral prices represents a substantial risk which no amount of planning or technical expertise can fully eliminate.  In the event gold prices decline or remain low for prolonged periods of time, we might be unable to develop our properties, which may adversely affect our results of operations, financial performance and cash flows

The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses.  

Exploration for and the production of minerals is highly speculative and involves greater risk than many other businesses.  Many exploration programs do not result in the discovery of mineralization, and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined.  Our operations are, and any future development or mining operations we may conduct will be, subject to all of the operating hazards and risks normally incident to exploring for and development of mineral properties, such as, but not limited to:

Any of these risks can materially and adversely affect, among other things, the development of properties, production quantities and rates, costs and expenditures, potential revenues and production dates.  We currently have limited insurance to guard against some of these risks.  If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a write-down of our investment in these interests.  All of these factors may result in losses in relation to amounts spent which are not recoverable, or result in additional expenses.

Difficult conditions in the global capital markets and the economy generally may materially adversely affect our business and results of operations, and we do not expect these conditions to improve in the near future.

Our results of operations are materially affected by conditions in the domestic capital markets and the economy generally. The stress experienced by domestic capital markets that began in the second half of 2007 has continued and substantially increased into the present. Recently, concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining real estate market in the U.S. have contributed to increased volatility and diminished expectation for the economy and the markets going forward. These factors, combined with volatile oil and gas prices, declining business and consumer confidence and increased unemployment, have precipitated an economic slowdown and fears of a continued recession. In addition, the fixed-income markets are experiencing a period of extreme volatility which has negatively impacted market liquidity conditions.

Initially, the concerns on the part of market participants were focused on the subprime segment of the mortgage-backed securities market. However, these concerns have since expanded to include a broad range of mortgage and asset-backed and other fixed income securities, including those rated investment grade, the U.S. and international credit and interbank money markets generally and a wide range of financial institutions and markets, asset classes and sectors. As a result, capital markets have experienced decreased liquidity, increased price volatility, credit downgrade events, and increased probabilities of default. These events and the continuing market upheavals may have an adverse effect on us because our liquidity and ability to fund our capital expenditures is dependent in part upon our access to the private and public capital markets. In addition, in the event of extreme prolonged market events, such as the global credit crisis, we could incur significant losses. Even in the absence of a market downturn, we are exposed to substantial risk of loss due to market volatility. The forgoing factors may have a negative impact on the value of our company, our assets, and our common stock resulting in illiquidity of our shares and potentially a total loss to our shareholders and a failure of our business.

Failure to extend the life of the Montana Tunnels Mine or Golden Dream Mine would significantly reduce our gold production.

Although our Montana Tunnels Mine had been in production from 1987 through 2008 the mine is currently on care and maintenance waiting financing to recommence production. During its productive period the Montana Tunnels Mine produced in excess of 1.7 million ounces of gold. As of December 2012, we declared a proven reserve of approximately 375,000 ounces of gold and a probable reserve of 130,000 ounces of gold remaining at the Montana Tunnels Mine and probable reserves of 260,000 ounces of gold at the Golden Dream Mine recoverable by open pit or underground mining methods. Development of these reserves is dependent upon financing at reasonable terms and a sufficient gold price to provide a reasonable return on investment. The ultimate success of both mines depends largely on our ability to raise the necessary capital to recommence mining activities on the current mine lives (9 years for Montana Tunnels Mine and 5 years for Golden Dream Mine) and, in due course, expand the mine lives of both operations.Title to our properties may be challenged or defective.

Our planned future operations, including our activities at the Golden Dream Mine and Montana Tunnels Mine projects and other exploration activities, may require amendments to our currently approved permits from various governmental authorities. Our operations are and will continue to be governed by laws and regulations governing prospecting, mineral exploration, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety, mining royalties and other matters. There can be no assurance that we will be able to acquire all required licenses, permits, amendments or property rights on reasonable terms or in a timely manner, or at all, and that such terms will not be adversely changed, that required extensions will be granted, or that the issuance of such licenses, permits or property rights will not be challenged by third parties.

We attempt to confirm the validity of our rights of title to, or contract rights with respect to, each mineral property in which we have a material interest. However, we cannot guarantee that title to our properties will not be challenged. Our mineral properties may be subject to prior unregistered agreements, interests or native land claims, and title may be affected by undetected defects. There may be valid challenges to the title of any of the claims comprising our mineral properties that, if successful, could impair possible development and/or operations with respect to such properties in the future. Challenges to permits or property rights, whether successful or unsuccessful; changes to the terms of permits or property rights; or a failure to comply with the terms of any permits or property rights that have been obtained, could have a material adverse effect on our business by delaying or preventing or making continued operations economically unfeasible.

A title defect could result in EGI or MTMI losing all or a portion of its right, title, and interest in and to the properties to which the title defect relates. Title insurance generally is not available, and our ability to ensure that we have obtained secure title to individual mineral properties or mining concessions may be severely constrained. In addition, we may be unable to operate our properties as permitted or to enforce our rights with respect to our properties. We regularly monitor the official land records in the counties in which our mineral properties lie to determine if there are annotations indicating the existence of a legal challenge against the validity of any of our concessions. As of December 31, 2012, there were no such annotations, nor are we aware of any challenges from the government or from third parties.

We are subject to complex environmental and other regulatory risks, which could expose us to significant liability and delay, and potentially the suspension or termination of our development efforts.

Compliance with environmental quality requirements and reclamation laws imposed by federal, state, provincial, and local governmental authorities may:

These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Applicable authorities may require us to prepare and present data pertaining to the effect or impact that any proposed exploration for or production of minerals may have upon the environment. The requirements imposed by any such authorities may be costly, time consuming, and may delay operations. Future legislation and regulations designed to protect the environment, as well as future interpretations of existing laws and regulations, may require substantial increases in equipment and operating costs and delays, interruptions, or a termination of operations. We cannot accurately predict or estimate the impact of any such future laws or regulations, or future interpretations of existing laws and regulations, on our operations.

Historic mining activities have occurred on certain of our properties. If such historic activities have resulted in releases or threatened releases of regulated substances to the environment, potential for liability may exist under federal or state remediation statutes. Such liability would include remediating any damage that we may have caused, including costs for removing or remediating the release and damage to natural resources, including ground water, as well as the payment of fines and penalties. Except as discussed in our periodic filings with the SEC, we are not aware of any such claims under these statutes at this time, and cannot predict whether any such claims will be asserted in the future.

We may produce air emissions and pollutions that could fall under the jurisdiction of U.S. federal laws.

Under the U.S. Resource Conservation and Recovery Act, mining companies may incur costs for generating, transporting, treating, storing, or disposing of hazardous waste, as well as for closure and post-closure maintenance once they have completed mining activities on a property. Our mining operations may produce air emissions, including fugitive dust and other air pollutants, from stationary equipment, storage facilities, and the use of mobile sources such as trucks and heavy construction equipment which are subject to review, monitoring and/or control requirements under the Federal Clean Air Act and state air quality laws. Permitting rules may impose limitations on our production levels or create additional capital expenditures in order to comply with the rules.

Legislation has been proposed that would significantly affect the mining industry.    

Periodically, members of the U.S. Congress have introduced bills which would supplant or alter the provisions of the General Mining Law of 1872, which governs the unpatented claims that we control with respect to our U.S. properties. One such amendment has become law and has imposed a moratorium on the patenting of mining claims, which reduced the security of title provided by unpatented claims such as those on our U.S. properties. If additional legislation is enacted, it could substantially increase the cost of holding unpatented mining claims by requiring payment of royalties, and could significantly impair our ability to develop mineral estimates on unpatented mining claims. Such bills have proposed, among other things, to make permanent the patent moratorium, to impose a federal royalty on production from unpatented mining claims and to declare certain lands as unsuitable for mining. Although it is impossible to predict at this time what royalties may be imposed in the future, the imposition of such royalties could adversely affect the potential for development of such mining claims, and the economics of existing operating mines on federal unpatented mining claims. Passage of such legislation could adversely affect our business.

Our operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations on our mining properties.  

Our operations, including ongoing exploration drilling programs, require permits from the state and federal governments, including permits for the use of water and for drilling wells for water. We may be unable to obtain these permits in a timely manner, on reasonable terms or on terms that provide us sufficient resources to develop our properties, or at all. Even if we are able to obtain such permits, the time required by the permitting process can be significant. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits, our timetable and business plan for exploration of our properties will be adversely affected, which may in turn adversely affect our results of operations, financial condition and cash flows.

We may face a shortage of water.

Water is essential in all phases of the exploration, development and operation of mineral properties. With the nature of our operations, water is used in such processes as exploration, drilling, testing, dust suppression, milling and tailings disposal. Although currently both of our contemplated operations have adequate water supplies under permit for use in the operations, the lack of available water and the cost of acquisition may make an otherwise viable project economically impossible to complete.

Global climate change is an international concern, and could impact our ability to conduct future operations.   

Global climate change is an international issue and receives an enormous amount of publicity. We would expect that the imposition of international treaties or federal, state or local laws or regulations pertaining to mandatory reductions in energy consumption or emissions of greenhouse gasses could affect the feasibility of our mining projects and increase our operating costs.

Because access to the mineral property may be restricted by inclement weather or other hazards, we may be delayed in our development efforts.

We are subject to risks and hazards, including environmental hazards, the encountering of unusual or unexpected geological formations, cave-ins, flooding, earthquakes and periodic interruptions due to inclement or hazardous weather conditions. As a result, access to our mineral properties may be restricted during parts of the year. The properties are in a mountainous area in the Jefferson County and Broadwater County, Montana which is accessible by county roads, BLM roads, and private roads. Although these roads have been used for exploration, forestry and mining operations in the past, they are best traveled by four-wheel drive vehicles from spring to the beginning of winter. During the winter months, heavy snowfall can make it difficult to undertake work programs. We do not currently plan exploration drilling operations in the winter months. Frequent inclement weather in the winter months can make development and mining activities difficult for short periods of time.

We may face a shortage of supplies, equipment and materials.

The mineral industry has experienced from time to growtime shortages of certain supplies, equipment and materials necessary in the exploration, evaluation, development and production of mineral deposits. The prices at which such supplies and materials are available have also greatly increased. Our planned operations could be subject to delays due to such shortages and further price escalations could increase our operations throughcosts for such supplies, equipment and materials. Our experience and that of others in the fundingindustry is that suppliers are often unable to meet contractual obligations for supplies, equipment, materials, and services, and that alternate sources of projects from proceedssupply do not exist.

The market for obtaining desirable properties, investment capital, and outside engineers and consultants is highly competitive.

Presently, we employ a limited number of previous productions,full-time employees, utilize outside consultants, and throughin large part rely on the potential acquisitionpersonal efforts of our officers and growth of a library of filmsdirectors. Our success will depend, in part, upon the ability to attract and media properties.retain qualified outside engineers and other professionals to develop and operate our mineral properties, in addition to obtaining investment capital to conduct our mining operations. We believe that we will be able to gain market share by developingattract competent employees and maintainingconsultants, but no assurance can be given that we will be successful in this regard as competition for these professionals is highly competitive. If we are unable to engage and retain the necessary personnel, our business would be materially and adversely affected.

We depend upon a library, which may involvelimited number of personnel and the acquisitionloss of films compatible withany of these individuals could adversely affect our mission.business. 

If any of our current executive employees were to die, become disabled or leave our company, we would be forced to identify and retain individuals to replace them.  Messrs. Patrick W.M Imeson, Robert Trenaman, Eric Altman and Timothy Smith are our critical employees at this time. In addition to continually seeking outthe executives, our company relies heavily on a several staff people that have extensive knowledge of our properties and evaluating new projectsmine plans.   There is no assurance that we can find suitable individuals to replace them or to add to our employee base if that becomes necessary.  We are entirely dependent on these individuals as our critical personnel at this time.  We have no life insurance on any of merit,our employees, and we may considerbe unable to hire a suitable replacement for them on favorable terms, should that become necessary.

Some of our directors may have conflicts of interest as a result of their involvement with other natural resource companies or with equity, preferred equity, or lost positions in the acquisitioncompany.    

Some of our directors are directors or officers of other productionnatural resource or mining-related companies, operatingor may be involved in related pursuits that could present conflicts of interest with their roles at the Company. These associations may give rise to conflicts of interest from time to time.

In the event that any such conflict of interest arises, a similar intellectual space.director who has such a conflict is required to disclose the conflict to the board of directors of the company in question and to abstain from voting for or against approval of any matter in which such director may have a conflict. In appropriate cases, we will establish a special committee of independent directors to review a matter in which any director or member of management may have a conflict.

Maintain Stringent Cost Controls

We have incurred substantial losses since our inception and may never be profitable.

We believe that maintaining stringent cost controlshave accumulated substantial losses, and we have very limited revenue from operations since the previous owners of Montana Tunnels Mine shut down the mill in 2009.  During the fiscal years ended 2012 and 2011, we have reported net losses of approximately $23 million and $30 million, respectively.  We had an accumulated deficit of approximately $94 million as of December 31, 2012.  We expect to continue to incur losses unless and until we generate sufficient revenue from production to fund continuing operations including exploration and development costs.  There is a key factor in achieving profitability and growth. We will limit our budget allocation for each production, thus avoiding the most common mistake of film companies both large and small, an excessive fiscal enthusiasm for one project at the expense of future projects. We intend to set limits of $2,000,000 per project with an operational target of $200,000. Our initial production, described below, is estimated at roughly $1,200,000. These cost controlsno assurance we will be maintained by monitoring production, scheduling and budgeting on a daily basis.

Experienced Management with Decentralized Operating Structure

As of now, we intendprofitable for any quarterly or annual period.  Our failure to rely uponreport profits may adversely affect the expertiseprice of our officerscommon stock and directors to spearhead initial productions. As we grow, we will rely upon the expertiseyou may lose all or part of our production managers, who will have significant experience in the film industry. We also intend to purchase intellectual properties from established creative personnel in the film industry. Each production will be executed as a separate business, wholly owned by us, executed by an independent crew of writers, directors and technicians with established credentials in their respective fields. In order to align corporate and divisional profit goals, production managers may receive bonuses based on the return on investment of their respective productions. We believe that this interaction between the divisional managers and corporate management provides enhanced operating results. Due to our current capital limitations, we will have difficulty in attracting experienced production managers and established creative personnel.

The Film Production Process

Making a full length motion picture at this budget level takes about 20 to 26 weeks.  The process is broken down into a few discreet phases of production.

Pre-Production

The pre-production period is largely spent preparing to shoot the movie’s scenes either on sets or on location.  Contracts are secured with necessary personnel, including directors of casting and photography and a line producer.  Actors for the various roles called for in the screenplay are cast.  Contracts with the appropriate unions are secured, including the Screen Actors Guild, Writers Guild of America and Directors Guild of America and International Brotherhood of Teamsters.  Other film crew positions are filled, such as assistant directors, cameramen, sound technicians, wardrobe, hair and make-up workers are hired.  Location scouting begins and equipment rentals are secured.

Production

The production phase largely consists of shooting the movie scenes.  Our production ofBuzzKill consisted of 20 shooting days in the New York area and five shooting days near Los Angeles.your investment. 

Post-ProductionExcept for the MPRPA (discussed below), we currently have not entered into forward sales, commodity, derivatives or hedging arrangements with respect to our gold production and as a result we are exposed to the impact of any significant decrease in the gold, zinc, lead, copper and silver prices.

Post-productionWe expect to sell the gold, zinc, lead, copper and silver we expect to be producing at prevailing market prices. Currently, we have not entered into forward sales, commodity, derivative or hedging arrangements to establish a price in advance for the sale of future production, although we may do so in the future. As a result, we may realize the benefit of any short-term increase in the gold price, but we are not protected against decreases in gold, zinc, lead, copper and silver prices, and if gold, zinc, lead, copper and silver prices decrease significantly, our expected future revenues may be materially adversely affected.

If we are unable to achieve mineral production levels anticipated from our Montana Tunnels Project and Elkhorn Goldfields Project, our financial condition and results of operation will be adversely affected.  

We are proceeding with the development of the Montana Tunnels open-pit mine expansion and the development of the Golden Dreamundergroundmine based on estimates of mineralized material identified in our drilling programs and estimates of mineralrecovery based on, in the case of Montana Tunnels, historical operating results and, in the case of the Golden Dream Mine, test work developed during our internal feasibility studies.  However, risks related to metallurgy are inherent when working with extractable minerals.  Sales of minerals, if any, that we realize from future mining activity will be less than anticipated if the mined material does not contain the concentration of minerals predicted by our geological exploration.  This risk may be increased since we have not sought or obtained a feasibility study or reserve report with regard to any of our properties.  If sales of our minerals are less than anticipated, we may not be able to recover our investment in our property and our operations may be adversely affected.  Our inability to realize production based on quarterly or annual projections may adversely affect the price of our common stock and you may lose all or part of your investment.

Our existing planned production is mostlylimited to two properties and our ability to become and remain profitable over the editing process, which tooklong term will depend on our ability to identify, explore and develop additional properties.  

Gold, zinc, lead, copper and silver properties are wasting assets.  They eventually become depleted or uneconomical to continue mining.  Under our current production plan and design at our open pit Montana Tunnels Mine, there are approximately 20 weeks.  Editingeight years of commercial production from operations commencement.  Accordingly, our ability to become and remain profitable over the soundlong term depends on our ability to finalize the design, permit, development and video, adding titlesprofitable extraction and recovery of mineral resources beyond the current planned nine year mine life for the Montana Tunnels Mine. At the Golden Dream Mine our current permitted production plan encompasses approximately five years of commercial production from operations commencement. As with the Montana Tunnels Mine our ability to become and remain profitable over the long term depends on our ability to finalize the design, permit, development and profitable extraction and recovery of mineral resources beyond the current five year mine life. If our ability to expand the operations beyond their current planned mined lives doesn’t occur we may seek to acquire other precious and base metals properties beyond our current properties. The acquisition of precious and base metals properties and their exploration and development are subject to intense competition.  Companies with greater financial resources, larger staff, more experience and more equipment for exploration and development may be in a better position than us to compete for such mineral properties.  If we are unable to find, develop, and economically mine new properties, we most likely will not be profitable on a long term basis and the price of our common stock may suffer.

Since we have a very limited operating history, investors have little basis to evaluate our ability to operate. 

Our activities to date have been focused on raising financing, exploring our properties and preparing those properties for production.  Although our mine and concentrating facilities at the beginningMontana Tunnels operation have operated from 1987 through to 2009, these operations were carried out under different ownership and, endas a consequence we face all of the movie,risks commonly encountered by other businesses that lack an established operating history, including the need for additional capital and developingpersonnel, and intense competition.  There is no assurance that our business plan will be successful.

The construction of our mines and optimization and continued operation of our mills are subject to all of the risks inherent in construction, start-up and operations. 

These risks include potential delays, cost overruns, shortages of material or labor, construction defects, breakdowns and injuries to persons and property.  We expect to engage self-employed personnel, subcontractors and material suppliers in connection with the construction and development of the Montana Tunnels Mine and Golden Dream Mine projects.  While we anticipate taking all measures which we deem reasonable and prudent in connection with construction of the mines and the operation of the mills, there is no assurance that the risks described above will not cause delays or cost overruns in connection with such construction or operation.  Any delays would postpone our anticipated receipt of revenue and adversely affect our operations, which in turn may adversely affect the price of our stock.

Our operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations.  

Our operations require permits from the State of Montana and the U.S. federal government.  If we cannot obtain or maintain the necessary permits, or if there is a musical soundtrackdelay in receiving future permits, our timetable and business plan will be adversely affected.

We do not insure against all compose parts of this process.  Itthe risks to which we may be subject in our operations.

While we currently maintain insurance against general commercial liability claims and the physical assets at our projects, we do not maintain insurance to cover all of the potential risks associated with our operations.  We might be subject to liability for environmental, pollution or other hazards associated with mineral exploration and development, which risks may not be insured against, which may exceed the limits of our insurance coverage, or which we may elect not to insure against because of premium costs or other reasons.  We may also not be insured against interruptions to our operations.  Losses from these or other events may cause us to incur significant costs which could materially adversely affect our financial condition and our ability to fund activities on our property.  A significant loss could force us to reduce or terminate our operations.

We may require significant additional capital to fund our business plan.

We will be required to expend significant funds to determine if proven and probable mineral reserves exist at some of our properties, to continue exploration and if warranted, develop our existing properties and to identify, and acquire additional properties to diversify our property portfolio.  There can be no assurance that any of the development properties we now hold, or which we may acquire, will contain a commercial ore reserve, and therefore, no assurance that we will ever generate a positive cash flow from the sale of production on such properties. In addition, once we decide to place a property into production, risks still exist that the amount and grade of the reserves may be significantly less than predicted. We have spent and will be required to continue to expend significant amounts of capital for drilling, geological and geochemical analysis, assaying and feasibility studies with regard to the results of our exploration.  We may not benefit from these investments if we are unable to identify commercially exploitable mineralized material.  If we do locate commercially mineable material or decide to put additional properties into production, we may be required to upgrade our milling facility at the Montana Tunnels Mill Complex or construct new milling facilities.

Our ability to obtain necessary funding for these purposes, in turn, depends upon a number of factors, including the status of the national and worldwide economy and the prices of gold and other precious and base metals.  Capital markets worldwide have been adversely affected by substantial losses by financial institutions, in turn caused by investments in asset-backed securities.  We may not be successful in obtaining the required financing, or if we can obtain such financing, such financing may not be on terms that are favorable to us.  Failure to obtain such additional financing could result in delay or indefinite postponement of further mining operations or exploration and development and the possible partial or total loss of our potential interest in our properties.

We have significant obligations at the Montana Tunnels Mine, which may adversely impact liquidity.

Our Montana Tunnels Mine in Montana operates under a number of permits issued by local, state and federal agencies. Those agencies require us to post a total of $33.6 million in reclamation bonds in order to commence development of our “M” Pit expansion. We have partially collateralized the surety bonds at the Montana Tunnels Mine with approximately $16 million in cash and reclamation bonds, $3.6 million in a security interest in real property mineral interests. In addition, the Golden Dream Mine has provided the regulatory agencies $604,021 in cash for its reclamation obligations pursuant to our operating and exploration permits.

Our operating costs could be adversely affected by inflationary pressures especially to labor and fuel costs.

The global economy is currently in a period of high commodity prices and as a result the mining industry is attempting to increase production. This has caused significant upward price pressures in the operating costs of mining companies especially in the area of skilled labor. The skilled labor needed by the mining industry is in this phasetight supply and its cost is increasing. Many of our competitors have lower costs and their mines are located in better locations that may give them a final printcompetitive advantage in employee hiring and retention.

The cost of fuel to run machinery and generate electricity is closely correlated to the price of oil and energy. Over the past two years the price of oil has risen significantly and has increased the operating cost of mines dependent on fuel to run their business. Continued upward price pressures in our operating costs may cause us to generate significantly less operating cash flows than expected which would have an adverse impact to our business.

Our continuing reclamation obligations at the Montana Tunnels Mine and our other properties could require significant additional expenditures.    

We are responsible for the reclamation obligations related to disturbances located on all of our mineral properties. We have posted bonds in the amount of the filmestimated reclamation obligation at the properties. The reclamation bond amount is generated.an estimation based upon mine closure plans which have been designed by our employees and consultants and submitted to, and approved by, BLM and the Montana Department of Environmental Quality (“MDEQ”). Every five years the regulatory authorities review the reclamation plans and apply new costs based upon inflation rates and updated rates and costs for reclamation activities. There is a risk that we will be unable to fund these additional bonding requirements, and further that increase reclamation and bonding requirements may increase to such a degree that it would not be commercially reasonable to continue exploration activities, which may adversely affect our results of operations, financial performance and cash flows.

We will continue to incur losses for the foreseeable future.

MarketingPrior to completion of the development and pre-production stage, we anticipate that we will incur increased operating expenses without realizing any revenues. We expect to incur continuing and significant losses until such time as we achieve commercial production from our mining operations on our mineral claims.  As a result of continuing losses, we may exhaust all of our resources and be unable to complete development of our planned mining operations. Our accumulated deficit will continue to increase as we continue to incur losses. We may not be able to generate profits or continue operations if we are unable to generate significant revenues from future mining of the mineral claims and our business will most likely fail.

RISKS RELATED TO OUR COMMON STOCK

Set forth belowThere currently is no public market for our Common Stock. Failure to develop or maintain a trading market could negatively affect the blueprintvalue of our Common Stock and make it difficult or impossible for marketingyou to sell your shares.

There is currently no public market for shares of our films,Common Stock and one may never develop. Our Common Stock is quoted on the OTC Bulletin Board operated by the Financial Industry Regulatory Authority, Inc. The OTC Bulletin Board is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. We may not ever be able to satisfy the listing requirements for our Common Stock to be listed on an exchange, which are often a more widely-traded and liquid market. Some, but not all, of the factors which may changedelay or prevent the listing of our Common Stock on a more widely-traded and liquid market include the following: our stockholders’ equity may be altered at various stagesinsufficient; the market value of productionour outstanding securities may be too low; our net income from operations may be too low; our Common Stock may not be sufficiently widely held; we may not be able to secure market makers for our Common Stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our Common Stock listed.

We cannot assure you that the Common Stock will become liquid or that it will be listed on a securities exchange.

Until our Common Stock is listed on a national securities exchange such as the producer sees fit.New York Stock Exchange or the Nasdaq Stock Market, we expect our Common Stock to remain eligible for quotation on the OTC Bulletin Board, or on another over-the-counter quotation system such as OTC Markets, Inc. In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of our Common Stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of the Common Stock. This would also make it more difficult for us to raise capital.

Pre-ProductionOur Common Stock is subject to the “Penny Stock” rules of the SEC and the trading market in the securities is limited, which makes transactions in the stock cumbersome and may reduce the value of an investment in the stock.

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

ProductionThe broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth:

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of common stock and cause a decline in the market value of stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Our common stock is controlled by one shareholder.

EGLLC beneficially owns approximately 90.7% of the Company’s common stock and 100% of the Company’s Series A preferred stock. Such concentrated control of the Company may adversely affect the price of our Common Stock. Investors who acquire Common Stock may have no effective voice in the management of the Company. Sales by this stockholder, along with any other market transactions, could affect the market price of the Common Stock. In addition, the Pubco Holders of our free trading shares of Common Stock immediately prior to the Merger, the Public Float Shares, entered into lock-up agreements with ESRI whereby the Pubco Holders agreed that forty percent (40%) of their Public Float Shares may not be sold for a period of twelve (12) months following the Merger closing date. These lock ups may alsoadversely affect the price of our Common Stock

The price of our Common Stock may become volatile, which could lead to losses by investors and costly securities litigation.

The trading price of our Common Stock is likely to be highly volatile and could fluctuate in response to factors such as:

Post-Production

An aggressive marketing plan of our product will be displayed at these venues.  Through our participation in these festivals we will attract attention to our films, use the buzz created and directly approach both foreign and domestic distributors.  We expect these efforts to enhance our recognition ultimately leading to distribution:

Distribution

There are two traditional roads a film can take towards distribution.  For an independent film, the most likely route is the purchase of worldwide rights by one of a number of distribution companies.  These companies buy films, present them in theaters and exploit the film in all other markets.  Some large distributors have sister companies or a division that deals specifically with low-budget independent films.

Competing with these specialty divisions are the many “independent distributors” which are unaffiliated with the major studios and acquire and distribute specialized films through their own “studio-like” infrastructure, such as Weinstein Co. and others.

The other traditional route that may be explored is to distribute the films, via a sales agent, through the various available markets.  We will seek to exploit seven principal motion picture markets:  (i) theatrical release, (ii) home video/DVD, (iii) pay cable services, (iv) pay-per-view, (v) independent television, (vi) foreign markets, and (vii) other markets.

Another emerging trend in distribution is content on demand provided digitally through the internet on home computers and on portable hand held devices such as iPod.  Soon, movies will come pouring through the internet and may provide fresh opportunities for low budget independently produced films.

The producers will simultaneously explore all options and ultimately adopt the one that maximizes the greatest exposure for the film and return to investors.

Current Project Description –Buzz Kill

On April 1, 2007, we acquired all rights, title and interest in and to the screenplay entitled “BuzzKill,” written by Steven Kampmann and Matt Smollon.  Pursuant to the Literary Purchase Agreement, dated April 1, 2007, each of Messrs. Kampmann and Smollon received the following compensation:  (i) $6,250, (ii) $12,731 in deferred compensation and (iii) contingent compensation equal to 3.5% of the “net proceeds” of the Film.  Messrs. Kampmann and Smollon will receive an additional $25,000, if the Film’s North American (i.e., the United States and Canada) theatrical box office receipts reach $15,000,000 and an additional $25,000 thereafter for each $15,000,000 in theatrical box office receipts reached thereafter.

On April 13, 2007, Buzz Kill hired Mr. Kampmann to direct the Film.  Pursuant to a Director Agreement, dated April 13, 2007, for his director services, Mr. Kampmann received the following compensation:  (i) $20,000, (ii) $50,000 in deferred compensation, (iii) an additional $10,000 for every $100,000 by which the final, actualized budget exceeds $650,000 and (iv) contingent compensation equal to 5% of the “net proceeds” of the Film.  Mr. Kampmann will also receive, as the Film’s director, an additional $25,000 if the Film’s North American (i.e., the United States and Canada) theatrical box office receipts reach $15,000,000 and an additional $25,000 thereafter for each $15,000,000 in theatrical box office receipts reached thereafter.

Pursuant to an investment agreement, dated May 1, 2007, with Buzz Kill, we provided financing to Buzz Kill in the amount of $800,000 for the production (principal photography only) and exploitation ofBuzzKill.  Under the agreement, we received a “first priority” right of recoupment of the financing amount and a 20% premium.  In addition, we are entitled to a percentage of the “net proceeds” of the Film, calculated as a percentage equal to 50% of the fraction with a numerator equal to the amount of our financing and a denominator equal to the amount of the final, actualized budget of the Film. Buzz Kill agreed (i) that the net cost of the Film (that is, the cost of actually producing and shooting the Film and not including such costs as distribution and promotion) would not exceed $1,100,000 without the written consent of our Company, and (ii) to limit its financing debt to $300,000 plus 20%.

In February 2008, through Buzz Kill, we completed post-production of the Film, and began to market the Film and secure distribution. We secured the services of a sales representative to assist us in guiding the Film through the festival and distribution process and, on May 13, 2010, Buzz Kill executed a trademark license agreement with Second City, Inc. Pursuant to this agreement, we acquired a non-exclusive right to use the “Second City” trademark in connection with the distribution of the Film, in exchange for payment of a royalty to Second City equal to 10% of the producer gross receipts, as defined in the agreement. On May 19, 2010, Buzz Kill executed a contest agreement with Reed Business Information and uPlaya Music Intelligence Solutions, Inc. (“uPlaya”), whereby uPlaya would provide hosting services for a contest to select a song forBuzzKill, and the contest would be co-branded and co-marketed from the media outlets of Variety, the weekly entertainment-trade magazine published by Reed Business Information. The contest ran through November 30, 2010. A team of celebrity judges selected a final winner, the Silent Critics, a rock band from Arlington, Virginia. The winning song, "The Perfect Dance," was put into the Film. Both the Film and the band were profiled on Variety.com, on uPlaya.com, and promoted through the Variety and uPlaya social networks.

In January 2011, we completed a domestic DVD/TV distribution arrangement with Indican Pictures, a Los Angeles-based distribution company. Indican has committed $50,000 to the marketing efforts of the Film and has agreed to pick up certain deliverable costs. As of Valentine’s day, February 14, 2012, through the efforts of Indican, the Film is now available via Video on Demand on many national cable outlets. Additionally, we expect that the film will be available for rent and sale through several DVD/Blu Ray distribution channels, and we are still negotiating with a number of cable systems about buying the cable rights to broadcast the Film. We have retained the theatrical rights and are currently exploring options for a small theatrical release.

To date, we have participated withBuzzKill in the following film festivals:

BuzzKill wonThe stock market is subject to significant price and volume fluctuations. In the People’s Choice Award for Best Feature Film atpast, following periods of volatility in the 2008 NJ State Film Festival at Cape Maymarket price of a company’s securities, securities class action litigation has often been initiated against the company. Litigation initiated against us, whether or not successful, could result in substantial costs and Best Comedy Feature Filmdiversion of our management’s attention and Best Director at the Big Easy.resources, which could harm our business and financial condition.

Compliance with Sarbanes-Oxley may result in our inability to achieve profitability.

The Sarbanes-Oxley Act of 2002 was enacted to increase corporate responsibility and accountability, to provide for enhanced penalties for accounting and auditing improprieties relating to publicly-traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to U.S. federal securities laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to file periodic reports with the SEC, under the Securities Exchange Act of 1934, as amended. Upon becoming a publicly reporting company, we are required to comply with the Sarbanes-Oxley Act and its costs to remain in compliance with the federal securities regulations. The enactment of the Sarbanes-Oxley Act has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it more costly to attract or may deter qualified individuals from accepting these roles. If we are unable to attract and retain qualified officers, directors and board committee members, which are required pursuant to the Sarbanes-Oxley Act, we may not be able to provide effective management or comply with federal law. Additionally, significant costs incurred as a result of being a public company could divert the use of finances from our operations resulting in our inability to achieve profitability.

We are required to annually evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have a material adverse effect on the price of our common stock.

Under Section 404 of the Sarbanes-Oxley Act, we are additionally required to furnish a report by our management on internal control over financial reporting.  Such a report must contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting, including a statement as to whether or not our internal control over financial reporting is effective.  This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by our management.  In conjunctionaddition, our evaluation of the effectiveness of our internal controls will be subject to an annual audit by our independent registered public accounting firm and there is no assurance that they will agree with our film distributionassessment.  If we are unable to maintain and to assert that our internal control over financial reporting is effective, or if we disclose material weaknesses in our internal control over financial reporting, or if our independent registered public accounting firm does not agree with our assessment, investors could lose confidence in the accuracy and completeness of our financial reports, which could have a material adverse effect on our stock price.Furthermore, if our efforts forBuzz Kill, we entered into a license agreement forto comply with new or changed laws, regulations, and standards differ from the Filmactivities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Compliance with a popular entertainment entityU.S. securities laws, including the Sarbanes-Oxley Act, will be costly and we hope this approach will open up a number of marketing opportunities.  The more a production has to offer in terms of promotion and advanced publicity, the more appealing it is to domestic theatrical distributors.time-consuming.

Although Buzz KillAfter completion of the Merger, we will continue to work with Indicanas a reporting company under U.S. securities laws, and will be exploring several low-cost marketing ideas, independent of the distributor, we are not very hopeful about the future prospects for retail sales ofBuzzKill. At this time, we do not believe that sales ofBuzzKill, if any, will generate any material revenues for the distributors, Buzz Kill or us and we do not believe that we will be ableobliged to recover, incomply with the provisions of applicable U.S. laws and regulations, including the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 and the related rules of the SEC, and the rules and regulations of the relevant U.S. market. Preparing and filing annual and quarterly reports and other information with the SEC, furnishing audited reports to stockholders and other compliance with these rules and regulations will involve a material way, any costs expended so far by us or Buzz Kill relating toincrease in regulatory, legal and accounting expenses and the Film. As a resultattention of these conclusions, we have decided to write down our capitalized film costs to $0.

Competition

The independent film market today is very mature, with countless production companies, filmsmanagement, and other media productions. We would be competing against these companies, films and other media productions.

Although the industry is intense, we believe our business model will be successful. Our Company does not target any specific genre of films. Each project will stand on its own. Generally, we seek quality scripts that are intelligent and entertaining. In addition, we will continue to choose scripts that can be produced with a low budget and have large commercial appeal. We believe our current film,BuzzKill, meets all of these criteria and should appeal to those people who enjoy comedy/dark comedies. It remains to be seen, however, whether our films will sustain in this intense market.BuzzKill won the People’s Choice Award for Best Feature Film at the 2008 NJ State Film Festival at Cape May and Best Comedy Feature Film and Best Director at the Big Easy. The exposure ofBuzzKill at these festivals helped open doors to new relations and, as a direct result, we are currently working to secure a distribution deal forBuzzKill.

Compliance with Government Regulation

We do not believe that government regulation will have a material impact on the way we conduct our business.

Employees

We currently have one employee - our president and treasurer, Thomas H. Hanna, Jr. We plan to conduct our business largely through agreements with consultants and other independent third party vendors.

Patents, Trademarks, and Licenses

We do not presently own, either directly or beneficially, any patents or trademarks. The filmBuzzKill does, however, have copyright protection.

Research and Development

We have not performed any research and development since our inception.

We have a history of operating losses which may continue.

We have a history of losses and will continue to incur operating and net losses for the foreseeable future. We incurred net losses of $1,409,898 and $195,576 during the years ended December 31, 2011 and 2010, respectively. As of December 31, 2011, our accumulated deficit was $1,977,229. We have not achieved revenues since our inception. Unless and until we commence new business operations, we may never achieve revenue or profitability.

Our auditors have indicated that our inability to generate sufficient revenue raises substantial doubt as to our ability to continue as a going concern.

Our audited financial statements for the year ended December 31, 2011 were prepared on a going concern basis in accordance with United States generally accepted accounting principles. The going concern basis of presentation assumes that we will continue in operation for the foreseeable future and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business. However, our auditors have indicated that our lack of revenues and accumulated losses raise substantial doubt as to our ability to continue as a going concern. In the absence of additional financing or significant revenues and profits, we may have to curtail or cease operations. However, we cannot guarantee that we will be able to obtain sufficient additional funds when needed, or those funds, if available, will be obtainable on terms satisfactory to us. In the event that our plans cannot be effectively realized, there can be no assurance that we will be able to continue ascomply with the applicable regulations in a going concern.timely manner, if at all.

We face substantial capital requirementsdo not anticipate dividends to be paid on our Common Stock, and financial risks.investors may lose the entire amount of their investment.

Cash dividends have never been declared or paid on the Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. Furthermore, in accordance with the terms of our outstanding Series A Preferred Stock, we cannot pay dividends on the Common Stock so long as the Series A Preferred remains outstanding. We expect to use future earnings, if any, to fund business growth and pay our obligations under our Series A Preferred Stock. Therefore, stockholders will not receive any funds absent a sale of their shares. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.

If securities analysts do not initiate coverage or continue to cover our Common Stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our Common Stock.

The nature oftrading market for the Common Stock will depend on the research and reports that securities analysts publish about our business is such that significant initial expenditures are required to produce, distribute and market a motion picture, while revenues from a film are earned over an extended period of time after its completion. A significant amount of time may elapse between our expenditure of funds and the receiptCompany. We do not have any control over these analysts. There is no guarantee that securities analysts will cover the Common Stock. If securities analysts do not cover the Common Stock, the lack of commercial revenues from our motion picture.research coverage may adversely affect its market price. If we increaseare covered by securities analysts, and our production budget,stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we may be requiredcould lose visibility in the financial markets, which could cause our stock price or trading volume to increase overhead and/or make larger up-front payments to talent and consequently bear greater financial risks. Anydecline.

State Blue Sky registration: potential limitations on resale of the foregoing could have a material adverse effect on our business, results of operations and financial condition.shares.

The costsholders of producingthe shares of the Company and marketing feature films have generally increasedpersons who desire to purchase the shares in recent years. These costs may continue to increaseany trading market that might develop in the future, should be aware that there may be significant state law restrictions upon the ability of investors to resell the securities. Accordingly, investors should consider the secondary market for the Company’s securities to be a limited one. It is the intention of our management to seek coverage and publication of information regarding the Company in an accepted publication which may make it more difficultpermits a “manuals exemption.” This manuals exemption permits a security to be sold by shareholders in a particular state without being registered if the company issuing the security has a listing for our films to generatethat security in a profit. Historically, production costssecurities manual recognized by that state. The listing entry must contain (i) the names of issuers, officers, and marketing costs have risen atdirectors, (ii) an issuer’s balance sheet, and (iii) a higher rate than increases inprofit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. The principal accepted manuals are those published by Standard and Poor’s and Mergent, Inc. Many states expressly recognize these manuals. A smaller number of domestic admissions to movie theaters or admission ticket prices.states declare that they recognize securities manuals, but do not specify the recognized manuals. Among others, the following states do not have any provisions and, therefore, do not expressly recognize the manuals exemption: Alabama, California, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont, and Wisconsin.

If we do not obtainYou may experience dilution of your ownership interests because of the future issuance of additional financing,shares of our business may fail.Common Stock.

WeIn the future, we may not be able to expand or maintainissue our operationsauthorized but previously unissued equity securities, resulting in the future without obtaining additional financing. If additional financing is not available or obtainable, investors may lose a substantial portion or all of their investment. We believe that our existing financial resources will not be sufficient to fund capital and operating requirements through such time as we are able to complete our business plan. Accordingly, we will likely need to seek additional financing to fund our operations in the future. Such additional funds may be raised through the issuance of equity, debt, convertible debt or similar securities that may have rights or preferences senior to thosedilution of the common shares. To the extent weownership interests of our present stockholders.  We are currently authorized to issue an aggregate of 310,000,000 shares of capital stock, consisting of 300,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock with preferences and rights as designated in the Certificate of Designation and rights of Series A Preferred Stock of Eastern Resources, Inc. dated February 29, 2012. As of December 31, 2012, there were 198,550,000 shares of our Common Stock and 10,000,000 shares of our Series A Preferred Stock issued and outstanding. There are 20,000,000 shares of our Common Stock reserved for issuance under our 2012 Equity Incentive Plan. As of the December 31, 2012, stock options exercisable for 12,920,000 shares of our Common Stock have been granted under the 2012 Plan and 12,660,000 remained outstanding. There are also, $1,800,000 of EGI bridge loans outstanding that have the right to convert into 900,000 shares of Common Stock, warrants to purchase 450,000 shares of Common Stock at $1.50 per share and special warrants to purchase an indeterminate number of additional shares of Common Stockexercisable upon the closing of the Company’s next private placement, provided the share price of the Common Stock offered in that private placement is less than $2.50 per share, so that the exercise of the special warrant will reduce the lender’s effective conversion price of the bridge loan for the Common Stock by a 25% discount to the private placement offering price, such special warrant exercisable at a price of $0.01 per share.

Any future issuance of our equity or equity-backed securities may dilute then-current stockholders’ ownership percentages and could also result in a decrease in the fair market value of our equity securities, because our assets would be owned by a larger pool of outstanding equity. As described above, we may need to raise additional capital through public or private offerings of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock. We may also issue such securities in connection with hiring or retaining employees and consultants (including stock options issued under our equity incentive plans), as payment to providers of goods and services, in connection with future acquisitions or for other business purposes. Our Board of Directors may at any time authorize the issuance of additional common or preferred stock without common stockholder approval, subject only to the total number of authorized common and preferred shares set forth in our articles of incorporation. The terms of equity securities issued by us in future transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior voting rights to purchase capitaland the issuance of warrants or other derivative securities, which may have a further dilutive effect. Also, the future issuance of any such additional shares of common or preferred stock including options and warrants, existing stockholders might be diluted. If adequate funds are not available to satisfy our short-term or long-term capital requirements, we would be required to limit our operations significantly or cease operations entirely. We have no immediate means for obtaining additional financing.other securities may create downward pressure on the trading price of the common stock. There can be no assurance that any such additional financing, when and if necessary,future issuances will not be available to us on acceptable terms, or at all.a price (or exercise prices) below the price at which shares of the common stock are then traded.

RISKS RELATED TO OUR PREFERRED STOCK

Our company is susceptible to industry trends and general economic conditions.

We have issued 10,000,000 shares of our Series A Preferred Stock, which may limit your rights as a holder of our Common Stock.

The film production business is capital intensiveWe currently have 10,000,000 shares of our Series A Preferred Stock issued and affected by changes inoutstanding. These shares carry, among other things, liquidation preferences redemption rights and dividend rights that prelude the general economy, interest rates, availabilityissuance of capital,dividends on our Common Stock so long as any shares of Series A Preferred Stock remain outstanding. These terms of the Series A Preferred Stock could adversely affect the rights of the holders of our Common Stock and, therefore, reduce the film/entertainment industry. External events that are political, economic, or even weather-driven in nature can cause sudden declines in audience participation.value of the Common Stock.

Furthermore, there can be no assurance that the audiences

If we are unable to generate sufficient funds or obtain financing for motion pictures will remain constant. There can be no assurance that every film will have a sufficient audience to produce a profit. If more than one film in succession should fail, our ability to survive could be threatened.

Because the film making industry is inherently risky, our films may fail under a number of different scenarios.

Substantially, all of our operating revenue will be derived from the production of motion pictures for theatrical exhibition, television and other markets. The motion picture and television industries are highly speculative and involve a substantial degree of risk. Each motion picture is an individual artistic work, and its commercial success is primarily determined by audience reaction, which is unpredictable; accordingly, there can be no assurance as to the financial success of any motion picture. Even if a production is a critical or artistic success, there is no assurance that it will be profitable. Relatively few motion pictures return a profit to investors. There can be no assurance that a motion picture will recoup its production costs. There is a high degree of risk that any motion picture we produce will not return all or any portion of our investment. The completion and commercial success of a motion picture depends upon factors, such as:

To some extent, these risks can be limited by insurance. It is not possible to insure against all risks, and it is sometimes impossible to continue production, notwithstanding the receipt of insurance proceeds, if any.

Motion picture piracy, which may intensify, could decrease the revenue we receive from the exploitation of our films.

Piracy and the unauthorized recording, transmission and distribution of our content will be challenges that we will have to face. Motion picture piracy is already prevalent outside of the United States, Canada and Western Europe and in countries wherefuture capital commitments, we may have difficulty enforcing our intellectual property rights. Technological advances, such as the digital distribution of motion pictures, could increase the prevalence of piracy, including in the United States, because such advances simplify the creation, transmission and sharing of high quality unauthorized copies of motion pictures in theatrical release, on videotapes and DVDs, from pay-per-view through set top boxes and other devices and through unlicensed broadcasts on free TV and the Internet. The proliferation of unauthorized copies of our products could have an adverse effect on our business, financial condition and results of operations and decrease the revenue we receive from our legitimate products. Additionally, in order to contain this problem, we may have to implement elaborate and costly security and anti-piracy measures, which could result in significant expenses and losses of revenue. We cannot assure you that even the highest levels of security and anti-piracy measures will prevent piracy.

Motion picture trade associations such as the Motion Picture Association of America monitor the progress and efforts made by various countries to limit or prevent piracy. Some of these trade associations have initiated voluntary embargoes on motion picture exports to certain countries in the past to exert pressure on the governments of those countries to become more aggressive in preventing motion picture piracy. In addition, the U.S. government has publicly considered implementing trade sanctions against specific countries that, in its opinion, do not make appropriate efforts to prevent copyright infringements of U.S. produced motion pictures. There can be no assurance, however, that voluntary industry embargoes or U.S. government trade sanctions will be enacted or, if enacted, effective. If enacted, such actions could impact the amount of revenue that we realize from the international exploitation of motion pictures depending upon the countries subject to such action and the duration and effectiveness of such action. If embargoes or sanctions are not enacted or if other measures are not taken, we may lose an indeterminate amount of additional revenue as a result of motion picture piracy.

Finding a distributor will be key to our success.

A pre-requisite for many films success is the purchase of its distribution rights by one of a limited number of distribution companies. Such companies purchase the distribution rights to a film, advertise and market the film, see that the film will be shown in theaters and exploit the film in other available markets and media. Many distributors have arrangements with companies already in place, assuring that their films will be shown in theaters. Distributors also commit resources to the advertising and marketing of films, making them more attractive to audiences and other markets.

A distributor looks at a number of factors in determining whether or not it wants to ultimately distribute a particular film:

Sometimes, demonstrating strength in all these areas is not enough to secure a distributor. Although qualitative standards are sometimes applied, it is more likely that a distributor is attracted to a certain film for subjective reasons. Although we are currently in negotiations with an independent media and production company, we cannot assure you that we will be able to secure a distributor on acceptable terms, if at all.

A distributor’s failure to promote our motion picture adequately would adversely affect our business.

Distributor’s decisions regarding the timing of release and promotional support of motion pictures are important in determining the success of these pictures. We do not control the timing and manner in which a distributor would distribute our motion picture. Any decision by those distributors not to promote our motion picture or to promote our competitors’ motion pictures to a greater extent than they promote ours could have a material adverse effect on our business, results of operations and financial condition.

Minimum guarantees do not eliminate the risks we face when we license distribution rights.

Licensing distribution agreements we seek to enter into with sub-distributors, typically with respect to international rights, may provide for minimum guarantees. However, these minimum guarantees do not assure the profitability of our motion pictures or our operations. Additional revenues may be necessary from distribution of a motion picture in order for us to recover any investment in excess of the aggregate minimum guarantees, pay for distribution costs, continue acquisition and development of other motion pictures, and cover general overhead. Licensing distribution rights to sub-distributors in exchange for minimum guarantees may also result in us receiving lower revenues with respect to highly successful films.

Our success depends on the commercial success of motion pictures generally, which is unpredictable.

Operating in the motion picture industry involves a substantial degree of risk. Each motion picture is an individual artistic work, and inherently unpredictable audience reactions determine commercial success. Generally, the popularity of our motion picture will depend on many factors, including the critical acclaim it receives, the format of its initial release (for example, theatrical or direct-to-video), the actors and other key talent, the genre and its specific subject matter. The commercial success of our motion picture also depends upon the quality and acceptance of films that our competitors release into the marketplace at or near the same time, critical reviews, the availability of alternative forms of entertainment and leisure activities, general economic conditions and other tangible and intangible factors, many of which we do not control and all of which may change. We cannot predict the future effects of these factors with certainty, any ofredeemed Series A Preferred Stock, which could have a material adverse effect on our business, resultsus.

EGLLC, as the sole shareholder of operations and financial condition.

In addition, because a motion picture’s performancethe Series A Preferred Stock has the option, exercisable in ancillary markets, such as home video and pay and free television, is often directly related to its box office performance or television ratings, poor box office results may negatively affect future revenue streams. Our success will depend on the experience and judgment of our management to select and develop new investment and production opportunities. We cannot make assurances that our motion picture will obtain favorable reviews or ratings or that our motion picture will perform well at the box officewhole or in ancillary markets.

Budget overruns may adversely affect our business.

Our business model requires that we be efficientpart at any time and from time to time prior to the third anniversary of the issuance of the Series A Preferred Stock as provided in the productioncertificate of our motion picture. Actual motion picture costs often exceed their budgets, sometimes significantly. The production, completion and distributiondesignation, to require us to purchase for cash, out of motion pictures arelegally available funds, any or all of the then-outstanding shares of Series A Preferred Stock at a price equal to $6.00 per share of an aggregate total of $60,000,000, subject to a number of uncertainties, including delays and increased expenditures due to creative differences among key cast members and other key creative personnel or other disruptions or events beyond our control. Risks such as death or disability of star performers, technical complications with special effects or other aspects of production, shortages of necessary equipment, damage to film negatives, master tapes and recordings or adverse weather conditions may cause cost overruns and delay or frustrate completion of a production. If our motion picture production incurs substantial budget overruns, we may have to seek additional financing to complete production.

In addition, if our motion picture production incurs substantial budget overruns, we cannot assure you that we will recoup these costs. Increased costs incurred with respect to a particular film may correlate to such film not being ready for release at the intended time and the postponement to a potentially less favorable time, all of which could cause a decline in box-office performance, and thus the overall financial success of such film. Budget overruns could also prevent a picture from being completed or released.

We face substantial competition in all aspects of our business.

The motion picture industry is extremely competitive. The competition comes from both companies within the same business and companies in other entertainment media which create alternative forms of leisure entertainment. We compete with several “major” film studios which are dominant in the motion picture industry, as well as with numerous independent motion picture and television production companies, television networks and pay television systems for the acquisition of literary properties, the services of performing artists, directors, producers and other creative and technical personnel, and production financing. Many of the organizations with which we compete have significantly greater financial and other resources than we do. The majors are typically large, diversified entertainment concerns or subsidiaries of diversified corporations which have strong relationships with creative talent, exhibitors and others involved in the entertainment industry, and whose non-motion picture operations provide stable sources of earnings that offset variations in the financial performance of their motion picture operations.

The entertainment industry is currently evolving into an industry in which certain multi-national multi-media firms, because of their control over key film, magazine and television content, as well as key network and cable outlets, will be able to dominate the communications industries in the United States. These organizations have numerous competitive advantages, such as the ability to acquire financing for their projects and to make favorable arrangements for the distribution of completed films.limitations. If we are unable to competepay for EGLLC’s redeemed shares, such failure could result in this intense industry, our business will fail.

An oversupply inan event of default under the market could hinder our films from competing effectively.

The number of motion pictures released by our competitors, particularly the major U.S. studios, may create an oversupply of product in the market, reduce our share of box office receiptsloan reinstatement and make it more difficult for our film to succeed commercially. Oversupply may become most pronounced during peak release times, such as school holidaysmodification agreement and national holidays, when theater attendance is expected to be highest.

Moreover, we cannot guarantee that we can release our film when it is scheduled. In addition to production or other delays that might cause us to alter our release schedule, a change in the schedule of a major studio may force us to alter the release date of a film because we cannot always compete with a major studio’s larger promotion campaign. Any such change could adversely impact our financial performance. In addition, if we cannot change our schedule after such a change by a major studio because we are too close to the release date, the major studio’s release and its typically larger promotion budget may adversely impact the financial performance of our film.

The limited supply of motion picture screens compounds this product oversupply problem. Currently, a substantial majoritypotential remedy of the motion picture screens inSecured Lenders would be a foreclosure on all of the U.S. typically is committed at any one timeassets and property of EGI and MTMI.Our inability to only 10 to 15 films distributed nationally by major studio distributors. In addition, as a result of changes in the theatrical exhibition industry, including reorganizations and consolidations and the fact that major studio releases occupy more screens, the number of screens available to us when we want to release our picture may decrease. If the number of motion picture screens decreases, box office receipts, and the correlatingfund these future revenue streams, such as from home video and pay and free television, of our motion picture may also decrease, whichcommitments could have a material adverse effect on our business, results of operations and financial condition.us. 

Protecting and defending claims against intellectual property claims may have a material adverse effect on our business.ITEM 1B. UNRESOLVED STAFF COMMENTS.

Our ability to compete depends, in part, upon successful protection of our intellectual property. We do not have the financial resources to protect our rights to the same extent as major studios. We will attempt to protect proprietary and intellectual property rights to our production through available copyright and trademark laws and licensing and distribution arrangements with reputable companies in specific territories and media for limited durations. Despite these precautions, existing copyright and trademark laws afford only limited practical protection in certain countries. We may also distribute our products in other countries in which there is little effective copyright or trademark protection. As a result, it may be possible for unauthorized third parties to copy and distribute our production or certain portions or applications of our intended production.

Litigation may also be necessary in the future to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others. Regardless of the validity or the success of the assertion of these claims, we could incur significant costs and diversion of resources in enforcing our intellectual property rights or in defending against such claims, which could have a material adverse effect on our business, results of operations and financial condition.None.

Because our business is subject to intellectual property right laws, our business may suffer due to illegal replication of our films or our own unintentional infringement upon other’s proprietary interests.ITEM 2. PROPERTIES.

We plan to copyright all of our film properties and projects. Litigation may be necessary in the future to enforce our intellectual property rights, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating results, or financial condition.

One of the risks of the film production business is the possibility that others may claim that our production and production techniques misappropriate or infringe the intellectual property rights of third parties with respect to their previously developed films, stories, characters, other entertainment or intellectual property. Any such assertions or claims may materially adversely affect our business, financial condition, or results of operations. Irrespective of the validity or the successful assertion of such claims, we could incur significant costs and diversion of resources in defending against them, which could have a material adverse effect on our business, financial condition, or results of operations. If any claims or actions are asserted against us, we may seek to settle such claim by obtaining a license from the plaintiff covering the disputed intellectual property rights. We cannot provide any assurances, however, that under such circumstances a license, or any other form of settlement, would be available on acceptable terms if at all.

We face risks from doing business internationally.

We may distribute our motion picture outside the United States through a distributor or other third party licensee. As a result, our business could become subject to certain risks inherent in international business, many of which are beyond our control. These risks include:

Events or developments related to these and other risks associated with international trade could adversely affect our revenues from non-U.S. sources.

We could be adversely affected by strikes or other union job actions.

We are directly or indirectly dependent upon highly specialized union members who are essential to the production of motion pictures, including members of the Screen Actors Guild, the Writers Guild of America, the Directors Guild of America and the International Brotherhood of Teamsters. A strike by, or a lockout of, one or more of the unions that provide personnel essential to the production of motion pictures could delay or halt our ongoing production activities. Such a halt or delay, depending on the length of time, could cause a delay or interruption in our motion picture.

Because we have limited assets and inexact capital requirements, we may not have or be able to obtain sufficient resources to successfully implement our business plan.

We have limited assets and require significant capital to complete the development of our business plan. Our success may significantly depend upon our ability to raise capital. Even if we are successful in raising capital, there is still no assurance that the capital raised will be sufficient to facilitate our ultimate needs, because we do not know the exact specific financial requirements of the projects in which we may eventually participate, and therefore do not know what our exact capital needs will be over time. In addition, we may incur substantial costs in connection with any research and/or negotiations for business opportunities, which may deplete our assets.

We cannot ensure that projections and assessments will be met.

Our ability to accomplish our objectives and whether or not we will be financially successful is dependent upon numerous factors, each of which could have a material effect on the results obtained. Some of these factors are within the discretion and control of management and others are beyond management’s control. The assumptions and hypothesis used in preparing any forward-looking assessments of profitability made by management herein are considered reasonable. We can provide no assurance, however, that any projections or assessments provided to potential investors will be realized or achieved at any level.

Rules issued under the Sarbanes-Oxley Act of 2002 may make it difficult for us to retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to retain listing of our common stock.

We may be unable to attract and retain those qualified officers, directors and members of board committees required to provide for our effective management because of rules and regulations that govern publicly held companies, including, but not limited to, certifications by principal executive officers. The enactment of the Sarbanes-Oxley Act has resulted in the issuance of rules and regulations and the strengthening of existing rules and regulations by the SEC, as well as the adoption of new and more stringent rules by the stock exchanges and NASDAQ. The perceived personal risk associated with these rules and regulations may deter qualified individuals from accepting roles as directors and executive officers.

If we fail to maintain an effective system of disclosure and internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock.

We must maintain effective disclosure and internal controls to provide reliable financial reports and detect fraud. Based on our evaluation as of December 31, 2011, we concluded that we do not maintain effective disclosure controls and procedures. Failure to implement changes to our controls that we may identify in the future as necessary to maintain an effective system of such controls could harm our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the trading price of our stock.

We may be unable to obtain additional capital that we will require to implement our business plan, which would restrict our ability to grow.

We have a limited amount of working capital that will not be sufficient to fully fund our planned operations. We will require additional capital to continue to operate and expand our business. We may be unable to obtain the additional capital required.

Future acquisitions, as well as administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance and accounting expenses) will require a substantial amount of additional capital and cash flow. We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not be able to obtain the capital we require by other means. If we do not succeed in raising additional capital, we may be unable to fund our operations going forward.

Our ability to obtain needed financing may be impaired by such factors as the capital markets and our status as an enterprise without a demonstrated operating history. If the amount of capital we are able to raise from financing activities is not sufficient to satisfy our capital needs, we may be required to curtail or cease our operations.

We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We also may be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which may adversely impact our financial condition.

Difficult conditions in the global capital markets may significantly affect our ability to raise additional capital necessary to fund our operations.Montana Tunnels Mine, Jefferson City, Montana

The ongoing global financialMontana Tunnels Mine is an open pit poly-metallic mine located about five miles west of Jefferson City, Montana and credit crisis may continue indefinitely. Becauseoperated between 1987 and 2009. The mine is located in the historic “Wickes-Corbin” mining district in Section 8 of severely reduced market liquidity,Township 7 North, Range 4 West, with approximate latitude of 46° 22’ and longitude 112° 8’.

The administrative offices are located at 270 Montana Tunnels Road, Jefferson City, Montana. The total land area controlled by the Montana Tunnels Mine is 9,293 acres consisting of 2,404 acres of wholly or partially owned Patented Mineral Claims, 45 acres of leased Patented Mineral Claims, 2,584 acres of fee land, and 4,260 acres of Unpatented Mineral Claims.

The area encompassed in MTMI’s M-Pit Permit Boundary and outlying facilities is 2,385 acres of which greater than 90% is privately owned by MTMI. Within this Permit Boundary 332 acres are designated for the M-Pit Mine open-pit area and perimeter of which greater than 99% is overlain by private property wholly owned by MTMI. Within the M-Pit Mine open-pit area lays one 0.3 acre Unpatented Mineral Claim (MF-1) and three leased Patented Mineral Claims (Mineral Survey numbers 6758, 6634 and 6640). The three leased Patented Mineral Claims carry a 4.5% Net Smelter royalty but overlie minor amounts of mineralization and insignificant royalty payments are anticipated when this area is eventually mined.

In October and November, 2008 MTMI was granted positive Records of Decisions by the lead government regulating agencies – the Montana Department of Environmental Quality ("MDEQ") and the Bureau of Land Management (“BLM”) – approving a major amendment – the M-Pit Expansion Plan – to Operating Permit #00113, subject to the placement of a Reclamation Bond pursuant to the approved Mining and Reclamation Plan.

Mortgages on MTMI Property

A Mortgage, Security Agreement, Assignment of Leases and Rents, and Fixture Filing in favor of the administrative agent of certain Secured Lenders to EGLLC and MFPI has been executed and delivered by MTMI, as mortgagor for the benefit of the Secured Lenders, recorded on February 22, 2010 in the official records of Jefferson County, Montana as documents numbered 236384 (mortgage) and 236385 (UCC filing).

Elkhorn Project – The Golden Dream Mine, Boulder, Montana

The Elkhorn Project consists of four known gold and gold-copper mineral deposits which we may not be ableare planning to raiseoperate using underground mining methods. The property is located 22 miles southeast of Helena, Montana and occupies portions of Sections 9, 10, 11, 14, 15 and 16 in Township 6 North, Range 3 West with approximate latitude of 45° 15’ and longitude of 111° 55’. The administrative offices are located at 2725-A Elkhorn Road, Boulder, Montana.

A Patented Mineral Claim is a claim on which a patent has been secured from the United States Government and exclusive title has passed to the claimant. It gives the owner title to the surface rights, locatable minerals and other resources. An Unpatented Mineral Claim is a parcel of Federal land on which the claimant is provided rights to locatable minerals but no land ownership rights are conveyed to the claimant.

The Elkhorn Project consists of 236 Unpatented Mineral Claims encompassing approximately 4,000 acres and 35 wholly or partially owned Patented Mineral Claims encompassing an additional capital when we need it. Because573 acres.

In 2007 EGI applied for a Mine Operating Permit to allow for the futureextraction of our business will dependbetween 500 and 1,000 tons per day from an underground mine located on its 100% owned Golden Dream Mineral Claim (US Mineral Survey #7176). The Company’s application sought a Mine Permit boundary consisting of 382.5 acres of Patented Mineral Claims surrounding the completionGolden Dream Claim. Approximately 40% of onethe Patented Mineral Claims contained within the Mine Permit boundary are subject to a Mining Lease Agreement with Mt. Heagan Development Inc. whereby EGI leases the Mineral Claims from Mt. Heagan subject to a “3% Net Return royalty from any ores, mineral or more investment transactions forother products removed” from the Mineral Claims covered under the terms of the Agreement. EGI pays to Mt. Heagan an “advanced minimum royalty” of $5,000 per month which most likely, we will need additional capital, we may not be ableis “creditable and recoupable” against any production royalty payments. The remaining 60% of the Patented Mineral Claims contained within the Mine Permit Boundary are 100% owned by EGI.

In July, 2008 the Company was granted an Operating Permit by the lead government regulating agency – the MDEQ – subject to complete such transactions or acquire revenue producing assets. Asthe placement of a result, we may not be ableReclamation Bond pursuant to generate incomethe approved Mining and to conserve capital, we may be forced to curtail our current business activities or cease operations entirely.Reclamation Plan. In November 2011, upon EGI posting the necessary Reclamation Bond in the amount of $591,474, the MDEQ approved the Golden Dream Operating Permit #00173.

We may not be ableMortgages on EGI Property

A Mortgage, Security Agreement, Assignment of Leases and Rents, and Fixture Filing in favor of the administrative agent of certain Secured Lenders to effectively expand operations or manage our growth, which may harm our profitability.EGLLC and MFPI has been executed and delivered by EGI, as mortgagor for the benefit of the Secured Lenders, recorded on May 29, 2009 in the official records of Jefferson County, Montana as documents numbered 233612 (mortgage) and 233614 (First Priority UCC filing).

Our strategy envisions expanding our business. If we failIn connection with a Minerals Product Receivables Purchase Agreement (the “MPRPA”) dated as of April 15, 2011, by and among EGI, EGLLC and BDH and a related security agreement of the same date by and between EGI and BDH, a UCC-1 (#584640340) was filed with Montana Secretary of State on November 17, 2011 with BDH as the secured party. This UCC-1 covers certain of EGI’s assets and property pursuant to effectively manage our growth, our financial results could be adversely affected. Growth may place a strain on our management systems and resources. We must continue to refine and expand our business development capabilities, our systems and processes, and our access to financing sources. As we grow, we must continue to hire, train, supervise and manage new employees. We cannot assure you that we will be able to:

If we are unable to manage our growth, our operations and our financial results could be adversely affected by inefficiency, which could diminish our profitability.the security agreement dated April 15, 2011.

Our business may suffer if we do not attract and retain talented personnel.Description of Corporate Offices

Our success will dependThe Company’s corporate offices are located at 1610 Wynkoop Street, Suite 400, Denver, Colorado 80202 in large measure on the abilities, expertise, judgment, discretion, integrity and good faith of our management and other personnel in conducting our intended business. We presently have a small management team consisting of our sole executive officer that we expect to expand in conjunction with our planned acquisition activities.space provided by Black Diamond Financial Group, LLC (“Black Diamond”). The loss of a key individual or our inability to attract suitably qualified staff could materially adversely impact our business. We presently do not maintain “key man” life insurance on any member of our management team. If wecorporate offices are unable to attract and retain key personnel, our business may be adversely affected.

There has been a limited trading market for our common stock that may impair your ability to sell your shares.

There has not been a trading market for our common stock since our inception. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capitalmaintained by selling shares of capital stock and may impair our ability to acquire other assets or companies by using common stock as consideration.

Our common stock is currently quoted on the Over-the-Counter Bulletin Board under the symbol “ESRI.OB.” As indicated above, our common stock is not presently trading. As a result, investors may find it difficult to obtain accurate quotationstwo of the price of our common stock. This situation severely limitsCompany’s officers and accounting, finance and administrative support staff. Currently, the liquidity of the common stock and hampers our abilityCompany’s cost for this office space is covered under its Management Services Agreement with Black Diamond pursuant to raisewhich it pays Black Diamond $15,000 per month. See Executive Compensation – Management Services Agreement for additional capital.information.

We do not expect to pay dividends in the foreseeable future.

We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest future earnings in the development and growth of our business. Therefore, investors will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares on favorable terms or at all. Investors cannot be assured of a positive return on investment or that they will not lose the entire amount of their investment in our common stock.

Applicable SEC rules governing the trading of “penny stocks” will limit the trading and liquidity of our common stock, which may affect the trading price of our common stock.

Our common stock is considered to be a “penny stock” and is therefore subject to SEC rules and regulations that (i) impose limitations upon the manner in which our shares may be publicly traded and (ii) regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules and may increase the difficulty investors might experience in attempting to liquidate such securities.

Not Applicable.ITEM 3. LEGAL PROCEEDINGS.

Our principal executive office is located at 4 Park Avenue, Suite 16K, New York, NY 10016,From time to time, we may become involved in various lawsuits and legal proceedings which is provided to us, on a rent free basis, by our President and Chief Executive Officer, Thomas H. Hanna, Jr.

Inarise in the ordinary course of our business, webusiness. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time become subjectthat may harm business.

Except for the matter described below, we are currently not aware of any pending legal proceedings to routine litigation or administrative proceedings which we are incidental to our business. We are not a party toor of which any of our property is the subject, nor are we aware of any existing,such proceedings that are contemplated by any governmental authority. Although there can be no assurance as to the ultimate outcome, we have denied liability in the case pending against us, and we intend to defend vigorously such case. Based on information currently available, we believe the amount, or threatened lawsuitsrange, of reasonably possible losses in connection with the action against us not to be material to our consolidated financial condition or cash flows. However, losses may be material to our operating results for any particular future period, depending on the level of income for such period.

On May 24, 2010, the EPA issued an “Action Memorandum” which documented the determination that soil removal was necessary to mitigate threats posed by elevated levels of lead and arsenic in the soil located on property in close proximity to MTMI (the "Company").  The work of clean-up conducted by the EPA of the Site commenced in June 2010 and was completed by August of the same year.  On August 26, 2010, the Company and the EPA entered into an “Access and Compensation Agreement” which detailed the responsibilities of both the EPA and the Company with respect to the clean-up and disposal of contaminated soils from the Site.  On October 26, 2011 the EPA proposed a settlement of $380,000.  On November 04, 2011, the Company agreed to the EPA proposed amount of $380,000 but added a stipulation that the amount be payable over time depending upon the status of the Company’s operations.  Subsequent to December 31, 2012, a settlement agreement was reached. The $380,000 settlement will be paid in 35 monthly installments of $2,500 and a final balloon payment of $292,500.

ITEM 4. MINE SAFETY DISCLOSURE.

We consider health, safety and environmental stewardship to be a core value for the Company.

Pursuant to Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection 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, involving us.and mining-related fatalities. During the fiscal year ended December 31, 2012, the Company reported no lost time accidents. During this same fiscal year the Company incurred seven MSHA citations, all of which have been cleared.

PART II

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIESSECURITIES.

Market Information

“Bid”Our Common Stock is currently eligible for quotation on theOTC Bulletin Board and ”ask” prices foron the OTC Markets, Inc. QB Tierunder the symbol “ESRI.”  Although our common stock are quotedwas officially available for trading on the Over-The-Counter Bulletin Board (the “OTCBB”) since September 2, 2008, underthere was no trading in the symbol “ESRI.OB”. However,stock until April 2012.  Since April 2012, there has been very limited trading in our stock has never traded.Common Stock to date.  

The following table sets forth the high and low closing bid prices for our common stockCommon Stock for the fiscal quarters indicated as reported by OTC Markets, Inc. Our Common Stock is very thinly traded, and therefore pricing of our Common Stock on the OTCBB by the National Association of Securities Dealers Composite Feed or other qualified interdealer quotation medium. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and doOTC Markets does not necessarily represent actual transactions.its fair market value.

Holders

As of March 28, 2012,the date of this Annual Report, we had 30 shareholders198,550,000 shares of recordCommon Stock outstanding held by approximately 15 stockholders of record. As of the date of this Annual Report, we have 10,000,000 outstanding shares of our common stock.Series A Preferred Stock held by one stockholder of record.

DividendsTrades in our Common Stock may be subject to Rule 15g-9 under the Exchange Act, which imposes requirements on broker/dealers who sell securities subject to the rule to persons other than established customers and accredited investors. For transactions covered by the rule, broker/dealers must make a special suitability determination for purchasers of the securities and receive the purchaser’s written agreement to the transaction before the sale.

The SEC also has rules that regulate broker/dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities listed on certain national exchanges, provided that the current price and volume information with respect to transactions in that security is provided by the applicable exchange or system). The penny stock rules require a broker/dealer, before effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker/dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker/dealer and salesperson compensation information, must be given to the customer orally or in writing before effecting the transaction, and must be given to the customer in writing before or with the customer’s confirmation. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for shares of Common Stock. As a result of these rules, investors may find it difficult to sell their shares.

Dividend Policy

We have never declaredpaid any cash dividends with respect to our common stock. Future payment of dividends is within the discretion of our board of directors and will depend on our earnings, capital requirements, financial conditionstock and other relevant factors. Although there are no material restrictions limiting, or that are likely to limit,do not anticipate paying any cash dividends on the Common Stock in the foreseeable future.  Also, the terms of the Series A Preferred Stock restrict our ability to pay dividends on our common stock, we presentlydividends.  (See “Description of Securities—Series A Preferred Stock” below.) We intend to retain future earnings if any, for use in our businessto fund ongoing operations and have no present intentionfuture capital requirements. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

Securities Authorized for Issuance under Equity Compensation Plans

2012 Equity Incentive Plan

On February 1, 2012, our Board of Directors of the Company adopted, and on February 29, 2012, our common stock.stockholders approved, the 2012 Equity Incentive Plan, which reserves a total of 20,000,000 shares of our Common Stock for issuance under the 2012 Plan. If an incentive award granted under the 2012 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2012 Plan.

In addition, the number of shares of Common Stock subject to the 2012 Plan, any number of shares subject to any numerical limit in the 2012 Plan, and the number of shares and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding Common Stock by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares or similar transaction.

Administration

The compensation committee of the Board, or the Board in the absence of such a committee, will administer the 2012 Plan. Subject to the terms of the 2012 Plan, the compensation committee has complete authority and discretion to determine the terms of awards under the 2012 Plan.

Grants

The 2012 Plan authorizes the grant to participants of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Internal Revenue Code (as amended, the “Code”) and stock appreciation rights, as described below:

Duration, Amendment, and Termination

The Board has the power to amend, suspend or terminate the 2012 Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year. Unless sooner terminated, the 2012 Plan would terminate ten years after it is adopted.

As of the December 31, 2012, we have granted option awards under the 2012 Plan to certain of our officers, directors and employees for a total of 10,720,000 shares of our Common Stock. We have also granted options for 200,000 shares of our Common Stock to our independent directors and 2,000,000 to an advisor. Of these options, 260,000 of the employee options have been forfeited, leaving 12,660,000 options outstanding and 7,340,000 options available for issuance.  Each of these options has been granted with a term of ten years and an exercise price of $1.00 per share, which price the Board of Directors has deemed to be the fair market value of the Company’s stock on the date of grant. Each option vests in three equal installments, on the first, second, and third anniversary of the grant date.

Options under the Plan

The Company has adopted its 2012 Equity Incentive Plan pursuant to which 20,000,000 shares of the Company’s Common Stock are reserved for issuance to employees, directors, consultants, and other service providers of the Company and its affiliates. On April 6, 2012, we authorized for issuance an aggregate of12,660,000options exercisable at $1.00 per share to certain of our executive officers, directors, employees and advisors. Each of these options has been granted with a term of ten years and an exercise price of $1.00 per share, which price the Board of Directors has deemed to be the fair market value of the Company’s stock on the date of grant. Each option vests in three equal installments, on the first, second, and third anniversary of the grant date.

Recent Sales of Unregistered Securities

On February 1,Private Placement

During May and June 2012, we closed conducted closing a private placement offering (the “February 2012 Offering”)of 150,000 and 230,000 units of our 10%securities for an aggregate of $150,000 and $230,000, respectively.  Each of the units consisted of one share of our common stock and a warrant representing the right to purchase one-half share of our common stock, exercisable for a period of five (5) years from issuance, at an exercise price of $1.50 per whole share.  The shares of common stock contained in the units and underling the warrants carry mandatory registration rights. The investors in this private placement agreed to renounce all right, title and interest in and to the warrants contained in the private placement units.

Warrants

During 2012, the Company issued an aggregate of 950,000 warrants in connection with securing convertible promissory notes (the “Februarybridge loans. The agreements provide an exercise price of $1.50 and expire, if not exercised, within 5 years.

During 2012, Notes”). In the Company issued 315,000 warrants in consideration of marketing a private placement financing. The agreement provides an exercise price of $1.50 which expires if unexercised within 5 years.

Convertible Securities

During February 2012, Offering, we sold $30,000 in principal amount ofprior to the February 2012 Notes to one existing investor. The February 2012 Notes mature on July 31, 2013 and will be automatically converted at the initial closing of the Company’s next private placementMerger, EGI entered into convertible bridge loans with related parties totaling $1,800,000 due in which we sells at least $1,000,000August 2012. In April 2012, after the closing of the Merger, EGI entered into an additional convertible bridge loan with an unrelated party for an additional $100,000 due in August 2012. The loans are unsecured and call for 12.00% annual interest on the outstanding unpaid principal. Prior to the maturity date, the holders could convert the entire principal and accrued interest then outstanding into units of our securities. The loans contained an embedded conversion option that allowed the holders to convert the notes into units of our securities so long as such offering closes concurrent with theat a conversion price of $1 per unit. Each unit consisted of one share of our common stock and a warrant to purchase one-half share of our common stock at an exercise price of $1.50 per share. Each unit also contained a contingent warrant exercisable upon closing of a related merger or other acquisition transaction.

Between April and June 27, 2011, our Company completed three closings of a private placement offering for a total of $131,500 in principal amount of 18-month, 10% convertible notes (the “2011 Notes”(“PPO”).  The principal and accrued interest on the 2011 Notes will be mandatorily converted into the securities or instruments issued by our Company in the next financing in which our Company raises a minimum of $1,000,000,us at a price equal to either (a) the price per share of stock (or unit of stock and other securities) paid by investors in the next securities offering or other financing by our Company, if the financing is an issuance of stock (or units of stock and other securities), or (b) the price paid by investors in the next securities offering or other financing by our Company, expressed as a percentage of the face amount of debt securities, if the financing is an issuance of debt securities (or units of debt securities and other securities) (including debt securities convertible into stock).

On September 10, 2010, Buzz Kill issued a 10% senior note due April 15, 2012 in the principal amount of $15,000 (the “Senior Note”) to Gottbetter Capital Group, Inc. (“GCGroup”), one of our five percent stockholders, for that party’s $15,000 loan to Buzz Kill. As a condition to this loan, all of the holders of the 2007 Notes and, in connection with the Hanna Loan (defined below), Thomas Hanna, signed a subordination agreement pursuant to which payment and performance of any and all obligations under the 2007 Notes and the Hanna Loan are subordinated to the Senior Note. The related cash proceeds were received on October 15, 2010. On December 30, 2011, Buzz Kill amended and restated the Senior Note to include an additional principal amount of $8,755 that GCGroup had previously lent to Buzz Kill. The additional principal and interest thereon are due to be repaid on June 30, 2013. The subordination agreement was amended as of December 30, 2011 to include the additional loan amount under the senior obligation.

On January 29, 2010, we issued a 10% convertible promissory note to an unaffiliated investor in the amount of $70,000 due on July 28, 2011. This note converts at the option of the holder at a conversion price of $0.10less than $1.25 per share. The maturity date on this note has been extendedbridge loans were convertible upon the completion of a PPO within 90 days of the closing of the Merger. We did not complete the PPO within the 90 days, causing the conversion feature to January 28, 2013.

On May 5, 2009, we issued an 8.25% convertible promissory note to an unaffiliated investorexpire during July 2012. Because of the non-payment under the terms of the bridge loans, the bridge loans are considered in default and are accruing interest at the amount of $45,000 due on November 8, 2010. This note converts at a price to be determined between us and the investor. The maturity date on this note has been extended to November 8, 2012.

From July to October 2007, our wholly-owned subsidiary, Buzz Kill, issued an aggregate principal amount of $160,000 of its 10% notes (the “2007 Notes”).  The 2007 Notes have andefault interest rate of 10%, compounded monthly.  $50,000 of14.00% per year. Subsequent to year end, the 2007 Notes were originally due on July 26, 2010 but have been extended to July 26, 2012; $10,000 of$100,000 bridge loan with the 2007 Notes were originally due on August 1, 2010 but have been extended to August 1, 2012; and $100,000 of the 2007 Notes were originally due on October 17, 2010 and have been extended to October 17, 2012.  Upon repayment of the 2007 Notes,unrelated party was paid in addition to the outstanding principal balance and all accrued and unpaid interest, the note holders will be entitled to receive (i) a premium equal to 20% of the original principal amount and (ii) contingent compensation equal to 12% of the “net proceeds” of the film. All amounts under the 2007 Notes remain unpaid, outstanding and subordinated to the Senior Note (defined below).  The proceeds from the 2007 Notes were used to finance the production of the film.full.

In July 2007, Buzz Kill received a bridge loan of $100,000 from Mr. Hanna (the “Hana Loan”).  $60,000 of the Hanna Loan was subsequently repaid, which reduced the outstanding balance of the Hanna Loan to $40,000 as of December 31, 2011.  The Hanna Loan is unsecured, interest free and repayable on demand, subject to its subordination to the Senior Note.Transfer Agent

All ofThe transfer agent for the offerings discussed above were conducted pursuant to the exemption from the registration requirements of the federal securities laws provided by Regulation DCommon Stock is Continental Stock Transfer & Trust Company. The transfer agent’s address is 17 Battery Place, New York, New York 10004, and Regulation S promulgated under the Securities Act of 1933, as amended , and Section 4(2) of the Securities Act. All of the notes were offered and sold only to “accredited investors,” as that termits telephone number is defined by Rule 501 of Regulation D, and/or to persons who were neither resident in, nor citizens of, the United States. No commissions were paid in connection with any of these offerings.(212) 845-3212.

ITEM 6. SELECTED FINANCIAL DATA.

Not Required.

ITEM 6.          SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSOPERATIONS.

Statement Regarding Forward-Looking Information

This report contains forward-looking statements. All statements other than statements of historical facts included in this Annual Report on Form 10-K, including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations regarding our financial position, estimated working capital, business strategy, the plans and objectives of our management for future operations and those statements preceded by, followed by or that otherwise include the words “believe”, “expects”, “anticipates”, “intends”, “estimates”, “projects”, “target”, “goal”, “plans”, “objective”, “should”, or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements.

Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Annual Report on Form 10-K to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Background and Recent Developments

ESRI was formed as a Delaware corporation on March 15, 2007 for the purpose of producing full length independent feature films through its then-wholly-owned subsidiary, Buzz Kill, Inc., a New York corporation.

Merger with MTMI and EGI

On April 6, 2012, ESRI, MTMI Acquisition Sub, EGI Acquisition Sub, MTMI, EGI and EGLLC entered into a merger agreement, which closed on the same date, and pursuant to which (i) MTMI Acquisition Sub merged with and into MTMI with MTMI as the surviving corporation and (ii) EGI Acquisition Sub merged with and into EGI with EGI as the surviving corporation. As a result of the Merger, MTMI and EGI became our wholly-owned subsidiaries.In conjunction with and concurrent upon the closing of the Merger, we split off Buzz Kill, Inc.

As the result of the Merger, which was accounted for as a reverse acquisition, a discussion of the past financial results of ESRI is not pertinent, and the historical financial results of MTMI and EGI, the accounting acquirers, prior to the Merger are considered the historical financial results of the Company.

The following discussion highlights our plan of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described. This discussion contains forward-looking statements. The following discussion and analysis are based on MTMI’s and EGI’s financial statements, which we have prepared in accordance with U.S. generally, accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.

The following discussion and analysis provides information which management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The discussion should be read in conjunction with our audited financial statements and related notes and the other financial information included elsewhere in this Annual Report.

Stock Split

On May 8, 2012, we declared a 2 to 1 forward stock split on our Common Stock outstanding in the form of a dividend, with a record date of May 17, 2012, with a payment date of June 8, 2012. We have reflected the effect of this forward stock split on a retroactive basis on all common stock share amounts disclosed throughout this report.

Expansion of Minerals Product Receivables Purchase Agreement

On August 17, 2012, the Company entered into a letter of intent with Black Diamond.  Pursuant to this letter agreement, the ounces of gold payable under the existing Minerals Product Receivables Purchase Agreement (the "MPRPA") between the Company and Black Diamond will be increased by 37,640 ounces, from 33,360 ounces to a total of 71,000 ounces.  The gold payable rate under the MPRPA will be reduced from 80% to 50% with a production cost paid to the Company of $500 per ounce on delivery.  The tail, which is due after the Golden Dream Mine has produced an initial 250,000 ounces, will be increased from 6.5% to 15% at a production cost of $600 per ounce paid to the Company at delivery.  The Company will realize up to $12,500,000 from the forward sale of the full 37,640 ounces which will be recognized as a refundable customer deposit until the gold is sold.

Funds from the successful sale of these additional ounces of gold will be used to continue the development of the Company's Golden Dream Mine.  The Company has completed approximately 650 feet of underground development, has complete surface infrastructure, and most recently installed a water treatment system giving it the capability to fully develop the Golden Dream Mine.

Black Diamond did not complete the financing detailed in the letter of intent. The Company subsequently modified the MPRPA to an Amended and Restated MPRPA based on the terms stated in the letter of intent. The Amended and Restated MPRPA will allow the Company to realize up to $15,391,200 in additional proceeds from the forward sale 46,640 ounces of gold, which will be recognized as a refundable customer deposit until the gold is sold. The MPRPA, as amended and restated, will allow for a total of 80,000 ounces of gold to be sold and 50% of the production from the Golden Dream Mine will be allocated toward the MPRPA at a production cost paid to the Company of $500 per ounce on delivery. The tail, which is due after the Golden Dream Mine has produced an initial 250,000 ounces, will be 15% at a production cost of $600 per ounce paid to the Company at delivery. The amounts above will be prorated if the Amended and Restated MPRPA is not fully subscribed.

On September 28, 2012, an investor subscribed for $660,000 of gold output under the Amended and Restated MPRPA. The $660,000 payment has been recognized as a refundable customer deposit until the gold is sold. Pursuant to this agreement, the ounces of gold payable under the existing MPRPA will be increased by 2,000 ounces, from 33,360 ounces to a total of 35,360 ounces. The gold payable rate under the MPRPA will be reduced from 80% to 50% with a production cost paid to the company of $500 per ounce upon delivery.

On October 30, 2012, an investor subscribed for $100,000 of gold output under the Amended and Restated MPRPA.  Pursuant to this agreement, the ounces of gold payable under the existing MPRPA, which was last expanded on September 28, 2012, will be increased by an additional 303 ounces, from 35,360 ounces to a total of 35,663 ounces.

General Overview

Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc. (referred to together as “Elkhorn”) were formed for the purpose of acquiring, holding, operating, selling, and otherwise dealing in assets of mining operations with gold and other metal reserves and exploration potential. Elkhorn’s objective is to operate mines and expand its interests through acquisition and exploration. Elkhorn has one mineral property, the Golden Dream Mine, that has completed the permitting process, is in the process of installing required infrastructure and has developed the 650 foot underground access ramp to reach the upper levels of the ore body and a second property, the Montana Tunnels Mine, that has completed the permitting except for posting the required reclamation bond. In addition, Elkhorn has several mineralized targets which are in the exploration stage. The permitted and nearly permitted mines consist of the Golden Dream Mine (formerly referred to as the Sourdough Mine) and the Montana Tunnels Mine. The mineralized targets are the East Butte, Gold Hill/Mount Heagan, Carmody, and the expansion of the previously operated Diamond Hill Mine. All the mines and properties are located in Jefferson County, Montana with the exception of the Diamond Hill Mine which is in Broadwater County, Montana. Elkhorn maintains its principal executive office in Denver, Colorado.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, allowance for doubtful accounts and property and equipment valuation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

The Company recognizes revenue when the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred in accordance with the terms of the arrangement, the price is fixed or determinable, and collectability is reasonably assured.

Revenue for sale of ore, concentrated materials, or gold ore is recognized at the time of delivery and transfer of title to counterparties.

Inventory

The Company’s minerals inventory is stated at the lower of weighted average production cost and net realizable value. Work-in process inventory, including stockpiled ore and in-circuit gold inventory, is valued at the lower of weighted average production cost and net realizable value. Materials and supplies are valued at the lower of average direct cost of acquisition and net realizable value.

The Company’s raw materials, finished goods, and purchased goods inventory is stated at the lower of cost or market using either the first-in, first-out or weighted average method. Inventory is adjusted for estimated obsolescence and excess quantities and written down to net realizable value based upon management estimates of expected usage.

Building, Equipment, and Land

Property and equipment is stated at cost. Equipment under capital lease is valued at the lower of fair market value or net present value of the minimum lease payments at inception of the lease. Depreciation is provided utilizing the straight-line method over the estimated useful lives for owned assets, ranging from 3 to 39 years, and the lesser of related lease terms.

Mining Properties

For new projects without established reserves, all costs, other than acquisition costs, are expensed prior to the establishment of proven and probable reserves. Reserves designated as proven and probable are supported by a feasibility study, indicating that the reserves have had the requisite geological, technical, and economic work performed and are legally extractable at the time of reserve determination. Once proven and probable reserves are established, all development and other site-specific costs are capitalized, including general and administrative charges for actual time and expenses incurred in connection with site supervision as mine development costs. Development drilling costs incurred to infill mineralized material to increase the confidence level in order to develop or increase proven and probable reserves are also capitalized as mine development costs. If subsequent events or circumstances arise that would preclude further development of the reserves under the then existing laws and regulations, additional costs are expensed until the impediments have been removed and the property would be subject to ongoing impairment reviews. When a mine is placed into production, the capitalized acquisition and mine development costs are reclassified to mining properties and are amortized to operations using the units-of-production method based on the estimated metals that can be recovered.

Mineral Interests

Mineral interests include the cost of obtaining patented and unpatented mining claims and the initial cost of acquiring mineral interests. If a mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If no mineable ore body is discovered or such rights are otherwise determined to have no value, such costs are expensed in the period in which it is determined the property has no future economic value. For the years ended December 31, 2012 and 2011, there are no mineral interest impairments.

Mine Development

The costs of removing overburden and waste materials to access the ore prior to the production phase are referred to as mine development costs. Mine development costs are capitalized during the development of the mine. Mine development costs are amortized using the units-of-production method based on estimated recoverable tons of proven and probable reserves. To the extent that these costs benefit the mine, they are amortized over the estimated life of the mine. Development costs incurred after the first saleable ore is extracted from the mine (i.e., post-production costs) are a component of mineral inventory cost. All post-production costs are considered variable production costs that are included in the costs of the inventory produced during the period in which the mining costs are incurred.

Reclamation Liability

Mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations to protect public health and the environment and believes its operations are in compliance with applicable laws and regulations in all material respects. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. Estimated future costs are discounted to their present value using a 12% discount rate. Reclamation obligations are secured by cash held directly by a surety or certificates of deposit.

Stock Compensation

The Company has granted stock option awards to key employees that will enable them to purchase shares of common stock of the Company. The Company recognized all share-based payments in the consolidated income statement as an operating expense, based on the estimated fair value of the awards on the date of grant. The Company determines the estimated fair value using the Black-Scholes option pricing model and recognizes compensation costs ratably over the vesting period using the straight-line method.

Income Taxes

The Company is a C corporation and uses the asset and liability method to account for income taxes based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years. The Company assesses a valuation allowance on the deferred tax assets if it is more likely than not that a portion of the available deferred tax assets will not be required. The Company records the deferred tax assets net of valuation allowance.

The Company also accounts for uncertainties in income taxes in that the Company recognized the tax benefits of tax positions only if it is more likely than not that the tax positions will not be sustained, upon examination, by the applicable taxing authorities, based on the technical merits of the positions. As required, the Company records potential interest and penalties with its tax positions. The Company records interest and penalties, if any, as a component of interest expense. No interest and penalties were recorded during the years ended December 31, 2012 and 2011, respectively.

Results of Operations

Fiscal year ended December 31, 2011 and since our date of inception (March 15, 2007), we have not generated any operating revenue. We do not anticipate generating operating revenue in2012 as compared with the near future. We are presently in the development stage of our business and we can provide no assurance that we will make any money on the films we produce.

For thefiscal year ended December 31, 2011.

Revenue from the Sale of Gold

Elkhorn had no revenues from the sale of gold from the Golden Dream or the Montana Tunnels Mines in 2012 or 2011. In August, 2011, we incurred totalthe Company did realize gross revenue of $573,942 from the sale of 874 tons of stockpiled rock from past mining (resulting in 303 ounces. of gold) from the East Butte mine, part of the Golden Dream Mine properties. The sale was recorded, net of related ore processing costs of revenues$133,863, on the Company’s 2011 Statement of $1,284,866 related to the impairment of capitalized film costs.Operations.

Operating Expenses

We incurred total operating expenses of $164,816General and administrative expense for the year ended December 31, 2011,2012 was $7,491,318 as compared to total operating expenses of $162,151$850,616 for the year ended December 31, 2010.2011. In June, 2011, development of the Golden Dream Mine commenced which resulted in the capitalization of payroll and related costs. The increaseGolden Dream Mine was placed on care and maintenance and development was temporarily halted in total operatingthe second quarter of 2012, resulting in payroll and related costs being expensed for the second, third, and fourth quarters of 2012. Furthermore, general and administrative expenses wasincreased in 2012 due to an increase in generalprofessional fees related to the Merger and administrative expenses.compensation expense related to the employee stock option plan of $2,216,516, stock options related to a corporate advisory agreement of $1,232,093 and marketing warrants of $204,874 issued in 2012.

We incurred interestAccretion expense of $46,486 for the year ended December 31, 2011,2012 was $1,847,134 as compared to interest expense of $34,503$1,327,221 for the year ended December 31, 2010. The increase2011. Management re-evaluates annually the timing of the deferred site closure and reclamation costs related to Montana Tunnels Mining mill and mine sites. They anticipate that reclamation of the mine and mill will be completed in interest expense was primarily2026 for MTMI which is extended several years from previous estimates, and 2019 for EGI. This extension is due to accrued interestmanagement pursuing financing to commence development of the M-Pit, which would extend the mine life by 9 years. The total cost of reclamation is consistent with previous estimates; however, by extending the timeline, it has reduced the related accretion expense. Estimated future costs are discounted to the 10% convertible promissory note issued on January 29, 2010. The Company also amortized thetheir present value using a 12% discount on the noterate for $1,625EGI and $2,008 as of December 31, 2011 and 2010, respectively.a 7.5% discount rate for MTMI.

We generated interest income in the amount of $15Mine care and maintenance for the year ended December 31, 2011,2012 was $943,075 as compared to interest income$1,037,199 year ended December 31, 2011. The decrease in mine care and maintenance was due to a reduction in work force in 2012 resulting in a decrease of $3approximately $419,000, offset by an increase in expense of approximately $335,000, due to the Elkhorn mine going into care and maintenance in May of 2012 resulting in the reduced capitalization of expenses.

Depreciation and amortization expense for the year ended December 31, 2010.

We have generated no operating revenues and our net loss from inception through December 31, 20112012 was $1,977,229.

Liquidity and Capital Resources

The report of our auditors on our audited financial statements$2,082 as compared to $6,604 for the fiscal year ended December 31, 2011 contains a going concern qualification as we have suffered losses since our inception. We have minimal assets2011. Depreciation and have achievedamortization are calculated on the units of production basis over the remaining proven and probable reserves of the mine. Montana Tunnels Mine ceased mining during 2008 after completion of the L-Pit and completed milling of stockpiled ore during April, 2009 at which time the mine was placed on care and maintenance. Accordingly, there was no operative revenues since our inception. We have depended on loans and sales of equity securitiesdepreciation expense related to conduct operations. As ofMontana Tunnels Mine for the years ended December 31, 2012 and 2011. Capitalized depreciation expense related to the development of the Golden Dream mine for the years ended December 31, 2012 and 2011 was $78,678, and 2010, we had cash of $2,125 and $297, current assets of $2,125 and $297, and current liabilities of $966,365 and $528,541,$60,100 respectively. Unless and until we achieve material revenues, we will remain dependent on financings to continue our operations.

Recent Financing Activities

Between April and June 27, 2011, we raised $135,500 throughTotal operating expense for the sale of our 2011 Notes.  We used these fundsyear ended December 31, 2012 was $10,283,609 as compared to $3,221,640 for working capital purposes.On February 1, 2012, we raised an additional $30,000 through the sale of our February 2012 Notes.year ended December 31, 2011.

Availability of FundsOther Income and Expense

We presently do not have any available credit, bank financing or other external sourcesInterest expense for the year ended December 31, 2012 was $9,719,668 as compared to $8,083,445 for the year ended December 31, 2011.

Interest income for the year ended December 31, 2012 was $59,312 as compared to $47,705 for the year ended December 31, 2011. Interest income is earned from restricted cash held directly by a surety in the form of liquidity. Duecertificates of deposit related to our brief historyreclamation obligations. Interest income earned throughout the year is remitted to the Company in the fourth quarter of each calendar year.

Loss on ore purchase derivative for the year ended December 31, 2012 was $1,510,661 as compared to $13,025,932 for the year ended December 31, 2011. The loss relates to MPRPA as the Company recognized the difference in the fair value of gold at the agreement date and historical operating losses, our operations have not beenthe contract price of gold in the agreement. The change in fair value of the embedded derivative for the year ended December 31, 2012 was a sourcegain of liquidity. At our current level$3,628,202 as compared to a loss of operation, including cash we have remaining$5,793,013 for the year ended December 31, 2011. The change relates to the change in the fair value of the commodity future prices and the projected production of gold of the MPRPA from the saledate of closing to December 31, 2012 and 2011, respectively, to reflect the change in fair value of the February 2012 Notes, we do not have sufficient cashderivative instrument.

Going Concern

This annual report contains explanatory language that substantial doubt exists about the Company’s ability to meet our expensescontinue as a going concern. This means that there is substantial doubt that the Company can continue as an on-going business for the next twelve months.

We intend to raisemonth unless we obtain additional capital to pay for development and operations. We believe that either the consummation of a private placement or completed forward sale of gold under the expanded MPRPA will provide financing for our marketing and distribution activities. Also, we need to obtainthis additional capital, although there can be no assurance that either of these financing possibilities will occur. The capital will put the Company into a position that the Golden Dream Deposit will begin extracting and selling mineral and providing sufficient cash flow for operations of the Golden Dream Mine, care and maintenance of the Montana Tunnels Mine and other general and administrative expenses; however, since we have not generated revenues since the Montana Tunnels Mine shuttered mining in order to maintain our public company regulatory requirements and execute our business plan, build our operations and become profitable. In order to obtain capital,2008, there is no assurance we will needever reach that point.

Plan of Operations and Capital Requirements

The planned objective for the remainder of 2013 – subject to sellfinancing – is to recommence development of the Golden Dream Mine (deferred in autumn, 2012) and commence preparations for development of the “M” Pit expansion at the Montana Tunnels Mine. The 2013 budget calls for approximately $40 million in new capital which we expect to raise through a $15 million expansion of the current MPRPA in combination with one or more of the potential investment options being presented to us by the investment bank we engaged in February 2013.

Elkhorn Property - Golden Dream Mine

Recommencement of development of the Golden Dream Mine will entail completing an additional shares1,200 feet of underground development, secondary egress/ventilation development, minor surface infrastructure additions prior to commencement of production. Concurrent with Golden Dream mine development, the Diamond Hill Mill at Montana Tunnels will be recommissioned to allow for processing sulfide ore shipments from the Golden Dream Mine.

Montana Tunnels Mine

Montana Tunnels is planning to complete equipment maintenance and preparations to commence the “M” Pit Expansion with an intended start date of third quarter 2013. This will include updating the Reclamation Bond for “M” Pit, commencement of development of the “M” Pit expansion and upgrades to equipment).

Financing Requirements - $40 million

Golden Dream mine development ($8.5 million)

(Access Ramp Development, Operations, Diamond Hill Mill preparations and Contingency)

MTMI ($30 million)

(Reclamation Bonding, Operations, Equipment Refurbishment and Contingency)

Additional Funds required beyond the end of 2013

Golden Dream Mine ($3 Million)

(Primary Ramp Development and Operations)

MTMI ($70 Million)

(“M” Pit Expansion through to production and Operations)

These projections are based on certain assumptions including, but not limited to, our common stock or debt securities, or borrow funds fromsuccess in raising the required capital in our planned private lenders or banking institutions.placements. There can be no assurance that we will be successful in obtaining additional funding in amounts or on terms acceptableour capital raising efforts. Failure to us, if at all. If we are unablereach our capital targets could adversely affect our ability to raise additional funding as necessary, we may have to suspendachieve our operations temporarily or cease operations entirely.three-year target projections.

Liquidity and Capital Resources

Off Balance Sheet ArrangementsOverview

We do not have any off-balance sheet arrangements.funded our operations and mine development primarily through issuances of debt and equity securities. However, to reach full production of the Golden Dream Mine and begin the “M” pit production at Montana Tunnels Mine, we plan to raise $125 million in additional capital in 2013, $40 million which will be deployed during the third and fourth quarters of 2013 with the remaining amount deployed during 2014 and during the first quarter of 2015. We believe that raising the additional capital will allow the Golden Dream Mine to reach a productive status during the first half of 2014 and for MTMI to be at or near commercial production sometime during the first quarter of 2015.

Critical Accounting PoliciesWe expect to invest $8.5 million of capital to enable the recommencement of development of the Golden Dream Mine focusing on development of the primary access ramp into the main ore body during the latter months of 2013. Concurrent with the Golden Dream development we intend to invest $30 million in capital to be deployed to commence the “M” Pit expansion at the Montana Tunnels Mine

In December 2001,During 2014, development of the Securities and Exchange Commission requested that all registrants discuss their "critical accounting policies"“M” Pit expansion is expected to require an additional $56 million in management's discussion and analysiscapital investment over the full year. An additional $14 million of financial condition and results of operations. The SEC indicated that a "critical accounting policy" is one that is both importantcapital investment will be required prior to the portrayal“M” Pit reaching a productive status sometime during the first quarter of 2015. The Golden Dream Mine will require an additional $3 million and should achieve a productive status sometime during the first half of 2014.

These projections are based on certain assumptions including, but not limited to, our success in raising the required capital in our planned private placements. There can be no assurance that we will be successful in our capital raising efforts. Failure to reach our capital targets could adversely affect our ability to achieve our target projections.

Cash

To date, the Company has funded its exploration, development and operations primarily through issuances of debt and equity securities. At December 31 31, 2012, the Company had cash of $113,505, compared to cash of $358,125 at December 31, 2011. The decrease in cash since December 31, 2011 included operating cash outflows of $1,167,164, investing cash outflows of $1,203,110 financing cash inflows of $2,125,654.

Liabilities

At December 31, 2012, the Company had liabilities of $116,884,986 compared to liabilities of $103,259,388 at December 31, 2011. Total current liabilities were $75,338,387 at December 31, 2012 as compared to $61,607,537 at December 31, 2011. Liabilities increased $13,625,598 during 2012 due to increased payables and accrued liabilities of $3,450,038, the issuance of convertible bridge loans of $1,900,000, the issuance of promissory notes of $1,077,260, and the addition of a derivative liability on warrants associated with the bridge loans of $204,874. These increases were slightly offset by payments on debt of $851,523 and payments on capital lease obligations of $280,083. The Company recognized additional MPRPA liabilities totaling $760,000 which was offset by a decrease of $2,117,541 in the embedded derivatives based on the contract terms, projected future gold prices and discount rate commensurate with estimates of contemporary credit risk using a discounted cash flow model. The increase in liabilities from December 31, 2011 to December 31, 2012 is also attributable to an increase in push down debt, interest and the redeemable obligation of the company's financial conditionparent and resultsits affiliate of $7,635,439 and thatan increase in reclamation liability of $1,847,134.

During April, 2011 the Company entered into a Minerals Product Receivables Purchase Agreement (the “MPRPA), with an affiliate of the Parent to sell 80% of the first 41,700 ounces of gold produced from the Golden Dream Mine for an up-front payment of $10,000,000 of consideration as a refundable customer deposit. The Company received an additional $760,000 of up-front payments, from unrelated parties, in 2012.

During 2012 the MPRPA was amended and requires management's most difficult, subjectivethe Company to pay all proceeds from 50% of the sales of gold in excess of the lesser of $500 per ounce or complex judgments. Such judgments are often the resultlatest COMEX spot gold price, if any, to the customers. Additionally, the customers may purchase 6.9% of the ounces produced by the mine after the mine has produced in excess of 250,000 aggregate ounces for a needpurchase price of the lesser of $600 per ounce or the latest COMEX spot gold price. The term of the MPRPA is through the closure of the Golden Dream Mine. Currently the Company estimates reserves at approximately 258,000 ounces of gold. During 2011 the Company entered into a security agreement with its Parent to make estimates aboutsecure the effectpayment of matters that are inherently uncertain.the Company’s obligations under the Agreement pursuant to which the Company granted the Parent a continuing security interest in all of the assets and property of the Company.

The preparationrelated party ore purchase liability is comprised of financial statementsa $10,760,000 refundable customer deposit as up-front consideration, a recognized loss of $1,510,661 reflecting the difference between the fair value of the commodity future prices of the gold at the agreement date and the contract price of gold. The cumulative change in conformity with generally accepted accounting principles (”GAAP”)fair value of the embedded derivative of $3,628,202 is a reflection of the change in the United Statesfair value of the derivative instrument contract from the date of closing to December 31, 2012.

During February and March, 2013, the Company received an aggregate of up-front payments of $920,000, from related parties, and issued $1,000,000 from the MPRPA to the secured creditor in exchange for a standstill agreement.

The Company’s assets serve as collateral for multiple loans and a redemption obligation of EGLLC and MFPI. Although the Company is not a maker or guarantor on the secured loans or redemption obligation, these loans and obligation have been “pushed down” to the Company as reflected in its audited financial statements. The redemption obligation was extended by MFPI to compensate and induce certain of its lenders who are also the Secured Lenders of EGLLC, obligating MFPI to purchase, at the Secured Lenders’ option, the $5,950,000 equity investment made in an investment fund that is an owner of EGLLC and is managed by Black Diamond. The Company’s mining properties and equipment have been pledged as collateral to the Secured Lenders under two filed and recorded mortgages. The loans of the EGLLC and MFPI are accruing interest between 15% and 18% per year. At December 31, 2012 and 2011, the outstanding principal and interest was $53,978,731 and $46,343,292, respectively.

The Company also owes $919,779 in Series A 8% bonds. The bonds matured during July 2012. Interest originally accrued at 8%, due to the default, interest now accrues at 12%.

Reclamation Liability

Elkhorn’s mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. Elkhorn conducts its operations to protect public health and the environment and believes its operations are in compliance with applicable laws and regulations in all material respects. Elkhorn has required our managementmade, and expects to make assumptions, estimates and judgments that affect the amounts reported in the financial statements,future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. Estimated future costs are discounted to their present value using a 12% discount rate. Reclamation obligations are secured by cash held directly by a surety or certificates of deposit. The reclamation liability at December 31, 2012 was $24,640,321.

On May 24, 2010, the EPA issued an “Action Memorandum” which documented the determination that soil removal was necessary to mitigate threats posed by elevated levels of lead and arsenic in the soil located on property in close proximity to MTMI (the "Company").  The work of clean-up conducted by the EPA of the Site commenced in June 2010 and was completed by August of the same year.  On August 26, 2010, the Company and the EPA entered into an “Access and Compensation Agreement” which detailed the responsibilities of both the EPA and the Company with respect to the clean-up and disposal of contaminated soils from the Site.  On October 26, 2011 the EPA proposed a settlement of $380,000.  On November 04, 2011, the Company agreed to the EPA proposed amount of $380,000 but added a stipulation that the amount be payable over time depending upon the status of the Company’s operations.  Subsequent to December 31, 2012, a settlement agreement was reached. The $380,000 settlement will be paid in 35 monthly installments of $2,500 and a final balloon payment of $292,500.

Series A Preferred Stock

As of the closing of the Merger and pursuant to the Merger Agreement, we issued 10,000,000 shares of our designated Series A Preferred Stock to EGLLC (as more fully described in the certificate of designations). EGLLC is entitled to receive, out of funds legally available, cumulative non-compounding preferential dividends at the rate of 12% of the stated value of $6.00 per shareper annum(the “Preferential Dividend”). In the event of any defined liquidation event,no distribution can be made to holders of shares of our capital stock ranking junior to the Series A Preferred Stock, including the notesCommon Stock, unless, prior thereto, EGLLC shall have received an amount per share equal to $6.00 (the “Liquidation Amount”) per share,plus the amount of any accrued and related disclosures of commitmentsunpaid Preferential Dividendowed to EGLLC. EGLLChas the option, exercisable in whole or in part at any time and contingencies, if any. Our significant accounting policies are disclosed in the notesfrom time to time prior to the audited financial statementsthird anniversary of the issuance of the Series A Preferred Stock, to require us to purchase for cash, out of legally available funds, any or all of the then-outstanding shares of Series A Preferred Stock at a price equal to $6.00 per share. We have the option, exercisable in whole or in part at any time and from time to time prior to the third anniversary of the issuance of the Series A Preferred Stock, to redeem any or all of the then-outstanding shares of Series A Preferred Stock at a price equal to $7.00 per share.

Provided that neither EGLLC nor the Company has exercised its redemption options in full by the third anniversary of the issuance of the Series A Preferred Stock, each share of then-outstanding Series A Preferred Stock shall automatically and immediately convert into one fully paid and non-assessable share of Common Stock of the Company.

Pursuant to the loan reinstatement and modification agreement between EGLLC and the Secured Lenders, EGLLC has informed us that it may exercise its redemption rights in accordance to the following schedule:

We believe our cash on hand, anticipated operating cash flow from the Golden Dream Mine, proceeds from the potential sale of mineral interests pursuant to the MPRPA and the proceeds from the EGI bridge financing and proposed private placements will be sufficient to meet EGLLC’s redemption exercises over the next year.

Discussion of changes in cash flows for the fiscal yeartwelve months ended December 31, 2012 as compared to the twelve months ended December 31, 2011.

Cash used in operating activities was $1,167,164 for the twelve months ended December 31, 2012 as compared to cash provided by operating activities of $9,473,607 for the twelve months ended December 31, 2011. The cash used in operating activities for the twelve months ended December 31, 2012 was attributable to net loss of $17,816,060, non-cash charges of $12,431,800 and net increases in operating assets and liabilities of $4,217,096. The cash provided by operating activities for the twelve months ended December 31, 2011 included in this Annual Report on Form 10-K.

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this annual report, we currently believe the following accounting policies to be critical:

Capitalized Film Costs - Film costs include all direct negative costs incurred in the physical production of the film as well as allocated production overhead. Such costs include story costs and scenario; compensation of cast, directors, producers and extras; set construction and operations; wardrobe and accessories; sound synchronization; location expenses and post production costs including music, special effects and editing. Film costs are amortized based on the ratio of current period gross revenues to estimated remaining ultimate revenues from all sources on an individual production basis. Estimated ultimate revenues are revised periodically and the carrying values of the films are evaluated for impairment. Losses, if any, are provided in full.

Fair Value of Financial Instruments - The carrying amount reported in the balance sheet for cash and cash equivalents, prepaid expenses, accounts payable and accrued expenses approximate fair value because of the immediate or short term maturity of these financial instruments.

Revenue Recognition - The Company recognizes revenues from the sale or licensing arrangement of a film upon delivery of a completed film or the commencement of a licensing period. The Company had substantially completed film production at December 31, 2010 but realized no revenues as of that date.

Income Taxes - Income taxes are accounted for in accordance with the provisions of FASB ASC Topic 740,“Income Taxes.” Deferred tax assets and liabilities are recognized for the future tax consequenceswas attributable to differences between the financial statement carrying amountsnet loss of existing assets$29,564,259, non-cash charges of $28,364,691 and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable incomenet increases in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxoperating assets and liabilities of a$10,673,175. The impact of changes in operating assets and liabilities may change in tax rates is recognizedfuture periods, depending on the timing of each period end in incomerelation to items such as internal payroll and billing cycles, payments from customers, payments to vendors, and interest payments. Non-cash activity consisted primarily of debt discount amortization, accretion expense, losses on and changes in fair value of the period that includesore purchase derivative, stock based compensation, and interest on the enactment date. Valuation allowances are established, when necessary,push-down debt of EGLLC.

Cash used in investing activities was $1,203,110 for the twelve months ended December 31, 2012 as compared to reduce deferred tax assetscash used in investing activities of $5,181,276 for the twelve months ended December 31, 2011. Cash used in investing activities for the twelve months ended December 31, 2012 and 2011 was used to develop the Golden Dream Mine, purchase mining equipment and fund additional bonding requirements related to the amountsGolden Dream Mine.

Cash provided by financing activities was $2,125,654 for the twelve months ended December 31, 2012 as compared to cash used in financing activities of $3,995,557 for the twelve months ended December 31, 2011. Cash provided by financing activities for the twelve months ended December 31, 2012 consisted of proceeds of $2,605,737 from the issuance of debt and proceeds of $380,000 from the issuance of common stock. These proceeds were offset by payments on debt of $480,000, payments on capital lease obligations of $280,083, and distributions to stockholders of $100,000. Cash used in financing activities for the twelve months ended December 31, 2011 consisted primarily of the payment of distributions to stock holders of $4,377,779 and payments on capital lease obligations totaling $42,057. These payments were offset by proceeds of $164,279 from the issuance of debt and proceeds of $260,000 from stockholder contributions.

Recent Developments

During February 2012, EGI entered into three convertible bridge loans with related parties totaling $1,800,000 due in August 2012. In April 2012, EGI entered into an additional convertible bridge loan with an unrelated party for an additional $100,000 due in August 2012. The loans are unsecured and call for 12% annual interest on the outstanding unpaid principal. The loans are convertible into common stock at an exercise price of $1.00 per share. Each $1.00 of the Principal Loan Balance is convertible into one share of common stock and a five year warrant to purchase ½ share of common stock at $1.50 per share.   Two warrants will allow the holder the rights to acquire one additional share of common stock for $1.50. In addition, the holders will be issued warrants exercisable at $0.01 per share, exercisable at the time of closing a PPO or the next round of funding. If the share value of the PPO is less than $1.25, an appropriate number of warrants may be exercised by the holders giving the holders additional shares at the cost of $0.01 per share to effect conversion at a 25% discount from the share price of the PPO or the next round of funding. The bridge loans were convertible upon the completion of a PPO within 90 days of the closing of the Merger. We did not complete the PPO within the 90 days, causing the conversion feature to expire during July 2012. Because of the non-payment under the terms of the $1.8 million in related party bridge loans, these bridge loans are considered in default and are accruing interest at the default interest rate of 14.00% per year. Subsequent to December 31, 2012, the unrelated party $100,000 loan was repaid in full.

In May and June 2012, we raised $380,000 in a unit private placement. 

During 2012, the Company entered into a series of promissory notes with related parties raising a total of $577,260. These notes accrue interest at a rate of 6% and originally had maturity dates of September 30, 2012 or October 18, 2012. The maturity dates of the notes have been extended to May 2013. During the fourth quarter of, 2012, promissory notes totaling $371,523 were repaid.

In December 2012, the Company entered into a promissory note with an un-related party for a total of $500,000. The note matures on March 31, 2013 and accrues interest at a rate of 6%. Subsequent to December 31, 2012, this note was extended to May 31, 2013.

All of the funds raised by the Company through these private placements and notes are being used for working capital purposes.

Subsequent Events

During February and March, 2013, we received an aggregate of up-front payments of $920,000 from BDH in connection certain commitments under the MPRPA and we issued $1,000,000 in gold commitments under the MPRPA to the Secured Lenders in exchange for a standstill agreement.

Capital Needs - Availability of Additional Funds

We are engaged in two capital raises to raise approximately $15 Million and approximately $100 Million for our two ongoing mining projects. The successful completion of the sale of an additional $15 Million in gold output under the MPRPA will be critical to reaching full operations at the Golden Dream Mine and completing the necessary maintenance and restart protocols at the smaller of the Company’s two mill circuits.  In addition, some of these proceeds may be used to complete safety and maintenance checks and engine rebuilds, if necessary, of the haul trucks, loaders and shovels, in anticipation of the Montana Tunnels Mine restart. Once the Golden Dream Mine reaches full production, we believe the expected cash flow from that operation will significantly diminish our need to rely on further issuance of debt and equity securities.

If these assumptions prove correct, our second, planned private placement to raise up to $100 million will become less critical, because proceeds from the Golden Dream Mine would be used to develop the Montana Tunnels Mine. However, proceeds from a second private placement would enable us to advance the development of the Montana Tunnels Mine on a pace more accelerated than we could achieve from waiting for the cash flow to be realized.generated from the Golden Dream Mine.

In any case, there can be no assurances that we will be successful in our capital raising efforts or in further expanding the MPRPA. Failure to raise the required capital could adversely affect our ability to achieve our target projections.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our audited financial statements and supplementary financial data are included beginning immediately following the signature page to this report. See ITEM 15 for a list of the financial statements included herein.

ITEM 8.9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL STATEMENTS AND SUPPLEMENTAL DATADISCLOSURE.

Our audited financial statements and supplementary financial data are included beginning immediately following the signature page to this report. See ITEM 15 for a list of the financial statements included herein.None.

ITEM 9.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Our Disclosure Controls and Internal ControlsProcedures

We maintainUnder the supervision and with the participation of our senior management, including our Chief Executive Officer and our Chief Financial Officer, we performed an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this annual report (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, are designedas of December 31, 2012, our disclosure controls and procedures were not effective to ensureprovide reasonable assurance that material information required to be disclosed by us in our periodicthe reports filed or submitted by us under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is accumulated,(i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is(ii) accumulated and communicated to our management, including our chief executive officerthe Chief Executive Officer and chief financial officer,Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. During

Management’s Report on Internal Control over Financial Reporting

Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the year ended December 31, 2011 we carried out an evaluation, underExchange Act, for the Company.