EASTERN RESOURCES, INC. AND SUBSIDIARIES

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10 – Q

(Mark One)

For the quarterly period endedSeptemberJune 30, 20122013

For the transition period from _______ to _______

Commission File Number:333-149850000-54645

EASTERN RESOURCES, INC.

(Exact name of registrant as specified in its charter)

1610 Wynkoop Street, Suite 400, Denver, CO 80202

(Address of principal executive offices)

(303) 893-2334

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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). Yesx Noo¨

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 “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

There were 198,550,000198,750,000 shares of the issuer’s common stock outstanding as of NovemberAugust 19, 2012.2013.

EXPLANATORY NOTE

Eastern Resources, Inc. (the “Company”) is filing this Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 (the “Report”) on the date hereof in reliance on Order Under Section 17A and Section 36 of the Securities Exchange Act of 1934 Granting Exemptions from Specified Provisions of the Exchange Act and Certain Rules Thereunder (the “Order”) promulgated by the Securities and Exchange Commission (the “SEC”) on November 14, 2012 (Securities Exchange Act of 1934 – Release No. 68224).

The Company was not able to meet the SEC mandated filing deadline due to Hurricane Sandy. The Company’s legal counsel, Gottbetter & Partners, LLP (“G&P”), is located in New York, New York and its offices were closed for two days during the hurricane. G&P counsels and advises the Company with respect to the preparation of the Company’s periodic reports that it files with the SEC and, because of Hurricane Sandy, G&P was not able to provide this support service in a timely fashion. Because of this hurricane related delay, the Company was not able to file the Report until today.

EASTERN RESOURCES, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBERJune 30, 20122013

TABLE OF CONTENTS

EASTERN RESOURCES, INC. AND SUBSIDIARIES

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EASTERN RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these statements.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTSSTATEMENT OF OPERATIONS

For the Three and Six Months Ended June 30, 2013 and 2012

(Unaudited)

The accompanying notes are an integral part of these statements.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICITCASH FLOWS

For the Six Months Ended June 30, 2013 and 2012 (Unaudited)

The accompanying notes are an integral part of these statements.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

The accompanying notes are an integral part of these statements.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Basis of Presentation and Merger

These financial statements represent the consolidated financial statements of Eastern Resources, Inc., and its wholly owned subsidiaries, Elkhorn Goldfields, Inc. and Montana Tunnels, Inc. The term “ESRI” refers to Eastern Resources, Inc., before giving effect to the Merger (defined below), 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, we entered intopursuant to an Agreementagreement and Planplan of Merger with ESRI, a public company. ESRI was merged into EGI and MTMI.merger of the same date, EGI and MTMI, as the Surviving Corporation, became a wholly-owned subsidiary of ESRI. We issued 180,000,000 shares of our common stock and 10,000,000 series A convertible redeemable preferred stock to acquire EGI and MTMI, which resulted in the stockholders of EGI and MTMI owning approximately 91.6% of our outstanding common stock and 100% of our series A convertible preferred stock after the consummation of 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,formerly each a wholly-owned subsidiary of Elkhorn Goldfields LLC, a Delaware limited liability company (“EGLLC” or “Parent”), 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, theESRI (the “Merger”). As a result of the Merger and the Split-Off, ESRI discontinued its pre-Merger business and acquired the business of MTMI and EGI as of April 6, 2012, and will continue the existing business operations of MTMI and EGI as a publicly-traded company under the name Eastern Resources, Inc.became our wholly owned subsidiaries.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the consolidated financial statements of the Company as of SeptemberJune 30, 2012.2013. The results of operations for the ninethree and six months ended SeptemberJune 30, 20122013 are not necessarily indicative of the operating results for the full year. It is recommended that these consolidated financial statements be read in conjunction with the consolidated financial statements and related disclosures for the year ended December 31, 2011 included in the Form 8-K2012 filed with the Securities and Exchange Commission (“SEC”) on April 12, 2012 and the amendments to that filing on Form 8-K/A filed with the SEC.16, 2013.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 1 - Description of Business

Elkhorn Goldfields, Inc. (“EGI”)EGI and Montana Tunnels Mining, Inc. (“MTMI”)MTMI (collectively, “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 that has completed the permitting process. That property has developed the 650-foot underground access tunnel to reach the top of the ore body and is inwill finish the process of installing required infrastructure to allow access to the lower levels of ore.ore once sufficient funding is received. In addition, a second property has completed the permitting, except for posting the required reclamation bonding. Lastly, Elkhorn has several mineralized targets in the exploration stage. The permitted or nearly permitted mines include Golden Dream Mine (formerly referred to as the Sourdough Mine) and Montana Tunnels Mine (“Montana Tunnels”), and the mineralized properties available to develop mine plans are East Butte, Gold Hill/Mount Heagan, and Carmody (collectively, the “Elkhorn Project”), 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.

On April 6, 2012, EGLLC entered into a merger agreement with ESRI, whereas EGI and MTMI would become wholly owned subsidiaries of ESRI in exchange for 180,000,000 shares of common stock and 10,000,000 shares of preferred stock. 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.

On May 8, 2012, wethe Company 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.

Note 2 - Summary of Significant Accounting Policies

PrinciplesFair Value of ConsolidationFinancial Instruments

The accompanying consolidated financial statements includedetermination of where assets and liabilities fall within this hierarchy is based upon the accountslowest level of ESRIinput that is significant to the fair value measurement. The valuation policies are determined by the Chief Financial Officer and its subsidiaries, EGI and MTMI.  All intercompany accounts and transactions have been eliminated in consolidation.

Debt Issuance Costs

Direct costs associatedare approved by the Chief Executive Officer. Fair value measurements are discussed with obtaining debt financing are deferred and amortized over the termCompany’s board of the debt using the effective interest method.  The net costs capitalized at for the nine months ended September 30, 2012 was $568,333 and were paid to related parties.directors, as deemed appropriate. The Company amortized $568,334 forhas consistently applied the nine months ended September 30, 2012.

valuation techniques discussed below in all periods presented.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Fair Value of Financial Instruments

The carrying amounts of financial instruments, including cash, accounts payable, and accrued liabilities, approximated fair value as of SeptemberJune 30, 20122013 and December 31, 20112012 because of the relatively short maturity of these instruments.

The Company applies the guidance to non-financialfinancial assets and liabilities measured at fair value on a non-recurringrecurring basis. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The financial and non-financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

The following assets are measured at fair value on a recurring basis as of SeptemberJune 30, 2012:2013:

The following assets are measured at fair value on a recurring basis as of December 31, 2011:

EASTERN RESOURCES, INC. AND SUBSIDIARIES2012:

Notes to Consolidated Financial Statements (Unaudited)

Ore Purchase Derivative Contract: Based onon: (i) contract terms of the production of 41,481 ounces of gold; (ii) projected future gold prices garnered from GCJ2 Comb Commodity Futures as of June 30, 2013; and (iii) discount rate commensurate with estimatesdetermined based on the observed weighted average cost capital of contemporary credit riska group of publicly traded comparable companies using a discounted cash flow model. The model is most sensitive to the future price of gold.gold and expected delivery of ore.

Warrant Liability: Based on: (i) stock price; (ii) volatility calculatedon the average volatility of stock for three publicly traded companies determined to be in a similar industry and with the same market capitalization as the Company; and (iii)risk free rate for the expected term of the option is based on the United States Treasury yield curve in effect on June 30, 2013.

There were no changes to the valuation techniques used during the ninesix months ended SeptemberJune 30, 2012 and2013 or the year ended December 31, 2011.2012.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The following table presents information about significant unobservable inputs to the Company’s Level 3 financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2013:

Future increases in the credit adjusted discount rate will result in a decline in the fair value of the ore derivative contracts.

Changes in the estimates of timing production of the ore further out into the future periods would cause a change in the value of the ore derivative liability.

Changes in the estimated future price of gold would cause a change in the value of the ore derivative contract.

Changes in the stock price, volatility, and the approximate risk-free rate would cause a change the value of the warrant liability.

The change in fair value of derivative instrument contract included in the statement of operations was 13,235,632 and ($412,064) for the six months ended June 30, 2013 and 2012, respectively.

The change in valuation of warrant liability was $141,543 and zero for the six months ended June 30, 2013 and 2012, respectively.

The following is a reconciliation of the beginning and ending balances for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine month periodsix months ended SeptemberJune 30, 2012:

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The embedded derivative is summarized between related and non-related parties as follows:

Management’s Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 3 - Management’s Plan

At SeptemberJune 30, 2012,2013, the Company has not generated any revenues to fund operations. The continuation of the Company as a going concern is dependent upon the ability of the Company to meet financial requirements for mine development and raise additional capital, which will require the issuance of additional debt and/or equity securities. The Company is attempting to raise capital through gold streaming, whereby upfront cash payments are exchanged for a percentage of the future gold production by the Golden Dream Mine. All of the company’s mining projects have been placed in care and maintenance until the Company secures additional financing. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 4–Accrued Liabilities

Accrued liabilitiesexpenses consist of the following:

Note 5 – Customer Deposits

During April, 2011 the Company received an up-front payment of $10,000,000, through an ore purchase agreement fromentered into a related party, dated April 15, 2011, to sell 80% of the first 41,700 ounces of gold and 6.5% of the gold produced after 250,000 ounces from the Golden Dream Mine at the Elkhorn Project. For each ounce of gold delivered under the Minerals Product Receivables Purchase Agreement (the "MPRPA"“MPRPA”), with an affiliate of the Company will payParent. In October, 2012, the related party, subjectMPRPA was amended to certain adjustments, (i) with respectsell up to 80%50% of the first 41,700160,000 ounces of gold produced from the Golden Dream Mine for up-front payments of $25,391,200. As of June 30, 2013, the Company has received $11,680,000 of up-front payments and is obligated to sell 50% of the first 41,481 ounces to the holders of the MPRPA. The following is a reconciliation of the up-front payment and ounces sold under the MPRPA as of June 30, 2013:

In addition, the company, as an inducement for the secured lenders from exercising their right of foreclosure through September 30, 2013, entered into an agreement extending $1,000,000 from the MPRPA

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

MPRPA, as amended, requires the Company to pay all proceeds from 50% of the sales of gold in excess of the lesser of $500 per ounce or the latest COMEX spot gold price, atif any, to the timecustomers. Additionally, the customers may purchase 15% (prorated if the entire MPRPA is not fully subscribed) of sale and (ii) with respect to each ouncethe ounces produced by the mine after the mine has produced in excess of gold over 250,000 aggregate ounces for a purchase price of the lesser of $600 per ounce or the latest COMEX spot gold priceprice. The term of the MPRPA is through the closure of the Golden Dream Mine. Currently the Company estimates reserves at the timeapproximately 258,000 ounces of sale. All pricing is subject to adjustment by an agreed upon inflation factor.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)gold.

The Agreement includedMPRPA includes an embedded derivative, which is valued using a discounted cash flow model with the major inputs of: (i) a 25% discount rate, (ii) gold future pricing, (iii) April 15, 2011 measurement date with the receipt of payment, and (iv) and management’s forecast to produce 72,72772,296 ounces by December 2014. TheMarch 2016. During the six months ended June 30, 2013, the Company recognized a $13,025,932$3,905,503 of loss on related partythe ore purchase agreement to reflect the difference between fair value of gold at the agreement datederivative contract liability and the contract price of gold in the Agreement. As the result, the offeringagreement. The customer deposit will be amortizedreduced by the Company with the delivery of the gold. The fair value of the embedded derivative fluctuates with changes in the price of gold. The change in fair value of the embedded derivative from the date of closing to September 30, 2012gold and December 31, 2011 resulted in a cumulative loss of $8,300,853 and $5,793,013, respectively, which was recorded in the consolidated statements of operations in the change in fair value of the derivative instrument.

During 2012, the Company received an up-front payment of $660,000, from an unrelated party, expanding the MPRPA. Pursuant to the 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. The percent of production that the MPRPA holder can purchase after the Golden Dream Mine has produced an initial 250,000 ounces has increased from 6.5% to 6.87% at a production cost of $600 per ounce paid to Elkhorn at delivery.

The Agreement included an embedded derivative, which is valued using a discounted cash flow model with the major inputs of: (i) a 25% discount rate, (ii) gold future pricing, (iii) September 30, 2012 measurement date, and (iv) and management’s forecast to produce 2,200 ounces by December 2014. The Company recognized a $1,407,694 loss on related party ore purchase agreement to reflect the difference between fair value of gold at the agreement date and the contract price of gold in the Agreement. As the result, the offering will be amortized by the Company with theexpected delivery of the gold. The fair value of the embedded derivative fluctuates with changes in the price of gold.ore.

The up-front payments of $10,660,000$12,680,000, at June 30, 2013, have been recognized as refundable customer deposits until the gold is sold. The refundable customer deposits are considered current due to the party’s making the payments having the right, upon written notice, at their option to demand repayment of the upfrontup-front cash deposit, without interest, for any shortfall in delivered ounces and the uncertainty of the commencement of ore production and the price of gold.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 6–Notes Payable

During July 2010, the Company entered into Series A 8% bonds for a total of $5,000,000, of which $1,235,500 was funded. The bonds matured during July 2012, with interest accruing at 8%. With the default, interest on the bonds accrues at 12%. The unpaid interest on the bonds shall be due and payable quarterly in arrears on the last day of each October, January, April, and July commencing in October 2010. The Company will make a bonus payment of $50,000 per bond upon maturity. The loans are currently in default and due on demand.

The holders each received five-year warrants to purchase 0.67 membership units of EGLLC per $50,000 bond at a purchase price of $37,500 per membership unit and on July 31, 2011 an additional five-year warrant to purchase 0.67 membership units of EGLLC per $50,000 bond at a purchase price of $37,500 per membership unit was issued. The warrants expire July 31, 2015. The warrants were valued using the Black-Scholes pricing model and expensed during 2010 and 2011.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Promissory Notes – Related Parties

During 2012 and 2013, the Company entered into a series of promissory notes with related parties for a total of $519,800 during 2013 and $577,260 during 2012. The notes mature on November 30, 2013 and accrue interest at a rate of 6%. The Company paid $371,523 on the notes during 2012.

Promissory Notes

During 2012, the Company entered into a promissory note with an un-related party for a total of $500,000. The note originally matured on March 31, 2013 and accrued interest at a rate of 6%. In March 2013, this note was extended to May 31, 2013 and the interest rate was amended to 8%. As of June 30, 2013, this loan is in default.

Related Party Convertible Bridge Loans

During February 2012, the Company entered into three convertible bridge loans with a related parties totaling $1,800,000.$1,800,000 due in August 2012. The loans arewere unsecured and callcalled for 12% annual interest on the outstanding unpaid principal. The bridge loans are convertible into common stock at an exercise price of $1.00 per share, with the holder receiving one five-year warrant attached to each share. Two warrants will allow the holder the rights to acquire an additional share of common stock for $1.50. In addition, the holder will be issued warrants exercisable at $0.01 per share, exercisableconsidered in default and currently bear interest at the time of closing a private placement offering (“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 holder giving the holder 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. If the PPO does not close within 180 days after the closing of the Merger (April 6, 2012), the holder may “put” the Conversion Shares to the Company at $2.00 per share. The loans matured during August 2012 and prior to that date, the Company did not make the required payments due under the terms of the convertible bridge loans which resulted in an event of default.

EASTERN RESOURCES, INC. AND SUBSIDIARIES14% default rate.

Notes to Consolidated Financial Statements (Unaudited)Unrelated Party Convertible Bridge Loans

During April 2012, the Company entered into a bridge loan with an unrelated party for $100,000. The loan is unsecured, has an annual interest rate of 12% on the outstanding, unpaid principal and matures$100,000, which was paid in October, 2012. Prior to the maturity date, the holder may convert the entire principal and accrued interest then outstanding into common stock of the Company. Furthermore, should the Company secure financing prior to the maturity date; the bridge loan shall automatically convert into common stock of the Company at a cost of $1.00 per share. The holder will receive one five-year warrant attached to each share of stock. Two warrants will acquire an additional share of common stock for $1.50 of acquirer. In addition, the holder will be issued warrants exercisable at $0.01 per share, exercisable at the time of closing a private placement offering ("PPO") of acquirer or the next round of funding of acquirer. If the share value is less than $1.25, an appropriate number of warrants may be exercised by the holder giving the holder 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 .If the Company is unable to close a financing within 180 days after the closing of the Holder’s applicable closing date, the holder shall have the right to require the Company to purchase all of the Conversion Shares (the “Put Right”) for $1.50 per share (“Put Price”).Holder shall exercise the Put Right within 30 days after the maturity date. Subsequent to September 30, 2012 the Company did not make the required payments due under the terms of the bridge loan which resulted in an event of default.full during March 2013.

At the discretion of the investor the outstanding principal amount and all accrued interest is convertible into shares of the Company’s common stock and warrants to purchase common stock. The 950,000 warrants were valued at $774,129 applying the Black-Scholes pricing model. Using the value of the warrants the Company calculated the value of the beneficial conversion options to be $521,981 to be amortized over the remaining estimated life. The value of the warrants under this agreement was determined using the following assumptions: lives of 5 years, exercise price of $2.00, no dividend payments, 118.00% volatility, and a risk free rate of 0.83%.

Notes Payable Maturity Schedule

At September 30, 2012

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Note 7 - Push-Down Debt, Interest, and Redemption Obligation of Parent and Its Affiliate

During May 2010, the Company entered into a pledge agreement with the Parent and an investor group.  Through the agreement the Company’s assets serve as collateral for multiple loans of the Parent to the investors group. The agreement states that all loans and redeemable interest are jointly and severally obligations of the Parent and the investor group may allocate payments at its discretion.   Although the Company is not a maker or guarantor on the loans, the loans have been “pushed down” to the Company in the accompanying consolidated financial statements in accordance with Statement of Accounting Bulletin No 54.  54, as all assets have been pledged as collateral and repayment is dependent upon the cash flows from the Company’s operations.

$5,000,000 Series A Convertible notes were due in December 2007. During 2007, the notes were extended to December 2009. During May 2009, the accrued and unpaid interest was included in the revised notes. Included in the revision, the convertible notes accrue interest at 18% per annum, compounded quarterly, and are due in April 2015. Interest only payments are to be made quarterly. At the election of the holder, principal amounts of the notes are convertible into $50,000 per membership unit of the Parent. The Company’s mining properties and equipment have been pledged as collateral to these notes. The balances of these notes were $5,791,701 at June 30, 2013 and December 31, 2012.

During 2007, an affiliate of the Parent entered into a loan for $8,050,000. The loan was due May 2009. During May 2009, the accrued and unpaid interest was included in the revised notes. Included in the revision, the loans accrue interest at 18% per annum, compounded quarterly, and are due April 2015. At the election of the holder, the principal amount of the loan can be exchanged for $13,416,666 of Series A Bonds of the Parent. The Company’s mining properties and equipment have been pledged as collateral to this note. The balance of this note was $9,680,125 at June 30, 2013 and December 31, 2012.

During 2008, an affiliate of the Parent entered into a loan for $5,000,000. The loan was due January 2009. During May 2009, the accrued and unpaid interest was included in the revised notes. Included in the revision, the loans accrue interest at 18% per annum, compounded quarterly, and are due April 2015. At the election of the holder, the principal amount of the loan can be exchanged for shares of an investment of the Parent at $1.00 per share, exchanged for the affiliate’s assets, or exchanged for bonds of an investment of the Parent at $1.00 principal for each $1.00 par amount of a bond. The Company’s mining properties and equipment have been pledged as collateral to this note. The balance of this note was $6,108,022 at June 30, 2013 and December 31, 2012.

Redeemable obligation of Parent and its affiliate.

An affiliate of the Parent offered redeemable options to certain debt holders (“Optionee”) to purchase membership units in an equity owner of the Parent. The affiliate as Optionor grants to each Optionee the option to put all or any portion of the membership units to the affiliate. The Company’s mining properties and equipment have been pledged as collateral to the redeemable interest. The balance of this redeemable option was $5,950,000 at June 30, 2013 and December 31, 2012.

The following is a summary of the loans as of the ninesix months ended SeptemberJune 30, 20122013 and year ended December 31, 2011. 2012:

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

During 2012 and 2011, theThe Parent and its affiliate have not made the interest payments on the notes or bonds;redeemable obligation; thus, an event of default ismay be present. Because of the non-payment of interest, the Company has classified the notesdebt and bondsredeemable obligation as current.

Note 8 - Capital Leases

The Company has acquired equipment under the provisions of long-term capitalized leases. For financial reporting purposes, the present value of future minimum lease payments relating to the assets has been capitalized. The leases expire in September 2013. Amortization of the leased property is being capitalized.

The assets under capital lease have cost and accumulated amortization as follows at September 30, 2012 and December 31, 2011:

Note 98 – Shareholders’ Deficit

Common Stock

As of SeptemberJune 30, 2012,2013, the authorized share capital of the Company consisted of 300,000,000 shares of common stock with a par value of $0.001 per share. There were 198,550,000 shares of common stock issued and outstanding as of SeptemberJune 30, 2012.2013.

On June 8, 2012 the Company recordeddeclared a 2 for 1 forward stock split on the Company’s common stock outstanding in the form of a dividend with a Declaration Date of May 8, 2012 and a Record Date of May 17, 2012. The stock split entitled each common stock shareholder as of the Record Date to receive one additional share of common stock for each share owned. All share and per share amounts presented in the accompanying consolidated financial statements have been restated to reflect this change.

During May and June 2012, the Company completed a private placement for 150,000 and 230,000 units for $150,000 and $230,000, respectively.  Each unit consisted of one share of our common stock and a warrant, representing the right to purchase one-half share of 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. Subsequent to the private placement the investors with 65,000 units agreed to renounce all right, title and interest in and to the warrants contained in the private placement units.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

The Company agreed to file the registration statement no later than ninety (90) calendar days following the final closing of the private placement and use its best efforts to ensure that such registration statement is declared effective within one hundred fifty (150) calendar days of filing with the SEC (the “Effectiveness Deadline”).

If the Company is late in filing the registration statement or if the registration statement is not declared effective by the Effectiveness Deadline, monetary penalties payable by the Company to each holder of registrable securities will commence to accrue and cumulate at a rate equal to one percent (1.0%)1.0% of the purchase price per share paid by such holder for the registrable securities for each full period of 30 days that (i) the Company is late in filing the registration statement or (ii) the registration statement is late in being declared effective by the SEC (which shall be pro-rated for any period less than 30 days); provided, however, that in no event shall the aggregate of any such penalties exceed ten percent (10%)10% of the purchase price per share paid by such holder for the registrable securities. Notwithstanding the foregoing, no payments shall be owed with respect to any period during which all of the holder’s registrable securities may be sold by such holder under Rule 144 or pursuant to another exemption from registration. Moreover, no such payments shall be due and payable with respect to any registrable securities we arethe Company is unable to register due to limits imposed by the SEC’s interpretation of Rule 415 under the Securities Act.Act of 1933, as amended (the “Securities Act”).

The Company has agreed to maintain the effectiveness of the registration statement through the earlier of second anniversary of the date the registration statement is declared effective by the SEC or until Rule 144 of the Securities Act is available to the holders to allow them to sell all of their registrable securities thereunder. The holders of any registrable securities removed from the registration statement as a result of any Rule 415 or other comments from the SEC shall have “piggyback” registration rights for the shares of common stock or common stock underlying such warrants with respect to any registration statement filed by us following the effectiveness of the registration statement which would permit the inclusion of these shares. As of SeptemberJune 30, 2012,2013, the Company has accrued a $38,000 for potential penalties related to the registration of the shares from the private stock sale.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Convertible Redeemable Preferred Stock

The authorized share capital of the Company includes 10,000,000 shares of Series A Convertible Redeemable Preferred Stock (“Preferred Stock”), issued April 6, 2012 with a par value of $0.001 per share.share, all 10,000,000 shares were outstanding at June 30, 2013. The holder of the Preferred Stock is entitled to receive, out of funds legally available therefor,the cumulative non-compounding preferential dividends at the rate of 12% non-cumulative of the stated value of $6.00 per share per year.year. No dividends may be declared or paid on the shares of common stock or any other capital stock of the Company so long as any shares of the Preferred Stock remain outstanding. As of SeptemberJune 30, 2012,2013, no dividends have been declared on the Preferred Stock. However, the Company has accrued dividends in arrears totaling $3,500,000$8,900,000 to the benefit of the Preferred Stock shareholders. The Preferred Stock has been designated to pay off the push down obligation which has been collateralized by assets of the Company. As money is distributed to the holder of the Preferred Stock either as a dividend or in redemption, it must be used to pay the interest and principle on the push down obligationobligations that isare reflected in the accompanying financial statements. The holders of the Preferred Stock have the option to redeem the Preferred Stock six months from the date of issuance or the date that the Company produces 25,000 ounces of gold, at any time prior to the third anniversary of issuance out of legally available funds. Under Delaware law, the board of directors has the discretion to determine, in good faith, whether there are sufficient legally available funds to make redemption. A surplus alone does not constitute legally available funds; the board of directors must determine if the funds available are sufficient to cover the redemption without making the Company insolvent. The contingency related to redemption has not been met because the redemption of the Preferred Stock would result in the insolvency of the Company. The Preferred Stock has been initially recorded as a deemed distribution at its estimated fair value of $8,009,150$13,656,708 based upon the discounted cash flows to be received by stock holders.

EASTERN RESOURCES, INC. AND SUBSIDIARIESholders as follows:

Notes to Consolidated Financial Statements (Unaudited)

The Preferred Stock redemption rights can be exercised by the stockholder the earlier of October 6, 2012 or with the production of 25,000 ounces of gold.  The redemption is not considered probable because the Company’s mines are on care and maintenance and redemption would place the Company in insolvency, which by state law is not permitted.   As of September 30, 2012 the Company did not adjust the carrying value for any changes in the redemption value because redemption is contingent on ore production and not probable until the Company secures additional funding.

Stock Option Plan

The Company's stockholders approved the 2012 Equity Incentive Plan (the “2012 Plan") on April 5, 2012 pursuant to which a total of 20,000,000 shares of common stock have been reserved for issuance to eligible employees, consultants, and directors of the Company. The 2012 Plan provides for awards of non-statutory stock options, incentive stock options, stock appreciation rights, performance share awards, and restrictive stock awards within the meaning of Section 422 of the IRC, of 1986, as amended and stock purchase rights to purchase shares of the Company's common stock.

The 2012 Plan is administered by the Board of Directors, which has the authority to select the individuals to whom awards will be granted and to determine whether and to what extent stock options and stock purchase rights are to be granted, the number of shares of common stock to be covered by each award, the vesting schedule of stock options, (generally straight line over a period of three years), and all other terms and conditions of each award. Stock options have a maximum term of ten years and incentive stock options have a maximum term of five years. It is the Company's practice to grant options to employees with exercise prices equal to or greater than the estimated fair market value of its common stock. The 2012 Plan shall terminate within ten years.

The fair value of each award is estimated on the date of grant.grant and recognized as expense over the service period which is generally the vesting period. Stock option values are estimated using the Black Scholes option valuation model, which requires the input of subjective assumptions, including the expected term of the option award, expected stock price volatility, and expected dividends. These estimates involve inherent uncertainties and the application of management judgment. For purposes of estimating the expected term of options granted, the Company aggregates option recipients into groups that have similar option exercise behavioral traits. Expected volatilities used in the valuation model are based on the average volatility of stock for three publicly traded companies determined to be in a similar industry and with the same market capitalization as the Company. The risk free rate for the expected term of the option is based on the United States Treasury yield curve in effect at the time of grant. The valuation model assumes no dividends. The forfeiture rate is 15%. During the periodsix months ended SeptemberJune 30, 2012,2013 the Company has recorded stock based compensation expense of $1,213,154$1,511,617, associated with stock options. As of SeptemberJune 30, 2012,2013, the Company has estimated approximately $6,730,000$5,345,851 of future compensation costs related to the unvested portions of outstanding stock options. options which is expected to be recognized over the next three years.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Stock based compensation related to common stock issued to a third party vendor, during 2012, in exchange for services of $536,913,was valued at $1,801,054, with no forfeiture rate, was included in general and administrative expenses in the statement of operations instock options vest over one year. During the ninesix months ended SeptemberJune 30, 2012.2013, the Company recorded $570,972, in consulting expense. As of SeptemberJune 30, 2012,2013, the Company has estimated approximately $536,000 ofno future general and administrative expense related to the unvested portions of outstanding stock options.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Stock option activity for the nineyear ended December 31, 2012 and the six months ended SeptemberJune 30, 20122013 was as follows:

The following table presents the composition of options outstanding and exercisable:

*Price and Life reflect the weighted average exercise price and weighted average remaining contractual life, respectively.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricingoption pricing model with the following weighted-average assumptions used:weighted average weighted assumptions:

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Warrants

The Company issued 750,000 warrants in connection with securing a convertible bridge loan. The agreement provides and exercise price of $2.00 which expires within 5 years of being exercised. The warrants were valued at $435,014 using the Black-Scholes option pricing model with the assumption of 118.00% volatility, of the risk free rate of 0.83% and no dividend yield.

The Company issued 50,000 warrants in connection with securing a convertible bridge loan. The agreement provides and exercise price of $2.00 which expires within 5 years of being exercised. The warrants were valued at $28,984 using the Black-Scholes option pricing model with the assumption of 118.00% volatility, of the risk free rate of 0.83% and no dividend yield.

The Company issued 100,000 warrants in connection with securing a convertible bridge loan. The agreement provides and exercise price of $2.00 which expires within 5 years of being exercised. The warrants were valued at $29,984 using the Black-Scholes option pricing model with the assumption of 118.00% volatility, of the risk free rate of 0.83% and no dividend yield.

The Company issued 50,000 warrants in connection with securing a convertible bridge loan. The agreement provides and exercise price of $2.00 which expires within 5 years of being exercised. The warrants were valued at $29,000 using the Black-Scholes option pricing model with the assumption of 118.00% volatility, of the risk free rate of 0.83% and no dividend yield.

The Company issued 315,000 warrants in consideration of marketing a private placement financing. The agreement provides and exercise price of $1.50 which expires if unexercised within 5 years. The warrants were valued at $306,568 using the Black-Scholes option pricing model with the assumption of 204.37% volatility, of the risk free rate of 0.73% and no dividend yield.

Note 9 - Related Party Transactions

During 2011, the Company entered into an ore purchase agreement (“Agreement”) with an affiliate of EGI to sell 80%A related party has funded $10,920,000 of the first 41,700MPRPA which entitles them to 36,148 of the 41,481 ounces of gold produced fromto be sold in accordance to the Golden Dream Mine for an up-front payment of $10,000,000 of consideration.(Note 5).MPRPA.

Upon the closing of the Merger, the Company entered into a management services agreement with Black Diamond Financial Group, LLC to provide certain management, financial and accounting services for $15,000 per month plus $200 per hour for each additional hour of service in excess of 125 hours to the Company. The management services agreement has an initial term of three years and may be extended thereafter for successive one-year terms. As of September 30, 2012 managementManagement fee expense was $90,000.

EASTERN RESOURCES, INC. AND SUBSIDIARIES$90,000 for the six months ended June 30, 2013 and is included in general and administrative expenses

Notes to Consolidated Financial Statements (Unaudited)During February 2012, the Company entered into convertible bridge loans with related parties totaling $1,800,000 due in August 2012. Because of the non-payment under the terms of the bridge loans, the bridge loans are considered in default and accruing interest at the default interest rate of 14%. (Note 6)

AsDuring 2013 and 2012, the Company entered into a series of Septemberpromissory notes with related parties for $519,800 and $577,260, respectively. The notes mature on November 30, 2013 and accrue interest at a rate of 6%. During 2012, there was $10,000 of related party payables included in accounts payable.promissory notes totaling $371,523 were paid. (Note 6)

Note 1110 - Commitments and Contingencies

Litigation

In the normal course of business, the Company is party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company.

Environmental Matters

The Company’s mining and exploration activities are subject to various 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 so as to protect the public health and 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. At SeptemberJune 30, 20122013 and December 31, 2011, approximately $23,850,0002012, $25,612,062 and $22,800,000,$24,640,321, respectively, werewas accrued for reclamation costs relating to currently producing mineral properties in accordance with asset retirement obligation guidance.

On May 24, 2010, the Environmental Protection Agency (“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 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 $377,500.  On November 04, 2011, the Company agreed to the EPA proposed amount of $377,500 but added a stipulation that the amount be payable over time depending upon the status of the Company’s operations.  The $377,500 settlement will be paid in 35 monthly installments of $2,500 and a final balloon payment of $292,500.

Property Taxes

The Company is not current with its 2012, 2011, 2010 and 2009 property and mining taxes. The total amount past due as of SeptemberJune 30, 20122013 and December 31, 20112012 is approximately $3,100,000$3,363,021 and $2,600,000,$3,228,136, respectively. The Company is in the process of assessing the implications of the unpaid property taxes.

On June 11, 2013, the Company entered into a Tax Payment Agreement with Jefferson County, Montana. The agreement outlined a quarterly payment schedule beginning on June 15, 2013. The payment schedule estimates a three year payoff of delinquent property and mining taxes.

EASTERN RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

Payroll Taxes

The Company is not current with its 2012 and 2013 payroll taxes. The total amount past due as of June 30, 2013 is approximately $111,000. The Company is in the process of assessing the implications of the unpaid payroll taxes.

Standstill Agreement

A standstill agreement with the secured lenders of the push-down debt and redemption obligation of the Parent and its affiliate (Note 7) was executed in May 2013. The standstill agreement prevents the lenders from exercising foreclosure rights against the Company through September 30, 2012 is approximately $168,000.2013. In consideration of the standstill agreement, the Company extended $1,000,000 of the MPRPA (Note 5) to the lender entitling them to 3,030 ounces.

Note 1211 – Subsequent Events

On October 30, 2012,During July 2013, the Company expanded its MPRPA bycompleted the closing on 200,000 units at $0.50 per unit for an additional $100,000. Pursuantaggregate of $200,000 in a private placement of up to 3,000,000 units.  Each unit consisted of one share of common stock and a warrant, representing the agreement,right to purchase one share of common stock, exercisable for a period of five (5) years from issuance, at an exercise price of $0.75 per share.  The shares of common stock contained in the ounces of gold payable underunits and underling 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. The percent of production that the MPRPA holder can purchase after the Golden Dream Mine has produced an initial 250,000 ounces has increased from 6.87% to 6.93% at a production cost of $600 per ounce paid to Elkhorn at delivery.warrants carry mandatory registration rights.

Statement Regarding Forward-Looking Information

This report contains forward-looking statements. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q 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.

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 (defined below), 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.

Background, General Overview and Recent Developments

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 SubCorp., 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 SubCorp., 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.corporation (collectively, the “Merger”). 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 our legacy film making business, Buzz Kill, Inc.

As the result of the Merger, and the change in business and operations of the Company to engaging in exploration and production activities in the precious metal industry,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 and unaudited financial statements and related notes and the other financial information included elsewhere in this Quarterly Report.

Stock Split

On May 8, 2012, we declaredGeneral 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, which has completed the permitting process, and, upon obtaining sufficient capital, will continue the process of installing required infrastructure. The Golden Dream Mine has developed the 650 foot underground access ramp to reach the upper levels of the ore body. A second Elkhorn property, the Montana Tunnels Mine, has completed permitting except for posting a 2 to 1 forward stock split on our Common Stock outstandingrequired reclamation bond. In addition, Elkhorn has several mineralized targets which are in the formexploration stage. The mineralized targets are the East Butte, Gold Hill/Mount Heagan, Carmody, and the expansion of a dividend,the previously operated Diamond Hill Mine. All the mines and properties are located in Jefferson County, Montana with a record datethe exception 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.Diamond Hill Mine which is in Broadwater County, Montana. Elkhorn maintains its principal executive office in Denver, Colorado.

Expansion of Minerals Product Receivables Purchase Agreement

On August 20,17, 2012, the Company entered into a letter of intent with a related party referenced above.Black Diamond Financial Group, LLC (“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 the related partyBlack 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 beproceeds received to date have been recognized as a refundable customer depositdeposits 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 described above. 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 proceeds received to date have been recognized as refundable customer deposits 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 Company expanded its current MPRPA by an additional $660,000.Amended and Restated MPRPA. The $660,000 payment has been recognized as a refundable customer deposit until the gold is sold. Pursuant to thethis 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. The percent of production that the MPRPA holder can purchase after the Golden Dream Mine has produced an initial 250,000 ounces has increased from 6.5% to 6.87% at a production cost of $600 per ounce paid to Elkhorn at delivery.

On October 30, 2012, an investor subscribed for $100,000 of gold output under the Company further expanded its MPRPA by an additional $100,000.Amended and Restated MPRPA.  Pursuant to thethis 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. The percent

In March, 2013, a related party investor subscribed for $920,000 of production thatgold output under the MPRPA holder can purchase after the Golden Dream Mine has produced an initial 250,000 ounces has increased from 6.87% to 6.93% at a production cost of $600 per ounce paid to Elkhorn at delivery.

To reflect these and previouscharges to the MPRPA, on October 18, 2012 we amended and restated the MPRPA. The Amended and Restated MPRPA will provide for an increase ofMPRPA.  Pursuant to this agreement, the ounces of gold payable under the existing MPRPA, which was last expanded on February 28, 2013, will be increased by 46,640an additional 2,788 ounces, from 35,663 ounces to a total of 80,00038,451 ounces.

In May 2013 (rather than in February as previously reported), we executed a standstill agreement with certain secured lenders of EGLLC.  The gold payable rate understandstill agreement prevents the Amended and Restated MPRPA will be reducedlenders from 80% to 50% with a production cost paid to EGI of $500 per ounce on delivery.  The tail, which is due after EGI’s 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 Elkhorn at delivery.   The forward saleexercising foreclosure rights against us through September 30, 2013.  In consideration of the additional 46,640standstill agreement, we extended $1,000,000 of the MPRPA to these secured lenders entitling them to 3,030 ounces of gold is projected to give us a cash infusion of $15,391,200under the MPRPA.

The Company has tested for impairment with a targeted closing date in the fourth quarter of 2012.gold prices at $1,100 and production costs at $625 per ounce and determined no impairment deemed necessary.

General Overview

Elkhorn Goldfields, Inc. (“EGI”) and Montana Tunnels Mining, Inc. (“MTMI”) (or combined 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.

Results from Operations

Three and ninesix months ended SeptemberJune 30, 20122013 as compared with the three and ninesix months ended SeptemberJune 30, 2011.2012.

Revenue from the Sale of Gold

Elkhorn had no revenues from the sale of gold from the Golden Dream Mine or the Montana Tunnels MineMines in 20122013 or 2011. In August, 2011, they did realize gross revenue of $573,942 from the sale of 874 tons of stockpile of rock from past mining (resulting in 303 oz. of gold) from the East Butte mine, part of the Golden Dream Mine properties. The related ore processing costs of $133,863 are included in general & administrative expense in 2011.2012.

Operating Expenses

General and administrative expense for the three and ninesix months ended SeptemberJune 30, 20122013 was $1,295,156$1,703,226 and $4,305,989$3,514,089, respectively, as compared to $262,319$2,579,357 and $883,864$3,010,833 for the three and ninesix months ended SeptemberJune 30, 2011.2012, respectively. In June, 2011,2012, development of the Golden Dream Mine commenced which resulted in the capitalization of payroll and related costs. As development of the Golden Dream Mine has been placed on care and maintenance temporarily halted in the second quarter of 2012, payroll and related costs are being expensed for the second and third quarters of 2012. Furthermore, generalGeneral and administrative expenses increased in 20122013 due to an increase in professional fees related to the Merger and compensation expense related to the employee stock option plan of $1,213,154,and stock options related to a corporate advisory agreement of $536,913 and marketing warrants of $306,568 issued in 2012. This is offset partially by ore processing costs in August 2011 from the sale of stockpiled ore from past mining included in general & administrative costs in 2011.agreement.

Accretion expense for the three and ninesix months ended SeptemberJune 30, 20122013 was $351,992$411,932 and $1,055,973$971,740, respectively, as compared to $307,843$340,741 and $1,069,461$703,981 for the three and ninesix months ended SeptemberJune 30, 2011. The decrease in 2012, as compared to 2011 is due to a reduction in accretion expense for reclamation of the L-Pit at Montana Tunnels Mine.respectively. Management re-evaluates annually the timing of the deferred site closure and reclamation costs related to the Montana Tunnels MiningMine mill and mine sites. They anticipateManagement anticipates that reclamation of the mineMontana Tunnels Mine and mill wouldwill be completed in 2024 which is extended2026, an extension of several years from previous estimates. Thisestimates, and of the EGI Golden Dream Mine, in 2019. The estimate extension is due to managementmanagement’s pursuing financing to commence development of the Montana Tunnels Mine M-Pit, which would extend the mine life by 9nine years. The total cost of reclamation is consistent with previous estimates,estimates; however, by extending the timeline, has reduced the related accretion expense.expense has been increased. Estimated future costs are discounted to their present value using a 6% discount rate for EGI and a 7.5% discount rate for MTMI. During the three months ended March 31, 2013, the Company adjusted the discount rate on EGI from 12% discount rate.to 6%.

Mine care and maintenance for the three and ninesix months ended SeptemberJune 30, 20122013 was $285,517$193,842 and $684,641$465,893, respectively, as compared to $196,078$299,434 and $641,643$399,124 for the three and ninesix months ended SeptemberJune 30, 2011.2012, respectively. The increase in mine care and maintenance was due to certain expenses that were capitalized as part of the development of the Golden Dream Mine in 20112012 and which are not being capitalized in 20122013 due to the Golden Dream Mine development beinghaving been put in care ofand maintenance starting in the second quarter of 2012.

Depreciation depletion and amortization expense for the three and ninesix months ended SeptemberJune 30, 20122013 was $0$7,920 and $2,082$9,237, respectively, as compared to $88$1,041 and $5,562$2,082 for the three and ninesix months ended SeptemberJune 30, 2011. Depreciation, depletion and amortization2012, respectively. With the exception of buildings, depreciation is calculated on the units of production basis over the remaining proven and probable reserves of the mine.reserves. Depreciation on buildings is calculated on a straight-line basis. Montana Tunnels Mine ceased mining during 2008 after completion of the L-Pit and completed milling of stockpiled ore during April 2009, atfollowing which time the mine was placed on care and maintenance. Accordingly, there was no depreciation expense related to Montana Tunnels Mine for the periods ended September 30, 2012 and 2011. Capitalized depreciation expense related to the development of the Golden Dream mineMine for the ninethree and six months ended SeptemberJune 30, 20122013 was zero, compared to $39,546 and 2011 was $78,678 for the three and $4,270six months ended June 30, 2012, respectively.

Total operating expenses for the three and ninesix months ended SeptemberJune 30, 20122013 was $1,932,665$2,316,920 and $6,048,685$4,960,959, respectively, as compared to $766,328$3,220,573 and $2,600,530$4,116,020 for the three and ninesix months ended SeptemberJune 30, 2011.

2012, respectively.

Other Income and Expense

Interest expense for the three and ninesix months ended SeptemberJune 30, 20122013 was $2,917,905$2,322,311 and $7,608,495$5,291,776, respectively, as compared to $2,020,861$825,963 and $6,062,583$4,690,590 for the three and ninesix months ended SeptemberJune 30, 2011.2012, respectively.

Interest income for the three and ninesix months ended SeptemberJune 30, 20122013 was $8,637 and$48,613$29,396 and $29,450, respectively, as compared to $59$40,040 and $47,608$39,976 for the three and ninesix months ended SeptemberJune 30, 2011.2012, respectively. Interest income is earned from restricted cash held directly by a surety in the form of certificates of deposit related to reclamation obligations. Interest income earned throughout the year is remitted to the Company in the fourth quarter of each calendar year.

Amortization of debt discountLoss on ore purchase derivatives for the three and ninesix months ended SeptemberJune 30, 20122013 was $568,333$2,034,196 and $568,333$3,905,504, respectively, as compared to $0 and $0zero for the three and ninesix months ended SeptemberJune 30, 2011. The amortization of debt discount in 2012 reflects expensing the remaining deferred financing from push down debt.

Loss on ore purchase derivative for the three and nine months ended September 30, 2012 was $1,407,694 and $1,407,694 as compared to $0 and $13,025,932 for the three and nine months ended September 30, 2011. The2012. This loss relates to the MPRPA as the Company recognized the difference in theembedded derivative fair value based on the price of gold at the MPRPA agreement date and the contract price of gold in the agreement. agreement in addition to the estimated production timing.

The change in fair value of the embedded derivative for the three and ninesix months ended SeptemberJune 30, 20122013 was $2,095,776$11,786,319 and $2,507,840$13,235,632, respectively, as compared to $1,489,960($127,841) and $4,216,849($412,064) for the three and ninesix months ended SeptemberJune 30, 2011.2012, respectively. The lossgain relates to the change in the fair value of theprojected future gold prices garnered from GCJ2 combined commodity future pricesfutures of the MPRPA fromfor the date of closing to Septemberthree and six months ended June 30, 20122013 and SeptemberJune 30, 2011,2012, respectively, to reflect the loss in the change in fair value of the derivative instrument.

Gain on valuation of warrant liability for the three and six months ended June 30, 2013 was $11,705 and $141,543, respectively, as compared to zero for the three and six months ended June 30, 2012. This gain relates to the recognition of a change in fair value on the warrants issued in 2012 in connection with the private placement; the change in value is due to the decrease in stock price.

Going Concern

As reflected in our financial statements for the quarter ended September 30, 2012, we have generatedOur significant debt obligations and cumulative losses andcreate substantial doubt exists about our ability to continue as a going concern. This means that there is substantial doubt that wethe Company can continue as an on-going business for the next twelve months unless we obtain additional capital to pay for development and operations. We believe that the completioneither the consummation of a proposed $8.5 million private placement or completed forward sale of gold under the expanded MPRPA will be sufficient to get us toprovide this additional capital. This capital would put the Company in a point whereposition that would enable the Golden Dream Mine willto begin extracting and selling mineral and providing sufficientminerals. We believe that revenues so generated from the Golden Dream Mine would generate cash flow sufficient for operations of that mine, forthe Golden Dream Mine, care and maintenance of the Montana Tunnels Mine and to cover other general and administrative expenses; however, because weexpenses and payment of debt obligations. We have not generated revenues since the Montana Tunnels Mine shuttereddiscontinued mining in 2008 and there is no assurance we will ever reach that point. Also, we believe we will be successful in our capital raising efforts; however,Additionally, there can be no assurance we will be successful in raising additional debt or equity financing or further expand the MPRPA, to fund our operations on terms agreeable to us.

Failure to reach our capital targets could adversely affect our ability to continue in operation.

Liquidity and Capital Resources

Overview

We have 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 the Montana Tunnels Mine, we plan to raise $38.5up to $200 million in additional capital in 2012 and 2013, which will be deployed in two stages from Q4, 2012 thru Q2, 2014.2013. We believe that raising the additional capital will allow the Golden Dream Mine to be in full production inreach a productive status during the second Quarterthird quarter of 20132014 and for the Montana Tunnels Mine to be at or near commercial production sometime induring the fourththird quarter of 2014.2015.

During Stage 1 (Q4, 2012 and Q1, 2013), weWe expect to invest $8.5 million of capital to enable the continuedrecommencement of development of the Golden Dream Mine focusing on the continued development of the primary access ramp into the main ore body to complete a raise bore tunnel as a secondary egress and escape way and to refurbishduring the Diamond Hill mill at MTMI’s site, readying it for production for ores from the Golden Dream Mine.

During Stage 2 (beginning in Q2 2013 through Q2 2014), weearly months of 2014. We expect to invest an additional $30$140 million ofin capital and pre-production development to move forwardbring the “M” Pit expansion at the Montana Tunnels Mine “M” Pit expansion plan.

As additional equipment and financing becomes available in 2013, we plan to double the size of the MTMI earth moving fleet with the goal of removing four (4) million tons of waste rock per month. Our plan is to complete the Montana Tunnels Mine development and full mill start up by the second or third quarter of 2014.

into commercial production.

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.

LiabilitiesCash

At SeptemberJune 30, 2012 we2013, the Company had liabilitiescash of $119,393,796$30,123, compared to liabilitiescash of $103,259,388$113,505 at December 31, 2011. Total current liabilities were $72,810,157 at September2012.

Discussion of changes in cash flows for the six months ended June 30, 20122013 as compared to $61,607,537 at December 31, 2011.the six months ended June 30, 2012.

Cash used in operating activities was $436,399 for the six months ended June 30, 2013 as compared to cash used in operating activities of $595,541 for the six months ended June 30, 2012. The increasecash used in operating activities for the six months ended June 30, 2013 was attributable to net loss of $1,784,729, non-cash charges of ($290,515) and net increases in operating assets and liabilities from December 31, 2011 to Septemberof $1,638,845. The cash used in operating activities for the six months ended June 30, 2012 iswas attributable to an increasenet loss of $9,168,177, non-cash charges of $6,660,475 and net increases in push down debt, interestoperating assets and the redeemable obligationliabilities of EGLLC$1,912,161. The impact of changes in operating assets and its affiliate of $5,647,558, the addition of $1,900,000liabilities may change in bridge loans, the addition of $432,260 of promissory notes, the increase in reclamation liability of $1,055,973 and the increase in the embedded derivative basedfuture periods, depending on the contract terms, projected future gold pricestiming of each period end in relation 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 rate commensurate with estimates of contemporary credit risk using a discounted cash flow model as it relates to the MPRPA of $3,915,534. The remainder of the increase is from an increase in accounts payablesamortization, accretion expense, losses on and accrued liabilities of $3,197,923.

 The refundable customer deposit, ore purchase agreement liability under the MPRPA is comprised of $10,660,000 of up-front consideration, a recognized loss of $1,407,694 as of September 30, 2012 and $13,025,932 as of December 31, 2011 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 changechanges in fair value of the embeddedore purchase derivative, of $8,300,853 is a reflection of the change in the fair value of the derivative instrument contract from the date of closing to September 30, 2012. The change in fair value of the derivative instrument contract from December 31, 2011 to September 30, 2012 was $2,507,840.

Our assets serve as collateral for multiple loans and a redemption obligation of EGLLC and MFPI*. Although we are not a maker or guarantor on the secured loans or redemption obligation, these loans and obligation have been “pushed down” to us as reflected in our 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 Financial Group LLC (“Black Diamond”). Our 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 September 30, 2012 and December 31, 2011, the outstanding principalstock based compensation, and interest on these loans was $51,990,850 and $46,343,292, respectively.the push-down debt of EGLLC.

EGI also owes $919,779Cash used in Series A 8% bonds. The bonds mature during July 2012, with interest accruing at 8%. Ininvesting activities was $52,843 for the case of default, interest on the bonds accrues at 12%. The Company recorded accrued interest of $182,003 as of Septembersix months ended June 30, 2012 and $106,358 as of December 31, 2011. The loans are currently in default and due on demand.

During 2012, the Company entered into a series of promissory notes with related parties for a total of $432,260. The notes mature on September 30, 2012 and accrue interest at a rate of 6%. The maturity dates of the notes have been extended to May 2013. During October, 2012, promissory notes totaling $107,060 were paid in full.

Cash; Funds Raised

Our consolidated cash and cash equivalents balance at September 30, 2012 was $579,8552013 as compared to $358,125 at December 31, 2011.

In February 2012, EGI entered into three convertible bridge loans with related parties totaling $1,800,000.  The loans are unsecured and callcash used in investing activities of $1,248,890 for 12% annual interest on the outstanding unpaid principal and mature on August 29, 2012.  The Company did not make the required payments due under the terms of the convertible bridge loans which resulted in an event of default.

In April, 2012, EGI entered into an additional bridge loan with an unrelated party for $100,000.  This loan is unsecured, has an annual interest rate of 12% on the outstanding, unpaid principal and matures in October, 2012.  Subsequent to September 30, 2012 the Company did not make the required payments due under the terms of the bridge loan which resulted in an event of default.

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

On September 6, 2012, we issued a short term unsecured 6% promissory note due September 30, 2012 to Black Diamond Holdings, LLC (“BDH”), in the principal amount of $150,000. The maturity date on this note was extended to May 31, 2013.

During the third quarter of 2012, EGI entered into a series of promissory notes with related parties raising a total of $267,260. 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 October, 2012, EGI promissory notes totaling $107,060 were repaid in full.

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

On August 13, 2012, EGI entered into a binding letter of intent with Black Diamond, the Manager of BDH, agreeing to the expansion of the existingMinerals Product Receivables Purchase Agreement (the “MPRPA”) between EGI and BDH. The revised MPRPA will provide for an increase of ounces of gold payable by 38,000 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 EGI of $500 per ounce on delivery.  The tail, which is due after EGI’s 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 Elkhorn at delivery.   The forward sale of the additional 38,000 ounces of gold is projected to give us a cash infusion of $12,500,000 with a targeted closing date of September 30, 2012. There can be no assurances, however, that EGI will be ableCash used in investing activities for the six months ended June 30, 2013 and 2012 was used to sell all of the additional ounces of gold under the amended MPRPA.

* “MFPI” - MFPI Partners, LLC, a Delaware limited liability Company whose sole members are Michael Feinberg and Patrick Imeson.

During September 2012, the Company received an up-front payment of $660,000, from an unrelated party, expanding the MPRPA. Pursuant to the 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. The percent of production that the MPRPA holder can purchase afterdevelop the Golden Dream Mine, has produced an initial 250,000 ounces has increased from 6.5%purchase mining equipment and fund additional bonding requirements related to 6.87% at a production cost of $600 per ounce paid to Elkhorn at delivery.

We will need, and we intend, to raise additional capital to provide financing for our ongoing operations and the operations of our two mining subsidiaries MTMI and EGI, to execute our business plan, build our operations and become profitable. Also, we will need to obtain additional capital to maintain our public company regulatory requirements. In order to obtain capital, we will need to sell additional shares of our common stock or debt securities, or borrow funds from private lenders or banking institutions. There can be no assurance that we will be successful in obtaining additional funding in amounts or on terms acceptable to us, if at all. If we are unable to raise additional funding as necessary, we may have to suspend our operations temporarily or cease operations entirely.

Subsequent Event

During October 30, 2012, the Company expanded its MPRPA by an additional $100,000. Pursuant to the 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. The percent of production that the MPRPA holder can purchase after the Golden Dream Mine has produced an initial 250,000 ounces has increasedMine.

Cash provided by financing activities was $405,860 for the six months ended June 30, 2013 as compared to cash provided by financing activities of $1,533,580 for the six months ended June 30, 2012. Cash provided by financing activities for the six months ended June 30, 2013 included proceeds from 6.87%the issuance of debt of $519,800, payments on debt of $100,000, and payments on capital lease obligations of $13,940. Cash provided by financing activities for the six months ended June 30, 2012 included proceeds from the issuance of debt of $1,910,000, proceeds from the sale of common stock of $380,000, payments on debt of $480,000, payments on capital lease obligations of $176,420, and distributions to 6.93% at a production costshareholders of $600 per ounce paid to Elkhorn at delivery.

$100,000.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Not applicable.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act of 1934 (the “Exchange Act”) is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

The management of Eastern Resources, Inc. is responsible for establishing and maintaining an adequate system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act. Under the supervision and with the participation of our senior management, consisting of Thomas H. Hanna, Jr.,including our then-ChiefChief Executive Officer and our Chief Financial Officer, ESRI conductedwe performed an evaluation of the effectiveness of the design and operation of itsour disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2012, the end of the period covered by this quarterly report (the “Evaluation Date”). Based on this evaluation, ESRI’s then-chief executiveour Chief Executive Officer and chief financial officerour Chief Financial Officer concluded that, as of the Evaluation Date, that ESRI’sJune 30, 2013, our disclosure controls and procedures were not effective because of the identification of a material weakness in ESRI’s internal control over financial reporting which is identified below.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally acceptedthat material information required to be disclosed by us in the United States. Because of its inherent limitations, internal controlreports filed or submitted by us under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. Management’s Report on Internal Control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. In evaluatingFinancial Reporting in our Annual Report on Form 10-K for the effectiveness of ESRI’s internal control over financial reporting, ESRI’s management usedyear ended December 31, 2012, discloses the criteria set forth by the Committee of Sponsoring Organizationsmaterial weaknesses of the Treadway Commission (COSO) inInternal Control—Integrated Framework. Based on this evaluation, ESRI’s then-sole officer concluded that, during the period covered by this quarterly report, ESRI’s internal controls over financial reporting were not operating effectively. Management did not identify any material weaknesses in its internal control over financial reporting as of September 30, 2012; however, it did identify the following deficiencies that, when aggregated, may possibly be viewed as a material weakness in ESRI’s internal control over financial reporting as of that date:

Management believes that the material weakness set forth in the item above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our Board of Directors resulted in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods. 

Management's Remediation InitiativesCompany.

The material weaknesses identified above reflect ESRI’s managementCompany does not have controls in place to insure that legal agreements are read and control profile priorassessed to determine that the closing ofappropriate financial statement ramifications and disclosures are presented in the Merger. Following the closing of the Merger, we now have a segregation of duties at the executive level with a new chief executive officerCompany’s financial statements and a chief financial officer with technical accounting experience. We also have a number of employees supporting these executive functions. Additionally, our Board of Directors is now comprised of four members, one of whom we have determined is independent.notes thereto.