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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Washington, D.C. 20549</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 12pt"><B>FORM 8-K</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CURRENT REPORT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Date of Report (Date of earliest event reported):&nbsp;&nbsp;April
6, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EASTERN RESOURCES, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact name of registrant as specified in
its charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 36%; font-weight: bold; text-align: center">Delaware</TD>
    <TD STYLE="width: 30%; font-weight: bold; text-align: center">333-149850</TD>
    <TD STYLE="width: 34%; font-weight: bold; text-align: center">45-0582098</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(State or Other Jurisdiction</TD>
    <TD STYLE="text-align: center">(Commission File</TD>
    <TD STYLE="text-align: center">(I.R.S. Employer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">of Incorporation)</TD>
    <TD STYLE="text-align: center">Number)</TD>
    <TD STYLE="text-align: center">Identification Number)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>1610 Wynkoop Street, Suite 400</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Denver, CO 80202</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address of principal executive offices,
including zip code)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(303) 893-2334</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Registrant&rsquo;s telephone number, including
area code)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Copy to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Adam S. Gottbetter, Esq.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Gottbetter &amp; Partners, LLP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">488 Madison Avenue, 12th Floor</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">New York, NY&nbsp;&nbsp;10022</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Phone:&nbsp;&nbsp;(212) 400-6900</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Facsimile:&nbsp;&nbsp;(212) 400-6901</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>166 East 34th Street, Suite 18K</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, NY 10016</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Former name or former address, if changed
since last report)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions
(see General Instruction A.2. below):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Wingdings">&uml;</FONT>
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Wingdings">&uml;</FONT>
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Wingdings">&uml;</FONT>
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-family: Wingdings">&uml;</FONT>
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Table of Contents</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<TR STYLE="background-color: rgb(204,255,204)">
    <TD COLSPAN="2" STYLE="vertical-align: top">Forward-Looking Statements</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">3</TD></TR>
<TR STYLE="background-color: White">
    <TD COLSPAN="2" STYLE="vertical-align: top">Explanatory Note</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">5</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="width: 15%; vertical-align: top">Item 1.01</TD>
    <TD STYLE="width: 76%; vertical-align: top">Entry into a Material Definitive Agreement</TD>
    <TD STYLE="width: 1%; vertical-align: top">&nbsp;</TD>
    <TD STYLE="width: 8%; vertical-align: bottom; text-align: right">5</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">Item 2.01</TD>
    <TD STYLE="vertical-align: top">Completion of Acquisition or Disposition of Assets</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">6</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">The Merger and Related Transactions</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">6</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Description of Business</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">12</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Description of Properties</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">37</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Risk Factors</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">39</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 13.75pt; text-indent: -13.75pt">Management&rsquo;s Discussion and Analysis of Financial Condition and Plan of Operations</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">55</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 9pt; text-indent: -9pt">Security Ownership of Certain Beneficial Owners and Management</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">67</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Directors, Executive Officers, Promoters and Control Persons</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">69</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Executive Compensation</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">75</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Summary Compensation Table</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">75</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Certain Relationships and Related Transactions</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">77</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 13.75pt; text-indent: -13.75pt">Market Price of and Dividends on Common Equity and Related Stockholder Matters</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">81</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Dividend Policy</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">81</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Description of Securities</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">84</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Legal Proceedings</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">86</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">Indemnification of Directors and Officers</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">86</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">Item 3.02</TD>
    <TD STYLE="vertical-align: top">Unregistered Sales of Equity Securities</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">87</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top">Item 5.01</TD>
    <TD STYLE="vertical-align: top">Changes in Control of Registrant</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">88</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">Item 5.02</TD>
    <TD STYLE="vertical-align: top; padding-left: 13.75pt; text-indent: -13.75pt">Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">88</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top">Item 9.01</TD>
    <TD STYLE="vertical-align: top">Financial Statements and Exhibits</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">88</TD></TR>
<TR STYLE="background-color: White">
    <TD COLSPAN="2" STYLE="vertical-align: top">Glossary of Relevant Mining Terms&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,255,204)">
    <TD STYLE="vertical-align: top">Signatures</TD>
    <TD STYLE="vertical-align: top; padding-left: 9pt; text-indent: -9pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORWARD-LOOKING STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This Current Report contains forward-looking
statements, including, without limitation, in the sections captioned &ldquo;Description of Business,&rdquo; &ldquo;Risk Factors,&rdquo;
and &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Plan of Operations,&rdquo; and elsewhere. Any
and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements.
Terms such as &ldquo;may,&rdquo; &ldquo;might,&rdquo; &ldquo;would,&rdquo; &ldquo;should,&rdquo; &ldquo;could,&rdquo; &ldquo;project,&rdquo;
&ldquo;estimate,&rdquo; &ldquo;pro-forma,&rdquo; &ldquo;predict,&rdquo; &ldquo;potential,&rdquo; &ldquo;strategy,&rdquo; &ldquo;anticipate,&rdquo;
&ldquo;attempt,&rdquo; &ldquo;develop,&rdquo; &ldquo;plan,&rdquo; &ldquo;help,&rdquo; &ldquo;believe,&rdquo; &ldquo;continue,&rdquo;
&ldquo;intend,&rdquo; &ldquo;expect,&rdquo; &ldquo;future,&rdquo; and terms of similar import (including the negative of any of
the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain
one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding
(i) the plans and objectives of management for future operations, including plans or objectives relating to exploration programs,
(ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends,
capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a
discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and
regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii)
above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition to the specific statements
referenced above and the factors identified under &ldquo;<B>Item 1A. Risk Factors</B>&rdquo; in this Current Report below, other
uncertainties that could affect the accuracy of our forward-looking statements include:</P>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">The effect of government regulations on our business;</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Our ability to secure additional capital;</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Unexpected changes in business and economic conditions, including the rate of inflation;</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Changes in interest rates and currency exchange rates;</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Timing and amount of production, if any;</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Technological changes in the mining industry;</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Our costs;</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Changes in exploration and overhead costs;</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Access and availability of materials, equipment, supplies, labor and supervision, power and water;</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Results of current and future feasibility studies;</TD></TR></TABLE>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">The level of demand for our products;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Changes in our business strategy, plans and goals;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Interpretation of drill hole results and the geology, grade and continuity of mineralization;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">The uncertainty of mineralized material estimates and timing of development expenditures;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Commodity price fluctuations;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Operational and environmental risks associated with the mining industry; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Lack of clear title to some of our mineral prospects.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The forward-looking statements are not
meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based
upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of
risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events
and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties.
Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ
materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, insufficient
cash flows and resulting illiquidity, our inability to expand our business, government regulations, lack of diversification, volatility
in the price of gold, zinc, silver, lead and copper, increased competition, results of arbitration and litigation, stock volatility
and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties
that could cause our actual results to differ materially from those described by the forward-looking statements in this Report
appears in the section captioned &ldquo;Risk Factors&rdquo; and elsewhere in this Report.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Readers are cautioned not to place undue
reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim
any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events
or circumstances or otherwise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Readers should read this Report in conjunction
with the discussion under the caption &ldquo;Risk Factors,&rdquo; our financial statements and the related notes thereto in this
Report, and other documents which we may file from time to time with the Securities and Exchange Commission (the &ldquo;SEC&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXPLANATORY NOTE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We were incorporated as Eastern Resources,
Inc., in Delaware on March 15, 2007.&nbsp;&nbsp;Prior to the Merger (as defined below), our business was to engage in the acquisition,
production and distribution of independent films.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As used in this Current Report, unless
otherwise stated or the context clearly indicates otherwise, the term &ldquo;ESRI&rdquo; refers to Eastern Resources, Inc., before
giving effect to the Merger, the term &ldquo;MTMI&rdquo; refers to Montana Tunnels Mining, Inc., a Delaware corporation, the term
&ldquo;EGI&rdquo; refers to Elkhorn Goldfields, Inc., a Montana corporation, and the terms &ldquo;Company,&rdquo; &ldquo;we,&rdquo;
&ldquo;us,&rdquo; and &ldquo;our&rdquo; refer to Eastern Resources, Inc., and its wholly-owned subsidiaries, including MTMI and
EGI, after giving effect to the Merger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 6, 2012, (i) MTMI Acquisition
Corp., a Delaware corporation formed on February 27, 2012 and a wholly-owned subsidiary of ESRI (&ldquo;MTMI Acquisition Sub&rdquo;),
merged with and into MTMI, a wholly-owned subsidiary of Elkhorn Goldfields LLC, a Delaware limited liability company (&ldquo;EGLLC&rdquo;),
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 (&ldquo;EGI Acquisition Sub&rdquo;), merged with and into EGI, a wholly-owned subsidiary of EGLLC,
with EGI as the surviving corporation (collectively, the &ldquo;Merger&rdquo;). As a result of the Merger and the Split-Off (as
defined below), ESRI discontinued its pre-Merger business and acquired the business of MTMI and EGI, and will continue the existing
business operations of MTMI and EGI as a publicly-traded company under the name Eastern Resources, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This Current Report contains summaries
of the material terms of various agreements executed in connection with the transactions described herein. The summaries of these
agreements are subject to, and are qualified in their entirety by, reference to these agreements, all of which are incorporated
herein by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This Current Report is being filed in connection
with a series of transactions consummated by the Company and certain related events and actions taken by the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This Current Report responds to the following Items in Form
8-K:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 7%">&nbsp;</TD>
    <TD STYLE="width: 9%">Item 1.01</TD>
    <TD STYLE="width: 84%">Entry into a Material Definitive Agreement</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 7%">&nbsp;</TD>
    <TD STYLE="width: 9%">Item 2.01</TD>
    <TD STYLE="width: 84%">Completion of Acquisition or Disposition of Assets</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>Item 3.02</TD>
    <TD>Unregistered Sales of Equity Securities</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 7%">&nbsp;</TD>
    <TD STYLE="width: 9%">Item 5.01</TD>
    <TD STYLE="width: 84%">Changes in Control of Registrant</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 7%">&nbsp;</TD>
    <TD STYLE="width: 9%">Item 5.02</TD>
    <TD STYLE="width: 84%">Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 7%">&nbsp;</TD>
    <TD STYLE="width: 9%">Item 9.01</TD>
    <TD STYLE="width: 84%">Financial Statements and Exhibits</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 1.01&nbsp;Entry into a Material Definitive Agreement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 6, 2012, ESRI, MTMI Acquisition
Sub, EGI Acquisition Sub, MTMI, EGI and EGLLC entered into an Agreement and Plan of Merger and Reorganization (the &ldquo;Merger
Agreement&rdquo;), which closed on the same date.&nbsp;&nbsp;Pursuant to the terms of the Merger Agreement, (i) MTMI Acquisition
Sub merged with and into MTMI with MTMI as the surviving corporation and (ii) EGI Acquisition Sub merged with and into EGI with
EGI as the surviving corporation. MTMI and EGI became wholly-owned subsidiaries of ESRI. For a description of the Merger and the
material agreements entered into in connection with the Merger, see the disclosures set forth in Item 2.01 to this Current Report,
which disclosures are incorporated into this Item by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 2.01&nbsp;Completion of Acquisition or Disposition of
Assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>THE MERGER AND RELATED TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Merger Agreement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 6, 2012, ESRI, MTMI Acquisition
Sub, EGI Acquisition Sub, MTMI, EGI and EGLLC entered into the Merger Agreement, which closed on the same date, and pursuant to
which (i) MTMI Acquisition Sub merged with and into MTMI with MTMI as the surviving corporation and (ii) EGI Acquisition Sub merged
with and into EGI with EGI as the surviving corporation. MTMI and EGI became wholly-owned subsidiaries of ESRI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the Merger, we ceased to engage
in the acquisition, production and distribution of independent films and acquired the business of MTMI and EGI to engage in exploration
and production activities in the precious metals mining industry, as a publicly-traded company under the name Eastern Resources,
Inc.&nbsp;&nbsp;See &ldquo;Split-Off&rdquo; below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At the closing of the Merger, (i) each
of the 100 shares of MTMI&rsquo;s common stock issued and outstanding immediately prior to the closing of the Merger was converted
into 45,000,000 shares of common stock, par value $0.001 per share (&ldquo;Common Stock&rdquo;), and 5,000,000 shares of Series
A preferred stock, par value $0.001 per share (&ldquo;Series A Preferred Stock&rdquo; and, together with the Common Stock, the
&ldquo;Capital Stock&rdquo;), of the Company and (ii) each of the 100 shares of EGI&rsquo;s common stock issued and outstanding
immediately prior to the closing of the Merger was converted into 45,000,000 shares of Common Stock and 5,000,000 shares of Series
A Preferred Stock. As a result, an aggregate of 90,000,000 shares of our Common Stock 10,000,000 shares of our Series A Preferred
Stock were issued to EGLLC, as the sole stockholder of each of MTMI and EGI. MTMI and EGI did not have any stock options or warrants
to purchase shares of their capital stock outstanding at the time of the Merger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Merger Agreement contained customary
representations and warranties and pre- and post-closing covenants of each party and customary closing conditions. Breaches of
the representations and warranties will be subject to customary indemnification provisions, subject to specified aggregate limits
of liability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Merger will be treated as a recapitalization
of the Company for financial accounting purposes. MTMI and EGI will be considered the acquirers for accounting purposes, and the
historical financial statements of ESRI before the Merger will be replaced with the historical combined financial statements of
MTMI and EGI before the Merger in all future filings with the SEC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The parties have taken all actions necessary
to ensure that the Merger is treated as a tax-free exchange under Section 368(a) of the Internal Revenue Code of 1986, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The issuance of shares of Common Stock
and Series A Preferred Stock to holders of MTMI&rsquo;s and EGI&rsquo;s capital stock in connection with the Merger was not registered
under the Securities Act of 1933, as amended (the &ldquo;Securities Act&rdquo;), in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and
Regulation D promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Merger Related Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At the closing of the Merger, Dylan Hundley,
a holder of 5,751,000 shares of our Common Stock prior to the Merger, surrendered to us for cancellation all of her shares. Ms.
Hundley agreed to the surrender of her shares to enhance our ability to complete the Merger and the Split-Off (discussed below).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Also at the closing of the Merger, holders
of approximately $270,000 of ESRI convertible promissory notes surrendered these notes to ESRI for cancellation. These note holders
agreed to release ESRI from any obligations to them relating to the notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Tri-Party Agreement; Security Interest in MTMI and EGI Assets;
and Pledge of Series A Preferred Stock </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From time to time between 2006 and 2009,
EGLLC and MFPI Partners, LLC, a Delaware limited liability company whose sole members are Michael Feinberg and Patrick Imeson (&ldquo;MFPI&rdquo;),
raised approximately $6,000,000 and $13,000,000, respectively, through the sale of promissory notes to certain investors (the &ldquo;Secured
Lenders&rdquo;). The notes issued by EGLLC included a $5,000,000 secured note issued in 2006 and a $1,000,000 secured bridge note
issued in 2009 and subsequently repaid in April, 2011. The $5,000,000 secured note was revised in May of 2009 to include accrued
interest. The revised note is in the principal amount of $5,800,000. The notes issued by MFPI included an $8,000,000 note issued
in 2007 and a $5,000,000 note issued in 2008. The MFPI notes were revised in May of 2009 to include accrued interest. The revised
notes are in the principal amounts of $9,700,000 and $6,100,000 respectively. During that time, EGLLC raised an additional $16,500,000
from the sale of unsecured bonds issued at a 40% discount to face value to certain investors, including MFPI, which invested $8,000,000
in the unsecured EGLLC bonds from the proceeds of the $13,000,000 it borrowed from the Secured Lenders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">EGLLC used $5,000,000 from the 2006 notes
to purchase a loan and mortgage on property owned by an unrelated mining company and used $14,250,000 of the $16,500,000 in proceeds
from the issuance of the unsecured bonds to complete a joint venture with Apollo Gold, Inc. that entitled EGLLC to 50% of the assets
and distributions of Montana Tunnels Mine &ndash; See Description of Business for additional information. In October 2009, EGLLC
paid $250,000 in cash and in February 2010 assigned that loan and mortgage on the property owned by the unrelated mining company
to Apollo Gold, Inc. for 100% ownership in MTMI (owner of Montana Tunnels Mine) and, concurrently with the closing of that payment
and assignment, EGLLC and Apollo dissolved their joint venture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2009, as a condition to the additional
$1,000,000 bridge loan (that was subsequently repaid) from the Secured Lenders to EGLLC and as an inducement for the Secured Lenders
to stand still regarding an event of default on the part of EGLLC, (i) the $5,000,000 secured notes issued by EGLLC, (ii) the $8,000,000
loan to MFPI to purchase the unsecured bonds, (iii) a $5,000,000 loan to MFPI whose proceeds were used to make an unrelated investment<SUP>1</SUP>
and (iv) a redemption right allowing the Secured Lenders to obligate MFPI to purchase from the Secured Lenders a $5,950,000 equity
investment made in one of the investment funds that is an owner of EGLLC and is managed by Black Diamond have been included under
a security agreement with the Secured Lenders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 9pt"><SUP>1</SUP></TD><TD STYLE="text-align: justify">MFPI invested $5,000,000 in Global VR, Inc. a private company managed by Black Diamond Holdings, LLC, which is managed by Patrick
Imeson and Eric Altman, principals of the Company</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Currently, the notes and rights secured
by the Company&rsquo;s assets include (i) approximately $21,600,000 in principal amount of notes, including the $5,800,000 issued
by EGLLC in 2006, $9,700,000 issued by MFPI in 2007 and $6,100,000 issued by MFPI in 2008, plus accrued and unpaid interest thereon
through May 2009, and (ii) the redemption rights on the Secured Lenders&rsquo; $5,950,000 equity investment in EGLLC. The approximate
amount of principal, accrued but unpaid interest and redemption rights as of December 31, 2011 was approximately $46,350,000. The
notes and rights have been secured by two first lien mortgages on all of the property and assets of EGI and MTMI. Under the terms
of these mortgages, the administrative agent representing the Secured Lenders was required to consent to the transfer by EGLLC
to ESRI of the capital stock of EGI and MTMI. Pursuant to the terms of a tri-party agreement by and among the Company, EGLLC and
the administrative agent dated as of the Merger closing date, the administrative agent consented to this transfer and ESRI acknowledged
and agreed to cause EGI and MTMI to perform and keep all the covenants and obligations set forth in the two mortgages.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Additionally, because certain of the secured
notes were in default prior to the Merger closing date, the administrative agent required that EGLLC and MFPI enter into a loan
reinstatement and modification agreement, effective as of the Merger closing date, pursuant to which EGLLC agreed to pledge, in
accordance with the terms of a separate pledge agreement, to the Secured Lenders all of its interest in the Series A Preferred
Stock. Under the tri-party agreement, the Company acknowledged and agreed to treat the administrative agent as the owner and holder
of the Series A Preferred Stock upon notice from the administrative agent of a default by EGLLC under the pledge agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the Merger Agreement, EGLLC has covenanted
that, for so long as any of its payment obligations under the loan restatement and modification agreement remain outstanding, EGLLC
will designate all proceeds derived from the Series A Preferred Stock, including from preferential dividends that may be paid on
this stock, to repay principal and interest due on the secured loans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each of the tri-party agreement, loan reinstatement
and modification agreement and pledge agreement has been filed as Exhibit 10.4, 10.3, and 10.5, respectively, <FONT STYLE="color: black">to
this Current Report and is incorporated herein by reference.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>The EGI Bridge Financing</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Prior to the closing of the Merger, EGI
completed a number of closings of a bridge financing with Black Diamond Holdings<B> </B>LLC (&ldquo;BDH&rdquo;), our beneficial
stockholder through holdings in EGLLC, and another investor. In this bridge financing, EGI sold an aggregate of $300,000 in principal
amount of its 12% unsecured convertible bridge notes (the &ldquo;Bridge Notes&rdquo;) to BDH and $1,500,000 in principal amount
of these Bridge Notes to the other investor. The Bridge Notes mature on August 29, 2012 and, prior to that date but after the closing
of the Merger, may be converted, at the sole discretion of each of the note holders, including accrued but unpaid interest, into
units of the Company&rsquo;s securities (the &ldquo;Units&rdquo;) at a conversion price of $2.00 per Unit, each Unit consisting
of: (i) one share of Common Stock, (ii) and a five year warrant to purchase one-half share of Common Stock, exercisable at a price
of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing of the Company&rsquo;s planned private placement,
provided the share price of the Common Stock offered in the private placement is less than $2.50 per share, so that the exercise
of the special warrant will reduce the lender&rsquo;s effective conversion price for the Common Stock at a 25% discount to the
private placement offering price, such special warrant exercisable at a price of $0.01 per share</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Split-Off</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="color: black">In conjunction
with the Merger and concurrent with the closing of the Merger, ESRI split off (the &ldquo;Split-Off&rdquo;) its wholly owned subsidiary,
Buzz Kill, Inc., a New York corporation (&ldquo;Split Corp.&rdquo;). </FONT>Split Corp. had been formed to produce the feature
length film entitled &ldquo;<I>BuzzKill</I>&rdquo; and to market the film to distributors in the United States and abroad. <FONT STYLE="color: black">The
Split-Off was accomplished through the exchange of 5,793,000 shares of our Common Stock held by certain ESRI shareholders (the
&ldquo;Split-Off Shareholders&rdquo;) for all of the issued and outstanding shares of common stock of Split Corp. Thomas H. Hanna,
Jr., our sole officer and director prior to the Merger, exchanged 5,755,000 shares of our Common Stock for Split Corp. shares as
part of the Split-Off.&nbsp;&nbsp;We executed a Split-Off Agreement and General Release Agreement with Split Corp. and the Split-Off
Shareholders, copies of which are attached to this Current Report and are incorporated herein by reference.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As an inducement to the Split-Off Shareholders
to agree to the Split-Off, ESRI and Buzz Kill terminated and cancelled an investment agreement between them dated May 1, 2007.
Pursuant to this agreement cancellation, ESRI relinquished its right to recoup its $800,000 investment in Buzz Kill and Buzz Kill
no longer is required to share 50% of its net revenue from sales of the film <I>BuzzKill</I> with ESRI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At the closing of the Merger, holders of
approximately $233,755 of Split Corp. promissory notes agreed to release ESRI from any obligations ESRI might have had with respect
to these notes having been the parent company of Split Corp. prior to the Split-Off.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2012 Equity Incentive Plan</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Before the Merger, our Board of Directors
(sometimes referred to herein as the &ldquo;Board&rdquo;) adopted, and our stockholders approved, the Company&rsquo;s 2012 Equity
Incentive Plan (the &ldquo;2012 Plan&rdquo;), which provides for the issuance of incentive awards of up to 10,000,000 shares of
Common Stock to officers, directors, employees and consultants of the Company and its affiliates. No awards have been granted under
the 2012 Plan.&nbsp;&nbsp;See &ldquo;Market Price of and Dividends on Common Equity and Related Stockholder Matters&mdash;Securities
Authorized for Issuance under Equity Compensation Plans&rdquo; below for more information about the 2012 Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Departure and Appointment of Directors and Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Board consists of five members. On
the Closing Date, Thomas H. Hanna, Jr., the sole director of the Company before the Merger, resigned his position as a director
of the Company, and Patrick Imeson, Robert Trenaman, Michael Feinberg and Kenneth Hamlet were appointed to the Company&rsquo;s
Board.&nbsp;&nbsp; Pursuant to the terms of the Merger Agreement, the stockholders of ESRI before the Merger have the right to
designate one person as a director to fill the vacancy on the Board prior to the next annual meeting of stockholders of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Also on the Closing Date, Mr. Hanna, the
sole officer of the Company before the Merger, resigned his position as an officer of the Company, and Patrick Imeson was appointed
as our Chairman and Chief Executive Officer, Robert Trenaman was appointed as our President and Chief Operating Officer, Eric Altman
was appointed as our Chief Financial Officer, Treasurer and Vice President&ndash;Finance, and Timothy G. Smith was appointed as
a Vice President&ndash;General Manager&ndash;Montana Tunnels Mine. See &ldquo;Management &ndash; Directors and Executive Officers.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Lock-up Agreements&nbsp;and Other Restrictions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Merger, holders
(the &ldquo;Pubco Holders&rdquo;) of the free trading shares of ESRI immediately prior to the Merger (the &ldquo;Public Float Shares&rdquo;)
entered into lock-up agreements with ESRI whereby the Pubco Holders agreed that forty percent (40%) of their Public Float Shares
may not be sold for a period of twelve (12) months following the Merger closing date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Further, for a period of twelve (12) months
after the Merger closing, the Public Holders have agreed to be subject to restrictions on engaging in certain transactions, including
effecting or agreeing to effect short sales, whether or not against the box, establishing any &ldquo;put equivalent position&rdquo;
with respect to the Public Float Shares, borrowing or pre-borrowing any shares of Common Stock, or granting other rights (including
put or call options) with respect to the Public Float Shares or with respect to any security that includes, relates to or derives
any significant part of its value from the Public Float Shares, or otherwise seeking to hedge their position in the Public Float
Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, all officers, directors, stockholders
holding ten percent (10%) or more of the Common Stock of ESRI after giving effect to the Merger and the Split-Off, and certain
key employees (the &ldquo;Restricted Holders&rdquo;) have agreed that, for a period of twelve (12) months after the Merger closing
date, the Restricted Holders will be subject to restrictions on engaging in certain transactions, including effecting or agreeing
to effect short sales, whether or not against the box, establishing any &ldquo;put equivalent position&rdquo; with respect to shares
of our Common Stock, borrowing or pre-borrowing any shares of Common Stock, or granting other rights (including put or call options)
with respect to our Common Stock or with respect to any security that includes, relates to or derives any significant part of its
value from our Common Stock, or otherwise seeking to hedge their position in the Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Pro Forma Ownership</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Immediately after giving effect to (i)
the closing of the Merger and (ii) the cancellation of 5,793,000 shares of Common Stock in the Split-Off and an additional 5,751,000
shares of our Common Stock surrendered for cancellation by Dylan Hundley, there were 109,085,000 issued and outstanding shares
of Capital Stock, as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">EGLLC, as the sole stockholder of each of MTMI and EGI, held an aggregate of 90,000,000 shares
of Common Stock and 10,000,000 shares of Series A Preferred Stock; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">The stockholders of the Company prior to the Merger held an aggregate of 9,085,000 shares of Common
Stock.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition,</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">The 2012 Plan authorized issuance of up to 10,000,000 shares of Common Stock as incentive awards
to officers, directors, employees and consultants; awards totaling 5,445,000 shares of Common Stock have been granted under the
2012 Plan; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">The Bridge Notes, may be converted, at the sole discretion of each of the note holders, including
accrued but unpaid interest, into Units of the Company&rsquo;s securities at a conversion price of $2.00 per Unit, each Unit consisting
of: (i) one share of Common Stock, (ii) a warrant to purchase one-half share of Common Stock, exercisable at a price of $3.00 per
whole share, and (iii) a special warrant exercisable upon the closing of the Company&rsquo;s planned private placement, provided
the share price of the Common Stock offered in the private placement is less than $2.50 per share, so that the exercise of the
special warrant will reduce the lender&rsquo;s effective conversion price for the Common Stock at a 25% discount to the private
placement offering price, such special warrant exercisable at a price of $0.01 per share</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No other securities convertible into or
exercisable or exchangeable for Common Stock (including options or warrants) are outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our common stock is quoted on the OTC Bulletin
Board under the symbol &ldquo;ESRI&rdquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Accounting Treatment; Change of Control</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Merger is being accounted for as a
&ldquo;reverse merger,&rdquo; and MTMI and EGI are deemed to be the acquirers in the reverse merger. Consequently, the assets and
liabilities and the historical operations that will be reflected in the financial statements prior to the Merger will be those
of MTMI and EGI and will be recorded at the historical cost basis of MTMI and EGI, and the consolidated financial statements after
completion of the Merger will include the assets and liabilities of MTMI and EGI, historical operations of MTMI and EGI and operations
of the Company and its subsidiaries from the closing date of the Merger. As a result of the issuance of the shares of Common Stock
and Series A Preferred Stock pursuant to the Merger, a change in control of the Company occurred as of the date of consummation
of the Merger. Except as described in this Current Report, no arrangements or understandings exist among present or former controlling
stockholders with respect to the election of members of our Board of Directors and, to our knowledge, no other arrangements exist
that might result in a change of control of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We continue to be a &ldquo;smaller reporting
company,&rdquo; as defined under the Securities Exchange Act of 1934, as amended (the &ldquo;Exchange Act&rdquo;), following the
Merger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Immediately following the Merger and the
Split-Off, the business of MTMI and EGI, to engage in the exploration and production activities in the precious and base metal
industry, became the business of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>GENERAL BACKGROUND</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Montana Tunnels Mining, Inc., a Delaware
corporation (&ldquo;MTMI&rdquo;), was formed in 1998 to own and operate the Montana Tunnels gold-zinc-silver-lead open pit mining
operation (the &ldquo;Montana Tunnels Mine&rdquo;). The Montana Tunnels Mine has been in operation since 1987. Elkhorn Goldfields,
Inc., a Montana corporation (&ldquo;EGI&rdquo;), was formed in 1998 and owns the Elkhorn Project, which includes the Golden Dream
mine &ndash; a planned gold-copper underground mining operation (&ldquo;Golden Dream Mine&rdquo;). Prior to the Merger, MTMI and
EGI were wholly-owned subsidiaries of Elkhorn Goldfields, LLC, a Delaware limited liability company (&ldquo;EGLLC&rdquo;). EGLLC
is a mining holding company and is owned by the private equity investment funds that are managed by Black Diamond Financial Group
LLC, a Delaware limited liability company (&ldquo;Black Diamond&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Corporate History</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pegasus Gold Inc., a Province of British
Columbia corporation (&ldquo;Pegasus&rdquo;), had operations in Montana, Nevada and Australia. Pegasus commenced operations at
the Montana Tunnels Mine in 1987. In January 1998, due to struggling mine operations external to the Montana Tunnels Mine, Pegasus
was unable to service approximately $238 million in debt and filed for bankruptcy under Chapter 11 of the United States Bankruptcy
Code. Under the reorganization plan, Pegasus incorporated a holding company named Apollo Gold Inc., a Delaware corporation, and
Apollo Gold Inc. became the owner/operator of the Montana Tunnels Mine.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the second quarter of 2002, Apollo
Gold Inc. was acquired by a Toronto Stock Exchange listed company &ndash; Nevoro Gold Inc. &ndash; which, upon closing of the acquisition,
changed its name to Apollo Gold Corporation (&ldquo;Apollo&rdquo;) and traded publicly on the Toronto Stock Exchange as such.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 28, 2006, EGLLC earned a 50% interest
in the Montana Tunnels Mine and related assets by providing $14,250,000 to establish a joint venture with Apollo to remediate the
&ldquo;L&rdquo; Pit and put the Montana Tunnels Mine back into production. Montana Tunnels Mine is an open pit mine. Each pit expansion
shell is named in alphanumeric order. The &ldquo;L&rdquo; Pit was the south and west wall layback. Before that was the &ldquo;K&rdquo;
Pit which was the east wall layback.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In July 2006, EGLLC established, and owned
100% of, Elkhorn Tunnels, LLC to facilitate the joint venture with Apollo. The &ldquo;L&rdquo; pit was mined out in November 2008.
In June 2009, Apollo advised EGLLC that it intended to market its position in the joint venture. EGLLC optioned to purchase Apollo&rsquo;s
interest which it exercised in the fall of 2009 and paid $250,000 as the first installment on the purchase. In February 2010, EGLLC
and Apollo renegotiated the form of payment and the terms of the purchase of Apollo&rsquo;s 50% interest in MTMI was modified to
include the $250,000 cash already paid plus an assignment to Apollo of EGLLC&rsquo;s interest in a certain loan and mortgage on
a property owned by an unrelated mining company. Elkhorn Tunnels, LLC was dissolved following EGLLC&rsquo;s completion of its acquisition
of the remaining interest in MTMI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">EGI is the operator of the Golden Dream
Mine located at 2725-A Elkhorn Road, Boulder, Montana. The mine is located near the historic town of Elkhorn which dates back to
the 1870s. The Golden Dream Mine is located about 15 air miles south east of the Montana Tunnels Mine and the over-the-road distance
between the mines is approximately 30 miles. EGI was purchased by Calim Private Equity, LLC from Elkhorn Gold Mining Corporation,
a Canadian corporation, in October 2000. Calim Private Equity, LLC, a private equity company, later created EGLLC and assigned
its 100% interest in EGI to EGLLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-transform: uppercase"><B>montana tunnels mine</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">MTMI is an integrated mining company which
is seeking to recommence mining and milling operations at the Montana Tunnels Mine. Currently, MTMI&rsquo;s operations are limited
to care and maintenance functions. MTMI&rsquo;s staff engineers, in association with outside independent mining consultants, have
designed a mine plan around the &ldquo;M&rdquo; Pit deposit of the Montana Tunnels Mine incorporating a proven and probable mineral
reserve of 37.8 million tons (a ton is equal to 2,000 pounds) of ore containing 488,000 ounces of gold, 8.2 million ounces of silver,
358 million pounds of zinc and 124 million pounds of lead (the &ldquo;M&rdquo; Pit Mine Plan&rdquo;), as documented in the Montana
Tunnels Technical Report dated November 2010 (the &ldquo;Nov. 2010 MTTR&rdquo;). Table 21.3 M-Pit Production Schedule below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 75%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">M-Pit Totals</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">TONS MOVED</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 77%">Ore</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 20%; text-align: right">20,166,779</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Lowgrade&nbsp;Ore</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,562,688</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Waste&nbsp;-&nbsp;Rock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">136,143,834</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Waste&nbsp;-&nbsp;Alluvium</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Rehandle/Other/Topsoil</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,304,696</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">Total&nbsp;Tons&nbsp;Moved</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">180,177,997</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">TONS&nbsp;MILLED</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">37,820,640</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Grade:&nbsp;&nbsp;&nbsp;Au&nbsp;&nbsp;(oz/ton)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0129</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Ag&nbsp;&nbsp;(oz/ton)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.218</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Pb&nbsp;&nbsp;&nbsp;(%)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.164</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Zn&nbsp;&nbsp;&nbsp;(%)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.473</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">PRODUCTION&nbsp;(GROSS)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Gold&nbsp;(oz)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">487,886</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Silver&nbsp;(oz)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,244,900</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Lead&nbsp;&nbsp;(lbs)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">124,051,699</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Zinc&nbsp;&nbsp;(lbs)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">357,783,254</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><B>PRODUCTION&nbsp;PAYABLE&nbsp;SOLD</B>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Gold&nbsp;(oz)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">346,681</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Silver&nbsp;(oz)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,651,964</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Lead&nbsp;&nbsp;(lbs)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">87,971,673</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Zinc&nbsp;&nbsp;(lbs)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">238,955,526</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Source: Montana Tunnels Technical Report
&ndash; Table 21.3 (page 113)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During 2011, gold prices peaked at $1,895
per ounce on the London Metal Exchange (&ldquo;LME&rdquo;) and silver prices reached levels not seen since 1980, exceeding $30
per ounce on the LME. As such, management believes that now is the ideal time to recommence development and production at the Montana
Tunnels Mine.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A common misconception is that the current
gold prices and predictions are in record territory; however, in 1980 gold traded at an average of $1,849 and peaked at $2,337
in 2011 dollars. The chart below reflects this inflation adjusted pricing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg14.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Montana Tunnels Mine lies within Jefferson
County, Montana &ndash; approximately 5 miles west of Jefferson City. Access to the mine site is from U.S. Highway #15 at the Jefferson
City exit approximately 19 miles south of Helena, Montana. From Jefferson City the mine is located 3.5 miles along Spring Creek
road.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg15.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Aerial view of the existing open pit Mine
at the Montana Tunnels Operation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>History of the Montana Tunnels Mine</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To a large extent, mining activity developed
and settled much of Montana during the 1860s and 1870s, including the historic &ldquo;Wickes-Corbin&rdquo; silver district in which
the current Montana Tunnels Mine is centrally located. The Wickes-Corbin district thrived from the 1860s into the early 1890s,
at which time the U.S. Government repealed the Sherman Silver Purchase Act (1893) sending silver prices plummeting and spelling
the eventual demise of many silver producing mining camps, including the Wickes-Corbin camp.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the early 1980s, with the price of silver
trading at $50 per ounce on the LME, many historic silver camps were re-examined employing modern exploration techniques. It was
during this period that the Montana Tunnels deposit &ndash; a named derived from the boring of two exploratory tunnels driven into
the deposit in the early 1900s &ndash; was discovered. By 1986 Pegasus had commenced development of the Montana Tunnels Mine and
construction of a 15,000 ton per day milling facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg16.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">View of the Montana Tunnels Milling Facility,
Crushing Facility and Administrative offices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The open pit mine is located to the top
and left of this photograph.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Since the commencement of production at
Montana Tunnels Mine in early 1987, the mine has produced, under its previous owners, 99.6 million tons of ore containing 1.7 million
ounces of gold, 30.9 million ounces of silver, 551,400 tons of zinc and 202,800 tons of lead, as reported through public filings
of the parent companies. Using average prices as of January 2012, the cumulative value of the metals mined from the Montana Tunnels
Mine since 1987 would total in excess of $4 billion. All metals mined at the Montana Tunnels Mine were sold prior to 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The table below sets forth the Montana
Tunnels Mine production history from 1987 to 2009.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Montana&nbsp;Tunnels&nbsp;Technical&nbsp;Report&nbsp;-&nbsp;November&nbsp;2010</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Table&nbsp;1.1&nbsp;Montana&nbsp;Tunnels&nbsp;Production&nbsp;History&nbsp;(Page&nbsp;2)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 90%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Mill&nbsp;Tons</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Au</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Oz&nbsp;Au</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Ag</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Oz&nbsp;A</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Pb</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Tons&nbsp;Pb</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Zn</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Tons&nbsp;Zn</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Year</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">000's</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">oz&nbsp;Au/t</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">000's</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">oz&nbsp;Ag/t</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">000's</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">%</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">000's</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">%</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">000's</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">1987</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">2,018</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">0.0198</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">39.9</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">0.485</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">979.7</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">0.377</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">7.6</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">0.923</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; text-align: right">18.6</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1988</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,982</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0228</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">90.7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.430</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,711.4</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.281</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.788</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31.4</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1989</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,047</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0204</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">82.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.488</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,974.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.250</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10.1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.674</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27.3</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1990</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,149</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0184</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">76.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.451</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,872.8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.222</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.627</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26.0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1991</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,271</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0185</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">78.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.428</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,829.7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.233</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.638</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27.2</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1992</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,573</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0199</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">91.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.441</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,014.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.217</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.609</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27.9</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1993</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,045</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0173</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">87.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.440</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,218.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.195</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.523</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26.4</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1994</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,411</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0185</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100.3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.323</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,746.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.240</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.555</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30.0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1995</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,474</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0202</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">110.8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.314</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,716.4</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.200</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.582</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31.8</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1996</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,467</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0167</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">91.4</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.274</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,497.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.186</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.509</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27.8</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1997</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,145</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0194</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.242</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,245.3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.224</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.576</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">29.6</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1998</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,833</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0188</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">91.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.207</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">998.8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.189</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.686</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">33.2</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1999</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,078</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0174</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">88.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.225</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,142.7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.203</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10.3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.614</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31.2</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,384</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0145</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">77.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.375</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,020.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.177</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.481</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">25.9</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2001</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,424</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0168</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">91.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.281</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,525.2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.182</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.552</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">29.9</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2002</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,881</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0156</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.238</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">684.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.167</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.470</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13.5</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2003</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,695</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0157</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">73.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.202</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">947.4</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.193</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.440</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20.6</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2004</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,394</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0096</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">51.7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.318</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,713.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.138</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7.4</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.374</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20.2</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2005</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,955</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0130</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">64.3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.190</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">939.8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.155</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7.7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.337</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16.7</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2006</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,427</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0077</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.169</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">240.4</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.097</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.4</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.201</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.9</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2007</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,971</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0123</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">49.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.221</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">876.4</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.197</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7.8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.466</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18.5</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2008</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,510</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.0144</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">64.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.175</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">788.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.221</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.629</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">28.4</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">2009</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,430</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.0100</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">14.3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.176</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">251.0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.160</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2.3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.442</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6.3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD COLSPAN="2" STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">Totals</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">99,563</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">0.0164</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">1,671.4</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">0.30</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">30,935.6</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">0.20</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">202.8</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">0.54</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">551.4</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>Products
and mining industry trends</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The deposit type currently being exploited
at the Montana Tunnels Mine is precious and base metal mineralization (gold, silver, zinc and lead) occurring as disseminated and
veined sulfides internal to a volcanic diatreme. Through the mining and treatment of the Montana Tunnels deposit, the mine will
produce (i) gold, (ii) silver, (iii) zinc and (iv) lead. Minor amounts of other metals are also contained within the deposit but
not of marketable quantities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg18.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Cross section cartoon depicting the Montana
Tunnels deposit showing current Pit development.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><B>I.</B></TD><TD STYLE="text-align: justify"><B>Gold</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the &ldquo;M&rdquo; Pit Mine Plan,
over the 9 years that <FONT STYLE="color: black">MTMI is planning to mine and treat ore </FONT>at the Montana Tunnels Mine <FONT STYLE="color: black">(the
&ldquo;</FONT>Life of Mine&rdquo;), we expect that 37.8 million tons of ore containing 488,000 ounces of gold will be mined and
processed at the Montana Tunnels Mine, as documented in the Nov 2010 MTTR. Table 21.3 M-Pit Production Schedule. Considering associated
dilution and deletion, mill recovery losses and smelter losses and deductions which are all within industry standards, we estimate
that the Montana Tunnels Mine will produce 347,000 recoverable ounces of gold over the Life of Mine of the &ldquo;M&rdquo; Pit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>The Gold Market</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The market for gold is large, liquid and
global. Gold continues to see demand in the jewelry, industrial and health science industries; however, gold&rsquo;s main demand
comes in the form of safe haven investment. From economic, political and social uncertainty to a hedge against inflation, gold
is, and has long been, considered by many a commodity of refuge from concerns with fiat currencies and their corresponding economies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The World Gold Council (&ldquo;WGC&rdquo;),
a leading international gold industry research organization, published on its website that total gold demand for the fourth quarter
of 2011 rose 21% to 1,017 metric tonnes (a metric tonne is equal to 2,204.6 pounds) year-on-year. Of this increase, investment
demand posted the largest segment increase, more than offsetting the decline in gold jewelry demand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg19a.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Gold prices over the past five years (courtesy
Kitco).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.5in; text-align: left"><B>II.</B></TD><TD STYLE="text-align: justify"><B>Silver</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Over the planned Life of Mine for &ldquo;M&rdquo;
Pit, we expect to mine and process 37.8 million tons of ore containing 8.24 million ounces of silver at Montana Tunnels Mine, as
documented in the Nov. 2010 MTTR. (Source: Table 21.3 M-Pit Production Schedule). Taking Montana Tunnels Mine historical mine deletion,
mill recoveries and industry-standard smelter payment terms into consideration, we estimate recovering 4.65 million recoverable
ounces of silver (losses from reserve ounces to payable ounces are within industry standards).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>The Silver Market</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Unlike the gold market, demand within the
silver market has been predominantly for fabrication &ndash; mainly industrial application, photography and jewelry &ndash; with
investment making up only a small portion of total yearly demand.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg19b.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Silver prices over the past five years (courtesy
Kitco).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><B>III.</B></TD><TD STYLE="text-align: justify"><B>Zinc</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Over the planned Life of Mine for &ldquo;M&rdquo;
Pit, we project total payable zinc production to be in excess of 239 million pounds, as documented in the Nov. 2010 MTTR. (Source:
Table 21.3 M-Pit Production Schedule). At planned production rates, Montana Tunnels Mine should produce approximately 0.2% of the
current annual global demand for zinc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>The Zinc Market</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Zinc is fourth in terms of tonnage on the
list of metals produced globally on an annual basis. Zinc is mainly used as coating to protect iron and steel from corrosion, as
alloying metal to make bronze and brass, as zinc-based die casting alloy and as rolled zinc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg20.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Pie chart depicting the various uses of
Zinc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As documented by the International Lead
and Zinc Study Group, global zinc supply has been in a surplus situation since late 2007. This supply surplus is forecast to continue
through 2012. It is currently projected that a supply shortfall will occur during 2013 and continues until 2017. As a result, due
to the lengthy time to restart mine production, a zinc supply shortfall may likely exist for some years after Montana Tunnels Mine
is anticipating a restart of its operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg21a.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Global Zinc supply and demand for years
2005 through 2010 (actual) and years 2011 through 2017 (forecast).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of January 26, 2012, zinc prices are
trading at around U.S. $1.00 per pound on the LME which is slightly above zinc&rsquo;s 5-year average price as depicted in the
chart below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg21b.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Zinc prices over the past five years (courtesy
Kitco)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in"><B>IV.</B></TD><TD STYLE="text-align: justify"><B>Lead</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Over the planned Life of Mine for &ldquo;M&rdquo;
Pit, we project total recoverable lead production to be approximately 88 million pounds, as documented in the Nov. 2010 MTTR. Table
21.3 M-Pit Production Schedule.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>The Lead Market</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As with the other metals that the Montana
Tunnels Mine will produce, the market for lead is global in nature and active in terms of participants. This ensures that the metals
produced from the Montana Tunnels Mine will be competitively priced.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Lead has been mined and used in daily life
for at least 5,000 years, mainly for corrosion-resistant items such as roofs, pipes and windows. Lead&rsquo;s use increased through
the 1900s in items such as batteries and as an additive in gasoline until the mid-1980s when environmental regulations significantly
reduced the use of lead in non-battery products. Per various public research publications, by the early 2000s the total demand
for lead for use in battery-related items represented 88% of lead production. Other uses include ammunition, casting metals and
oxides in glass and ceramics.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of January 26, 2012, lead prices are
trading at around U.S. $1.00 per pound on the LME which is slightly above lead&rsquo;s 5-year average price as depicted in the
chart below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg22.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Lead prices over the past five years (courtesy
Kitco)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In total, we project that the Montana Tunnels
Mine &ldquo;M&rdquo; Pit deposit will produce 347,000 ounces of gold, 4.65 million ounces of silver, 239 million pounds of zinc
and 88 million pounds of lead over the planned Life of Mine, as documented in the Nov. 2010 MTTR.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>OPERATIONS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Mission.</B> MTMI is an integrated mining
company focused on the exploration, development and mineral extraction of the Montana Tunnels Mine. MTMI has produced gold, silver,
zinc and lead from the Montana Tunnels Mine starting in 1987. We believe that extracting the remaining deposit will be more than
ample to provide sufficient mineral resources to establish a mine plan to continue profitable mining and milling operations on
the current target at Montana Tunnels Mine for approximately 9 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>The Operations.</B> The Montana Tunnels
Mine is a fully integrated open-pit mine and concentrating facility. The goal in any successful metal mining operation is to take
a lower concentration of metals per ton of rock &ndash; raw ore &ndash; and upgrade the valuable metal content per ton &ndash;
while minimizing the loss of that metal content &ndash; thereby improving, or &ldquo;concentrating&rdquo; the value per ton.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This process is generally done in three
steps &ndash; (1) mining, (2) beneficiation (concentration) and (3) smelting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mining
Operations at Montana Tunnels Mine. </B>There are four distinct stages to production mining at the Montana Tunnels Mine &ndash;
(i) drilling, (ii) blasting, (iii) loading and (iv) hauling.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(i)</TD><TD STYLE="text-align: justify"><U>Drilling</U> &ndash; Following directions provided by the engineering, geological and technical
staff, workers drill 6.75-inch diameter holes to depths of usually 20 feet on what are called &ldquo;benches&rdquo; using rotary
percussion drills as depicted below. Samples from the drill piles are taken for analysis at the onsite assay lab to determine the
ore value component of the rock to ensure, once the rock is blasted, that ore is being taken to the concentrator and waste is taken
to the waste areas.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: center"><img src="pg23a.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(ii)</TD><TD STYLE="text-align: justify"><U>Blasting</U> &ndash; Once drilling is completed on a &ldquo;bench&rdquo;, the drilled out holes
are filled with ANFO explosive (ammonium nitrate/fuel oil mixture) and, following a detonation pattern, are blasted.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg23b.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(iii)</TD><TD STYLE="text-align: justify"><U>Loading</U> &ndash; The blasted rock material is loaded by 21 yard shovels or by 13 yard front-end
loaders into waiting haul trucks.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg24a.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(iv)</TD><TD STYLE="text-align: justify"><U>Hauling</U> &ndash; A fleet of haul trucks capable of hauling between 85 to 150 tons of ore
or waste material per load work in unison with the loaders to quickly remove the blasted rock to the crushing facility, in the
case of ore or, in the case of waste, to the waste rock dump for eventual reclamation. Once the blasted material is removed, the
next cycle of drilling commences again.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg24b.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beneficiation
Operations at Montana Tunnels.</B> Beneficiation is the act of crushing and separating ore into valuable substances by any of a
variety of techniques so that metal can be recovered at a profit. Montana Tunnels Mine beneficiation plant is rated at 15,000 tons
per day and consists of three distinct stages &ndash; (i) crushing, (ii) grinding and (iii) flotation &amp; filtration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(i)</TD><TD STYLE="text-align: justify"><U>Crushing</U> &ndash; Ore grade material from the mine is delivered to the crushing circuit where
primary and secondary &ldquo;jaw crushers&rdquo;, used in series, crush the rock to between 5&rdquo; and 7&rdquo; in size. At times,
ore from the open-pit is too large to enter the mouth of the jaw crusher and pneumatic rock breakers are employed to reduce the
size to enable the rock to enter the jaw crusher. The crushed rock is stored on the &ldquo;coarse ore stockpile&rdquo; awaiting
entry into the grinding circuit.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg25.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Ore leaving the crushing circuit going to
the coarse ore stockpile</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(ii)</TD><TD STYLE="text-align: justify"><U>Grinding</U> &ndash; From the coarse ore stockpile apron feeders draw the ore onto conveyor
belts and deliver the coarse ore to a semi-autogenous grinding mill where it is mixed with water and 5&rdquo; steel balls and ground
to create coarse slurry. This slurry discharges from the semi-autogenous mill and, dependent upon size, is either sent to a cone
crusher if oversized, or sent to the ball mill for further size reduction. The oversized material, once treated by the cone crusher,
re-enters the semi-autogenous mill for additional grinding before being directed to the ball mill for additional size reduction.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">The ground ore material/slurry
from the ball mill is pumped to the gravity circuit where gravity cyclones <FONT STYLE="color: black">(funnel-shaped devices that
separate particles entering the funnel by density)</FONT>, Knelson concentrators<B> </B>(<FONT STYLE="color: black">machines that
utilize the principles of a centrifuge to enhance gravitational force experienced by feed particles to effect separation based
on particle density)</FONT>, sluices (<FONT STYLE="color: black">troughs with riffles in the bottom that provide a lodging place
for heavy or dense material such as gold)</FONT><B> </B>and separating tables work to separate the coarse gold-silver particles
from the slurry. This gold-silver concentrated product is smelted onsite to produce d<FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal">or&eacute;</FONT>
bullion bars or flats.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">Material passes from the gravity
circuit to hyrocyclones where it is once again separated. The oversized material from this separation reports back to the ball
mill for further grinding while the fine slurry or pulp material is pumped to the lead flotation circuit to commence the flotation
and filtration process.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg26.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Montana Tunnels Semi-Autogenous Mill (left)
and Ball Mill (right).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(iii)</TD><TD STYLE="text-align: justify"><U>Flotation and filtration</U> &ndash; The flotation circuit is made up of a series of large tanks,
or cells, with each cell containing an agitator and air blower. There is a set of cells for concentrating the lead minerals and
an independent set of cells for concentrating the zinc minerals.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">The process for concentrating
the minerals occurs as the mineralized pulp enters the first in this series of tanks. At this point two reagents &ndash; a frothing
reagent and a collecting reagent &ndash; are added to the pulp. These reagents create the conditions within the tanks to compel
the lead and lead-associated minerals to attach to &ldquo;bubbles&rdquo; created by the frothing reagent mixed with air from the
air blower. These mineral-ladened bubbles are collected through this series of cells, cleaned, thickened and filtered using a drum
filter to make a final lead concentrate. Historically, the Montana Tunnels Mine lead concentrates contain 50% to 55% lead, 2.0
to 3.5 ounces per ton gold and 20 to 50 ounces per ton silver. Moisture content is between 8% and 10%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">After the pulp exits the final
lead cell, reagents are again introduced to the pulp which activates the zinc minerals to attach to bubbles. As with the lead circuit,
these zinc-ladened bubbles are collected, cleaned, thickened and filtered &ndash; this time using a pressure filter &ndash; to
make a final zinc concentrate. The Montana Tunnels Mine final zinc concentrate traditionally have contained 52% to 56% zinc, 0.1
to 0.3 ounces per ton gold, 5 to 20 ounces per ton silver with a moisture content of between 8% and 10%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">Finally, with this pulp denuded
of minerals it is pumped to <FONT STYLE="color: black">a designed and approved area for storing the treated waste fraction of an
ore</FONT> or the &ldquo;Tailings Impoundment Area&rdquo; for eventual reclamation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg27.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Schematic of Montana Tunnels beneficiation
operations</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smelting
and Refining of the Montana Tunnels Mine Products.</B> We project that for the Life of Mine of the &ldquo;M&rdquo; Pit deposit,
annual production of lead concentrate will be 16,000 tons and annual production of zinc concentrate will be approximately 46,000
tons, based upon historical production and the Nov. 2010 MTTR. Smelting of these concentrates has traditionally been carried out
at a smelter facility in Trail, British Columbia, Canada which is owned by mining conglomerate Teck Corp. While we anticipate competitively
shopping for alternative smelter facilities, we have identified Teck Corp. as the best situated smelting facility for the Montana
Tunnels Mine.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From the Montana Tunnels Mine, lead and
zinc concentrates are loaded separately into over-the-road haul trucks and delivered to railheads near Helena, Montana. From there,
the concentrate products are delivered to Teck Corp.&rsquo;s lead and zinc smelter approximately 400 miles via rail from Helena,
Montana where they are smelted and refined into saleable lead and zinc products. Teck Corp. charges MTMI a smelting charge per
metric tonne which is within industry standards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A third product produced from the Montana
Tunnels Mine is gold d<FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal">or&eacute; flats (a mold of
semi-pure alloy consisting of gold and silver created at the mine site). Historically, between 8% to 12% of the gold recovered
at Montana Tunnels reports to the gravity circuit and is smelted onsite into </FONT>d<FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal">or&eacute;
flats. In the past, these </FONT>d<FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal">or&eacute; flats
have been refined into gold bars by Johnson Matthey Inc.&rsquo;s refining facility in Salt Lake City, Utah.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Montana Tunnels Mine &ldquo;M&rdquo;
Pit Expansion</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2008, Montana Tunnels Mine
was placed into a care and maintenance operational mode at the completion of the &ldquo;L&rdquo; Pit permit. The newly permitted
&ldquo;M&rdquo; Pit is an expansion of the existing &ldquo;L&rdquo; Pit to enable the Company to continue to mine an additional
37.8 million tons of ore as an extension to the same ore body that has been previously mined since the inception of the Montana
Tunnels Mine operation. The expansion plan will &ldquo;layback&rdquo; or expand the perimeter of the current pit making it wider,
and making an additional 7.0 years of ore available to be mined from the bottom of the expanded pit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have completed ore-delineation drilling
beneath the current pit elevation and have identified proven and probable reserves of the &ldquo;M&rdquo; Pit expansion as detailed
in the table below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 94%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD COLSPAN="25" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Proven and Probable Reserves <BR>Montana Tunnels Technical Report <BR>Montana Tunnels Mining, Inc.</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="18" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Grade</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Pit Design</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Classification</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Tons</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Gold</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Silver</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Lead</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Zinc</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 18%; text-align: center">M &ndash; Pit</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 19%; text-align: center">Proven</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">27,673,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">0.0129</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">0.212</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">0.164</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">0.487</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center; padding-bottom: 1pt">M &ndash; Pit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: center">Probable</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,105,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.0129</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.211</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.160</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.434</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD COLSPAN="4" STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">Total 2P Reserves</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">37,778,000</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">0.0129</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">0.212</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">0.163</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">%</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">0.474</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">%</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Gold and Silver grades in ounces per ton,
Lead and Zinc grades as percentage mineral content.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2004, MTMI commenced the process of
permitting the &ldquo;M&rdquo; Pit expansion by filing a major amendment to the Montana Tunnels Operating Permit #00113 to expand
the open pit and process ores from the &ldquo;M&rdquo; Pit mine design. An updated Environmental Impact Statement was completed
and Records of Decisions to mine and process the &ldquo;M&rdquo; Pit were finally received in November 2008, subject to the addition
of approximately $16 million to the current $18 million of reclamation bonds pledged by MTMI with the Montana Department of Environmental
Quality (&ldquo;MDEQ&rdquo;). The reclamation bond can be in the form of cash, surety bond, letter of credit, company-owned land
or a combination of any of these subject to the approval of the MDEQ.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The &ldquo;M&rdquo; Pit Mine Plan calls
for an 18 to 24 month period of pit expansion development in which 53 million tons of waste rock will be removed to access the
ore below the waste rock. The &ldquo;M&rdquo; Pit Mine Plan is contingent on the Company obtaining the capital required to begin
the expansion development. The Company will seek to obtain funding from debt and the capital markets. If the Company is unable
to secure acceptable terms from these markets the expansion development will begin only when the cash flow from the Golden Dream
Mine (discussed below) can support the capital needs of the Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Although we expect that some fringe ores
will be encountered during the pit expansion, this ore will be stockpiled during the pit expansion phase. Only after primary ores
are being mined from the pit on a continuous and sufficient basis to maintain continuous operation of the concentrator, will ore
processing through the concentrator begin. It is planned that this will occur approximately 18 to 20 months after commencement
of &ldquo;M&rdquo; Pit expansion development. Cash flow is expected to begin the month after the concentration mill is restarted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Currently, MTMI has eight staff individuals
working at the mine site conducting care and maintenance of the mine. This team also supports operations at the Golden Dream Mine
(see discussion below). These individuals occupy the key positions in management, engineering, environmental, human resources and
accounting. Upon financing, MTMI will quickly increase the number of full-time hourly employees to approximately 160 and 190 individuals.
Being within commuting distance from Montana&rsquo;s capital city &ndash; Helena &ndash; and the major mining communities of Butte
and Whitehall should allow for a quick filling of these hourly positions. In August 2006, when MTMI re-commenced operations, it
took approximately 4 weeks to hire 125 qualified mine equipment operators and mechanics. In August 2006, the unemployment rate
in Montana was 3.3%. As of December 2011, unemployment in Montana was approximately 6.6%, according to the United States Department
of Labor, Bureau of Labor Statistics.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The existing Montana Tunnels Mine mining
equipment has been in use since the early-to-mid 1990s and, as such, now is prone to maintenance costs and associated downtime.
We plan to use the existing mining fleet at Montana Tunnels Mine augmented with new equipment as it becomes available. The existing
and new planned equipment are listed in the tables below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 88%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; font-weight: bold">Existing Equipment Description</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; font-weight: bold">Size</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">Quantity</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 46%">Caterpillar 5230 Hydraulic Front Shovel</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 36%">21 cubic yard</TD>
    <TD STYLE="text-align: center; width: 2%">&nbsp;</TD>
    <TD STYLE="text-align: right; width: 8%">2</TD>
    <TD STYLE="width: 6%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar 992 Loader</TD>
    <TD>&nbsp;</TD>
    <TD>13.5 cubic yard</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">3</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar 785 Truck</TD>
    <TD>&nbsp;</TD>
    <TD>150 ton</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">12</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar 777 Truck</TD>
    <TD>&nbsp;</TD>
    <TD>85 ton</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">2</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar D9N Bulldozer</TD>
    <TD>&nbsp;</TD>
    <TD>370 Horsepower</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">2</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Ingersoll-Rand DN45E Drill</TD>
    <TD>&nbsp;</TD>
    <TD>6.75 inch hole</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">3</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar 16-G Motor Grader</TD>
    <TD>&nbsp;</TD>
    <TD>16 foot blade</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">2</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar 950 F11 Loader</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">1</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar 325B Excavator</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">1</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Existing Montana Tunnels Mining Equipment</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 88%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 46%; border-bottom: windowtext 1pt solid; font-weight: bold">New Equipment Description</TD>
    <TD STYLE="width: 2%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 36%; border-bottom: windowtext 1pt solid; font-weight: bold">Size</TD>
    <TD STYLE="width: 2%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 14%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">Quantity</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Shovel &ndash; Terex, Komatsu, Caterpillar</TD>
    <TD>&nbsp;</TD>
    <TD>20 cubic yard</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar 993K Loader</TD>
    <TD>&nbsp;</TD>
    <TD>15 cubic yard</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">1</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar 785D Truck</TD>
    <TD>&nbsp;</TD>
    <TD>150 ton</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">9</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar D10T Bulldozer</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">1</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar D9T Bulldozer</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">1</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar D25KS Drill</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar 16-M Motor Grader</TD>
    <TD>&nbsp;</TD>
    <TD>10.1 foot blade base</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Light Plant</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">4</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Lube Truck</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">2</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Stemming Truck</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">1</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Caterpillar 777D/Water Truck</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">1</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">New Equipment planned for Montana Tunnels
Mine &ldquo;M&rdquo; Pit expansion</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As described above under the beneficiation
section, the existing Montana Tunnels Mine concentrating and processing facility equipment consists of a number of components used
in the crushing, grinding, flotation and filtration of gold, zinc, silver, lead and copper ores. In April 2009, the MTMI concentrator
was turned off in a systematic way over a period of three weeks to ensure that recommencement of the facility would be seamless.
All components of the MTMI concentrating facility are intact and the only piece of equipment contemplated to be replaced is the
zinc pressure filter. Replacement of this component will be carried out in conjunction with the restart of the MTMI concentrating
facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Montana Tunnels Mine operation has
been through several phases of exploration, development and production since the mid-1980s. Through this quarter century of operational
experience, our management team has acquired the skills and knowledge to accurately plan and project development and operations
timelines and costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The operational and cost components with
the greatest influence relate to: (i) grade of the ore; (ii) mill recoveries; (iii) development and mining costs; and (iv) smelting
and outside treatment costs. The grade of Montana Tunnels Mine &ldquo;M&rdquo; Pit has been delineated to standards employing defined
requirements as set by the mining industry.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Historical &ndash; 1988 through 2009 &ndash;
Montana Tunnels Mine mill recoveries for each of the payable metals are compiled in the table below (mill recovery is a calculation
showing the percentage of recovered metals by analyzing the grade of pre-processed rock (heads) and comparing that with the grade
of the same post-processed rock (tails)):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 88%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Metal</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Gold</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Silver</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Lead</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Zinc</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%; font-weight: bold; text-align: center">Mill Recovery</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">79.9</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">%</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">73.7</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">%</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">86.0</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">%</TD><TD STYLE="width: 1%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">84.7</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Montana Tunnels Mine Historical Mill Recoveries
(1988 through 2009)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">MTMI&rsquo;s engineering and management
staff have projected development and operating costs combining a mix of the planned new equipment and existing equipment applying
each particular piece of equipment&rsquo;s operating specifications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Over the 20-plus years of operations at
Montana Tunnels Mine, various smelting and outside treatment options have been explored and utilized. Because of its relative proximity
and its smelter payment terms, the most appropriate smelter for Montana Tunnels&rsquo; zinc and lead concentrates, found to date,
is Teck Corp.&rsquo;s Trail, B.C. Smelter. World benchmark smelter treatment charges are established annually between miners and
smelters for both zinc and lead concentrates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-weight: normal"><img src="pg30.jpg"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal">A
gold </FONT>d<FONT STYLE="font-family: Times New Roman, Times, Serif; font-weight: normal">or&eacute; flat ready for shipment to</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-weight: normal">Johnson
Matthey Inc. (2006)</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-transform: uppercase"><B>The ELKHORN project
and the Golden Dream Mine </B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Golden Dream Mine lies within the boundaries
of EGI&rsquo;s Elkhorn Project approximately 35 road miles to the south-east of the Montana Tunnels Mine. The Elkhorn Project consists
of a collection of patented and unpatented mineral claims totaling approximately 4,500 acres.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg31.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The Elkhorn Project and Golden Dream Mine
are located approximately 35 road miles from Montana Tunnels.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Similar to the area in which the Montana
Tunnels Mine is located, the area in which the Golden Dream Mine is located was extensively explored and settled during the 1870s
through the 1890s. The present ghost town of Elkhorn, which lays just outside the Elkhorn Project property boundaries, once boosted
a population in excess of 2,000 people in the 1880s. The major operating mine during this period was the Elkhorn Mine, a silver-lead
mine, but several smaller silver, gold and copper mines were also being worked in the area. By 1894, the town&rsquo;s population
had diminished to 600 people and mining activity &ndash; due in large part to the collapse in silver prices &ndash; steadily declined
through the 1890s.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the early 1980s reconnaissance exploration
started on the Elkhorn Project. Over the next decade extensive core drilling, analysis, planning and design work was carried out
by Gold Fields Corp. (NYSE: GFI) and Santa Fe Pacific Gold Corp (&ldquo;Santa Fe&rdquo;) on the Elkhorn Project. In 1997 Newmont
Corp (NYSE: NEM) acquired Santa Fe thereby creating the opportunity for EGI to acquire the Elkhorn Project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At the time EGI acquired the Elkhorn Project
from Newmont in 1998, exploration work performed by Santa Fe Pacific Gold Corporation had identified a geologic resource containing
1.653 million ounces of gold located within four deposits &ndash; Carmody, Gold Hill, East Butte and Golden Dream .</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During EGI&rsquo;s ownership of the Elkhorn
Project it has focused its ore delineation drilling, analysis, design, planning and permitting on the Golden Dream deposit. EGI
staff engineers have outlined in an internal feasibility study of the Golden Dream deposit a probable underground mineral reserve
of 1.17 million tons containing 258,000 ounces of gold and 8.3 million pounds of copper and designed a Mine Plan around this mineral
reserve as depicted below in computer-generated Mine Plan model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg32.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Computerized schematic of the Golden Dream
Mine showing planned tunnels and actual drill holes and ore blocks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Unlike the Montana Tunnels Mine, the Golden
Dream Mine is an underground mine with tunnels being approximately 14 feet high and 14 feet wide. The solid green bands in the
above computer model represent the tunnels accessing the initial ore and the various other ore levels. It will be through these
tunnels that the mined ore will be transported to the surface and then transported by haul trucks to the Montana Tunnels Mill Facility
for processing (once the Montana Tunnels Mill Facility is up and running). Prior to the restart of the Montana Tunnels Mine Facility
the ore may be shipped to other regional mills for processing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Production mining will be undertaken using
two different methods &ndash; cut-and-fill and sub-level stopping. The cut-and-fill method will be utilized on the upper levels
of the Golden Dream Mine which are more oxidized or weathered.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Although the cut-and-fill method of mining
is more expensive on a per ton basis, it is used in mining situations where waste rock, or country rock, around the ore to be mined
is weaker and subject to falling in and diluting the ore. In the cut-and-fill mining method, ore is mined or &ldquo;cut&rdquo;
along strike by driving a tunnel to remove the ore. This &ldquo;cut&rdquo; is then backfilled with cemented &ldquo;fill&rdquo;
and another cut in the ore is driven alongside or above the cemented fill. The cemented backfill provides additional support to
the country rock. Utilizing this mining method in the oxidized portions of the Golden Dream Mine should reduce dilution to the
ore and provide a stable pillar that will not collapse or subside as the deeper sub-level areas are opened and mined.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As the mine reaches a depth below the first
150 feet of ore, the country rock turns from an oxidized, or weathered, material to a more solid, competent rock. At this point
production mining will move from the cut-and-fill method to a sub-level stopping method. In the sub-level mining method, two drifts
are driven, one at the top and one at the bottom of a block of ore 45 to 60 feet thick. Holes can then be drilled between the two
levels and loaded with explosives and the ore blasted out. The mined out areas remaining from this procedure would be backfilled
with loose rock or cemented backfill, if needed, for ground support.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The broken ore from either method of mining
will be loaded into underground haul trucks and transported to the surface where it will be transferred into 30 ton covered over-the-road
haul trucks and transported to the Montana Tunnels Mill Facility for processing (once the Montana Tunnels Mill Facility is up and
running). Prior to the restart of the Montana Tunnels Mine Facility the ore may be shipped to other regional mills for processing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Whereas in an open-pit operation the general
goal is to move material for the lowest cost per ton &ndash; a bulk mining exercise &ndash; the general goal in an underground
operation is to move fewer tons of material with the highest grade &ndash; an ore control exercise. Using the geologic model determined
by core drilling analysis, staff engineers and geologists completed a production model and associated financial pro-forma employing
capital and operating costs, mill recoveries and outside smelting and refining charges.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The current Golden Dream Mine Plan extends
only to a depth of approximately 850 feet below surface. Drill intercepts by the prior owners of the Elkhorn Project have intersected
ore grade mineralization on the Golden Dream deposit to depths of 1,400 feet below surface. EGI has also completed drilling and
analysis laterally along the Golden Dream Mine deposit mineralized structure with positive results. Although the drill density
in these locations is insufficient to define them as mineral reserves, there is a strong likelihood that additional mineable reserves
will be identified upon commencement of mining operations at the Golden Dream Mine.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition to the mineralization in and
around the Golden Dream Mine deposit, EGI and the property&rsquo;s predecessors have completed drilling on the other mineralized
deposits on the Elkhorn Project, namely Gold Hill, East Butte and Carmody. The current Elkhorn Project reserves and resources,
as reported in the Santa Fe prefeasibility and EGI feasibility studies, including all deposits are outlined in the table below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg33.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Golden Dream Project Underground Development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the third quarter of 2011, EGI commenced
development of the Golden Dream deposit. As of April 6, 2012, EGI has developed approximately 650 feet of 14&rsquo; X 14&rsquo;
main underground access tunnel and 350 feet of 12&rsquo; X 12&rsquo; underground ore access tunnel to reach a specific level of
the ore body. We are currently completing underground and surface water treatment and disposal infrastructure pursuant to our Operating
Permit and, upon completion of this work we will commence development of the next stage at the decline into the lower level ore
zones.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg34a.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Golden Dream Main Access Decline (September
2011)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg34b.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Company&rsquo;s Two-Boom Jumbo working in
6500 level ore access ramp at Golden Dream Deposit (November 2011)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg35.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Trench being completed for Golden Dream
water disposal (January 2012).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Golden Dream Main Access Decline and Mine
shop buildings in background</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>Compliance
with Government and Environmental Regulation</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s mining, processing
operations and exploration activities are subject to various laws and regulations governing the protection of the environment (federal
regulator is the Bureau of Land Management (&ldquo;BLM&rdquo;) and state regulator is the Montana Department of Environmental Quality
(&ldquo;MDEQ&rdquo;), exploration (BLM and MDEQ), mine safety, development and production (federal regulator is the Mine Safety
and Health Administration (&ldquo;MSHA&rdquo;), exports, taxes, labor standards, occupational health (MSHA), waste disposal (BLM
and MDEQ), toxic substances, water rights (federal regulator is the Department of Natural Resources and Conservation (&ldquo;DNRC&rdquo;),
explosives (federal regulator is the Bureau of Alcohol, Tobacco, Firearms and Explosives (&ldquo;ATF&rdquo;) and other matters.
New laws and regulations, amendments to existing laws and regulations or more stringent implementation of existing laws and regulations
could have a material adverse impact on the Company, increase costs, cause a reduction in levels of, or suspension of, production
and/or delay or prevent the development of new mining properties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company believes it is currently in
compliance in all material respects with all applicable environmental laws and regulations. Such compliance requires significant
expenditures and increases mine development and operating costs. Mining is subject to potential risks and liabilities associated
with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production.
Environmental liability may result from mining activities conducted by others prior to the Company&rsquo;s ownership of a property.
To the extent the Company is subject to uninsured environmental liabilities, the payment of such liabilities would reduce the Company&rsquo;s
otherwise available earnings and could have a material adverse effect on the Company. Should the Company be unable to fully fund
the cost of remedying an environmental problem, it might be required to suspend operations or enter into interim compliance measures
pending completion of the required remedy, which could have a material adverse effect on the Company. In addition, the Company
does not have coverage for certain environmental losses and other risks as such coverage cannot be purchased at a commercially
reasonable cost.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>Licenses
and Permits</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s operations require
licenses and permits from various governmental authorities. The Company believes it holds all material licenses and permits required
under applicable laws and regulations and believes it is presently complying in all material respects with the terms of such licenses
and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that
the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its
properties, commence construction or operation of mining facilities and properties under exploration or development or to maintain
continued operations that economically justify the cost.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>Mine
Safety and Health Administration Regulations </B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We consider health, safety and environmental
stewardship to be a core value for the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to Section 1503(a) of the recently
enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, issuers that are operators, or that have a subsidiary that is
an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC
information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and
mining-related fatalities. During the fiscal year ended December 31, 2011, the Company reported no lost time accidents. During
this same fiscal year the Company incurred nine MSHA citations, seven of which have been cleared. The remaining two citations are
being contested. All of the citations are covered by Section 104 (a) of the Mine Safety Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>Competition</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Because the life of a mine is limited by
its mineral reserves, the Company is continually seeking to replace and expand its reserves through the exploration of existing
properties as well as through acquisitions of interests in new properties or of interests in companies which own such properties.
The Company encounters competition from other mining companies in connection with the acquisition of properties and with the engaging
and maintaining of qualified industry experienced personnel. This competition may increase the cost of acquiring suitable properties
and retaining qualified industry experienced personnel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>Employees</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2011, we had 18 full-time
employees and two part-time employees, including our executive officers.&nbsp;&nbsp;We believe the relationship we have with our
employees is good.&nbsp;&nbsp;In 2012 we anticipate the need to hire additional technical, mining and administrative personnel.
Although demand for quality staff is high in the mining industry, we believe we will be able to fill these positions in a timely
manner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="text-transform: uppercase"><B>Financial
Statements and &ldquo;Going Concern&rdquo; Opinion</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The auditor&rsquo;s report accompanying
our audited financial statements for the years ended December 31, 2011 and 2010, included in Item 9.01 of this Current Report,
contained an explanation that our financial statements were prepared assuming that we will continue as a going concern.&nbsp;&nbsp;The
report cites the generation of significant losses from operations, an accumulated stockholders&rsquo;&nbsp;deficit, and a working
capital deficit.&nbsp;&nbsp;Our ability to continue operating as a going concern will depend on our ability to derive sufficient
funds from sales of equity and/or debt securities or our creation of a source of recurring revenue,&nbsp;to generate operating
capital in excess of our required cash expenditures and, thereafter, to generate sufficient funds to allow us to effectuate our
business plan.&nbsp;&nbsp;Further, to the extent that funds for our operations and business plan are required that exceed our gross
revenues, our ability to continue operating as a going concern will also depend on our ability to obtain sufficient financing,
whether in the form of debt or equity.&nbsp;&nbsp;We cannot provide any assurance that we will have sufficient sales or that sufficient
financing will&nbsp;be available to us on terms or at times that we may require.&nbsp;&nbsp;Failure in any of these efforts may
materially and adversely affect our ability to continue our operations or for you to receive any positive return on your investment
in us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF PROPERTIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Montana Tunnels Mine, Jefferson City,
Montana</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Montana Tunnels Mine is an open pit
poly-metallic mine located about five miles west of Jefferson City, Montana and operated between 1987 and 2009. The mine is located
in the historic &ldquo;Wickes-Corbin&rdquo; mining district in Section 8 of Township 7 North, Range 4 West, with approximate latitude
of 46&deg; 22&rsquo; and longitude 112&deg; 8&rsquo;. The administrative offices are located at 270 Montana Tunnels Road, Jefferson
City, Montana.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The total land area controlled by the Montana
Tunnels Mine is 9,293 acres consisting of 2,404 acres of wholly or partially owned Patented Mineral Claims<SUP>2</SUP>, 45 acres
of leased Patented Mineral Claims, 2,584 acres of fee land, and 4,260 acres of Unpatented Mineral Claims.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="color: black">The area encompassed
in MTMI&rsquo;s M-Pit Permit Boundary and outlying facilities is 2,385 acres of which greater than 90% is privately owned by MTMI.
Within this Permit Boundary 332 acres are designated for the M-Pit Mine open-pit area and perimeter of which greater than 99% is
overlain by private property wholly owned by MTMI. Within the M-Pit Mine open-pit area lays one 0.3 acre Unpatented Mineral Claim
(MF-1) and three leased Patented Mineral Claims (Mineral Survey numbers 6758, 6634 and 6640). The three leased Patented Mineral
Claims carry a 4.5% Net Smelter royalty but overlie minor amounts of mineralization and i</FONT>nsignificant royalty payments are
anticipated when this area is eventually mined.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In&nbsp;October and November,&nbsp;2008
MTMI was granted positive Records of Decisions by the lead government regulating agencies &ndash; the Montana&nbsp;Department of
Environmental Quality (&quot;MDEQ&quot;) and the Bureau of Land Management (&ldquo;BLM&rdquo;)&nbsp;&ndash; approving a major amendment
&ndash; the M-Pit Expansion Plan &ndash; to Operating Permit #00113, subject to the placement of a Reclamation Bond pursuant to
the approved Mining and Reclamation Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Mortgages on MTMI Property</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A Mortgage, Security Agreement, Assignment
of Leases and Rents, and Fixture Filing in favor of the administrative agent of certain Secured Lenders to EGLLC and MFPI has been
executed and delivered by MTMI, as mortgagor for the benefit of the Secured Lenders, recorded on February 22, 2010 in the official
records of Jefferson County, Montana as documents numbered 236384 (mortgage) and 236385 (UCC filing).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Elkhorn Project &ndash; The Golden Dream
Mine, Boulder, Montana</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Elkhorn Project consists of four known
gold and gold-copper mineral deposits which we are planning to operate using underground mining methods. The property is located
22 miles southeast of Helena, Montana and occupies portions of Sections 9, 10, 11, 14, 15 and 16 in Township 6 North, Range 3 West
with approximate latitude of 45&deg; 15&rsquo; and longitude of 111&deg; 55&rsquo;. The administrative offices are located at 2725-A
Elkhorn Road, Boulder, Montana.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><SUP>2</SUP> A Patented Mineral Claim is
a claim on which a patent has been secured from the United States Government and exclusive title has passed to the claimant. It
gives the owner&nbsp;title to the surface rights, locatable minerals and other resources. An Unpatented Mineral Claim is a parcel
of Federal land on which the claimant is provided rights to locatable minerals but no land ownership rights are conveyed to the
claimant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Elkhorn Project consists of 236 Unpatented
Mineral Claims encompassing approximately 4,000 acres and 35 wholly or partially owned Patented Mineral Claims encompassing an
additional 573 acres.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2007 EGI applied for a Mine Operating
Permit to allow for the extraction of between 500 and 1,000 tons per day from an underground mine located on its 100% owned Golden
Dream Mineral Claim (US Mineral Survey #7176). The Company&rsquo;s application sought a Mine Permit boundary consisting of 382.5
acres of Patented Mineral Claims surrounding the Golden Dream Claim. Approximately 40% of the Patented Mineral Claims contained
within the Mine Permit boundary are subject to a Mining Lease Agreement with Mt. Heagan Development Inc. whereby EGI leases the
Mineral Claims from Mt. Heagan subject to a &ldquo;3% Net Return royalty from any ores, mineral or other products removed&rdquo;
from the Mineral Claims covered under the terms of the Agreement. EGI pays to Mt. Heagan an &ldquo;advanced minimum royalty&rdquo;
of $5,000 per month which is &ldquo;creditable and recoupable&rdquo; against any production royalty payments. The remaining 60%
of the Patented Mineral Claims contained within the Mine Permit Boundary are 100% owned by EGI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In&nbsp;July,&nbsp;2008 the Company was
granted an Operating Permit by the lead government regulating agency &ndash; the MDEQ &ndash; subject to the placement of a Reclamation
Bond pursuant to the approved Mining and Reclamation Plan.&nbsp; In November 2011, upon EGI posting the necessary Reclamation Bond
in the amount of $591,474, the MDEQ approved the Golden Dream Operating Permit #00173.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Mortgages on EGI Property</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A Mortgage, Security Agreement, Assignment
of Leases and Rents, and Fixture Filing in favor of the administrative agent of certain Secured Lenders to EGLLC and MFPI has been
executed and delivered by EGI, as mortgagor for the benefit of the Secured Lenders, recorded on May 29, 2009 in the official records
of Jefferson County, Montana as documents numbered 233612 (mortgage) and 233614 (First Priority UCC filing).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with a Minerals Product Receivables
Purchase Agreement (the &ldquo;MPRPA&rdquo;) dated as of April 15, 2011, by and among EGI, EGLLC and BDH and a related security
agreement of the same date by and between EGI and BDH, a UCC-1 (#584640340) was filed with Montana Secretary of State on November
17, 2011 with BDH as the secured party. This UCC-1 covers certain of EGI&rsquo;s assets and property pursuant to the security agreement
dated April 15, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Description of Corporate Offices</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s corporate offices are
located at 1610 Wynkoop Street, Suite 400, Denver, Colorado 80202 in space provided by Black Diamond Financial Group, LLC (&ldquo;Black
Diamond&rdquo;). The corporate offices are maintained by two of the Company&rsquo;s officers and accounting, finance and administrative
support staff. Currently, the Company&rsquo;s cost for this office space is covered under its Management Services Agreement with
Black Diamond pursuant to which it pays Black Diamond $15,000 per month. See Executive Compensation &ndash; Management Services
Agreement for additional information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our business is to engage in exploration
and production activities in the precious minerals mining industry, which is a highly speculative activity. An investment in our
securities involves a high degree of risk. You should not invest in our securities if you cannot afford to lose your entire investment.
In deciding whether you should invest in our securities, you should carefully consider the following information together with
all of the other information contained in this Current Report. Any of the following risk factors can cause our business, prospects,
financial condition or results of operations to suffer and you to lose all or part of your investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>RISKS RELATED TO OUR BUSINESS AND FINANCIAL
CONDITION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Estimates of mineralized material
are based on interpretation and assumptions and may yield less mineral production under actual conditions than is currently estimated.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There are numerous uncertainties inherent
in estimating quantities of mineralized material such as gold, zinc, lead, copper and silver, including many factors beyond our
control and no assurance can be given that the recovery of mineralized material will be realized. In general, estimates of mineralized
material are based upon a number of factors and assumptions made as of the date on which the estimates were determined, including:</P>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">geological and engineering estimates that have inherent uncertainties and the assumed effects of
regulation by governmental agencies;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">the judgment of the engineers preparing the estimates;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">estimates of future metals prices and operating costs;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">the quality and quantity of available data;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">the interpretation of that data; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">the accuracy of various mandated economic assumptions, all of which may vary considerably from
actual results.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Until mineralized material is actually
mined and processed, it must be considered an estimate only.&nbsp;&nbsp;These estimates are imprecise and depend on geological
interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable.&nbsp;&nbsp;We
cannot assure you that these mineralized material estimates will be accurate or that this mineralized material can be mined or
processed profitably.&nbsp;&nbsp;Any material changes in estimates of mineralized material will affect the economic viability of
placing a property into production and such property&rsquo;s return on capital.&nbsp;&nbsp;There can be no assurance that minerals
recovered in small scale metallurgical tests will be recovered at production scale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may have difficulty meeting our
current and future capital requirements.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our management and our board of directors
monitor our overall costs and expenses and, if necessary, adjust our programs and planned expenditures in an attempt to ensure
we have sufficient operating capital.<B>&nbsp; </B>We continue to evaluate our costs and planned expenditures for our on-going
development and care and maintenance efforts at our mineral properties. We raised in excess of $10 million during our 2011 fiscal
year from that certain MPRPA dated as of April 15, 2011 between EGI, EGLLC and BDH, and increased our cash and cash equivalent
assets by $296,774. In February 2012, we raised an additional $1.8 million in bridge financing. However, the continued development
and care and maintenance of our mineral properties will require significant amounts of additional capital. &nbsp;As a result, we
may need to explore raising additional capital during fiscal 2012 and beyond so that we can continue to fully fund our planned
activities.&nbsp; Our ability to obtain this financing will depend upon, among other things, the price of gold and the industry&rsquo;s
perception of its future price. The extraordinary conditions in the global financial and capital markets have currently limited
the availability of this funding.&nbsp;&nbsp;Therefore, availability of funding is dependent largely upon factors outside of our
control, and cannot be accurately predicted. If the disruptions in the global financial and capital markets continue, debt or equity
financing may not be available to us on acceptable terms, if at all.&nbsp; If we are unable to fund future operations by way of
financing, including public or private offerings of equity or debt securities, our business, financial condition and exploration
activities will be adversely impacted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The outstanding debt instruments
of our largest shareholder (EGLLC) and its affiliate (MFPI) contains restrictive covenants relating to our operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="background-color: white">Pursuant
to secured mortgages encumbering all of the assets and property of EGI and MTMI, the secured lenders to our largest shareholder,
EGLLC, and its affiliate, MFPI, imposed restrictions on us that affect our ability to incur additional debt. Further, the Tri-Party
Agreement by and among EGLLC, the Secured Lenders and the Company requires us to comply with various financial covenants set forth
in the mortgages encumbering all of the assets and property of EGI and MTMI. A breach of the covenants could result in an acceleration
of the debt obligations of EGLLC and MFPI and if a waiver or modification is not agreed upon with the Secured Lenders, our ability
to continue as a going concern would be affected and the Secured Lenders would be able to foreclose on the assets and property
of EGI and MTMI as provided for in the loan reinstatement and modification agreement by and among EGLLC and the Secured Lenders.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The volatility of the price of gold,
zinc, lead, copper or silver could adversely affect our future operations and, if warranted, our ability to develop our properties</I></B>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The potential for profitability of our
operations, the value of our properties and our ability to raise funding to conduct continued exploration and development, if warranted,
are directly related to the market prices of gold, zinc, lead, copper, silver and other precious metals.&nbsp;&nbsp;The prices
of such metals fluctuate widely and are affected by numerous factors beyond our control, including interest rates, expectations
for inflation, speculation, currency values (in particular the strength of the U.S. dollar), global and regional demand, political
and economic conditions and production costs in major metal producing regions of the world. The price of gold may also have a significant
influence on the market price of our common stock and the value of our properties.&nbsp;&nbsp;Our decision to put a mine into production
and to commit the funds necessary for that purpose must be made long before the first revenue from production would be received.&nbsp;&nbsp;A
decrease in the prices of gold, zinc, lead, copper or silver may prevent our property from being economically mined or result in
the write-off of assets whose value is impaired as a result of lower gold, zinc, lead, copper or silver prices.&nbsp;&nbsp;The
prices of gold, zinc, lead, copper and silver is affected by numerous factors beyond our control, including inflation, fluctuation
of the United States dollar and foreign currencies, global and regional demand, the sale of gold, zinc, lead, copper and silver
by central banks, and the political and economic conditions of major gold and silver producing countries throughout the world.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The volatility in gold, silver and copper
prices is illustrated by the following table, which sets forth for each of the past five calendar years, the average annual market
prices in U.S. dollars per ounce of gold and silver, based on the daily London P.M. fixing, and per ounce of copper, based on the
Mundi Index:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Mineral</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2007</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2008</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2009</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 30%; text-align: justify">Gold</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">695.39</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">871.96</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">972.35</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">1,224.52</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">1,571.52</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">Silver</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">13.41</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">14.69</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">20.20</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">35.26</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">Copper</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.23</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.16</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.34</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.42</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The volatility of mineral prices represents
a substantial risk which no amount of planning or technical expertise can fully eliminate.&nbsp;&nbsp;In the event gold prices
decline or remain low for prolonged periods of time, we might be unable to develop our properties, which may adversely affect our
results of operations, financial performance and cash flows</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The nature of mineral exploration
and production activities involves a high degree of risk and the possibility of uninsured losses</I></B>.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Exploration for and the production of minerals
is highly speculative and involves greater risk than many other businesses.&nbsp;&nbsp;Many exploration programs do not result
in the discovery of mineralization, and any mineralization discovered may not be of sufficient quantity or quality to be profitably
mined.&nbsp;&nbsp;Our operations are, and any future development or mining operations we may conduct will be, subject to all of
the operating hazards and risks normally incident to exploring for and development of mineral properties, such as, but not limited
to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Economically insufficient mineralized material;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Fluctuation in production costs that make mining uneconomical;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Labor disputes;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Unanticipated variations in grade and other geologic problems;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Environmental hazards;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Water conditions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Difficult surface or underground conditions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Industrial accidents;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Metallurgic and other processing problems;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Mechanical and equipment performance problems;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Failure of pit walls or dams;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Unusual or unexpected rock formations;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Personal injury, fire, flooding, cave-ins and landslides; and</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">Decrease in the value of mineralized material due to lower gold, zinc, lead, copper or silver prices.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Any of these risks can materially and adversely
affect, among other things, the development of properties, production quantities and rates, costs and expenditures, potential revenues
and production dates.&nbsp;&nbsp;We currently have limited insurance to guard against some of these risks.&nbsp;&nbsp;If we determine
that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a writedown
of our investment in these interests.&nbsp;&nbsp;All of these factors may result in losses in relation to amounts spent which are
not recoverable, or result in additional expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Difficult conditions in the global
capital markets and the economy generally may materially adversely affect our business and results of operations, and we do not
expect these conditions to improve in the near future</I>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our results of operations are materially
affected by conditions in the domestic capital markets and the economy generally. The stress experienced by domestic capital markets
that began in the second half of 2007 has continued and substantially increased into the present. Recently, concerns over inflation,
energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining real estate market
in the U.S. have contributed to increased volatility and diminished expectation for the economy and the markets going forward.
These factors, combined with volatile oil and gas prices, declining business and consumer confidence and increased unemployment,
have precipitated an economic slowdown and fears of a continued recession. In addition, the fixed-income markets are experiencing
a period of extreme volatility which has negatively impacted market liquidity conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Initially, the concerns on the part of
market participants were focused on the subprime segment of the mortgage-backed securities market. However, these concerns have
since expanded to include a broad range of mortgage and asset-backed and other fixed income securities, including those rated investment
grade, the U.S. and international credit and interbank money markets generally and a wide range of financial institutions and markets,
asset classes and sectors. As a result, capital markets have experienced decreased liquidity, increased price volatility, credit
downgrade events, and increased probabilities of default. These events and the continuing market upheavals may have an adverse
effect on us because our liquidity and ability to fund our capital expenditures is dependent in part upon our access to the private
and public capital markets. In addition, in the event of extreme prolonged market events, such as the global credit crisis, we
could incur significant losses. Even in the absence of a market downturn, we are exposed to substantial risk of loss due to market
volatility. The forgoing factors may have a negative impact on the value of our company, our assets, and our common stock resulting
in illiquidity of our shares and potentially a total loss to our shareholders and a failure of our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Failure to extend the life of the
Montana Tunnels Mine or Golden Dream Mine would significantly reduce our gold production. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Although our Montana Tunnels Mine has been
in production from 1987 through 2008 the mine is currently on care and maintenance awaiting financing to recommence production.
During its productive period the Montana Tunnels Mine produced in excess of 1.7 million ounces of gold. As of December 2011, we
declared reserves of approximately 450,000 ounces of gold remaining at the Montana Tunnels Mine and 260,000 ounces of gold at the
Golden Dream Mine recoverable by open pit or underground mining methods. Development of these reserves is dependent upon financing
at reasonable terms and a sufficient gold price to provide a reasonable return on investment. The ultimate success of both mines
depends largely on our ability to raise the necessary capital to recommence mining activities on the current mine lives (9 years
for Montana Tunnels Mine and 5 years for Golden Dream Mine) and, in due course, expand the mine lives of both operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Title to our properties may be challenged
or defective.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our planned future operations, including
our activities at the Golden Dream Mine and Montana Tunnels Mine projects and other exploration activities, may require amendments
to our currently approved permits from various governmental authorities. Our operations are and will continue to be governed by
laws and regulations governing prospecting, mineral exploration, exports, taxes, labor standards, occupational health, waste disposal,
toxic substances, land use, environmental protection, mine safety, mining royalties and other matters. There can be no assurance
that we will be able to acquire all required licenses, permits, amendments or property rights on reasonable terms or in a timely
manner, or at all, and that such terms will not be adversely changed, that required extensions will be granted, or that the issuance
of such licenses, permits or property rights will not be challenged by third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We attempt to confirm the validity of our
rights of title to, or contract rights with respect to, each mineral property in which we have a material interest. However, we
cannot guarantee that title to our properties will not be challenged. Our mineral properties may be subject to prior unregistered
agreements, interests or native land claims, and title may be affected by undetected defects. There may be valid challenges to
the title of any of the claims comprising our mineral properties that, if successful, could impair possible development and/or
operations with respect to such properties in the future. Challenges to permits or property rights, whether successful or unsuccessful;
changes to the terms of permits or property rights; or a failure to comply with the terms of any permits or property rights that
have been obtained, could have a material adverse effect on our business by delaying or preventing or making continued operations
economically unfeasible.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A title defect could result in EGI or MTMI
losing all or a portion of its right, title, and interest in and to the properties to which the title defect relates. Title insurance
generally is not available, and our ability to ensure that we have obtained secure title to individual mineral properties or mining
concessions may be severely constrained. In addition, we may be unable to operate our properties as permitted or to enforce our
rights with respect to our properties. We regularly monitor the official land records in the counties in which our mineral properties
lie to determine if there are annotations indicating the existence of a legal challenge against the validity of any of our concessions.
As of December 31, 2011, there were no such annotations, nor are we aware of any challenges from the government or from third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We are subject to complex environmental
and other regulatory risks, which could expose us to significant liability and delay, and potentially the suspension or termination
of our development efforts.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Compliance with environmental quality requirements
and reclamation laws imposed by federal, state, provincial, and local governmental authorities may:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">require significant capital outlays;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">materially affect the economics of a given property;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">cause material changes or delays in our intended activities; and</TD></TR></TABLE>

<P STYLE="font: 10pt Wingdings; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Wingdings">&sect;</FONT></TD><TD STYLE="text-align: justify">expose us to lawsuits.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">These regulations mandate, among other
things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation,
transportation, storage and disposal of solid and hazardous waste. Applicable authorities may require us to prepare and present
data pertaining to the effect or impact that any proposed exploration for or production of minerals may have upon the environment.
The requirements imposed by any such authorities may be costly, time consuming, and may delay operations. Future legislation and
regulations designed to protect the environment, as well as future interpretations of existing laws and regulations, may require
substantial increases in equipment and operating costs and delays, interruptions, or a termination of operations. We cannot accurately
predict or estimate the impact of any such future laws or regulations, or future interpretations of existing laws and regulations,
on our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Historic mining activities have occurred
on certain of our properties. If such historic activities have resulted in releases or threatened releases of regulated substances
to the environment, potential for liability may exist under federal or state remediation statutes. Such liability would include
remediating any damage that we may have caused, including costs for removing or remediating the release and damage to natural resources,
including ground water, as well as the payment of fines and penalties. Except as discussed in our periodic filings with the SEC,
we are not aware of any such claims under these statutes at this time, and cannot predict whether any such claims will be asserted
in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may produce air emissions and
pollutions that could fall under the jurisdiction of U.S. federal laws.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the U.S. Resource Conservation and
Recovery Act, mining companies may incur costs for generating, transporting, treating, storing, or disposing of hazardous waste,
as well as for closure and post-closure maintenance once they have completed mining activities on a property. Our mining operations
may produce air emissions, including fugitive dust and other air pollutants, from stationary equipment, storage facilities, and
the use of mobile sources such as trucks and heavy construction equipment which are subject to review, monitoring and/or control
requirements under the Federal Clean Air Act and state air quality laws. Permitting rules may impose limitations on our production
levels or create additional capital expenditures in order to comply with the rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Legislation has been proposed that
would significantly affect the mining industry.&nbsp;&nbsp;&nbsp;&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Periodically, members of the U.S. Congress
have introduced bills which would supplant or alter the provisions of the General Mining Law of 1872, which governs the unpatented
claims that we control with respect to our U.S. properties. One such amendment has become law and has imposed a moratorium on the
patenting of mining claims, which reduced the security of title provided by unpatented claims such as those on our U.S. properties.
If additional legislation is enacted, it could substantially increase the cost of holding unpatented mining claims by requiring
payment of royalties, and could significantly impair our ability to develop mineral estimates on unpatented mining claims. Such
bills have proposed, among other things, to make permanent the patent moratorium, to impose a federal royalty on production from
unpatented mining claims and to declare certain lands as unsuitable for mining. Although it is impossible to predict at this time
what royalties may be imposed in the future, the imposition of such royalties could adversely affect the potential for development
of such mining claims, and the economics of existing operating mines on federal unpatented mining claims. Passage of such legislation
could adversely affect our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our operations are subject to permitting
requirements which could require us to delay, suspend or terminate our operations on our mining properties.&nbsp;&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our operations, including ongoing exploration
drilling programs, require permits from the state and federal governments, including permits for the use of water and for drilling
wells for water. We may be unable to obtain these permits in a timely manner, on reasonable terms or on terms that provide us sufficient
resources to develop our properties, or at all. Even if we are able to obtain such permits, the time required by the permitting
process can be significant. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits,
our timetable and business plan for exploration of our properties will be adversely affected, which may in turn adversely affect
our results of operations, financial condition and cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may face a shortage of water.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Water is essential in all phases of the
exploration, development and operation of mineral properties. With the nature of our operations, water is used in such processes
as exploration, drilling, testing, dust suppression, milling and tailings disposal. Although currently both of our contemplated
operations have adequate water supplies under permit for use in the operations, the lack of available water and the cost of acquisition
may make an otherwise viable project economically impossible to complete.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Global climate change is an international
concern, and could impact our ability to conduct future operations</I></B>.&nbsp;&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Global climate change is an international
issue and receives an enormous amount of publicity. We would expect that the imposition of international treaties or federal, state
or local laws or regulations pertaining to mandatory reductions in energy consumption or emissions of greenhouse gasses could affect
the feasibility of our mining projects and increase our operating costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Because access to the mineral property
may be restricted by inclement weather or other hazards, we may be delayed in our development efforts.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are subject to risks and hazards, including
environmental hazards, the encountering of unusual or unexpected geological formations, cave-ins, flooding, earthquakes and periodic
interruptions due to inclement or hazardous weather conditions. As a result, access to our mineral properties may be restricted
during parts of the year. The properties are in a mountainous area in the Jefferson County and Broadwater County, Montana which
is accessible by county roads, BLM roads, and private roads. Although these roads have been used for exploration, forestry and
mining operations in the past, they are best traveled by four-wheel drive vehicles from spring to the beginning of winter. During
the winter months, heavy snowfall can make it difficult to undertake work programs. We do not currently plan exploration drilling
operations in the winter months. Frequent inclement weather in the winter months can make development and mining activities difficult
for short periods of time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may face a shortage of supplies,
equipment and materials.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The mineral industry has experienced from
time to time shortages of certain supplies, equipment and materials necessary in the exploration, evaluation, development and production
of mineral deposits. The prices at which such supplies and materials are available have also greatly increased. Our planned operations
could be subject to delays due to such shortages and further price escalations could increase our costs for such supplies, equipment
and materials. Our experience and that of others in the industry is that suppliers are often unable to meet contractual obligations
for supplies, equipment, materials, and services, and that alternate sources of supply do not exist.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The market for obtaining desirable
properties, investment capital, and outside engineers and consultants is highly competitive.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Presently, we employ a limited number of
full-time employees, utilize outside consultants, and in large part rely on the personal efforts of our officers and directors.
Our success will depend, in part, upon the ability to attract and retain qualified outside engineers and other professionals to
develop and operate our mineral properties, in addition to obtaining investment capital to conduct our mining operations. We believe
that we will be able to attract competent employees and consultants, but no assurance can be given that we will be successful in
this regard as competition for these professionals is highly competitive. If we are unable to engage and retain the necessary personnel,
our business would be materially and adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We depend upon a limited number of
personnel and the loss of any of these individuals could adversely affect our business</I></B>.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If any of our current executive employees
were to die, become disabled or leave our company, we would be forced to identify and retain individuals to replace them.&nbsp;&nbsp;Messrs.
Patrick W.M Imeson, Robert Trenaman, Eric Altman and Timothy Smith are our critical employees at this time. In addition to the
executives, our company relies heavily on a several staff people that have extensive knowledge of our properties and mine plans.
&nbsp; There is no assurance that we can find suitable individuals to replace them or to add to our employee base if that becomes
necessary.&nbsp;&nbsp;We are entirely dependent on these individuals as our critical personnel at this time.&nbsp;&nbsp;We have
no life insurance on any of our employees, and we may be unable to hire a suitable replacement for them on favorable terms, should
that become necessary.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Some of our directors may have conflicts
of interest as a result of their involvement with other natural resource companies or with equity, preferred equity, or lost positions
in the company.&nbsp;&nbsp;&nbsp;&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Some of our directors are directors or
officers of other natural resource or mining-related companies, or may be involved in related pursuits that could present conflicts
of interest with their roles at the Company. These associations may give rise to conflicts of interest from time to time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the event that any such conflict of
interest arises, a director who has such a conflict is required to disclose the conflict to the board of directors of the company
in question and to abstain from voting for or against approval of any matter in which such director may have a conflict. In appropriate
cases, we will establish a special committee of independent directors to review a matter in which any director or member of management
may have a conflict.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have incurred substantial losses
since our inception and may never be profitable.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have accumulated substantial losses,
and we have very limited revenue from operations since the previous owners of Montana Tunnels Mine shut down the mill in 2009.&nbsp;&nbsp;During
the fiscal years ended 2011 and 2010, we have reported net losses of approximately $30 million and $10 million, respectively.&nbsp;&nbsp;We
had an accumulated deficit of approximately $59 million as of December 31, 2011.&nbsp;&nbsp;We expect to continue to incur losses
unless and until we generate sufficient revenue from production to fund continuing operations including exploration and development
costs.&nbsp;&nbsp;There is no assurance we will be profitable for any quarterly or annual period.&nbsp;&nbsp;Our failure to report
profits may adversely affect the price of our common stock and you may lose all or part of your investment.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Except for the MPRPA (discussed below),
we currently have not entered into forward sales, commodity, derivatives or hedging arrangements with respect to our gold production
and as a result we are exposed to the impact of any significant decrease in the gold, zinc, lead, copper and silver prices</I></B>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We expect to sell the gold, zinc, lead,
copper and silver we expect to be producing at prevailing market prices. Currently, we have not entered into forward sales, commodity,
derivative or hedging arrangements to establish a price in advance for the sale of future production, although we may do so in
the future. As a result, we may realize the benefit of any short-term increase in the gold price, but we are not protected against
decreases in gold, zinc, lead, copper and silver prices, and if gold, zinc, lead, copper and silver prices decrease significantly,
our expected future revenues may be materially adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to achieve mineral
production levels anticipated from our Montana Tunnels Project and Elkhorn Goldfields Project, our financial condition and results
of operation will be adversely affected</I></B>.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are proceeding with the development
of the Montana Tunnels open-pit mine expansion and the development of the Golden Dream<I> </I>underground<I> </I>mine based on
estimates of mineralized material identified in our drilling programs and estimates of mineral<B> </B>recovery based on, in the
case of Montana Tunnels, historical operating results and, in the case of the Golden Dream Mine, test work developed during our
internal feasibility studies.&nbsp;&nbsp;However, risks related to metallurgy are inherent when working with extractable minerals.&nbsp;&nbsp;Sales
of minerals, if any, that we realize from future mining activity will be less than anticipated if the mined material does not contain
the concentration of minerals predicted by our geological exploration.&nbsp;&nbsp;This risk may be increased since we have not
sought or obtained a feasibility study or reserve report with regard to any of our properties.&nbsp;&nbsp;If sales of our minerals
are less than anticipated, we may not be able to recover our investment in our property and our operations may be adversely affected.&nbsp;&nbsp;Our
inability to realize production based on quarterly or annual projections may adversely affect the price of our common stock and
you may lose all or part of your investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our existing planned production is
limited to two properties and our ability to become and remain profitable over the long term will depend on our ability to identify,
explore and develop additional properties</I></B>.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Gold, zinc, lead, copper and silver properties
are wasting assets.&nbsp;&nbsp;They eventually become depleted or uneconomical to continue mining.&nbsp;&nbsp;Under our current
production plan and design at our open pit Montana Tunnels Mine, there are approximately eight years of commercial production from
operations commencement.&nbsp;&nbsp;Accordingly, our ability to become and remain profitable over the long term depends on our
ability to finalize the design, permit, development and profitable extraction and recovery of mineral resources beyond the current
planned nine year mine life for the Montana Tunnels Mine. At the Golden Dream Mine our current permitted production plan encompasses
approximately five years of commercial production from operations commencement. As with the Montana Tunnels Mine our ability to
become and remain profitable over the long term depends on our ability to finalize the design, permit, development and profitable
extraction and recovery of mineral resources beyond the current five year mine life. If our ability to expand the operations beyond
their current planned mined lives doesn&rsquo;t occur we may seek to acquire other precious and base metals properties beyond our
current properties. The acquisition of precious and base metals properties and their exploration and development are subject to
intense competition.&nbsp;&nbsp;Companies with greater financial resources, larger staff, more experience and more equipment for
exploration and development may be in a better position than us to compete for such mineral properties.&nbsp;&nbsp;If we are unable
to find, develop, and economically mine new properties, we most likely will not be profitable on a long term basis and the price
of our common stock may suffer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Since we have a very limited operating
history, investors have little basis to evaluate our ability to operate</I></B>.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our activities to date have been focused
on raising financing, exploring our properties and preparing those properties for production.&nbsp;&nbsp;Although our mine and
concentrating facilities at the Montana Tunnels operation have operated from 1987 through to 2009, these operations were carried
out under different ownership and, as a consequence we face all of the risks commonly encountered by other businesses that lack
an established operating history, including the need for additional capital and personnel, and intense competition.&nbsp;&nbsp;There
is no assurance that our business plan will be successful.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The construction of our mines and
optimization and continued operation of our mills are subject to all of the risks inherent in construction, start-up and operations</I></B>.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">These risks include potential delays, cost
overruns, shortages of material or labor, construction defects, breakdowns and injuries to persons and property.&nbsp;&nbsp;We
expect to engage self-employed personnel, subcontractors and material suppliers in connection with the construction and development
of the Montana Tunnels Mine and Golden Dream Mine projects.&nbsp;&nbsp;While we anticipate taking all measures which we deem reasonable
and prudent in connection with construction of the mines and the operation of the mills, there is no assurance that the risks described
above will not cause delays or cost overruns in connection with such construction or operation.&nbsp;&nbsp;Any delays would postpone
our anticipated receipt of revenue and adversely affect our operations, which in turn may adversely affect the price of our stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our operations are subject to permitting
requirements which could require us to delay, suspend or terminate our operations</I></B>.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our operations require permits from the
State of Montana and the U.S. federal government.&nbsp;&nbsp;If we cannot obtain or maintain the necessary permits, or if there
is a delay in receiving future permits, our timetable and business plan will be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We do not insure against all of the
risks to which we may be subject in our operations.</I></B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">While we currently maintain insurance against
general commercial liability claims and the physical assets at our projects, we do not maintain insurance to cover all of the potential
risks associated with our operations.&nbsp;&nbsp;We might be subject to liability for environmental, pollution or other hazards
associated with mineral exploration and development, which risks may not be insured against, which may exceed the limits of our
insurance coverage, or which we may elect not to insure against because of premium costs or other reasons.&nbsp;&nbsp;We may also
not be insured against interruptions to our operations.&nbsp;&nbsp;Losses from these or other events may cause us to incur significant
costs which could materially adversely affect our financial condition and our ability to fund activities on our property.&nbsp;&nbsp;A
significant loss could force us to reduce or terminate our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may require significant additional
capital to fund our business plan.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We will be required to expend significant
funds to determine if proven and probable mineral reserves exist at some of our properties, to continue exploration and if warranted,
develop our existing properties and to identify and acquire additional properties to diversify our property portfolio.&nbsp;&nbsp;There
can be no assurance that any of the development properties we now hold, or which we may acquire, will contain a commercial ore
reserve, and therefore, no assurance that we will ever generate a positive cash flow from the sale of production on such properties.
In addition, once we decide to place a property into production, risks still exist that the amount and grade of the reserves may
be significantly less than predicted. We have spent and will be required to continue to expend significant amounts of capital for
drilling, geological and geochemical analysis, assaying and feasibility studies with regard to the results of our exploration.&nbsp;&nbsp;We
may not benefit from these investments if we are unable to identify commercially exploitable mineralized material.&nbsp;&nbsp;If
we do locate commercially mineable material or decide to put additional properties into production, we may be required to upgrade
our milling facility at the Montana Tunnels Mill Complex or construct new milling facilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our ability to obtain necessary funding
for these purposes, in turn, depends upon a number of factors, including the status of the national and worldwide economy and the
prices of gold and other precious and base metals.&nbsp;&nbsp;Capital markets worldwide have been adversely affected by substantial
losses by financial institutions, in turn caused by investments in asset-backed securities.&nbsp;&nbsp;We may not be successful
in obtaining the required financing, or if we can obtain such financing, such financing may not be on terms that are favorable
to us.&nbsp;&nbsp;Failure to obtain such additional financing could result in delay or indefinite postponement of further mining
operations or exploration and development and the possible partial or total loss of our potential interest in our properties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have significant obligations at
the Montana Tunnels Mine, which may adversely impact liquidity.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Montana Tunnels Mine in Montana operates
under a number of permits issued by local, state and federal agencies. Those agencies require us to post a total of $33.6 million
in reclamation bonds in order to commence development of our &ldquo;M&rdquo; Pit expansion. We have partially collateralized the
surety bonds at the Montana Tunnels Mine with $16 million in cash and reclamation bonds, $3.6 million in a security interest in
real property mineral interests. In addition, the Golden Dream Mine has provided the regulatory agencies $604,021 in cash for its
reclamation obligations pursuant to our operating and exploration permits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our operating costs could be adversely
affected by inflationary pressures especially to labor and fuel costs.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The global economy is currently in a period
of high commodity prices and as a result the mining industry is attempting to increase production. This has caused significant
upward price pressures in the operating costs of mining companies especially in the area of skilled labor. The skilled labor needed
by the mining industry is in tight supply and its cost is increasing. Many of our competitors have lower costs and their mines
are located in better locations that may give them a competitive advantage in employee hiring and retention.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The cost of fuel to run machinery and generate
electricity is closely correlated to the price of oil and energy. Over the past two years the price of oil has risen significantly
and has increased the operating cost of mines dependent on fuel to run their business. Continued upward price pressures in our
operating costs may cause us to generate significantly less operating cash flows than expected which would have an adverse impact
to our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our continuing reclamation obligations
at the Montana Tunnels Mine and our other properties could require significant additional expenditures.&nbsp;&nbsp;&nbsp;&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are responsible for the reclamation
obligations related to disturbances located on all of our mineral properties. We have posted bonds in the amount of the estimated
reclamation obligation at the properties. The reclamation bond amount is an estimation based upon mine closure plans which have
been designed by our employees and consultants and submitted to, and approved by, the Bureau of Land Management (&ldquo;BLM&rdquo;)
and the Montana Department of Environmental Quality (&ldquo;MDEQ&rdquo;). Every five years the regulatory authorities review the
reclamation plans and apply new costs based upon inflation rates and updated rates and costs for reclamation activities. There
is a risk that we will be unable to fund these additional bonding requirements, and further that increase reclamation and bonding
requirements may increase to such a degree that it would not be commercially reasonable to continue exploration activities, which
may adversely affect our results of operations, financial performance and cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We will continue to incur losses
for the foreseeable future. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="background-color: white">Prior
to completion of the development and pre-production stage, we anticipate that we will incur increased operating expenses without
realizing any revenues. We expect to incur continuing and significant losses until such time as we achieve commercial production
from our mining operations on&nbsp;our mineral claims.&nbsp; As a result of continuing losses, we may exhaust all of our resources
and be unable to complete development of our planned mining operations. Our accumulated deficit will continue to increase as we
continue to incur losses. We may not be able to generate profits or continue operations if we are unable to generate significant
revenues from future mining of the mineral claims and our business will most likely fail.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>RISKS RELATED TO OUR COMMON STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>There currently is no public market
for our Common Stock. Failure to develop or maintain a trading market could negatively affect the value of our Common Stock and
make it difficult or impossible for you to sell your shares.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There is currently no public market for
shares of our Common Stock and one may never develop. Our Common Stock is quoted on the OTC Bulletin Board operated by the Financial
Industry Regulatory Authority, Inc. The OTC Bulletin Board is a thinly traded market and lacks the liquidity of certain other public
markets with which some investors may have more experience. We may not ever be able to satisfy the listing requirements for our
Common Stock to be listed on an exchange, which are often a more widely-traded and liquid market. Some, but not all, of the factors
which may delay or prevent the listing of our Common Stock on a more widely-traded and liquid market include the following: our
stockholders&rsquo; equity may be insufficient; the market value of our outstanding securities may be too low; our net income from
operations may be too low; our Common Stock may not be sufficiently widely held; we may not be able to secure market makers for
our Common Stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our
Common Stock listed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We cannot assure you that the Common
Stock will become liquid or that it will be listed on a securities exchange.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Until our Common Stock is listed on a national
securities exchange such as the New York Stock Exchange or the Nasdaq Stock Market, we expect our Common Stock to remain eligible
for quotation on the OTC Bulletin Board, or on another over-the-counter quotation system such as OTC Markets, Inc. In those venues,
however, an investor may find it difficult to obtain accurate quotations as to the market value of our Common Stock. In addition,
if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who
sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter
broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of the Common Stock. This
would also make it more difficult for us to raise capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our Common Stock is subject to the
&ldquo;Penny Stock&rdquo; rules of the SEC and the trading market in the securities is limited, which makes transactions in the
stock cumbersome and may reduce the value of an investment in the stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The SEC has adopted Rule 15g-9 which establishes
the definition of a &ldquo;penny stock,&rdquo; for the purposes relevant to us, as any equity security that has a market price
of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, the rules require:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">that a broker or dealer approve a person&rsquo;s account for transactions in penny stocks; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the broker or dealer receive from the investor a written agreement to the transaction, setting
forth the identity and quantity of the penny stock to be purchased.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In order to approve a person&rsquo;s account
for transactions in penny stocks, the broker or dealer must:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">obtain financial information and investment experience objectives of the person; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">make a reasonable determination that the transactions in penny stocks are suitable for that person
and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions
in penny stocks.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The broker or dealer must also deliver,
prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which,
in highlight form sets forth:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the basis on which the broker or dealer made the suitability determination; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">that the broker or dealer received a signed, written agreement from the investor prior to the transaction.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Generally, brokers may be less willing
to execute transactions in securities subject to the &ldquo;penny stock&rdquo; rules. This may make it more difficult for investors
to dispose of common stock and cause a decline in the market value of stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Disclosure also has to be made about the
risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both
the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available
to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price
information for the penny stock held in the account and information on the limited market in penny stocks.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our common stock is controlled by
one shareholder.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="color: black">EGLLC beneficially
owns approximately 88.2% of our capital stock, on a fully diluted basis. Such concentrated control of the Company may adversely
affect the price of our Common Stock. Investors who acquire Common Stock may have no effective voice in the management of the Company.
Sales by this stockholder, along with any other market transactions, could affect the market price of the Common Stock. In addition,
the Pubco Holders</FONT> of our free trading shares of Common Stock immediately prior to the Merger, the Public Float Shares, entered
into lock-up agreements with ESRI whereby the Pubco Holders agreed that forty percent (40%) of their Public Float Shares may not
be sold for a period of twelve (12) months following the Merger closing date. These lock ups may also <FONT STYLE="color: black">adversely
affect the price of our Common Stock</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The price of our Common Stock may
become volatile, which could lead to losses by investors and costly securities litigation.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The trading price of our Common Stock is
likely to be highly volatile and could fluctuate in response to factors such as:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">actual or anticipated variations in our operating results;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">announcements of developments by us or our competitors;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">announcements by us or our competitors of significant acquisitions, strategic partnerships, joint
ventures or capital commitments;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">adoption of new accounting standards affecting our Company&rsquo;s industry;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">additions or departures of key personnel;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">sales of our Common Stock or other securities in the open market; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">other events or factors, many of which are beyond our control.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The stock market is subject to significant
price and volume fluctuations. In the past, following periods of volatility in the market price of a company&rsquo;s securities,
securities class action litigation has often been initiated against the company. Litigation initiated against us, whether or not
successful, could result in substantial costs and diversion of our management&rsquo;s attention and resources, which could harm
our business and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Compliance with Sarbanes-Oxley may
result in our inability to achieve profitability</I>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Sarbanes-Oxley Act of 2002 was enacted
to increase corporate responsibility and accountability, to provide for enhanced penalties for accounting and auditing improprieties
relating to publicly-traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures
pursuant to U.S. federal securities laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to
file periodic reports with the SEC, under the Securities Exchange Act of 1934, as amended. Upon becoming a publicly reporting company,
we are required to comply with the Sarbanes-Oxley Act and its costs to remain in compliance with the federal securities regulations.
The enactment of the Sarbanes-Oxley Act has resulted in a series of rules and regulations by the SEC that increase responsibilities
and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes
may make it more costly to attract or may deter qualified individuals from accepting these roles. If we are unable to attract and
retain qualified officers, directors and board committee members, which are required pursuant to the Sarbanes-Oxley Act, we may
not be able to provide effective management or comply with federal law. Additionally, significant costs incurred as a result of
being a public company could divert the use of finances from our operations resulting in our inability to achieve profitability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We are required to annually evaluate
our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from
such evaluation could result in a loss of investor confidence in our financial reports and have a material adverse effect on the
price of our common stock.</I></B>&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under Section 404 of the Sarbanes-Oxley
Act, we are additionally required to furnish a report by our management on internal control over financial reporting.&nbsp;&nbsp;Such
a report must contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting,
including a statement as to whether or not our internal control over financial reporting is effective.&nbsp;&nbsp;This assessment
must include disclosure of any material weaknesses in our internal control over financial reporting identified by our management.&nbsp;&nbsp;In
addition, our evaluation of the effectiveness of our internal controls will be subject to an annual audit by our independent registered
public accounting firm and there is no assurance that they will agree with our assessment.&nbsp;&nbsp;If we are unable to maintain
and to assert that our internal control over financial reporting is effective, or if we disclose material weaknesses in our internal
control over financial reporting, or if our independent registered public accounting firm does not agree with our assessment, investors
could lose confidence in the accuracy and completeness of our financial reports, which could have a material adverse effect on
our stock price. <FONT STYLE="color: black">Furthermore, if our efforts to comply with new or changed laws, regulations, and standards
differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities
may initiate legal proceedings against us and our business may be harmed.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Compliance with U.S. securities laws,
including the Sarbanes-Oxley Act, will be costly and time-consuming.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">After completion of the Merger, we will
continue as a reporting company under U.S. securities laws, and we will be obliged to comply with the provisions of applicable
U.S. laws and regulations, including the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 and the related rules
of the SEC, and the rules and regulations of the relevant U.S. market. Preparing and filing annual and quarterly reports and other
information with the SEC, furnishing audited reports to stockholders and other compliance with these rules and regulations will
involve a material increase in regulatory, legal and accounting expenses and the attention of management, and there can be no assurance
that we will be able to comply with the applicable regulations in a timely manner, if at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We do not anticipate dividends to
be paid on our Common Stock, and investors may lose the entire amount of their investment.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cash dividends have never been declared
or paid on the Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. Furthermore, in
accordance with the terms of our outstanding Series A Preferred Stock, we cannot pay dividends on the Common Stock so long as the
Series A Preferred remains outstanding. We expect to use future earnings, if any, to fund business growth and pay our obligations
under our Series A Preferred Stock. Therefore, stockholders will not receive any funds absent a sale of their shares. We cannot
assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will
not lose the entire amount of their investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If securities analysts do not initiate
coverage or continue to cover our Common Stock or publish unfavorable research or reports about our business, this may have a negative
impact on the market price of our Common Stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The trading market for the Common Stock
will depend on the research and reports that securities analysts publish about our business and the Company. We do not have any
control over these analysts. There is no guarantee that securities analysts will cover the Common Stock. If securities analysts
do not cover the Common Stock, the lack of research coverage may adversely affect its market price. If we are covered by securities
analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one
or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility
in the financial markets, which could cause our stock price or trading volume to decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>State Blue Sky registration: potential
limitations on resale of the shares.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holders of the shares of the Company
and persons who desire to purchase the shares in any trading market that might develop in the future, should be aware that there
may be significant state law restrictions upon the ability of investors to resell the securities. Accordingly, investors should
consider the secondary market for the Company&rsquo;s securities to be a limited one. It is the intention of our management to
seek coverage and publication of information regarding the Company in an accepted publication which permits a &ldquo;manuals exemption.&rdquo;
This manuals exemption permits a security to be sold by shareholders in a particular state without being registered if the company
issuing the security has a listing for that security in a securities manual recognized by that state. The listing entry must contain
(i) the names of issuers, officers, and directors, (ii) an issuer&rsquo;s balance sheet, and (iii) a profit and loss statement
for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. The principal accepted
manuals are those published by Standard and Poor&rsquo;s and Mergent, Inc. Many states expressly recognize these manuals. A smaller
number of states declare that they recognize securities manuals, but do not specify the recognized manuals. Among others, the following
states do not have any provisions and, therefore, do not expressly recognize the manuals exemption: Alabama, California, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont, and Wisconsin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>You may experience dilution of your
ownership interests because of the future issuance of additional shares of our Common Stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="color: black">In the future,
we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of
our present stockholders.&nbsp;&nbsp;We are currently authorized to issue an aggregate of 310,000,000 shares of capital stock,
consisting of 300,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock with preferences and rights to be determined
by our Board of Directors. As of April 6, 2012, there were 99,085,000 shares of our Common Stock (including an aggregate of 90,000,000
shares entitled to be received by EGLLC in the Merger) and 10,000,000 shares of our Series A Preferred Stock (all entitled to be
received by EGLLC in the Merger) issued and outstanding. There are 10,000,000 shares of our Common Stock reserved for issuance
under our 2012 Equity Incentive Plan. As of the Merger Closing Date, stock options exercisable for 5,445,000 shares of our Common
Stock have been granted under the 2012 Plan. There are also, $1,800,000 of EGI bridge loans outstanding that have the right to
convert into 900,000 shares of Common Stock, warrants to purchase 450,000 shares of Common Stock at $3.00 per share and special
warrants to purchase an indeterminate number of additional shares of Common Stock </FONT>exercisable upon the closing of the Company&rsquo;s
next private placement, provided the share price of the Common Stock offered in that private placement is less than $2.50 per share,
so that the exercise of the special warrant will reduce the lender&rsquo;s effective conversion price of the bridge loan for the
Common Stock by a 25% discount to the private placement offering price, such special warrant exercisable at a price of $0.01 per
share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Any future issuance of our equity or equity-backed
securities may dilute then-current stockholders&rsquo; ownership percentages and could also result in a decrease in the fair market
value of our equity securities, because our assets would be owned by a larger pool of outstanding equity. As described above, we
may need to raise additional capital through public or private offerings of our common or preferred stock or other securities that
are convertible into or exercisable for our common or preferred stock. We may also issue such securities in connection with hiring
or retaining employees and consultants (including stock options issued under our equity incentive plans), as payment to providers
of goods and services, in connection with future acquisitions or for other business purposes. Our Board of Directors may at any
time authorize the issuance of additional common or preferred stock without common stockholder approval, subject only to the total
number of authorized common and preferred shares set forth in our articles of incorporation. The terms of equity securities issued
by us in future transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior
voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect. Also, the
future issuance of any such additional shares of common or preferred stock or other securities may create downward pressure on
the trading price of the common stock. There can be no assurance that any such future issuances will not be at a price (or exercise
prices) below the price at which shares of the common stock are then traded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>RISKS RELATED TO OUR PREFERRED STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have issued 10,000,000 shares
of our Series A Preferred Stock, which may limit your rights as a holder of our Common Stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We currently have 10,000,000 shares of
our Series A Preferred Stock issued and outstanding. These shares carry, among other things, liquidation preferences redemption
rights and dividend rights that prelude the issuance of dividends on our Common Stock so long as any shares of Series A Preferred
Stock remain outstanding. These terms of the Series A Preferred Stock could adversely affect the rights of the holders of our Common
Stock and, therefore, reduce the value of the Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to generate sufficient
funds or obtain financing for future capital commitments, we may not be able to pay for redeemed Series A Preferred Stock, which
could have a material adverse effect on us.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">EGLLC, as the sole shareholder of the Series
A Preferred Stock has the option, exercisable in whole or in part at any time and from time to time prior to the third anniversary
of the issuance of the Series A Preferred Stock as provided in the certificate of designation, to require us to purchase for cash,
out of legally available funds, any or all of the then-outstanding shares of Series A Preferred Stock at a price equal to $6.00
per share of an aggregate total of $60,000,000, subject to certain limitations. If we are unable to pay for EGLLC&rsquo;s redeemed
shares, such failure could result in an event of default under the loan reinstatement and modification agreement and a potential
remedy of the Secured Lenders would be a foreclosure on all of the assets and property of EGI and MTMI. <FONT STYLE="color: black">Our
inability to fund these future commitments could have a material adverse effect on us.&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AND PLAN OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>The following management&rsquo;s discussion
and analysis should be read in conjunction with MTMI&rsquo;s and EGI&rsquo;s historical combined financial statements and the related
notes. The management&rsquo;s discussion and analysis contains forward-looking statements that involve risks and uncertainties,
such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical
fact are forward-looking statements. When used, the words &ldquo;believe,&rdquo; &ldquo;plan,&rdquo; &ldquo;intend,&rdquo; &ldquo;anticipate,&rdquo;
&ldquo;target,&rdquo; &ldquo;estimate,&rdquo; &ldquo;expect&rdquo; and the like, and/or future tense or conditional constructions
(&ldquo;will,&rdquo; &ldquo;may,&rdquo; &ldquo;could,&rdquo; &ldquo;should,&rdquo; etc.), or similar expressions, identify certain
of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual
results or events to differ materially from those expressed or implied by the forward-looking statements in this Current Report.
The Company&rsquo;s actual results and the timing of events could differ materially from those anticipated in these forward-looking
statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to
reflect events or circumstances occurring after the date of this Current Report. Please see &ldquo;Forward-Looking Statements&rdquo;
and &ldquo;Risk Factors&rdquo; for a discussion of the uncertainties, risks and assumptions associated with these forward-looking
statements.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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,
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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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&rsquo;s and EGI&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 report.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>General Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Elkhorn Goldfields, Inc. (&ldquo;EGI&rdquo;)
and Montana Tunnels Mining, Inc. (&ldquo;MTMI&rdquo;) (or combined as &ldquo;Elkhorn&rdquo;) 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&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Results from Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Revenue from the Sale of Gold</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Elkhorn had no revenues from the sale of
gold from the Golden Dream or the Montana Tunnels Mines in 2011 or 2010. In August, 2011, The Company did realize revenue (net
of ore processing costs) of approximately $440,000 from the sale of 874 tons of stockpile of rock from past mining (resulting in
303 oz. of Gold) from the East Butte mine. The net revenue is included in other income for 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Operating Expenses</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mine care and maintenance for the year
ended December 31, 2011 were $1,037,199, compared to $1,236,832 for the year ended December 31, 2010. The decrease is a result
of lower repairs and maintenance costs in 2011 as compared to 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">General and administrative expenses for
the year ended December 31, 2011 were $850,616, compared to $1,580,991 for the year ended December 31, 2010. In June, 2011, development
of the Golden Dream Mine commenced which resulted in the capitalization of payroll and related costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Accretion expense for the year ended December
31, 2011 were $1,327,221, compared to $1,535,632 for the year ended December 31, 2010. The decrease in 2011 as compared to 2010
is due to a reduction in accretion expense for the L-Pit at Montana Tunnels Mine. Management re-evaluates annually the timing of
the deferred site closure and reclamation costs related to Montana Tunnels Mining mill and mine sites. They anticipate that reclamation
of the mine and mill would be completed in 2024 which is extended several years from previous estimates. This extension is due
to management pursuing financing to commence development of the M-Pit, which would extend the mine life by 9 years. The total cost
of reclamation is consistent with previous estimates, however by extending the timeline, has reduced the related accretion expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Depreciation, depletion and amortization
expenses for the year ended December 31, 2011 were $6,604, compared to $11,129 for the year ended December 31, 2010. Depreciation,
depletion and amortization is calculated on the units of production basis over the remaining proven and probable reserves of the
mine. Montana Tunnels Mine ceased mining during 2008 after completion of the L-Pit and completed milling of stockpiled ore during
April, 2009 at which time the mine was placed on care and maintenance. Accordingly, there was no depreciation expense related to
Montana Tunnels Mine for the years ended December 31, 2011 and 2010. For the year ended, December 31, 2011, $60,100 of depreciation
expense for EGI was capitalized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Total operating expenses for the year ended
December 31, 2011 were $3,221,640, compared to $4,364,584 for the year ended December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Other Income and Expense</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Interest expense for the year ended December
31, 2011 was $8,083,445, compared to $5,546,184 for the year ended December 31, 2010. The increase from 2010 to 2011 of interest
expense is a result annual compounding of accrued interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt">Interest
income for the year ended December 31, 2011 was $47,705, compared to $33,384 for the year ended December 31, 2010. 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 year. Slightly higher interest
rates in 2011 resulted in addition interest income as compared to 2010.</FONT><FONT STYLE="color: #1F497D"> </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other income for the year ended December
31, 2011 was $512,066, compared to $6,628 for the year ended December 31, 2010. The increase in other income is primarily due to
the one &ndash; time sale of stockpile of rock from past mining from the East Butte Mine totaling $440,000, net of processing costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Loss on related party ore purchase agreement
for the year ended December 31, 2011 was $13,025,932, compared to nil for the year ended December 31, 2010. The loss relates to
MPRPA as the Company recognized the difference fair value of gold at the agreement date and the contract price of gold in the agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The change in fair value of the embedded
derivative for the year ended December 31, 2011 was $5,793,013, compared to nil for the year ended December 31, 2010. The loss
relates to the <FONT STYLE="font-size: 10pt">change in the fair value of the commodity future prices of the MPRPA from the date
of closing to December 31, 2011 </FONT>to reflect the loss in the change in fair value of the derivative instrument.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Going Concern</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The attached annual report of contains
explanatory language that substantial doubt exists about Elkhorn&rsquo;s ability to continue as a going concern. This means that
there is substantial doubt that Elkhorn 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 completion of the proposed $7.5M Private Placement will be sufficient
to get the company into a position that the Golden Dream Deposit will begin extracting and selling mineral and providing sufficient
cash flow for operations of the Golden Dream Mine, care and maintenance of the Montana Tunnels Mine and other general and administrative
expenses; however, since we have not generated revenues since Montana Tunnels Mine shuttered mining in 2008, there is no assurance
we will ever reach that point.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Financing Operations and Capital Plan
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition to the bridge financing we
completed prior to the closing of the Merger, we will need to raise additional capital to move the Golden Dream Mine into full
operations and commence the expansion and restart of the Montana Tunnels Mine. To accomplish this, we expect to engage in two private
placement offerings to raise approximately $7.5 million and approximately $30 million for our two ongoing mining projects, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Completed Bridge Financing </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February of 2012, prior to the closing
of the Merger, EGI completed a number of closings of a bridge financing with BDH, one of our beneficial stockholders through their
holdings in EGLLC, and another investor. In this bridge financing, EGI sold an aggregate of $300,000 in principal amount of its
12% unsecured convertible Bridge Notes to BDH and $1,500,000 in principal amount of these Bridge Notes to the other investor. The
Bridge Notes mature on August 29, 2012 and, prior to that date but after the closing of the Merger, may be converted, at the sole
discretion of each of the note holders, including accrued but unpaid interest, into Units of the Company&rsquo;s securities at
a conversion price of $2.00 per Unit, each Unit consisting of: (i) one share of Common Stock, (ii) and a warrant to purchase one-half
share of Common Stock, exercisable at a price of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing
of the Company&rsquo;s planned private placement, provided the share price of the Common Stock offered in the private placement
is less than $2.50 per share, so that the exercise of the special warrant will reduce the lender&rsquo;s effective conversion price
for the Common Stock at a 25% discount to the private placement offering price, such special warrant exercisable at a price of
$0.01 per share. Funds raised through this financing are being used by EGI to advance Golden Dream Mine operations and for general
working capital purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We believe we will be successful in our
capital raising efforts; however, there can be no assurance we will be successful in raising additional debt or equity financing
to fund our operations on terms agreeable to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>Plan of Operations and Capital Requirements</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the remainder of 2012, we plan to continue
mine development at the Golden Dream Mine, refurbishment of the Diamond Hill mill and maintenance of our equipment in advance of
beginning the M- Pit Expansion at the Montana Tunnels Mine. At the Montana Tunnels Mine, we plan to begin the M- Pit Expansion
with the existing haul fleet and equipment, and then augment our current equipment as new equipment and financing become available.
Our 2012 budget will require approximately $37.5 million in new capital which we expect to raise through the proposed private placement
offerings discussed above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our operating projections for the three
years beginning 2012 are set forth below. 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 three-year
target projections.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>Operating Projections</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Elkhorn Goldfields, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>3 Year Budget</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 88%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid"><B>Metal Sales &amp; Production</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>2012</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>2013</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>2014</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 55%; text-align: left; padding-left: 9pt">Gold Production (k oz)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">15.0</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">46.1</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">46.5</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt; padding-bottom: 1pt">Gold Sales ($ million)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">14.1</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">54.2</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">69.8</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Copper Production (k lbs)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.966.4</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.544.4</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Copper Sales ($ million)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.0</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.5</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 88%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid"><B>Financial Projection</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>2012</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>2013</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>2014</B></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 55%; padding-left: 9pt"><B>Revenue</B></TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left"><B>$</B></TD><TD STYLE="width: 12%; text-align: right"><B>14.1</B></TD><TD STYLE="width: 1%; text-align: left"><B>&nbsp;</B></TD><TD STYLE="width: 1%"><B>&nbsp;</B></TD>
    <TD STYLE="width: 1%; text-align: left"><B>$</B></TD><TD STYLE="width: 12%; text-align: right"><B>57.2</B></TD><TD STYLE="width: 1%; text-align: left"><B>&nbsp;</B></TD><TD STYLE="width: 1%"><B>&nbsp;</B></TD>
    <TD STYLE="width: 1%; text-align: left"><B>$</B></TD><TD STYLE="width: 12%; text-align: right"><B>76.3</B></TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Mine Operating Costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15.7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">27.3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">20.4</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in; padding-bottom: 1pt">General &amp; Administrative Costs</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1.7</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">3.3</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">3.9</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt"><B>EBITDA</B></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left"><B>$</B></TD><TD STYLE="text-align: right"><B>(3.3</B></TD><TD STYLE="text-align: left"><B>)</B></TD><TD><B>&nbsp;</B></TD>
    <TD STYLE="text-align: left"><B>$</B></TD><TD STYLE="text-align: right"><B>26.6</B></TD><TD STYLE="text-align: left"><B>&nbsp;</B></TD><TD><B>&nbsp;</B></TD>
    <TD STYLE="text-align: left"><B>$</B></TD><TD STYLE="text-align: right"><B>52.0</B></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.25in">Interest Expense (Capital Lease)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.5</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.4</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Loss on related party ore purchase derivative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.6</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4.6</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.25in; padding-bottom: 1pt">Depreciation/Amortization/Accretion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">0.8</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">1.7</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">2.0</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt"><B>Net Income</B></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left"><B>$</B></TD><TD STYLE="text-align: right"><B>(7.0</B></TD><TD STYLE="text-align: left"><B>)</B></TD><TD><B>&nbsp;</B></TD>
    <TD STYLE="text-align: left"><B>$</B></TD><TD STYLE="text-align: right"><B>19.7</B></TD><TD STYLE="text-align: left"><B>&nbsp;</B></TD><TD><B>&nbsp;</B></TD>
    <TD STYLE="text-align: left"><B>$</B></TD><TD STYLE="text-align: right"><B>49.6</B></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt"><B>Preferred Dividends</B></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left"><B>$</B></TD><TD STYLE="text-align: right"><B>1.8</B></TD><TD STYLE="text-align: left"><B>&nbsp;</B></TD><TD><B>&nbsp;</B></TD>
    <TD STYLE="text-align: left"><B>$</B></TD><TD STYLE="text-align: right"><B>7.2</B></TD><TD STYLE="text-align: left"><B>&nbsp;</B></TD><TD><B>&nbsp;</B></TD>
    <TD STYLE="text-align: left"><B>$</B></TD><TD STYLE="text-align: right"><B>7.2</B></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><img src="pg59.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">2012 &amp; 2013 Gold Sales: EGI entered
into an MPRPA with a related party to sell 80% of the first 41,700 ounces of gold produced from the Golden Dream Mine for an up-front
payment of $10,000,000. The agreement requires the Company to pay all proceeds from the sale of gold in excess of $500 per ounce
to the related party. EGI received the up-front payment in 2011 and recognized it as deferred revenue for the first 33,333 ounces
of gold sales (80% of the first 41,700 ounces per the agreement). As a result, Gold Sales in 2012 and 2013 reflect 80% of the first
41,700 ounces at $800 per ounce and 20% at market price. Thereafter, all gold sales are at market prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Subject to successfully completing the
$7.5M private placement offering, Management projects that the Golden Dream Mine should be in full production by the 3rd quarter
of 2012. As a result, the above reflects metal sales commencing in September, 2012. The sales projections listed above assume a
$1,500 per ounce market price for gold and a $3.75 per pound market price for copper.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Montana Tunnels Mining, Inc. 3 Year
Plan</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Expansion of the mine in order to resume
full mining operations at MTMI is contingent upon raising sufficient capital to fund the M-Pit expansion, refurbishing the mill
and existing equipment and fund additional reclamation bonding requirements. Successfully raising the required capital in the second
half of 2012 would put the Montana Tunnels Mine on track to be in full operations in 2014. Once in full operations, the Montana
Tunnels Mine is projected to produce approximately 50,000 ounces of gold and 34 million pounds of zinc annually, resulting in average
net income of $49 million annually.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>Liquidity and Capital Resources </U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have funded our operations primarily
through issuances of debt and equity securities and will be required to raise additional proceeds through the further issuance
of debt and equity securities until at least one of our two mining properties generates positive cash flow from production.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At December 31, 2011, our total assets
were $43.9 million compared to $38.2 million at December 31, 2010. The increase in total assets is primarily attributable to the
$3.9 million invested in mine development of the Golden Dream Mine and $1 million in additions to equipment at EGI</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At December 31, 2011, we had restricted
cash totaling $604,000 compared to $285,000 at December 31, 2010. Restricted cash represents cash held for the bonding requirements
imposed by the MDEQ that relates to the future reclamation costs on the Company's properties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At December 31, 2011 we had a reclamation
bond totaling $16.2 million compared to $15.8 million at December 31, 2010. Reclamation bonds consist of cash held directly by
a surety for the reclamation of the Montana Tunnels and Elkhorn Project. The restriction will be released when the reclamation
is completed, which the Company expects to be in 2024 and 2018, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Cash </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To date, the Company has funded its exploration,
development and operations primarily through issuances of debt and equity securities. At December 31, 2011, the Company had cash
of $358,125, compared to cash of $61,351 at December 31, 2010. The increase in cash since December 31, 2010 included operating
cash inflows of $9,473,607, investing cash outflows of $5,181,276, financing cash outflows of $3,995,557. The primary source of
cash inflows in 2011 was from the MPRPA with consideration of $10,000,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Liabilities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At December 31, 2011, the Company had liabilities
of $103,259,388, compared to $65,126,180 at December 31, 2010. Liabilities increased during 2011 primarily due to the Company recognizing
a MPRPA liability totaling $10,000,000 and $18,818,945 embedded derivative based on the contract terms, projected future gold prices
and discount rate commensurate with estimates of contemporary credit risk using a discounted cash flow model. The increase in liabilities
from 2010 to 2011 is also attributable to an increase in push down debt, interest and the redeemable obligation of parent and its
affiliate of $6,655,104. The remainder of the increase is from the reclamation liability of $1,327,221.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During 2011, the Company entered into an
MPRPA with a related party to sell 80% of the first 41,700 ounces of gold produced from the Golden Dream Mine for an up-front payment
of $10,000,000. The agreement requires the Company sell 80% of the first 41,700 ounces of gold produced for $500 per ounce, if
any, to the related party. Additionally, the related party may purchase 6.5% of the ounces produced after the mine has produced
in excess of 250,000 aggregate ounces for a purchase price of $600 per ounce. The term of this agreement runs through the closure
of the Golden Dream Mine, which is expected at least 5 years following the start of production.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The related party ore purchase liability
is comprised of $10,000,000 of up-front consideration, a recognized loss of $13,025,932 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 change in fair value
of the embedded derivative of $5,793,013 is a reflection of the change in the fair value of the derivative instrument contract
from the date of closing to December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s assets serve as collateral
for multiple loans and a redemption obligation of EGLLC and MFPI. Although the Company is not a maker or guarantor on the secured
loans or redemption obligation, these loans and obligation have been &ldquo;pushed down&rdquo; to the Company as reflected in its
audited financial statements. The redemption obligation was extended by MFPI to compensate and induce certain of its lenders who
are also the Secured Lenders of EGLLC, obligating MFPI to purchase, at the Secured Lenders&rsquo; option, the $5,950,000 equity
investment made in an investment fund that is an owner of EGLLC and is managed by Black Diamond. The Company&rsquo;s mining properties
and equipment have been pledged as collateral to the Secured Lenders under two filed and recorded mortgages. The loans of the EGLLC
and MFPI are accruing interest between 15% and 18% per year. At December 31 2011 and 2010, the outstanding principal and interest
was $46,343,292 and $39,688,188.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">EGI also owes $1,399,779 in Series A 8%
bonds. The bonds mature during July 2012, with interest accruing at 8%. In the case of default, interest on the bonds accrues at
12%. The Company recorded accrued interest of $106,358 as of December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 24, 2010, the Environmental Protection
Agency (the &ldquo;EPA&rdquo;) issued an &ldquo;Action Memorandum&rdquo; which documented the determination that soil removal was
necessary to mitigate threats posed by soils containing elevated levels of lead and arsenic located in historic mining areas near
the MTMI property (the &ldquo;Site&rdquo;). Site clean-up commenced in June 2010 and was completed by August 2010 at a total cost
to the EPA of approximately $1,700,000. On August 26, 2010, MTMI and the EPA entered into an Access and Compensation Agreement
(&ldquo;A&amp;C Agreement&rdquo;) pursuant to which MTMI has agreed to pay to the EPA a total of $380,000. MTMI will remit $2,500
per month with a balloon payment due at month 36. The total amount due to the EPA is included in Accrued Liabilities in the audited
financial statements. It is expected that MTMI will start making these monthly payments by the third quarter of 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Recent Developments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>The EGI Bridge Financing</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February of 2012, prior to the closing
of the Merger, EGI completed a bridge financing, wherein it sold an aggregate of $1,800,000 in principal amount of its 12% unsecured
convertible Bridge Notes to two accredited investors, one of whom is an affiliate of the Company. The Bridge Notes mature on August
29, 2012 and, prior to that date but after the closing of the Merger, may be converted, along with accrued but unpaid interest,
at the sole discretion of the lender, into Units of the Company&rsquo;s securities at a conversion price of $2.00 per Unit, each
Unit consisting of: (i) one share of Common Stock, (ii) and a warrant to purchase one-half share of Common Stock, exercisable at
a price of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing of the Company&rsquo;s planned private
placement, provided the share price of the Common Stock offered in the private placement is less than $2.50 per share, so that
the exercise of the special warrant will reduce the lender&rsquo;s effective conversion price for the Common Stock at a 25% discount
to the private placement offering price, such special warrant exercisable at a price of $0.01 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Series A Preferred Stock</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of the closing of the Merger and pursuant
to the Merger Agreement, we issued 10,000,000 shares of our designated Series A Preferred Stock to EGLLC (as more fully described
in the certificate of designations). EGLLC is entitled to receive, out of funds legally available therefor, cumulative non-compounding
preferential dividends at the rate of 12% of the stated value of $6.00 per share <I>per annum </I>(the &ldquo;Preferential Dividend&rdquo;).
In the event of any defined liquidation event, <FONT STYLE="color: black">no distribution can be made to holders of shares of our
capital stock ranking junior to the Series A Preferred Stock, including the Common Stock, unless, prior thereto, EGLLC shall have
received an amount per share equal to $6.00 (the &ldquo;Liquidation Amount&rdquo;) per share, </FONT>plus the amount of any accrued
and unpaid Preferential Dividend <FONT STYLE="color: black">owed to EGLLC. EGLLC </FONT>has the option, exercisable in whole or
in part at any time and from time to time prior to the third anniversary of the issuance of the Series A Preferred Stock, to require
us to purchase for cash, out of legally available funds, any or all of the then-outstanding shares of Series A Preferred Stock
at a price equal to $6.00 per share. We have the option, exercisable in whole or in part at any time and from time to time prior
to the third anniversary of the issuance of the Series A Preferred Stock, to redeem any or all of the then-outstanding shares of
Series A Preferred Stock at a price equal to $7.00 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Provided that neither EGLLC nor the Company
has exercised its redemption options in full by the third anniversary of the issuance of the Series A Preferred Stock, each share
of then-outstanding Series A Preferred Stock shall automatically and immediately convert into one fully paid and non-assessable
share of Common Stock of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the loan reinstatement and
modification agreement between EGLLC and the Secured Lenders, EGLLC has informed us that it may exercise its redemption rights
in accordance to the following schedule:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 50%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">Date</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center">Series A Convertible Preferred<BR> Stock</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; text-align: center">9/30/2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 2%; text-align: left">&nbsp;</TD><TD STYLE="width: 48%; text-align: right">500,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">12/31/2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">583,333</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">3/31/2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">666,667</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">6/30/2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">750,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">9/30/2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">833,333</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">12/31/2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">916,667</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">3/31/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">6/30/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">9/30/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: center">12/31/2014</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">2/28/2015</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We believe our cash on hand, anticipated
operating cash flow from the Golden Dream Mine, proceeds from the potential sale of mineral interests pursuant to the MPRPA and
the proceeds from the EGI bridge financing and proposed private placements will be sufficient to meet EGLLC&rsquo;s redemption
exercises over the next year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Capital Needs - Availability of Additional
Funds</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We expect to be engaging in two private
placement offerings to raise approximately $7.5 million and approximately $30 million for our two ongoing mining projects. The
successful completion of the $7.5 million private placement will be critical to reaching full operations at the Golden Dream Mine,
completing the necessary maintenance and restart protocols at the smaller of the Company&rsquo;s two mill circuits and repaying
certain debt that is due in 2012. In addition, some of these proceeds may be used to complete safety and maintenance checks and
engine rebuilds, if necessary of the haul trucks, loaders and shovels in anticipation of the Montana Tunnels Mine restart. Once
the Golden Dream Mine reaches full production, we believe the expected cash flow from that operation will significantly diminish
our need to rely on further issuance of debt and equity securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If these assumptions prove correct, our
second, planned private placement to raise up to $30 million will become less critical, because proceeds from the Golden Dream
Mine would be used to develop the Montana Tunnels Mine. However, proceeds from a second private placement would enable us to advance
the development of the Montana Tunnels Mine on a pace more accelerated than we could achieve from waiting for the cash flow to
be generated from the Golden Dream Mine.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We plan to continue raising capital in
order to meet our liquidity needs. However, we may be unable to raise sufficient additional capital when we need it or to raise
capital on favorable terms. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly
curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Off-Balance Sheet Arrangements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have no off-balance sheets arrangements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Critical Accounting Policies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Inventory</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Dor&eacute; inventory is stated at the
lower of weighted-average production cost and net realizable value. Production costs for dor&eacute; inventory include direct production
costs, attributable overhead, and depreciation incurred to bring the material to its current point in the processing cycle. Stockpiled
ore inventory represents ore that has been mined and is available for further processing. Work-in-process inventory, including
stockpiled ore and in-circuit gold inventory, is valued at the lower of weighted average production cost and net realizable value.
Materials and supplies are valued at the lower of average direct cost of acquisition and net realizable value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Buildings and Equipment</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">MTMI buildings and equipment are recorded
at acquisition cost and amortized on a units-of production basis over the remaining proven and probable reserves of the mine. Equipment
under capital lease is valued at the lower of fair market value or net present value of the minimum lease payments at the inception
of the lease. Equipment that is mobile is amortized on a straight-line basis over the estimated useful life of the equipment ranging
from five to ten years, not to exceed the related estimated mine lives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">EGI buildings and equipment are stated
at cost. Repair and maintenance costs are expensed as incurred. Depreciation is provided utilizing the straight-line method over
the estimated useful lives for owned assets taking into account estimated salvage values, ranging from 3 to 39 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Mine Development</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The costs of removing overburden and waste
materials to access the ore prior to the production phase are referred to as &quot;mine development costs.&quot; Mine development
costs are capitalized during the development of the mine. Mine development costs are amortized using the units-of-production method
based on estimated recoverable tons of proven and probable reserves. To the extent that these costs benefit the mine, they are
amortized over the estimated life of the mine. Development costs incurred after the first saleable ore is extracted from the mine
(i.e. post-production costs) are a component of mineral inventory cost. All post-production costs are considered variable production
costs that are included in the costs of the inventory produced during the period that the mining costs are incurred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Mining Properties and Mine Development</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For new projects without established reserves,
all costs, other than acquisition costs, are expensed prior to the establishment of proven and probable reserves. Reserves designated
as proven and probable are supported by a feasibility study, indicating that the reserves have had the requisite geologic, technical,
and economic work performed and are legally extractable at the time of reserve determination. Once proven and probable reserves
are established, all development and other site-specific costs are capitalized, including general and administrative charges for
actual time and expenses incurred in connection with site supervision. Development drilling costs incurred to infill mineralized
material to increase the confidence level in order to develop or increase proven and probable reserves are capitalized. If subsequent
events or circumstances arise which would preclude further development of the reserves under the then existing laws and regulations,
additional costs are expensed until the impediments have been removed and the property would be subject to ongoing impairment reviews.
When a mine is placed into production, the capitalized acquisition and mine development costs are reclassified to mining properties
and are amortized to operations using the units-of-production method based on the estimated metals that can be recovered.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Mineral Interests</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mineral interests include the cost of obtaining
patented and unpatented mining claims and the initial cost of acquiring mineral interests. If a mineable ore body is discovered,
such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If
no mineable ore body is discovered or such rights are otherwise determined to have no value, such costs are expensed in the period
in which it is determined the property has no future economic value. For the years ended December 31, 2011 and 2010, there are
no mineral interest impairments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Reclamation Liability</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s mining and exploration
activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws
and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations to protect
public health and the environment and believes its operations are in compliance with applicable laws and regulations in all material
respects. The company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot
predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory
requirements. Estimated future costs are discounted to their present value using a 12% discount rate. Reclamation obligations are
secured by cash held directly by a surety or certificates of deposit. The following table summarizes the activity for the Company's
asset retirement obligation for the years ended December 31, 2011 and 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">December 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">2011</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">2010</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Asset retirement obligations at January 1</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">21,465,966</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">19,930,334</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accretion expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,327,221</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,535,632</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Liabilities incurred</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Liabilities assumed</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Liabilities settled</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Revision in estimates</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Asset retirement obligations at December 31</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">22,793,187</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">21,465,966</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Less current portion of asset retirement obligations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Asset retirement obligations at December 31, less current portion</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">22,793,187</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">21,465,966</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Fair Value of Financial Instruments</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The carrying amounts of financial instruments
including cash, accounts payable and accrued liabilities approximated fair value as of December 31, 2011 and 2010, because of the
relatively short maturity of these instruments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company applies the guidance to non-financial
assets and liabilities measured at fair value on a non-recurring 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0">Level 1: Quoted prices in active markets
for identical assets or liabilities;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0">Level 2: Quoted prices in active markets
for similar assets and liabilities and inputs that are observable for the asset or liability; or</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: 0">Level 3: Unobservable inputs in which there
is little or no market data, which requires the reporting entity to develop its own assumptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following assets are measured at fair value as of December
31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 94%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Description</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 1</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 2</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 3</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%">Certificate of deposits</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">604,021</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">604,021</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Reclamation bonds</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">16,190,556</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">16,190,556</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Embedded derivative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(18,818,945</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(18,818,945</TD><TD STYLE="text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following assets are measured at fair value as of December
31, 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 94%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Description</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 1</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 2</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 3</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%">Certificate of deposits</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">284,467</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">284,467</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Reclamation bonds</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15,842,403</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15,842,403</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Certificates of deposit: Recorded at cost, which approximates
fair value due to the short duration of the investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Reclamation Bonds: Recorded at the amount provided by the Montana
Department of Environmental Quality, which is based upon the fair value of the cash underlying the bond.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Embedded Derivatives: Based on contract
terms, projected future gold prices, and discount rate commensurate with estimates of contemporary credit risk using a discounted
cash flow model. The model is most sensitive to the future price of gold.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There were no changes to the valuation techniques used during
the year ended December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Recent Accounting Pronouncements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2011, the Financial Accounting Standards
Board (&ldquo;FASB&rdquo;) issued Accounting Standards Update (&ldquo;ASU&rdquo;) No. 2011- 04, <I>&ldquo;Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (&ldquo;IFRS&rdquo;).&rdquo;</I>
This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure
requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and changes
the disclosure requirements to include quantitative information about unobservable inputs used for level 3 fair value measurements.
This pronouncement is effective for reporting periods beginning on or after December 15, 2011 (early adoption is prohibited). The
Company is evaluating the potential impact of adopting this guidance on its combined financial position, results of operations,
cash flows, and disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June 2011, the FASB issued ASU No. 2011-05,
<I>&ldquo;Presentation of Comprehensive Income.&rdquo;</I> ASU 2011-05 eliminates the option to report other comprehensive income
and its components in the statement of changes in stockholders&rsquo; equity and requires an entity to present the total of comprehensive
income, the components of net income and the components of other comprehensive income either in a single continuous statement or
in two separate but consecutive statements. This pronouncement is effective for fiscal years, and interim periods within those
years, beginning after December 15, 2011 (early adoption is permitted). The Company is evaluating the potential impact of adopting
this guidance on its combined financial position, results of operations, cash flows, and disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2011, the FASB issued ASU No.
2011-12<I>, &ldquo;Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated
Other Comprehensive Income in Accounting Standards Update No. 2011-05.&rdquo;</I> ASU 2011-12 indefinitely defers certain provisions
of ASU 2011-05 relating to the presentation of reclassification adjustments out of accumulated other comprehensive income by component.
This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following tables sets forth information
with respect to the beneficial ownership of our Common Stock and our Series A Preferred Stock as of April 6, 2012, by (i) each
stockholder known by us to be the beneficial owner of more than 5% of our Common Stock or our Series A Preferred Stock, (ii) each
of our directors and executive officers, and (iii) all of our directors and executive officers as a group. We have two classes
of voting securities - the Common Stock and the Series A Preferred Stock. To the best of our knowledge, except as otherwise indicated,
each of the persons named in the table has sole voting and investment power with respect to the shares of Common Stock beneficially
owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed
below are held under a voting trust or similar agreement. Other than the Merger, to our knowledge, there is no arrangement, including
any pledge by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result
in a change in control of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Unless otherwise indicated in the following
tables, the address for each person named in the tables is c/o Eastern Resources, Inc., 1610 Wynkoop Street, Suite 400, Denver,
CO 80202.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Title of Class: Common Stock</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Name&nbsp;and&nbsp;Address&nbsp;of&nbsp;Beneficial&nbsp;Owner</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Amount</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>of</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Beneficial</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Ownership<SUP>1</SUP></B></P></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Percentage<BR> of<BR> Class<SUP>2</SUP></B></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; text-align: left">Patrick Imeson</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; text-align: right">3,177,000</TD><TD NOWRAP STYLE="width: 1%; text-align: left"><SUP>(3)(4)</SUP></TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; text-align: right">3.21</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Robert Trenaman</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Eric Altman</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">144,000</TD><TD NOWRAP STYLE="text-align: left"><SUP>(3)(5)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Tim Smith</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Michael Feinberg</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45,441,000</TD><TD NOWRAP STYLE="text-align: left"><SUP>(6)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45.86</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Kenneth Hamlet</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.5in">&nbsp;<I>All directors and officers as a group (6 persons)</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48,762,000</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">49.21</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Elkhorn Goldfields, LLC</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">90,000,000</TD><TD NOWRAP STYLE="text-align: left"><SUP>(3)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">90.84</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 20%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* Less than 1%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Title of Class: Series A Preferred Stock</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Name&nbsp;and&nbsp;Address&nbsp;of&nbsp;Beneficial&nbsp;Owner</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Amount<BR> of<BR> Beneficial<BR>
    Ownership<SUP>1</SUP></B></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Percentage<BR> of<BR> Class<SUP>8</SUP></B></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; text-align: left">Patrick Imeson</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; text-align: right">353,000</TD><TD NOWRAP STYLE="width: 1%; text-align: left"><SUP>(3)(4)</SUP></TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; text-align: right">3.53</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Robert Trenaman</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Eric Altman</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,000</TD><TD NOWRAP STYLE="text-align: left"><SUP>(3)(5)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">*</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Tim Smith</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Michael Feinberg</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,049,000</TD><TD NOWRAP STYLE="text-align: left"><SUP>(6)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50.49</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Kenneth Hamlet</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.5in"><I>All directors and officers as a group (6 persons)</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,418,000</TD><TD NOWRAP STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54.18</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Elkhorn Goldfields, LLC</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,000,000</TD><TD NOWRAP STYLE="text-align: left"><SUP>(7)</SUP></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">100.0</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* Less than 1%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><SUP>1</SUP></TD><TD STYLE="text-align: justify">Beneficial ownership is determined in accordance with the rules of the SEC and generally includes
having or sharing voting or investment power with respect to securities. Shares of Common Stock or Series A Preferred Stock, as
the case may be, subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days
of April 6, 2012, are deemed outstanding for computing the percentage of the person holding such option or warrant but are not
deemed outstanding for computing the percentage of any other person.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><SUP>2</SUP></TD><TD STYLE="text-align: justify">Percentages are based upon 99,085,000 shares of Common Stock issued and outstanding as of April
6, 2012, after giving effect to the Merger, the Split Off and the cancellation of 5,751,000 shares of our Common Stock surrendered
by Dylan Hundley.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><SUP>3</SUP></TD><TD STYLE="text-align: justify">Patrick Imeson and Eric Altman are the managers of <FONT STYLE="color: black">Black Diamond. Black
Diamond is the manager of </FONT>BDH. BDH is the owner of ninety-nine percent (99%) of the membership interests of EGLLC. <FONT STYLE="color: black">As
such, Patrick Imeson and Eric Altman have sole voting and investment power with respect to our Common Stock and Series A Preferred
Stock owned by EGLLC and may be deemed to beneficially own all of that stock owned by EGLLC. Messrs. Imeson and Altman disclaim
beneficial ownership of this stock.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><SUP>4</SUP></TD><TD STYLE="text-align: justify">Patrick Imeson owns indirectly, through certain investment funds that comprise BDH, 3.53% of the
membership interests of EGLLC. As such, Mr. Imeson is deemed to beneficially own 3.21% of the Common Stock of ESRI (3,177,000 shares)
and 3.53% of Series A Preferred Stock of ESRI (353,000 shares) owned by EGLLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><SUP>5</SUP></TD><TD STYLE="text-align: justify">Eric Altman owns indirectly, through certain investment funds that comprise BDH, 0.16% of the membership
interests of EGLLC. As such, Mr. Altman is deemed to beneficially own 0.15% of the Common Stock of ESRI (144,000 shares) and 0.16%
of the Series A Preferred Stock of ESRI (16,000 shares) owned by EGLLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><SUP>6</SUP></TD><TD STYLE="text-align: justify">Michael Feinberg owns directly 0.49% and indirectly, through certain investment funds that comprise
BDH, 50% of the membership interests of EGLLC, for a total of 50.49%. As such, Mr. Feinberg is deemed to beneficially own 45.86%
of the Common Stock of ESRI (45,441,000 shares) and 50.49% of the Series A Preferred Stock of ESRI (5,049,000 shares) owned by
EGLLC.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><SUP>7</SUP></TD><TD STYLE="text-align: justify">Percentages are based upon 10,000,000 shares of Series A Preferred Stock issued and outstanding
as of April 6, 2012, after giving effect to the Merger.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Directors and Executive Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Below are the names and certain information
regarding the Company&rsquo;s executive officers and directors who were appointed effective upon the closing of the Merger:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 23%; border-bottom: windowtext 1pt solid; font-weight: bold">Name</TD>
    <TD STYLE="width: 1%; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 6%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">Age</TD>
    <TD STYLE="width: 1%; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 45%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">Position(s)</TD>
    <TD STYLE="width: 1%; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 23%; border-bottom: windowtext 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Date&nbsp;Named&nbsp;to</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Board&nbsp;of&nbsp;Directors</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Patrick Imeson</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">63</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Executive Officer and Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">April 6, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Robert Trenaman</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">51</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Operating Officer, President and Director</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">April 6, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Eric Altman</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">42</TD>
    <TD>&nbsp;</TD>
    <TD>Chief Financial Officer, Vice President-Finance and Treasurer</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Timothy G. Smith</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">55</TD>
    <TD>&nbsp;</TD>
    <TD>Vice President &ndash; Operations and General Manager &ndash; Montana Tunnels Mine</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Michael Feinberg</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">67</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">April 6, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Kenneth Hamlet</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">67</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">April 6, 2012</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Directors are elected to serve until the
next annual meeting of stockholders and until their successors are elected and qualified. Pursuant to the terms of the Merger Agreement,
the parties agreed that the Company&rsquo;s Board of Directors, as of the closing of the Merger, would consist of five members.
Our Board of directors is now comprised of four members, all of whom have been designated by EGLLC. One member of the Board of
Directors remains to be appointed. That person shall be designated by the stockholders of ESRI prior the Merger, pursuant to the
terms of the Merger Agreement. Executive officers are appointed by the Board of Directors and serve at its pleasure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The principal occupation and business experience
during the past five years for our executive officers and directors is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Patrick Imeson</B> has served as our
Chief Executive Officer and Chairman of our Board of Directors since April 6, 2012. Mr. Imeson began assembling the Elkhorn properties
and management team in 2000. Mr. Imeson draws upon a diverse career in finance and company operations. As a senior vice president
of a midsized asset management firm, he led initiatives in sales and marketing of alternative investments as well as building international
relationships. He has also held senior executive and entrepreneurial responsibilities in sectors including engineering, regional
airlines, insurance, food &amp; beverage, and mining. Imeson was educated at New Mexico Military Institute and attended two years
at the U.S. Naval Academy at Annapolis, MD prior to leaving to pursue a career in business and finance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Robert Trenaman</B> has served as our
President, Chief Operating Officer and a director since April 6, 2012. Mr. Trenaman brings over 25 years of experience within the
mining industry. Mr. Trenaman has spent over 12 years in Montana initially acquiring the Elkhorn Project nearby the Montana Tunnels
Mine for Treminco Resources Ltd from Newmont in 1998. Mr. Trenaman was part of the team that successfully completed the U.S. $14.25
million investment in MTMI in 2006 on behalf of EGLLC. As a result, MTMI restarted commercial production in March 2007 with EGLLC
being a 50% Joint Venture partner. In February 2010, EGLLC acquired a full interest in the Montana Tunnels Mine through the 100%
acquisition of the MTMI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From 1986 through to 2000, Mr. Trenaman
was involved in building Treminco Resources, Ltd. Under his leadership, Treminco evolved from an exploration company listed on
the Vancouver Stock Exchange, to a two-operation, 120-employee, underground-focused mining company listed on the Toronto Stock
Exchange. He has successfully managed corporate, financial and operational affairs, negotiated smelter contracts, union contracts,
term lending facilities and public company financings. Mr. Trenaman is a graduate of the University of British Columbia.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Eric Altman</B> has served as our Chief
Financial Officer, Vice President &ndash; Finance and Treasurer since April 6, 2012. Mr. Altman brings experience in financing
companies that are the developmental stage along with public, tax and industry accounting/finance experience. In his career as
the CFO and Portfolio Manager of a private equity firm and as a senior accountant with Coopers &amp; Lybrand, Fidelity Investments,
and several smaller firms, he has worked with companies in sectors such as software, biotechnology, energy consulting, construction,
real estate and lodging, mutual funds, and venture capital. Altman holds a BS in industrial economics from Union College and a
joint MS/MBA degree from the Graduate School of Professional Accounting at Northeastern University.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Timothy G. Smith</B> has served as our
Vice President &ndash; Operations and General Manager &ndash; Montana Tunnels Mine since April 2011.&nbsp;Mr. Smith also serves
as Chief Operating Officer for Fire River Gold Corporation. Previous to these appointments, Mr. Smith was Vice President &ndash;
U.S. and Canadian Operations of Apollo Gold and, before that, was Vice President and General Manager of Montana Tunnels Mining,
Inc. Mr. Smith has over 35 years of mine operations experience in gold, copper, coal and lead and zinc mining. Mr. Smith holds
a Bachelor of Engineering &ndash;Metallurgical, from McGill University and is a Professional Engineer registered in British Columbia.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Michael Feinberg</B> has served as a
director since April 6, 2012. Mr. Feinberg, draws on a 40 year experience as a property developer and owner and investor in growth
companies. He has owned and/or developed residential and office buildings in the greater metropolitan New York and South Florida
areas. Additionally, Mr. Feinberg currently as a director of Rackwise Inc. (a public company) and Transnetyx Inc. (a privately
held company) and is the owner and designed the course at The Club at Emerald Hills in Hollywood, Florida, was one of the earlier
financiers of Ultimate Software, a leading provider of end-to-end strategic human resources, payroll, and talent management solutions;
invested in the 2006 recapitalization of the Indian Wells Tennis Tournament and is an investor in the funds managed by Black Diamond
Financial Group.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Kenneth Hamlet </B>has served as a director
since April 6, 2012. Mr. Hamlet <FONT STYLE="color: black">has a wide spectrum of executive experience, notably his tenure as president
and CEO of Holiday Inns Inc. Hotel Group. After the sale of Holiday Inns, Inc., Mr. Hamlet founded, in 1990, and became chairman
and CEO of Hamlet Holdings LLC, which held interests in a diverse set of industries including: real estate development, manufacturing,
services, retail, investment banking, agriculture and computer-based entertainment in hotel rooms. Mr. Hamlet has also served in
a variety of leadership roles of not-for-profit organizations including the co-chairman of the U.S. Olympic Committee for the Mid-South
Region, president of the Boy&rsquo;s Club of Memphis, vice chairman of the United Way&rsquo;s mid-South fundraising campaign, club
master for the Boy Scouts of America, board member of the UCSD Graduate School of International Relations and Pacific Studies.
He has been an active board member of the Conrad Foundation since July 2009, a Senior Advisor at Crestview Partners since July
2010, an advisory board member of BDH since October 2011 and is also currently the co-managing member of Monalex Partners, LLC.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Key Employees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>John Schaefer</B>, Environmental Manager
&ndash; Montana Tunnels Mine. Mr. Schaefer has 40 years of experience in the mining and manufacturing industries with more than
20 years focused on environmental compliance and management. Mr. Schaefer has been employed at the Montana Tunnels Mine for 23
years while managing the facility&rsquo;s environmental programs for the past 14 years. Holding a Bachelor of Science degree in
chemistry, Mr. Schaefer brings a wide range of experience in environmental matters, analytical chemistry and manufacturing production
management from past employment with Kaiser Aluminum and Chemical Corporation, Rockwell International, Alunite Metallurgical Center,
Hazen Research and Northern Testing Laboratories. From 2004 through 2008, Mr. Schaefer managed the Environmental Impact Statement
process for a major permit amendment to the Montana Tunnels&rsquo; Mine plan that resulted in favorable Records of Decision from
regulatory agencies for the next expansion phase of mine operations. In addition to environmental affairs, Mr. Schaefer oversees
land matters, reclamation bonding, laboratory operations and all operating licenses for MTMI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Chris
Frank</B></FONT><B><FONT STYLE="font-family: Times New Roman, Times, Serif; color: black">, </FONT></B><FONT STYLE="font-size: 10pt">Chief
Engineer &ndash; Golden Dream Mine. After studying mining engineering at the Montana College of Mineral Sciences and Technology
Mr. Frank commenced his career with Diamond Hill Mines, Inc. as an engineering tech at the Diamond Hill mine near Townsend, MT.&nbsp;
The Diamond Hill mine was a 500 ton-per-day underground gold mine producing from a skarn deposit utilizing long-hole open stopping.&nbsp;
After Diamond Hill closed Mr. Frank became the Senior Mine Engineer at the Montana Tunnels mine:&nbsp; a 15,000 ton per day open
pit gold, zinc, silver and lead operation where he was responsible for grade control, short to medium term planning, mine budgeting,
drill and blast design, and cost tracking.&nbsp; After operations were suspended at Montana Tunnels, Frank became the Senior Mine
Engineer at the Black Fox mine near Matheson, Ont.&nbsp; The Black Fox mine is a 2,000 metric tonne per day underground and open-pit
gold operation.&nbsp; Frank was responsible for short to medium term planning, drill and blast design, locating and collapsing
underground workings within the pit, ore grade control, updating the block model with definition drilling, and assisting in the
design and building of infrastructure at the mine site to support open pit and underground operations.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Shane
Hanninen</B></FONT><FONT STYLE="color: black">, </FONT><FONT STYLE="font-size: 10pt">Mine Operations Manager &ndash; Golden Dream
Mine. Mr. Hanninen commenced his career in the mining industry with Newmont&nbsp;Mining Corp.&nbsp;in 1992 where he expanded upon
his hands-on knowledge operating all aspects of open-pit mine equipment as well as gaining field supervisory experience. In 2005,
Mr. Hanninen oversaw open pit mine operations at the molybdenum mine owned by Montana Molybdenum Corp.&rsquo;s in the capacity
of Mine Foreman. In 2006 he joined Montana Tunnels Mining, Inc. as Safety Director and in 2011 became Mine Operations Manager for
the Golden Dream Mine. Mr. Hanninen is a Certified Mine Safety and Health Administration (&ldquo;MSHA&rdquo;) instructor.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Shane Parrow</B>, Advisor. Mr. Parrow
led the team that developed the Golden Dream Mine plan and obtained the operating permit. He has over 15 years of mining experience
and has established excellent public relations within the local community. Mr. Parrow will bring his extensive knowledge regarding
rock mechanics, blasting, materials handling, mine valuation, ventilation, environmental considerations, mine safety, and the design
and operation of surface and underground mines. This includes: project management for start-up underground mining operations; general
manager responsible for underground mine planning, designs, budgeting, permitting, and exploration; production foreman/mine engineer
with task of short and long-range mine planning; production engineer for oil and gas company; and underground mine manager/mill
process production foreman. In addition to serving as an advisor to us, Mr. Parrow is an Associate Professor in the Mine Engineering
department of Montana Tech.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We intend to hire independent geologists,
engineers, landmen and various subcontractors on an as-needed basis.&nbsp;&nbsp;We have not entered into any negotiations or contracts
with any such persons.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Involvement in Certain Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the past ten (10) years, none of
the above individuals has:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">been subject to a petition under the federal bankruptcy laws or any state insolvency law, filed
by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person,
or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation
or business association of which he was an executive officer at or within two years before the time of such filing;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">been convicted in a criminal proceeding or is a named subject of a pending criminal proceeding
(excluding traffic violations and other minor offenses);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">been the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission,
or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as
an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company,
or engaging in or continuing any conduct or practice in connection with such activity;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">engaging in any type of business practice; or</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">engaging in any activity in connection with the purchase or sale of any security or commodity or
in connection with any violation of Federal or State securities laws or Federal commodities laws;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">been the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated,
of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to act
as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of
the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct
or practice in connection with such activity, or to be associated with persons engaged in any such activity;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">been found by a court of competent jurisdiction in a civil action or by the Commission to have
violated any federal or state securities law, and the judgment in such civil action or finding by the Commission has not been subsequently
reversed, suspended, or vacated; or</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading
Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed, suspended or vacated.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Director Independence</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are not currently listed on any national
securities exchange or quoted on an inter-dealer quotation system that has a requirement that certain of the members of the Board
of Directors be independent. However, the Board of Directors has made a determination as to which of its members are independent.
In evaluating the independence of its members and the composition of the committees of the Board of Directors, the Board utilizes
the definition of &ldquo;independence&rdquo; developed by the Nasdaq Stock Market and in SEC rules, including the rules relating
to the independence standards in audit committee members and the non-employee director definition of Rule 16b-3 promulgated under
the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Board of Directors expects to continue
to evaluate whether and to what extent the members of the Board and its committees are independent. The Company intends to appoint
persons to the Board and committees of the Board who will meet the corporate governance requirements imposed by a national securities
exchange. Therefore, the Company expects that a majority of its directors will be independent directors of which at least one director
will qualify as an &ldquo;audit committee financial expert,&rdquo; within the meaning of SEC rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Additionally, the Board of Directors is
expected to appoint an audit committee, governance committee and compensation committee and to adopt charters relative to each
such committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We believe that Mr. Hamlet is currently
an &ldquo;independent&rdquo; director as that term is defined in the listing standards of the Nasdaq Stock Market and SEC rules,
including the rules relating to the independence standards for audit committee members and the non-employee director definition
of Rule 16b-3 promulgated under the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Board Committees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company currently has not established
any committees of the Board of Directors.&nbsp;&nbsp;Our Board of Directors may designate from among its members an executive committee
and one or more other committees in the future.&nbsp;&nbsp;We do not have a nominating committee or a nominating committee charter.&nbsp;&nbsp;Further,
we do not have a policy with regard to the consideration of any director candidates recommended by security holders.&nbsp;&nbsp;To
date, no security holders have made any such recommendations.&nbsp;&nbsp;The entire Board of Directors performs all functions that
would otherwise be performed by committees.&nbsp;&nbsp;Given the present size of our board it is not practical for us to have committees.&nbsp;&nbsp;If
we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities
accordingly.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Audit Committee Financial Expert</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have no separate audit committee at
this time.&nbsp;&nbsp;The entire Board of Directors shall oversee our audits and auditing procedures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Shareholder Communications</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Currently, we do not
have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security
holders have made any such recommendations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Code of Ethics</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have adopted a written Code of Ethics.
We believe that the Code of Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full,
fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting
of code violations; and provide accountability for adherence to the code. A copy of our Code of Ethics will be provided to any
person requesting same without charge. To request a copy of our Code of Ethics, please make written request to our Chief Executive
Officer, c/o Eastern Resources, Inc., 1610 Wynkoop Street, Suite 400, Denver, CO 80202.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Compliance with Section 16(a) of the
Exchange Act</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Our Common Stock is not
registered pursuant to Section 12 of the Exchange Act. Accordingly, our officers, directors and principal shareholders are not
subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table sets forth information
concerning the total compensation paid or accrued by us during the fiscal year ended December 31, 2011 to (i) all individuals that
served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended December
31, 2011; (ii) all individuals that served as our principal financial officer or acted in a similar capacity for us at any time
during the fiscal year ended December 31, 2011; and (iii) all individuals that served as executive officers of ours at any time
during the fiscal year ended December 31, 2011 that received annual compensation during the fiscal year ended December 31, 2011
in excess of $100,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Summary Compensation Table</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-style: italic; border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 8pt">Name&nbsp;and<BR> Principal&nbsp;Position</FONT></TD><TD NOWRAP STYLE="font-style: italic; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-style: italic; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Year</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-style: italic; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-style: italic; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Salary<BR>
    ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-style: italic; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-style: italic; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Bonus<BR>
    ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-style: italic; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-style: italic; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Stock<BR>
    Awards<BR> ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-style: italic; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-style: italic; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Option<BR>
    Awards<BR> ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-style: italic; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-style: italic; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Non-Equity<BR>
    Incentive<BR> Plan<BR> Compen-<BR> sation<BR> ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-style: italic; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-style: italic; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Non-qualified<BR>
    Deferred<BR> Compen-<BR> sation<BR> Earnings<BR> ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-style: italic; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-style: italic; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">All&nbsp;Other<BR>
    Compensation<BR> ($)</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="font-style: italic; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-style: italic; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Total<BR>
    ($)</FONT></TD><TD STYLE="padding-bottom: 1pt; font-style: italic"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 19%; text-align: left"><FONT STYLE="font-size: 8pt">Patrick Imeson, Chief</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 6%; text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">Executive Officer and Chairman</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2010</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Eric Altman, Chief</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">Financial Officer</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2010</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Robert Trenaman, President</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">2011</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">132,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">132,500</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.12in"><FONT STYLE="font-size: 8pt">and Chief Operating Officer</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">2010</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="vertical-align: middle; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">90,000</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="vertical-align: middle; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="vertical-align: middle; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">0</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="vertical-align: middle; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="vertical-align: middle; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="vertical-align: middle; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="vertical-align: middle; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="vertical-align: middle; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right; vertical-align: middle"><FONT STYLE="font-size: 8pt">90,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Outstanding Equity Awards at Fiscal
Year-End</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have one compensation plan approved
by our stockholders, the 2012 Plan.&nbsp;&nbsp;As of the closing of the Merger, we have granted option awards under the 2012 Plan
to certain of our officers, directors and employees for a total of 5,320,000 shares of our Common Stock. We have also granted options
for a total 50,000 shares of our Common Stock to our independent director and option for a total of 75,000 shares to certain contractors
and advisors.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have no plans in place and have never
maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement
including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred
contribution plans and nonqualified deferred contribution plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Except as indicated below, we have no contracts,
agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers listed
above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Employment Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Robert Trenaman salary for 2010 and 2011
was paid by EGLLC pursuant to an offer of employment letter dated July 1, 2011 according to which EGLLC agreed to pay Mr. Trenaman
an annual base salary of $180,000. This letter was modified as of that same date by a side agreement between EGLLC and Mr. Trenaman,
which reduced Mr. Trenaman&rsquo;s monthly salary, beginning July 1, 2011, to $12,500, until the Gold Dream Mine enters commercial
production.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have entered into employment agreements
with certain of our executive officers effective April 6, 2012, upon the closing of the Merger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 6, 2012, we entered into executive
employment agreements with (i) Patrick Imeson, our Chief Executive Officer and Chairman, (ii) Robert Trenaman, our President and
Chief Operating Officer, (iii) Eric Altman, our Chief Financial Officer and Treasurer, and (iv) Tim Smith, our Vice President &ndash;
Operations and General Manager of MTMI. The term of each of these employment agreements is three (3) years. Mr. Imeson&rsquo;s
agreement provides for annual compensation of $60,000 and an option grant of 1,000,000 shares of our Common Stock under our 2012
Plan; Mr. Altman&rsquo;s agreement also provide for annual compensation of $60,000 and an option grant of 500,000 shares of our
Common Stock under the 2012 Plan; Mr. Trenaman&rsquo;s agreement provides for compensation that includes an annual base salary
of $225,000 and an option grant under the 2012 Plan of 3,000,000 shares; and Mr. Smith&rsquo;s agreement provides for compensation
that includes an annual base salary of $100,000 and an option grant under the 2012 Plan of 500,000 shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Base salaries will be subject to annual
review by our Board of Directors and increase (but not decrease) as the Board determines. Our Board shall determine in its sole
discretion, following the closing of the Merger, what bonuses, if any, our executive officers shall be entitled to, based on milestones
to be agreed upon by the Board and each of the executives. Each of our executive officers shall be eligible to participate in any
other bonus or incentive program established by us for executives of the Company and shall be entitled to other benefits as may
be adopted by us from time to time for the benefit of our executives, as determined by our Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The employment agreements with each of
Messrs. Imeson, Altman, Trenaman and Smith are filed as Exhibits to this Current Report and are incorporated herein by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Management Services Agreement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Effective April 6, 2012 upon the closing
of the Merger, Black Diamond, owned and managed by Messrs. Imeson and Altman, entered into a management services agreement with
us pursuant to which Black Diamond has agreed to provide certain management, financial and accounting services to us and to make
available Messrs. Imeson and Altman to serve as our Chief Executive Officer and Chief Financial Officer, respectively. The agreement
has an initial term of three years and may be extended thereafter for successive one-year terms. The agreement may be terminated
(i) by either party upon thirty (30) days&rsquo; notice prior to the end of the then-current term or earlier if one of the parties
commits a material breach of the agreement and (ii) by us for any reason provided that we pay Black Diamond all fees due through
the end of the then-current term. Under this agreement, we have agreed to pay Black Diamond $15,000 per month plus further compensation
at a rate of $200 per hour for each additional hour that Black Diamond renders services to us under the agreement in excess of
125 hours. We have also granted to certain employees of Black Diamond options to purchase up to 50,000 shares of our Common Stock
under the 2012 Plan. The agreement also provides for the provision of office space for our executive offices at 1610 Wynkoop Street,
Suite 400, Denver, Colorado 80202, our deemed principal place of business. This agreement replaces and supersedes a similar agreement
dated November 1, 2010 between Black Diamond and EGLLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This management services agreement has
been filed as Exhibit 10.21 <FONT STYLE="color: black">to this Current Report and is incorporated herein by reference.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Director Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Prior to the Merger, ESRI did not pay its
directors any cash compensation for services on its Board of Directors.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Following the consummation of the Merger,
our directors will be entitled to receive compensation as follows: Each non-employee director will receive an initial grant under
our 2012 Plan of options to purchase 50,000 shares of our Common Stock. Each non-employee director will also receive an annual
retainer of $25,000. The Chairman of the Board of Directors, if a non-employee, will receive an additional annual retainer of $15,000.
The audit committee chairman will receive an annual fee of $10,000 and other committee chairpersons will receive $5,000 annually,
once these committees are established. Members of the Board of Directors will receive a fee of $750 for each Board meeting that
they attend in person and $500 for a meeting attended telephonically. Each director will receive a travel fee of $500 per day,
not including the day of the Board meeting, and related travel and out-of-pocket expenses will be reimbursed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Transactions involving ESRI and/or ESRI Stockholders</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Split-Off and Release</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Concurrent with the closing of the Merger,
ESRI exchanged with certain of our former stockholders all of the outstanding shares of common stock of Split Corp that it previously
held for 5,793,000 shares of our Common Stock .</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Related to the Split-Off, ESRI and Buzz
Kill terminated and cancelled an investment agreement between them dated May 1, 2007. Pursuant to this agreement cancellation,
ESRI relinquished its right to recoup its $800,000 investment in Buzz Kill and Buzz Kill no longer is required to share 50% of
its net revenue from sales of the film <I>BuzzKill</I> with ESRI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At the closing of the Merger, holders of
approximately $233,000 of Split Corp. promissory notes agreed to release ESRI from any obligations ESRI might have had with respect
to these notes having been the parent company of Split Corp. prior to the Split-Off.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Employment Agreements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 6, 2012, we entered into executive
employment agreements with (i) Patrick Imeson, our Chief Executive Officer and Chairman, (ii) Robert Trenaman, our President and
Chief Operating Officer, (iii) Eric Altman, our Chief Financial Officer and Treasurer, and (iv) Tim Smith, our Vice President &ndash;
Operations and General Manager of MTMI. The term of each of these employment agreements is three (3) years. Mr. Imeson&rsquo;s
agreement provides for annual compensation of $60,000 and an option grant of 1,000,000 shares of our Common Stock under our 2012
Plan; Mr. Altman&rsquo;s agreement also provides for annual compensation of $60,000 and an option grant of 500,000 shares of our
Common Stock under the 2012 Plan; Mr. Trenaman&rsquo;s agreement provides for compensation that includes an annual base salary
of $225,000 and an option grant under the 2012 Plan of 3,000,000 shares; and Mr. Smith&rsquo;s agreement provides for compensation
that includes an annual base salary of $100,000 and an option grant under the 2012 Plan of 500,000 shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Lock-up Agreements&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Merger, the Pubco
Holders entered into lock-up agreements with ESRI whereby they agreed that forty percent (40%) of their Public Float Shares may
not be sold for a period of twelve (12) months following the Merger closing date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Forgiveness of Debt; Share Surrender and Cancellation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At the closing of the Merger<FONT STYLE="color: black">,
holders of ESRI promissory notes discharged and forgave notes, including all accrued but unpaid interest, in the aggregate principal
amount of approximately $276,000.&nbsp;&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Additionally, Dylan Hundley, a holder of
5,751,000 shares of ESRI Common Stock prior to the Merger, surrendered to us for cancellation all of her shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Transactions involving EGLLC and/or EGLLC Related Parties</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Minerals Product Receivables Purchase Agreement</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 15, 2011, EGI, EGLLC and BDH entered
into a Minerals Product Receivables Purchase Agreement (the &ldquo;MPRPA&rdquo;) pursuant to which EGI agreed to sell a certain
percentage of the gold output from the Golden Dream Mine to BDH for the life of the Golden Dream Mine. On that date, EGI and BDH
also entered into a security agreement <FONT STYLE="color: black">to secure the payment of EGI&rsquo;s obligations under the MPRPA
</FONT>pursuant to which EGI granted BDH a continuing security interest in all of the assets and property of EGI.<FONT STYLE="color: black">
</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with the terms of the MPRPA,
EGI has agreed to sell BDH eighty percent (80%) of the first 41,700 ounces and six and one-half percent (6.5%) of the ounces produced
over 250,000, of the gold produced from the Golden Dream Mine, subject to certain specified reductions, free and clear of any liens
and encumbrances. Under this agreement, BDH paid EGI &ldquo;pre-closing payments&rdquo; of $525,000 and additional &ldquo;balance
payments&rdquo; of $9,475,000 to meet EGI&rsquo;s cash flow needs prior to the commencement of commercial production at the Golden
Dream Mine.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For each ounce of gold delivered to BDH
under the MPRPA, BDH will pay EGI, subject to certain adjustments, (i) with respect to 80% of the first 41,700 ounces sold to BDH,
the lesser of $500 per ounce or the latest COMEX spot gold price at the time of sale and (ii) with respect to each ounce of gold
over 250,000 ounces, the lesser of $600 or the latest COMEX spot gold price at the time of sale. All pricing is subject to adjustment
by an agreed upon inflation factor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The MPRPA and related security agreement
have been filed as Exhibits 10.23, and 10.25, respectively, <FONT STYLE="color: black">to this Current Report and are incorporated
herein by reference.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Employee Leasing Agreement between
EGI and MTMI</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 1, 2011, EGI and MTMI entered
into an employee leasing agreement pursuant to which EGI retained the services of certain employees of MTMI so that these MTMI
employees could work on properties and projects owned by EGI. Pursuant to the terms of this agreement, EGI agreed to pay a certain
percentage of MTMI&rsquo;s wages and employee benefit costs associated with the MTMI employees identified in the agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Management Services Agreement with
Black Diamond</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Effective April 6, 2012 upon the closing
of the Merger, Black Diamond Financial Group, LLC (&ldquo;Black Diamond&rdquo;), owned and managed by Messrs. Imeson and Altman,
entered into a management services agreement with us pursuant to which Black Diamond has agreed to provide certain management,
financial and accounting services to us and to make available Messrs. Imeson and Altman to serve as our Chief Executive Officer
and Chief Financial Officer, respectively. The agreement has an initial term of three years and may be extended thereafter for
successive one-year terms. The agreement may be terminated (i) by either party upon thirty (30) days&rsquo; notice prior to the
end of the then-current term or earlier if one of the parties commits a material breach of the agreement and (ii) by us for any
reason provided that we pay Black Diamond all fees due through the end of the then-current term. Under this agreement, we have
agreed to pay Black Diamond $15,000 per month plus further compensation at a rate of $200 per hour for each additional hour that
Black Diamond renders services to us under the agreement in excess of 125 hours. We have also agreed to grant to certain principals
and employees of Black Diamond options to purchase up to 100,000 shares of our Common Stock under the 2012 Plan. The agreement
also provides us with office space allocation at 1610 Wynkoop Street, Suite 400, Denver, Colorado 80202 for our principal place
of business. This agreement replaces and supersedes a similar agreement dated November 1, 2010 between Black Diamond and EGLLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Contributions and Distribution between
EGLLC and its subsidiaries (EGI and MTMI)</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2011 and 2010, EGLLC made equity contributions
of $260,000 and $870,000 to EGI and MTMI, respectively. Also, EGI and MTMI made distributions to EGLLC of $4,377,779 and 964,091,
respectively. These distributions were to repay certain bridge loans and accrued operating expenses of EGLLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>EGI 2010 Private Placement &ndash;
Series A Bonds Outstanding</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During 2010 and 2011, EGI issued an 8%
Series A Bond to Black Diamond Bridge Capital Fund I, LLC (an entity controlled by Black Diamond) in the principal amount of $1,199,779.
This bond matures in July, 2012 and accrues interest at a rate of 8% per annum.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The EGI Bridge Financing </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Prior to the closing of the Merger, EGI
completed a number of closings of a bridge financing with BDH, one of our beneficial stockholders through holdings in EGLLC, and
another investor. In this bridge financing, EGI sold an aggregate of $300,000 in principal amount of its 12% unsecured convertible
Bridge Notes to BDH and $1,500,000 in principal amount of these Bridge Notes to the other investor. The Bridge Notes mature on
August 29, 2012 and, prior to that date but after the closing of the Merger, may be converted, at the sole discretion of each of
the note holders, including accrued but unpaid interest, into Units of the Company&rsquo;s securities at a conversion price of
$2.00 per Unit, each Unit consisting of: (i) one share of Common Stock, (ii) and a warrant to purchase one-half share of Common
Stock, exercisable at a price of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing of the Company&rsquo;s
planned private placement, provided the share price of the Common Stock offered in the private placement is less than $2.50 per
share, so that the exercise of the special warrant will reduce the lender&rsquo;s effective conversion price for the Common Stock
at a 25% discount to the private placement offering price, such special warrant exercisable at a price of $0.01 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Tri-Party Agreement; Security Interest in MTMI and EGI Assets;
and Pledge of Series A Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From time to time between 2006 and 2009,
EGLLC and MFPI Partners, LLC, a Delaware limited liability company whose sole members are Michael Feinberg and Patrick Imeson (&ldquo;MFPI&rdquo;),
raised approximately $6,000,000 and $13,000,000, respectively, through the sale of promissory notes to certain investors (the &ldquo;Secured
Lenders&rdquo;). The notes issued by EGLLC included a $5,000,000 secured note issued in 2006 and a $1,000,000 secured bridge note
issued in 2009. The notes issued by MFPI included an $8,000,000 note issued in 2007 and a $5,000,000 note issued in 2008. During
that time, EGLLC raised an additional $16,500,000 from the sale of unsecured bonds issued at a 40% discount to face value to certain
investors, including MFPI, which invested $8,000,000 in the unsecured EGLLC bonds from the proceeds of the $13,000,000 it borrowed
from the Secured Lenders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">EGLLC used $5,000,000 from the 2006
notes to purchase a loan and mortgage on property owned by an unrelated mining company and used $14,250,000 of the
$16,500,000 in proceeds from the issuance of the unsecured bonds to complete a joint venture with Apollo Gold, Inc. that
entitled EGLLC to 50% of the assets and distributions of Montana Tunnels Mine &ndash; See Description of Business for
additional information. In October 2009, EGLLC paid $250,000 in cash and in February 2010 assigned that loan and mortgage
on the property owned by the unrelated mining company to Apollo Gold, Inc. for 100% ownership in MTMI (owner of Montana
Tunnels Mine) and, concurrently with the closing of that payment and assignment, EGLLC and Apollo dissolved their joint
venture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2009, as a condition to the additional
$1,000,000 bridge loan (that was subsequently repaid) from the Secured Lenders to EGLLC and as an inducement for the Secured Lenders
to stand still regarding an event of default on the part of EGLLC, (i) the $8,000,000 loan to MFPI to purchase the unsecured bonds,
(ii) a $5,000,000 loan to MFPI whose proceeds were used to make an unrelated investment<SUP>3</SUP> and (iii) a redemption right
allowing the Secured Lenders to obligate MFPI to purchase from the Secured Lenders a $5,950,000 equity investment made in one of
the investment funds that is an owner of EGLLC and is managed by Black Diamond have been included under a security agreement with
the Secured Lenders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Currently, the notes and rights secured
by the Company&rsquo;s assets include (i) $21,600,000 in principal amount of notes, including the $5,800,000 issued by EGLLC in
2006, $9,700,000 issued by MFPI in 2007 and $6,100,000 issued by MFPI in 2008, plus accrued and unpaid interest thereon through
May 2009, and (ii) the redemption rights on the Secured Lenders&rsquo; $5,950,000 equity investment in EGLLC. The approximate amount
of principal, accrued but unpaid interest and redemption rights as of December 31, 2011 was $46,350,000. The notes and rights have
been secured by two first lien mortgages on all of the property and assets of EGI and MTMI. Under the terms of these mortgages,
the administrative agent representing the Secured Lenders was required to consent to the transfer by EGLLC to ESRI of the capital
stock of EGI and MTMI. Pursuant to the terms of a tri-party agreement by an among the Company, EGLLC and the administrative agent
dated as of the Merger closing date, the administrative agent consented to this transfer and ESRI acknowledged and agreed to cause
EGI and MTMI to perform and keep all the covenants and obligations set forth in the two mortgages</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Additionally, because certain of the secured
notes were in default prior to the Merger closing date, the administrative agent required that EGLLC and MFPI enter into a loan
reinstatement and modification agreement, effective as of the Merger closing date, pursuant to which EGLLC agreed to pledge, in
accordance with the terms of a separate pledge agreement, to the Secured Lenders all of its interest in the Series A Preferred
Stock. Under the tri-party agreement, the Company acknowledged and agreed to treat the administrative agent as the owner and holder
of the Series A Preferred Stock upon notice from the administrative agent of a default by EGLLC under the pledge agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the Merger Agreement, EGLLC has covenanted
that, for so long as any of its payment obligations under the loan restatement and modification agreement remain outstanding, EGLLC
will designate all proceeds derived from the Series A Preferred Stock, including from preferential dividends that may be paid on
this stock, to repay principal and interest due on the secured loans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 9pt"><SUP>3</SUP></TD><TD>MFPI invested $5,000,000 in Global VR, Inc. a private company managed by Black Diamond Holdings, LLC, which is managed by Patrick
Imeson and Eric Altman, principals of the Company</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MARKET PRICE OF AND DIVIDENDS ON COMMON
EQUITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>AND RELATED STOCKHOLDER MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="color: black">Our Common Stock
is currently eligible for quotation on the </FONT>OTC Bulletin Board <FONT STYLE="color: black">under the symbol &ldquo;ESRI.OB.&rdquo;&nbsp;&nbsp;The
trading of our common stock began on September 2, 2008.&nbsp;&nbsp;There has been very limited trading in our Common Stock to date.&nbsp;&nbsp;As
of the date of this Current Report, we had&nbsp;99,085,000 shares of Common Stock outstanding held by approximately&nbsp;11 stockholders
of record. To date, we have not paid dividends on our common stock. As of the date of this Current Report, we have 10,000,000 outstanding
shares of our Series A Preferred Stock held by one stockholder of record.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Trades in our Common Stock may be subject
to Rule 15g-9 under the Exchange Act, which imposes requirements on broker/dealers who sell securities subject to the rule to persons
other than established customers and accredited investors. For transactions covered by the rule, broker/dealers must make a special
suitability determination for purchasers of the securities and receive the purchaser&rsquo;s written agreement to the transaction
before the sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The SEC also has rules that regulate broker/dealer
practices in connection with transactions in &ldquo;penny stocks.&rdquo; Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities listed on certain national exchanges, provided that the current price and volume information
with respect to transactions in that security is provided by the applicable exchange or system). The penny stock rules require
a broker/dealer, before effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in
the penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker/dealer and its salesperson in the transaction, and monthly account statements showing the market
value of each penny stock held in the customer&rsquo;s account. The bid and offer quotations, and the broker/dealer and salesperson
compensation information, must be given to the customer orally or in writing before effecting the transaction, and must be given
to the customer in writing before or with the customer&rsquo;s confirmation. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for shares of Common Stock. As a result of these rules, investors
may find it difficult to sell their shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Dividend Policy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have never paid any cash dividends on
our capital stock and do not anticipate paying any cash dividends on the Common Stock in the foreseeable future.&nbsp;&nbsp;Also,
the terms of the Series A Preferred Stock restrict our ability to pay dividends.&nbsp;&nbsp;(See &ldquo;Description of Securities&mdash;Series
A Preferred Stock&rdquo; below.) We intend to retain future earnings to fund ongoing operations and future capital requirements.
Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon financial
condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Securities Authorized for Issuance under Equity Compensation
Plans</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Plan&nbsp;Category</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number&nbsp;of&nbsp;shares<BR> to&nbsp;be&nbsp;issued&nbsp;upon<BR> exercise&nbsp;of<BR> outstanding<BR> options,&nbsp;warrants<BR> and&nbsp;rights</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Weighted-<BR> average&nbsp;exercise<BR> price&nbsp;of<BR> outstanding<BR> options,<BR> warrants&nbsp;and<BR> rights</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Number&nbsp;of&nbsp;shares<BR> remaining<BR> available&nbsp;for<BR> future&nbsp;issuance<BR> under&nbsp;equity<BR> compensation<BR> plans&nbsp;(excluding<BR> shares&nbsp;reflected&nbsp;in<BR> the&nbsp;first&nbsp;column)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 46%; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Equity compensation plans approved by security holders</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">5,445,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">2.00</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">4,555,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Equity compensation plans not approved by security holders</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,445,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2.00</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,555,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company had no equity compensation
plans as of the end of fiscal year 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2012 Equity Incentive Plan</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 1, 2012, our Board of Directors
of the Company adopted, and on February 29, 2012, our stockholders approved, the 2012 Equity Incentive Plan, which reserves a total
of 10,000,000 shares of our Common Stock for issuance under the 2012 Plan. If an incentive award granted under the 2012 Plan expires,
terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares
subject to such award and the surrendered shares will become available for further awards under the 2012 Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In addition, the number of shares of Common
Stock subject to the 2012 Plan, any number of shares subject to any numerical limit in the 2012 Plan, and the number of shares
and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding Common Stock by reason
of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation,
liquidation, business combination or exchange of shares or similar transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Administration</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The compensation committee of the Board,
or the Board in the absence of such a committee, will administer the 2012 Plan. Subject to the terms of the 2012 Plan, the compensation
committee has complete authority and discretion to determine the terms of awards under the 2012 Plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Grants</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The 2012 Plan authorizes the grant to participants
of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended
to comply with Section 162(m) of the Internal Revenue Code (as amended, the &ldquo;Code&rdquo;) and stock appreciation rights,
as described below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Options granted under the 2012 Plan entitle the grantee, upon exercise, to purchase a specified
number of shares from us at a specified exercise price per share. The exercise price for shares of Common Stock covered by an option
cannot be less than the fair market value of the Common Stock on the date of grant unless agreed to otherwise at the time of the
grant.&nbsp;&nbsp;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Restricted stock awards and restricted stock units may be awarded on terms and conditions established
by the compensation committee, which may include performance conditions for restricted stock awards and the lapse of restrictions
on the achievement of one or more performance goals for restricted stock units.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">The compensation committee may make performance grants, each of which will contain performance
goals for the award, including the performance criteria, the target and maximum amounts payable, and other terms and conditions.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">The 2012 Plan authorizes the granting of stock awards. The compensation committee will establish
the number of shares of Common Stock to be awarded and the terms applicable to each award, including performance restrictions.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Stock appreciation rights (&ldquo;SARs&rdquo;) entitle the participant to receive a distribution
in an amount not to exceed the number of shares of Common Stock subject to the portion of the SAR exercised multiplied by the difference
between the market price of a share of Common Stock on the date of exercise of the SAR and the market price of a share of Common
Stock on the date of grant of the SAR.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Duration, Amendment, and Termination</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Board has the power to amend, suspend
or terminate the 2012 Plan without stockholder approval or ratification at any time or from time to time. No change may be made
that increases the total number of shares of Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum
exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders
within one year. Unless sooner terminated, the 2012 Plan would terminate ten years after it is adopted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of the closing of the Merger, we have
granted option awards under the 2012 Plan to certain of our officers, directors and employees for a total of 5,320,000 shares of
our Common Stock. We have also granted options for 50,000 shares of our Common Stock to our independent director and 75,000 to
certain advisors and consultants.&nbsp;&nbsp;Each of these options has been granted with a term of ten years and an exercise price
of $2.00 per share, which price the Board of Directors has deemed to be the fair market value of the Company&rsquo;s stock on the
date of grant. Each option vests in three equal installments on the first, second and third anniversary of the Merger closing date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF SECURITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have authorized capital stock consisting
of 300,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of preferred stock, $0.001 par value. As of the
date of this Report, we had 99,085,000 shares of common stock issued and outstanding and 10,000,000 shares of Series A preferred
stock issued and outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holders of outstanding shares of common
stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and
in such amounts as the board from time to time may determine. Holders of common stock are entitled to one vote for each share held
on all matters submitted to a vote of shareholders. There is no cumulative voting of the election of directors then standing for
election. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation,
dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably
among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims
of creditors. Each outstanding share of common stock is duly and validly issued, fully paid and non-assessable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Shares of preferred stock may be issued
from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by
our Board of Directors prior to the issuance of any shares thereof. Preferred stock will have such voting powers, full or limited,
or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class
or series of preferred stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares
thereof. The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then outstanding shares of
our capital stock entitled to vote generally in the election of the directors, voting together as a single class, without a separate
vote of the holders of the preferred stock, or any series thereof, unless a vote of any such holders is required pursuant to any
preferred stock designation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are authorized to issue 10,000,000 shares
of &ldquo;blank check&rdquo; preferred stock, par value $0.001 per share. As of the closing of the Merger and pursuant to the Merger
Agreement, we issued 10,000,000 shares of our designated Series A Preferred Stock to EGLLC with the following terms (as more fully
described in the certificate of designations):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><U>Voting Rights</U>. Each share of Series A Preferred Stock entitles the holder to one vote on
all matters submitted to a vote of the holders of our common stock;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><U>Dividends</U>. The holder of the Series A Preferred Stock is entitled to receive, out of funds
legally available therefor, cumulative non-compounding preferential dividends at the rate of 12% of the stated value of $6.00 per
share <I>per annum </I>(the &ldquo;Preferential Dividend&rdquo;). 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 Series A Preferred Stock remain outstanding;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><U>Liquidation Preference</U>. In the event of any defined liquidation event, <FONT STYLE="color: black">no
distribution can be made to holders of shares of our capital stock ranking junior to the Series A Preferred Stock, unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received an amount per share equal to $6.00 (the &ldquo;<U>Liquidation
Amount</U>&rdquo;) per share, </FONT>plus the amount of any accrued and unpaid Preferential Dividend <FONT STYLE="color: black">owed
to holders of shares of the Series A Preferred Stock;</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><U>Holder Optional Redemption</U>. The holder of the Series A Preferred Stock has the option, exercisable
in whole or in part at any time and from time to time prior to the third anniversary of the issuance of the Series A Preferred
Stock, to require us to purchase for cash, out of legally available funds, any or all of the then-outstanding shares of Series
A Preferred Stock at a price equal to $6.00 per share ;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><U>Company Optional Redemption</U>. We have the option, exercisable in whole or in part at any
time and from time to time prior to the third anniversary of the issuance of the Series A Preferred Stock, to redeem any or all
of the then-outstanding shares of Series A Preferred Stock at a price equal to $7.00 per share;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><U>Automatic Conversion</U>. Provided that neither the holder not the Company has exercised their
redemption options in full, by the third anniversary of the issuance of the Series A Preferred Stock, each share of then-outstanding
Series A Preferred Stock shall automatically and immediately convert into one fully paid and non-assessable share of common stock
of the Company; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><U>Protection Provisions</U>. So long as any shares of the Series A Preferred Stock are outstanding,
the Company cannot take any of the following corporate actions (whether by merger, consolidation or otherwise) without first obtaining
the approval of the holder of the Series A Preferred Stock: encumber the assets of the Corporation; alter or change the rights,
preferences or privileges of the Series A Preferred Stock, or increase the authorized number of shares of Series A Preferred Stock;
alter or change the rights, preferences or privileges of any capital stock of the Corporation so as to affect adversely the Series
A Preferred Stock; create or issue any securities senior to or <I>Pari Passu</I> with the Series A Preferred Stock; issue any additional
shares of Series A Preferred Stock; issue any debt securities, incur any indebtedness or enter into any other agreement or arrangement
that would entitle any third party to any preferences over the Series A Preferred Stock upon the occurrence of a Liquidation Event;
enter into any agreement, commitment, understanding or other arrangement to take any of the foregoing actions; or cause or authorize
any subsidiary of the Corporation to engage in any of the foregoing actions</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The certificate of designations,
preferences and rights of the Series A Preferred Stock is filed as Exhibit 4.1  to this Current Report and is incorporated
herein by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Options under the Plan </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has adopted its 2012 Equity
Incentive Plan pursuant to which 10,000,000 shares of the Company&rsquo;s Common Stock are reserved for issuance to employees,
directors, consultants, and other service providers of the Company and its affiliates. On April 6, 2012, we authorized for issuance
an aggregate of <FONT STYLE="color: black">5,445,000 </FONT>options exercisable at $2.00 per share to certain of our executive
officers, directors, employees and advisors. Each of these options has been granted with a term of ten years and an exercise price
of $2.00 per share, which price the Board of Directors has deemed to be the fair market value of the Company&rsquo;s stock on the
date of grant. Each option vests in three equal installments on the first, second and third anniversary of the Merger closing date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of the date hereof, the Company has
no warrants outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Convertible Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of the date hereof, the Company has
not issued any convertible securities other than the convertible notes issued by ESRI prior to, and cancelled upon, the closing
of the Merger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Transfer Agent</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The transfer agent for the Common Stock
is Continental Stock Transfer &amp; Trust Company. The transfer agent&rsquo;s address is 17 Battery Place, New York, New York 10004,
and its telephone number is (212) 845-3212.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL PROCEEDINGS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From time to time, we may become involved
in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Except for the matter described below,
we are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject,
nor are we aware of any such proceedings that are contemplated by any governmental authority. Although there can be no assurance
as to the ultimate outcome, we have denied liability in the case pending against us, and we intend to defend vigorously such case.
Based on information currently available, we believe the amount, or range, of reasonably possible losses in connection with the
action against us not to be material to our consolidated financial condition or cash flows. However, losses may be material to
our operating results for any particular future period, depending on the level of income for such period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 24, 2010, the EPA issued an &ldquo;Action
Memorandum&rdquo; 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, MTMI and the EPA entered into an
&ldquo;Access and Compensation Agreement&rdquo; which detailed the responsibilities of both the EPA and MTMI with respect to the
clean-up and disposal of contaminated soils from the Site. On October 26, 2011 the EPA proposed a settlement of $380,000. On November
04, 2011, MTMI agreed to the EPA proposed amount of $380,000 but added a stipulation that the amount be payable over time depending
upon the status of MTMI&rsquo;s operations. On February 21, 2012, MTMI heard back from the EPA tacitly agreeing to the total amount
of $380,000 on a monthly schedule of $2,500 per month with a balloon payment at month 36.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INDEMNIFICATION OF DIRECTORS AND OFFICERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Delaware General Corporation Law and our
Certificate of Incorporation allow us to indemnify our officers and directors from certain liabilities and our Bylaws state that
we shall indemnify every (i) present or former director, advisory director or officer of us, (ii) any person who while serving
in any of the capacities referred to in clause (i) served at our request as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authority granted by)
the Board of Directors or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii) (each an &ldquo;Indemnitee&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Bylaws provide that we shall indemnify
an Indemnitee against all judgments, penalties (including excise and similar taxes), fines, amounts paid in settlement and reasonable
expenses actually incurred by the Indemnitee in connection with any proceeding in which he was, is or is threatened to be named
as defendant or respondent, or in which he was or is a witness without being named a defendant or respondent, by reason, in whole
or in part, of his serving or having served, or having been nominated or designated to serve, if it is determined that the Indemnitee
(a) conducted himself in good faith, (b) reasonably believed, in the case of conduct in his official capacity, that his conduct
was in our best interests and, in all other cases, that his conduct was at least not opposed to our best interests, and (c) in
the case of any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful; provided, however, that
in the event that an Indemnitee is found liable to us or is found liable on the basis that personal benefit was improperly received
by the Indemnitee, the indemnification (i) is limited to reasonable expenses actually incurred by the Indemnitee in connection
with the proceeding and (ii) shall not be made in respect of any proceeding in which the Indemnitee shall have been found liable
for willful or intentional misconduct in the performance of his duty to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other than in the limited situation described
above, our Bylaws provide that no indemnification shall be made in respect to any proceeding in which such Indemnitee has been
(a) found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an
action taken in the Indemnitee&rsquo;s official capacity, or (b) found liable to us. The termination of any proceeding by judgment,
order, settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself determinative that the Indemnitee
did not meet the requirements set forth in clauses (a) or (b) above. An Indemnitee shall be deemed to have been found liable in
respect of any claim, issue or matter only after the Indemnitee shall have been so adjudged by a court of competent jurisdiction
after exhaustion of all appeals therefrom. Reasonable expenses shall, include, without limitation, all court costs and all fees
and disbursements of attorneys for the Indemnitee. The indemnification provided shall be applicable whether or not negligence or
gross negligence of the Indemnitee is alleged or proven.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other than discussed above, neither our
Bylaws nor our Certificate of Incorporation includes any specific indemnification provisions for our officers or directors against
liability under the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions,
or otherwise, the small business issuer has been advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item 3.02&nbsp;&nbsp;&nbsp;Unregistered
Sales of Equity Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Shares Issued in Connection with the
Merger</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On the closing date of the Merger, EGLLC,
the sole holder of common stock of MTMI and EGI, surrendered all of its 100 issued and outstanding MTMI shares and 100 issued and
outstanding EGI shares, and received an aggregate of 90,000,000 shares of the Company&rsquo;s Common Stock and 10,000,000 shares
of the Company&rsquo;s Series A Preferred Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The ESRI stockholders retained 9,085,000
shares of Common Stock in the Merger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The transactions described above were exempt
from registration under Section 4(2) of the Securities Act and Rule 506 of Regulation D as promulgated by the SEC. None of the
securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item 5.01&nbsp;&nbsp;Changes in Control
of Registrant.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">See Item 1.01 and Item 2.01.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item 5.02&nbsp;&nbsp;Departure of
Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">See Item 1.01 and Item 2.01.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item 9.01&nbsp;&nbsp;Financial Statements
and Exhibits.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(a)&nbsp;&nbsp;Financial statements of
business acquired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with Item 9.01(a), audited
combined financial statements of MTMI and EGI as of, and for the years ended, December 31, 2011 and 2010 are included in this Report
beginning on Page F-1.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(b)&nbsp;&nbsp;Pro forma financial information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with Item 9.01(b), unaudited
pro forma combined financial statements of MTMI and EGI as of, and for the year ended, December 31, 2011 are included in this Report
beginning on Page F-26.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(d)&nbsp;&nbsp;Exhibits</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 14%; border-bottom: windowtext 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Exhibit</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number</B></P></TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">SEC<BR> Report<BR> Reference<BR> Number</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 74%; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: center">Description</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;2.1</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Agreement and Plan of Merger and Reorganization,
        dated as of April 6, 2012, by and among the Registrant, MTMI Acquisition Corp., (a Delaware corporation), EGI Acquisition Corp.,
        (a Montana corporation), Elkhorn Goldfields LLC, (a Delaware limited liability company), Montana Tunnels Mining, Inc. (a Delaware
        corporation) and Elkhorn Goldfields, Inc. (a Montana Corporation) (1)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.2</TD>
    <TD>&nbsp;</TD>
    <TD>2.2</TD>
    <TD>&nbsp;</TD>
    <TD>Certificate of Merger dated as of April 5, 2012,filed with Delaware Secretary of State for the merger of MTMI Acquisition Corp. into Montana Tunnels Mining, Inc. (1)&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>2.3</TD>
    <TD>&nbsp;</TD>
    <TD>2.3</TD>
    <TD>&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Articles of Merger dated as of April 6 2012, filed with Montana
        Secretary of State for the merger of EGI Acquisition Corp. into Elkhorn Goldfields LLC (1)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>3.1</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certificate of Incorporation of the Registrant
        (2)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.2</TD>
    <TD>&nbsp;</TD>
    <TD>3.2</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certificate of Amendment to Certificate
        of Incorporation of the Registrant, filed with the Delaware Secretary of State on April 4, 2012 (1)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.3</TD>
    <TD>&nbsp;</TD>
    <TD>3.2</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Bylaws of the Registrant (2)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>4.1</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of the Registrant (2)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.2</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Form of 2012 Bridge 12% Unsecured Convertible Promissory Note of Elkhorn Goldfields, Inc.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 14%">4.3</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%">*</TD>
    <TD STYLE="width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 74%; text-align: justify">Form of 8% Series A Bond due July 31, 2012 of Elkhorn Goldfields, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.1</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Share Cancellation Agreement dated April 6, 2012 between the Registrant and Dylan Hundley</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.2</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Form of Note Cancellation and General Release Agreement dated April 6, 2012 by and between the Registrant and certain note holders</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.3</TD>
    <TD>&nbsp;</TD>
    <TD>10.1</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Loan Reinstatement and Modification Agreement between Gordon Snyder as Administrative Agent of Certain Note Holders, MFPI Partners, LLC, a Delaware limited liability company, and Elkhorn Goldfields, LLC (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>10.2</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Tri-Party Agreement by and among the Registrant, Elkhorn Goldfields LLC and Gordon Snyder as Administrative Agent of Certain Note Holders (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.5</TD>
    <TD>&nbsp;</TD>
    <TD>10.3</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Pledge Agreement between Gordon Snyder as Administrative Agent of Certain Note Holders, MFPI Partners, LLC, a Delaware limited liability company, and Elkhorn Goldfields, LLC (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Split-Off Agreement dated as of April 6,
        2012, by and among the Registrant, Buzz Kill, Inc. (a New York corporation) and the Buyers listed on Exhibit A thereto</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.7</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">General Release Agreement dated as of April
        6, 2012, by and among the Registrant, Buzz Kill, Inc. and the Buyers listed on Exhibit A thereto</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.8</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Termination of Investment Agreement dated April 6, 2012 by and between the Registrant and Buzz Kill, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.9</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Form of General Release of the Registrant by Certain Note Holders of Buzz Kill, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.10</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Form of Public Float Shares Lock-Up Agreement
        between the Registrant and certain stockholders</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.11</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Form of Public Float Shares Escrow Agreement
        between the Registrant and certain stockholders</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.12</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Form of No Short Selling Agreement between the Registrant and the officers, directors, certain employees and certain stockholders</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.13</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Form of Indemnification Escrow Agreement
        between the Registrant. and the officers, directors and employees party thereto</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.14</TD>
    <TD>&nbsp;</TD>
    <TD>10.4</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Registrant&rsquo;s 2012 Equity Incentive Plan (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.15</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Form of Incentive Stock Option Agreement</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.16</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Form of Non-Qualified Stock Option Agreement</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 14%">10.17</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%">*</TD>
    <TD STYLE="width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 74%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Executive Employment Agreement for Patrick
        Imeson</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.18</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Executive Employment Agreement for Robert Trenaman</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.19</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>Executive Employment Agreement for Eric Altman</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.20</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>Executive Employment Agreement for Tim Smith</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.21</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>Management Services Agreement between the Registrant and Black Diamond Financial Services Group, LLC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.22</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>Form of Subscription Agreement for 8% Series A Bond of Elkhorn Goldfields, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.23</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>Mineral Product Receivables Purchase Agreement dated April 15, 2011 by and among Elkhorn Goldfields, Inc., Elkhorn Goldfields, LLC and Black Diamond Holdings LLC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.24</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>Mining Lease with Option to Purchase between Mt. Heagan Development, Inc. and Elkhorn Goldfields, Inc. and Extension Letter</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.25</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>Security Agreement dated April 15, 2011 between Elkhorn Goldfields, Inc. and Black Diamond Holdings LLC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.26</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>Employee Leasing Agreement dated August 1, 2011 by and between Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>14.1</TD>
    <TD>&nbsp;</TD>
    <TD>14.1</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Code of Ethics (3)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>21.1</TD>
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">List of Subsidiaries</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">* Filed herewith.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD STYLE="text-align: justify">Incorporated by reference to the exhibit numbered as indicated above to the Registrant&lsquo;s
Form 8-A, File Number 000-54645, filed with the SEC on April 6, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD STYLE="text-align: justify">Incorporated by reference to the exhibit numbered as indicated above to the Registrant&lsquo;s
Form S-1, File Number 333-149850, filed with the SEC on March 21, 2008.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(3)</TD><TD STYLE="text-align: justify">Incorporated by reference to the exhibit numbered as indicated above to the Registrant&lsquo;s
Annual Report Form 10-K for the fiscal year ended December 31, 2008, File Number 333-149850, filed with the SEC on March 31, 2009.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><U>Table of Contents</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Combined Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>and</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Independent Auditors&rsquo; Report</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011 and 2010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 90%">&nbsp;</TD>
    <TD STYLE="width: 2%; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 8%; border-bottom: windowtext 1pt solid; text-align: center">Page</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Independent Auditors&rsquo; Report</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-2</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD>Combined Financial Statements</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.5in">Combined Balance Sheets</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-3</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.5in">Combined Statements of Operations</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-4</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.5in">Combined Statement of Changes in Stockholders&rsquo; Deficit</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-5</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.5in">Combined Statements of Cash Flows</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-6</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.5in">Notes to Combined Financial Statements</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">F-8</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EASTERN RESOURCES, INC. AND</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELECTED UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.5in; width: 92%">Explanatory Notes</TD>
    <TD STYLE="width: 8%; text-align: right">F-26</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.5in">Balance Sheet</TD>
    <TD STYLE="text-align: right">F-27</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.5in">Statement of Operations</TD>
    <TD STYLE="text-align: right">F-28</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.5in">Adjustments</TD>
    <TD STYLE="text-align: right">F-29</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">INDEPENDENT AUDITORS&rsquo; REPORT</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To the Stockholders of</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Elkhorn Goldfields, Inc. and Montana Tunnels
Mining, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Denver, Colorado</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying combined
balance sheets of Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc. (collectively the &ldquo;Company&rdquo;) as of December
31, 2011 and 2010 and the related combined statements of operations, changes in stockholders&rsquo; deficit, and cash flows for
the years then ended. These combined financial statements are the responsibility of the Company&rsquo;s management. Our responsibility
is to express an opinion on these combined financial statements based on our audits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audits in accordance with
auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&rsquo;s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statements and assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying combined financial statements
have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the combined financial statements,
the Company has not generated any revenues to fund operations and has a working capital deficit and a stockholders&rsquo; deficit
of $53,561,713 and $59,310,302, respectively, which raises substantial doubt about the ability of the Company to continue as a
going concern. Management&rsquo;s plans regarding those matters also are described in Note 2. The combined financial statements
do not include any adjustments that might result from the outcome of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In our opinion, the combined financial
statements referred to above present fairly, in all material respects, the combined financial position of Elkhorn Goldfields, Inc.
and Montana Tunnels Mining, Inc. as of December 31, 2011 and 2010 and the results of their operations and their cash flows for
the years then ended in accordance with accounting principles generally accepted in the United States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">Ehrhardt Keefe Steiner &amp; Hottman PC</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">March 15, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Denver, Colorado</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.</B></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Combined Balance Sheets</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: center">Assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left; padding-left: 9pt">Cash and cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">358,125</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">61,351</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Inventory, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">912,676</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,038,524</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Other current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,433</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,242</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,283,234</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,109,117</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Non-current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Buildings, equipment, and land, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,621,186</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,588,602</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Mine development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,869,342</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Mining properties and mineral interests, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,380,747</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,358,839</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Restricted cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">604,021</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">284,467</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Reclamation bonds</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">16,190,556</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">15,842,403</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total non-current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">42,665,852</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">37,074,311</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">43,949,086</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">38,183,428</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: center">Liabilities and Stockholders&rsquo; Deficit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0">Current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">282,141</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">86,040</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,247,232</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,650,486</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Current portion of capital lease obligation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">335,093</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Series A 8% bonds</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,399,779</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,235,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Deferred revenue, related party ore purchase agreement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,237,410</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Push-down redeemable obligation of Parent and its affiliate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,085,960</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,117,659</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Push-down interest of Parent and its affiliate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,677,484</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,071,953</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Push-down debt of Parent and its affiliate</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">21,579,848</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">22,498,576</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">54,844,947</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">43,660,214</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Non-current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Capital lease obligations, less current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">39,719</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Reclamation liability</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,793,187</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,465,966</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Deferred revenue, related party ore purchase agreement, less current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,762,590</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Related party ore purchase derivative contract</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">18,818,945</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total non-current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">48,414,441</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">21,465,966</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Total liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">103,259,388</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">65,126,180</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Commitments and contingencies</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Stockholders&rsquo; deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(59,310,302</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(26,942,752</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total liabilities and stockholders&rsquo; deficit</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">43,949,086</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">38,183,428</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See notes to combined financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.</B></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Combined Statements of Operations</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Operating expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left; padding-left: 9pt">General and administrative</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">850,616</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,580,991</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accretion expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,327,221</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,535,632</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Mine care and maintenance</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,037,199</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,236,832</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Depreciation, depletion, and amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,604</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,129</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total operating expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,221,640</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,364,584</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Loss from operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,221,640</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,364,584</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Other (expense) income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8,083,445</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,546,184</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">47,705</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">33,384</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Other income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">512,066</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,628</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Loss on related party ore purchase derivative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13,025,932</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Change in fair value of derivative instrument contract</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,793,013</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total other expense</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(26,342,619</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,506,172</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net loss</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(29,564,259</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(9,870,756</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See notes to combined financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Combined Statement of Changes in Stockholders&rsquo;
Deficit</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Years Ended December 31, 2011
and 2010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Total</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Capital</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Accumulated</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">Stockholders&rsquo;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Stock</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%">Balance - December 31, 2009</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">200</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">11,280,392</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(31,948,297</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">(20,667,905</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Non-cash contributions</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,690,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,690,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Cash distributions</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(964,091</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(964,091</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Cash contributions</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">870,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">870,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,870,756</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,870,756</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Balance - December 31, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">200</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,876,301</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(41,819,053</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(26,942,752</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Non-cash contribution</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,314,488</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,314,488</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Cash distributions</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,377,779</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,377,779</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Cash contributions</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">260,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">260,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net loss</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(29,564,259</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(29,564,259</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Balance - December 31, 2011</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">200</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">12,073,010</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(71,383,312</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(59,310,302</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See notes to combined financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Combined Statements of Cash Flows</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center">For the Years Ended</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Cash flows from operating activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Net loss</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">(29,564,259</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">(9,870,756</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Adjustments to reconcile net loss to net cash (used in) provided by operating activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Inventory reserve</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">242,329</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">601,241</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Depreciation, depletion, and amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,604</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,129</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Accretion expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,327,221</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,535,632</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Loss on related party ore purchase derivative contract</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,025,932</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Change in fair value of derivative instrument</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,793,013</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Push-down redeemable obligation of Parent and its affiliate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">968,301</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,240,579</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Push-down interest of Parent and its affiliate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,001,291</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,254,375</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.35in">Changes in operating assets and liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 34.2pt">Mineral sales receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">111,704</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 34.2pt">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(116,481</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,570</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 34.2pt">Other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,191</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">56,414</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 34.2pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">196,101</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(517,592</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 34.2pt">Accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">596,746</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,570,400</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 34.2pt">Deferred revenue, related party
    ore  purchase agreement</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,000,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">39,037,866</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,869,452</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.6in">Net cash provided by (used in) operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,473,607</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,001,304</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Cash flows from investing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Purchase of building and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(682,419</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(79,480</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Cash received from acquisition of the remaining 50% interest in Montana Tunnels Mine</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">44,044</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Additions to mine development</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,809,242</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Additions to mining properties and mineral interests</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(21,908</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(41,149</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Change in restricted cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(319,554</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(478</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Change in reclamation bonds</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(348,153</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(92,687</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.6in">Net cash used in investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(5,181,276</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(169,750</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Cash flows from financing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Proceeds from Series A 8% bonds</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">164,279</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,235,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Payments on capital lease obligations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(42,057</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(80,197</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 16.2pt">Proceeds from stockholder contributions</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">260,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">870,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-indent: -0.1in; padding-left: 16.2pt">Payments of distributions to stockholders </TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,377,779</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(964,091</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.6in">Net cash (used in) provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,995,557</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,061,212</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Net increase (decrease) in cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">296,774</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(109,842</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Cash and cash equivalents - beginning of period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">61,351</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">171,193</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">Cash and cash equivalents - end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">358,125</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">61,351</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(Continued on the following page)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See notes to combined financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.</B></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Combined Statements of Cash Flows</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(Continued from the previous page)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Supplemental disclosure of cash flow information:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">Cash paid for interest for the
years ended December 31, 2011 and 2010 was $45,708 and $13,017, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Supplemental disclosure of non-cash investing
and financing activity:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">During 2011, the Company acquired
$416,869 of equipment through a capital lease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">During 2011, $60,100 of depreciation
expense was capitalized to mine development.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">During 2011, Elkhorn Goldfields,
LLC (the &ldquo;Parent&rdquo;) paid on behalf of the Company $1,314,488 of accrued pushed-down interest and debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">During 2010, the Parent transferred
the value of its Calais Resources, Inc. investment for the remaining 50% interest of the net assets of Montana Tunnels. The following
is the allocation of the remaining 50% interest of the assets and liabilities acquired of Montana Tunnel as of December 31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 82%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.75in">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 82%; text-align: left">Cash and cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 15%; text-align: right">44,044</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Mineral sales receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">78,704</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.05in; padding-left: 0.05in">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">822,456</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">543</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Buildings and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,210,717</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Mining properties, mine development, and mineral interests, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,123,652</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Restricted cash and reclamation bonds </TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,184,845</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(306,398</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(471,698</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Capital lease obligations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(35,716</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.05in; padding-left: 0.05in">Reclamation liability</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,961,149</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Investment in debt securities, at estimated fair value</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,690,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See notes to combined financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 1 - Description of Business
and Summary of Significant Accounting Policies</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Elkhorn Goldfields, Inc. (&ldquo;EGI&rdquo;)
and Montana Tunnels Mining, Inc. (&ldquo;MTMI&rdquo;) (collectively, the &ldquo;Company&rdquo;) 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. The Company&rsquo;s objective is to operate mines and expand its interests through acquisition and exploration.
The Company 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 in the process of installing required infrastructure to allow the Company
to access the lower levels of ore. In addition, a second property has completed the permitting, except for posting the required
reclamation bonding. Lastly, the Company 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 (&ldquo;Montana Tunnels&rdquo;),
and the mineralized properties available to develop mine plans are East Butte, Gold Hill/Mount Heagan, and Carmody (collectively,
the &ldquo;Elkhorn Project&rdquo;), 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.
The Company maintains its principal executive office in Denver, Colorado.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During July 2006, Elkhorn Goldfields, LLC
(the entity that wholly owns the Company) (the &ldquo;Parent&rdquo;) entered into a 50% joint venture interest (the &ldquo;JV&rdquo;)
with the former owner of MTMI). The JV agreement called for the Parent to contribute $14,250,000 in return for a 50% interest in
the assets relating to Montana Tunnels, including the mining equipment and mill. Montana Tunnels is an open pit mine that produced
gold dor&eacute;, lead-gold, and zinc-gold concentrates. Montana Tunnels ceased mining in an area referred to as the L Pit and
completed milling of stockpiled ore at the end of April 2009, at which time the mine was placed on care and maintenance. The Company
is currently completing plans to enlarge the L Pit. The enlargement and further mine development is referred as the M Pit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 1, 2010, the Parent acquired
the remaining 50% interest in Montana Tunnels and the related assets, plus acquired Diamond Hill Mine and Mill and has pushed-down
the assets to the Company as of February 1, 2010 (Note 3).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Principles of Combination</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2011 and
2010, the accompanying combined financial statements include the accounts of EGI and MTMI. EGI includes the property and equipment
relating to the Golden Dream Mine and the mineralized targets of the Elkhorn Project. MTMI includes the property, mill, and equipment
relating to Montana Tunnels and Diamond Hill Mine. All intercompany accounts and transactions have been eliminated.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Cash and Cash Equivalents</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company considers all highly liquid
instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors
its positions with, and the credit quality of, the financial institutions with which it invests. As of the balance sheet dates,
and periodically throughout the years, the Company has maintained balances in various operating accounts in excess of federally
insured limits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Inventory</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Dor&eacute; inventory is stated at the
lower of weighted-average production cost and net realizable value. Production costs for dor&eacute; inventory include direct production
costs, attributable overhead, and depreciation incurred to bring the material to its current point in the processing cycle. Stockpiled
ore inventory represents ore that has been mined and is available for further processing. Work-in-process inventory, including
stockpiled ore and in-circuit gold inventory, is valued at the lower of weighted-average production cost and net realizable value.
Materials and supplies are valued at the lower of average direct cost of acquisition and net realizable value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Buildings and Equipment</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">MTMI buildings and equipment are recorded
at acquisition cost and amortized on a units-of-production basis over the remaining proven and probable reserves of the mine. Equipment
under capital lease is valued at the lower of fair market value or net present value of the minimum lease payments at the inception
of the lease. Equipment that is mobile is amortized on a straight-line basis over the estimated useful life of the equipment ranging
from five to ten years, not to exceed the related estimated mine lives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">EGI buildings and equipment are stated
at cost. Repair and maintenance costs are expensed as incurred. Depreciation is provided utilizing the straight-line method over
the estimated useful lives for owned assets taking into account estimated salvage values, ranging from 3 to 39 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Mine Development</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The costs of removing overburden and waste
materials to access the ore prior to the production phase are referred to as &ldquo;mine development costs.&rdquo; Mine development
costs are capitalized during the development of the mine. Mine development costs are amortized using the units-of-production method
based on estimated recoverable tons of proven and probable reserves. To the extent that these costs benefit the mine, they are
amortized over the estimated life of the mine. Development costs incurred after the first saleable ore is extracted from the mine
(i.e., post-production costs) are a component of mineral inventory cost. All post-production costs are considered variable production
costs that are included in the costs of the inventory produced during the period in which the mining costs are incurred.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Mining Properties and Mineral Interests</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Mining Properties</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For new projects without established reserves,
all costs, other than acquisition costs, are expensed prior to the establishment of proven and probable reserves. Reserves designated
as proven and probable are supported by a feasibility study, indicating that the reserves have had the requisite geologic, technical,
and economic work performed and are legally extractable at the time of reserve determination. Once proven and probable reserves
are established, all development and other site-specific costs are capitalized, including general and administrative charges for
actual time and expenses incurred in connection with site supervision as mine development costs. Development drilling costs incurred
to infill mineralized material to increase the confidence level in order to develop or increase proven and probable reserves are
also capitalized as mine development costs. If subsequent events or circumstances arise that would preclude further development
of the reserves under the then existing laws and regulations, additional costs are expensed until the impediments have been removed
and the property would be subject to ongoing impairment reviews. When a mine is placed into production, the capitalized acquisition
and mine development costs are reclassified to mining properties and are amortized to operations using the units-of-production
method based on the estimated metals that can be recovered.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none"><I>&nbsp;</I></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="text-underline-style: none"><I>Mineral Interest</I>s</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mineral interests include the cost of obtaining
patented and unpatented mining claims and the initial cost of acquiring mineral interests. If a mineable ore body is discovered,
such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If
no mineable ore body is discovered or such rights are otherwise determined to have no value, such costs are expensed in the period
in which it is determined the property has no future economic value. For the years ended December 31, 2011 and 2010, there are
no mineral interest impairments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Restricted Cash</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Restricted cash consists of cash held in
certificates of deposit for the reclamation of the Elkhorn Project. The restriction will be released when the reclamation is completed,
which the Company does not expect to happen prior to 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Bond Reclamation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Bond reclamation consists of cash held
directly by a surety for reclamation of Montana Tunnels and the Elkhorn Project. The restriction will be released when the reclamation
is completed, which the Company expects to be in 2024 and 2018, respectively.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Long-Lived Assets</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered.
The Company looks primarily to the estimated undiscounted future cash flows in its assessment of whether or not long-lived assets
have been impaired. If impairment has occurred, the long-lived assets are written down to its estimated fair value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Fair Value of Financial Instruments</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The carrying amounts of financial instruments,
including cash, accounts payable, and accrued liabilities, approximated fair value as of December 31, 2011 and 2010 because of
the relatively short maturity of these instruments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company applies the guidance to non-financial
assets and liabilities measured at fair value on a non-recurring 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&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The hierarchy is broken down into three
levels based on the reliability of the inputs as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 1in">Level 1:</TD><TD STYLE="text-align: justify">Quoted prices in active markets for identical assets or liabilities;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-align: justify; text-indent: -1.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 1in">Level 2:</TD><TD STYLE="text-align: justify">Quoted prices in active markets for similar assets and liabilities and inputs that are observable
for the asset or liability; or</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.5in; text-align: justify; text-indent: -1.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 1in">Level 3:</TD><TD STYLE="text-align: justify">Unobservable inputs in which there is little or no market data, which requires the reporting entity
to develop its own assumptions.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following assets are measured at fair
value as of December 31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Description</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 1</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 2</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 3</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%">Certificate of deposits</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">604,021</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">604,021</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Reclamation bonds</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">16,190,556</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">16,190,556</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Embedded derivative</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(18,818,945</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(18,818,945</TD><TD STYLE="text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Fair Value of Financial Instruments (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following assets are measured at fair
value as of December 31, 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Description</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 1</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 2</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Level 3</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%">Certificate of deposits</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">284,467</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">284,467</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Reclamation bonds</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15,842,403</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15,842,403</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><I>Certificates of Deposit:</I>
Recorded at cost, which approximates fair value due to the short duration of the investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><I>Reclamation Bonds</I>: Recorded
at the amount provided by the Montana Department of Environmental Quality, which is based upon the fair value of the cash underlying
the bond.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><I>Embedded Derivatives:</I>
Based on contract terms, projected future gold prices, and discount rate commensurate with estimates of contemporary credit risk
using a discounted cash flow model. The model is most sensitive to the future price of gold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There were no changes to the valuation
techniques used during the year ended December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 period ended December&nbsp;31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Embedded<BR> Derivative</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Reclamation<BR> Bonds</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; text-align: left">Beginning balance</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">15,842,403</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Issuances</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13,025,932</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Total gains or losses (realized/unrealized)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Included in earnings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,793,013</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Included on the balance sheet</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">348,153</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.05in; padding-left: 0.05in">Transfers in and/or out of Level 3</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Ending balance</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(18,818,945</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,190,556</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE><BR STYLE="clear: both">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 102; Value: 7 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Reclamation Liability</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s mining and exploration
activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws
and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations to protect
public health and the environment and believes its operations are in compliance with applicable laws and regulations in all material
respects. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot
predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory
requirements. Estimated future costs are discounted to their present value using a 12% discount rate. Reclamation obligations are
secured by cash held directly by a surety or certificates of deposit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table summarizes the activity
for the Company&rsquo;s asset retirement obligations:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">For the Years Ended <BR>December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Asset retirement obligations at January 1</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">21,465,966</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">19,930,334</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Accretion expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,327,221</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,535,632</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Liabilities incurred</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Asset retirement obligations at December 31</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,793,187</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,465,966</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Less current portion of asset retirement obligations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">Asset retirement obligations at December 31, less current portion</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">22,793,187</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">21,465,966</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE><BR STYLE="clear: both">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Income Taxes</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognizes deferred tax liabilities
and assets based on the differences between the tax basis of assets and liabilities and the reported amounts in the combined financial
statements that will result in taxable or deductible amounts in future years. The Company&rsquo;s temporary differences result
primarily from net operating losses and depreciation. A valuation allowance is established for deferred tax assets to the extent
there is uncertainty regarding the ultimate utilization. To date, no deferred tax assets have been recognized in the accompanying
combined financial statements because of the uncertainty of the realization of those assets.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Income Taxes (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company applies guidance on accounting
for uncertainty in income taxes. Under this guidance, the Company recognizes the tax benefit from an uncertain tax position if
it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical
merits of the position. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous
and are often ambiguous. As such, the Company is required to make many subjective assumptions and judgments regarding income tax
exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes
to its subjective assumptions and judgments that can materially affect amounts recognized in its combined balance sheets and statements
of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Interest and penalties associated with
tax positions are recorded in the period assessed as general and administrative expenses. No interest or penalties have been assessed
for the years ended December&nbsp;31, 2011 and 2010. The Company&rsquo;s returns for tax years subject to examination by tax authorities
include 2007 and 2008 through the current period for state and federal tax reporting purposes, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Revenue Recognition</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognizes revenue from the
sale of gold and co-products when the following conditions are met: persuasive evidence of an arrangement exists, delivery has
occurred in accordance with the terms of the arrangement, the price is fixed or determinable, and collectibility is reasonably
assured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenue for gold bullion is recognized
at the time of delivery and transfer of title to counterparties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company received an up-front payment
of $10,000,000 to sell 80% of the first 41,700 ounces of gold and 6.5% of the gold produced after 250,000 ounces to a related party.
The $10,000,000 payment has been recognized as deferred revenue until the gold is sold. The Company will recognize revenue of $800
per ounce as the 80% of the first 41,700 ounces is sold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Use of Estimates</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preparation of combined 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 combined financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 2 - Management&rsquo;s Plan</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At December 31, 2011, 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 likely involve the issuance
of debt and/or equity securities. These factors raise substantial doubt as to the Company&rsquo;s ability to continue as a going
concern. The combined financial statements do not include any adjustments that might result from the outcome of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 3 - Acquisition of the Remaining
50% in Montana Tunnels</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 1, 2010, the Parent acquired
the remaining 50% interest in MTMI, from Apollo Gold (&ldquo;Apollo&rdquo;) in exchange for certain promissory notes from Calais
Resources, Inc. (&ldquo;Calais&rdquo;) held by the Parent and certain investors in the Parent or its affiliates with an aggregate
outstanding face balance and a carrying value of $3,440,000 and $250,000 deposit reflected in mining properties. Such value was
based upon the<B> </B>appraised value<B> </B>of the real estate collateralizing the notes. The acquisition allows the Company to
own and develop Montana Tunnels. The acquisition of the remaining 50% has been &ldquo;pushed down&rdquo; and reflected as a non-cash
contribution as on February 1, 2010 in the combined financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company ascribed a value of $3,690,000
to the remaining 50% interest and the net assets acquired from MTMI representing the value of the Calais investment. The following
is the allocation of the remaining 50% interest of the assets and liabilities acquired at February 1, 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 75%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.15in">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 79%; text-align: left; text-indent: -0.05in; padding-left: 0.05in">Cash and cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">44,044</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Mineral sales receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">78,704</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.05in; padding-left: 0.05in">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">822,456</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">543</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Buildings and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,210,717</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Mining properties, mine development, and mineral interests, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,123,652</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Restricted cash and reclamation bonds</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,184,845</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(306,398</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(471,698</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Capital lease obligations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(35,716</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.05in; padding-left: 0.05in">Reclamation liability</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,961,149</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,690,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The results of operations related to the
50% interest of MTMI has been included in the combined statements of operations from the date of acquisition, February 1, 2010,
and summarized in the<B> </B>pro forma information for the 12 months ended December 31, 2010. January 2010 has been omitted as
there were no mining operations during the month. The pro forma information reflects<B> </B>the push-down basis of accounting for
the fair values of these transactions from the Parent to the subsidiary, EGI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 105; Value: 7 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 4 - Consolidated Balance Sheet
Disclosures</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Inventory</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Inventory is summarized as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; text-align: left; text-indent: -0.05in; padding-left: 0.05in">Materials and supplies</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">2,136,302</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">2,168,717</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Stockpiled ore</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">693,700</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">544,804</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.05in; padding-left: 0.05in">Allowance for obsolete materials and supplies inventory</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,917,326</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,674,997</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">912,676</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,038,524</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE><BR STYLE="clear: both">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There were no mineral inventory impairments
during 2011 or 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Buildings, Equipment, and Land</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Buildings, equipment, and land consist
of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; text-align: left; text-indent: -0.05in; padding-left: 0.05in">Mining equipment</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">8,886,851</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">8,886,851</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.05in; padding-left: 0.05in">Crushers</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,371,808</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,371,808</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.05in; padding-left: 0.05in">Buildings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">871,703</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">871,703</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.05in; padding-left: 0.05in">Equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,380,173</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">280,885</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.05in; padding-left: 0.05in">Land</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">164,752</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">164,752</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Office equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">113,542</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">113,542</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.05in; padding-left: 0.05in">Vehicles</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">117,830</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">117,830</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.05in; padding-left: 0.05in">Software</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">39,899</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">39,899</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.05in; padding-left: 0.05in">Computer equipment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,972</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">17,972</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,964,530</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,865,242</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.05in; padding-left: 0.05in">Less accumulated depreciation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,343,344</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,276,640</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,621,186</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,588,602</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE><BR STYLE="clear: both">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Depreciation expense for the years ended
December 31, 2011 and 2010 was $6,604 and $11,129, respectively. For the year ended December 31, 2011, $60,100 of depreciation
expense was capitalized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 106; Value: 7 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 4 - Consolidated Balance Sheet
Disclosures (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Montana Tunnels ceased mining during November
2008, after completion of the L-Pit, and completed milling of stockpiled ore at the end of April 2009, at which time the mine was
placed on care and maintenance until finances are secured to initiate the mine pit (M-Pit) expansion. Accordingly, there was no
depreciation expense relating to Montana Tunnels for the years ended December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Net Mining Properties, Mine Development, and Mineral Interests</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mine development and mineral interests
consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="22" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">December&nbsp;31,</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP>&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Mine<BR> Development</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Mining<BR> Properties<BR> and&nbsp;Mineral<BR> Interest</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Total&nbsp;Book<BR> Value</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Mine<BR> Development</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Mining<BR> Properties<BR> and&nbsp;Mineral<BR> Interest</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid">Total&nbsp;Book<BR> Value</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 34%; text-align: left; text-indent: -0.1in; padding-left: 0.1in">Montana Tunnels</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">13,129,669</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">13,129,669</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">13,167,893</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 8%; text-align: right">13,167,893</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.1in; padding-left: 0.1in">Golden Dream Mine</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,869,342</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,615,195</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,484,537</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,615,195</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,615,195</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Gold Hill/Mount Heagan</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">635,883</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">635,883</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">575,751</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">575,751</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">Total mine development and mineral interest, net</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,869,342</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,380,747</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20,250,089</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,358,839</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,358,839</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Depletion expense related to MTMI mining
properties for the years ended December 31, 2011 and 2010 was zero. MTMI ceased mining during November 2008 and completed milling
of stockpiled ore at the end of April 2009, at which time the mine was placed on care and maintenance. Accordingly, there was no
depletion for the years ended December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Other Mine Development and Mineral Interests</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">EGI owns the Elkhorn Project, located in
the Elkhorn Mountains of Jefferson County, Montana. The Elkhorn Project consists of one permitted mine and three known gold mineralized
deposits &ndash; Golden Dream Mine (formerly referred to as the Sourdough Mine), and the Elkhorn Project mineralized deposits.
The Company developed a five-year mine plan on the Golden Dream Mine deposit, which is projected to mine and process 1.2 million
tons of gold and copper bearing ore. The permit process has been completed, and the Company has initiated mine development activities.
The Elkhorn Project are in the preliminary stages of drilling to define the ore body, developing the mine plan, and applying for
the required permits from the regulatory agencies before proceeding with mining operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The costs associated with the Mount Heagan
mineral property are net smelter royalty payments with a monthly minimum to allow for the development of the property. The monthly
minimum payments are $5,000. The total payments made under the agreement from the inception of the agreement are $640,000 and will
not exceed $1,500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 107; Value: 7 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 4 - Consolidated Balance Sheet
Disclosures (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Other Mine Development and Mineral Interests (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The costs associated with the Golden Dream
Mine property were used to establish the viability of the mine site. These include all direct costs of development since the Company&rsquo;s
internal evaluation established proven and probable reserves.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.55in; text-align: justify; text-indent: -0.55in"><U>Accrued
Liabilities</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Accrued liabilities consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0in">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 66%; text-align: left; text-indent: -0.05in; padding-left: 0.05in">Property and mining taxes payable</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">2,630,365</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 14%; text-align: right">2,502,663</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Environmental remediation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">380,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: -0.05in; padding-left: 0.05in">Payroll and related expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">130,509</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">109,610</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.05in; padding-left: 0.05in">Other expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">106,358</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">38,213</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,247,232</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,650,486</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE><BR STYLE="clear: both">

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 108; Value: 7 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 5 - Notes Payable</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Series A 8% Bonds</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify; text-indent: -0.1in; padding-left: 0.1in">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 during 2010 and $164,279 was funded during 2011. The bonds mature during July 2012, with interest accruing at 8%. In the case of 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 Company has not made the quarterly interest payments on the bonds; thus, an event of default is present. Because of the non-payment of interest, the Company has classified the bonds as current. &nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify; text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify; text-indent: -0.1in; padding-left: 0.1in; width: 70%">The holders each received five-year warrants to purchase 0.67 membership units of the Parent per $50,000 bond at a purchase price of $37,500 per membership unit. If the 2010 issuance is not paid prior to July 31, 2011, then the Company will issue separate four-year warrants to purchase 0.67 equity units per $50,000 bond at a purchase price of $37,500 per membership unit. The warrants expire July 31, 2015.</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,399,779</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,235,500</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Less current portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,399,779</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,235,500</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Current Notes Payable Maturities</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Maturities of notes payable obligations
are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="RIGHT" STYLE="width: 97%; font: 10pt Times New Roman, Times, Serif; margin-left: 0in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">Year Ending December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Related Party</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; font-weight: normal; text-align: left; padding-left: 0.65in">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 14%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: normal; text-align: left; padding-left: 0.65in">2012</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,199,779</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">200,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE><BR STYLE="clear: both">

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 109; Value: 7 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 6 - Push-Down Debt, Interest
and Redemption Obligation of Parent and Its Affiliate</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s assets serve as collateral
for multiple loans of the Parent. Although the Company is not a maker or guarantor on the loans, the loans have been &ldquo;pushed
down&rdquo; to the Company in the accompanying combined financial statements in accordance with Statement of Accounting Bulletin
No. 54. The following is a summary of the loans as of December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Series A Convertible Notes</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: justify; text-indent: -0.1in; padding-left: 0.1in">$5,000,000, 12% Series A convertible notes.&nbsp; These notes were due in December 2007.&nbsp; The notes pay interest at the rate of 12% per annum, payable on the maturity date or within 30 days after conversion.&nbsp; In the case of default, interest on the notes accrues at 18%.&nbsp; During 2007, the notes were extended to December 2009.&nbsp; During May 2009, the accrued and unpaid interest was included in the revised notes.&nbsp; Included in the revision, the convertible notes accrue interest at 18% per annum compounded quarterly and are due in November 2013.&nbsp; Interest only payments equivalent to 12% of the face amount commenced during April 2010 and were to be made quarterly.&nbsp; At the election of the holder, principal amounts of the notes are convertible into membership units at $50,000 per membership unit or into membership interests of the Parent.&nbsp; The Company&rsquo;s mining properties and equipment have been pledged as collateral to these notes.</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">5,791,701</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">5,791,701</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify; text-indent: -0.1in; padding-left: 0.1in">On May 14, 2007, an affiliate of the parent entered into a loan for $8,050,000.&nbsp; The loan was due May 2009.&nbsp; The loan pays interest at the rate of 12% per annum, payable monthly.&nbsp; During May 2009, the accrued and unpaid interest was included in the revised notes.&nbsp; Included in the revision, the loans accrue interest at 18% per annum compounded quarterly and are due November 2013.&nbsp; 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 that is held by the affiliate.&nbsp; The Company&rsquo;s mining properties and equipment have been pledged as collateral to this note.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,680,125</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,680,125</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 110; Value: 7 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><U>Note 6 - Push-Down Debt, Interest
and Redemption Obligation of Parent and Its Affiliate (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Series A Convertible Notes (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify; text-indent: -0.1in; padding-left: 0.1in; width: 70%">On January 22, 2008, an affiliate of the Parent entered into a loan for $5,000,000.&nbsp; The loan was due January 2009.&nbsp; The loan pays interest at the rate of 12% per annum, payable monthly.&nbsp; During May 2009, as part of the $1,000,000 note agreement, the accrued and unpaid interest was included in the revised notes.&nbsp; Included in the revision, the loans accrue interest at 18% per annum compounded quarterly and are due November 2013.&nbsp; 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 $1,350,000 of Series A Convertible Bond, or exchanged for bonds of an investment of the Parent at $1.00 principal for each $1.00 par amount of a bond.&nbsp; The Company&rsquo;s mining properties and equipment have been pledged as collateral to this note.</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">6,108,022</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">6,108,022</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: justify; text-indent: -0.1in; padding-left: 0.1in">On May 13, 2009 the Company entered into a promissory note (&ldquo;Promissory Note&rdquo;) for a total of $1,000,000.&nbsp; As of December 31, 2011, the Promissory Note and accrued interest were paid in full.</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">918,728</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Total push-down debt of Parent and its affiliate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">21,579,848</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,498,576</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.15in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; text-indent: -0.1in; padding-left: 0.1in">An affiliate of the Parent offered redeemable options to certain debt holders (&ldquo;Optionee&rdquo;) to purchase membership units in a equity owner of the Parent.&nbsp; The affiliate as Optionor grants to each Optionee the option to put all or any portion of the membership units to the affiliate, whereupon the affiliate shall have the obligation to purchase the put units at the Optionees&rsquo; cost plus 15% annualized return, less cash distributions or the fair market value of in-kind distributions, which shall first be deducted from the 15% annualized return from each Optionee&rsquo;s date of acquisition of the units.&nbsp; The affiliate will satisfy the put by executing and delivering to each Optionee the affiliates&rsquo; fully amortized 60-month note in the amount of the put price bearing interest at 12% per annum.&nbsp; The Optionees have the right to exercise the put at any time until 60 days after all push-down debt and related interest have been repaid in full.&nbsp;&nbsp; The Company&rsquo;s mining properties and equipment have been pledged as collateral to the redeemable interest.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,085,960</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,117,659</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in">Push-down accrued interest of Parent and its affiliate</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,677,484</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,071,953</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">46,343,292</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">39,688,188</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During 2011, the Company has not made the
interest payments on the notes or bonds; thus, an event of default is present. Because of the non-payment of interest, the Company
has classified the notes and bonds as current.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 7 - Capital Leases</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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 included
in depreciation expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The assets under capital lease have cost
and accumulated amortization as follows at December 31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.15in">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 81%; text-indent: -0.05in; padding-left: 0.05in">Equipment</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 16%; text-align: right">416,869</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.05in; padding-left: 0.05in">Less accumulated depreciation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(9,993</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">406,876</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Maturities of capital lease obligations
are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 85%; font: 10pt Times New Roman, Times, Serif; margin-left: 0.15in">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Year Ending December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 81%; text-align: left; padding-left: 0.5in">2012</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 16%; text-align: right">385,358</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.5in">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">49,780</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.5in">Total minimum lease payments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">435,138</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.5in">Amount representing interest</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(60,326</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0.5in">Present value of net minimum lease payments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">374,812</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.5in">Less current portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(335,093</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 0.5in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.5in">Long-term capital lease obligation</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">39,719</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 8 - Income Taxes</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Deferred income taxes have been provided
for temporary differences that exist between the financial reporting and income tax bases of assets and liabilities and have been
classified as either current or non-current based upon the related assets or liabilities. As of December 31, 2011 and 2010, primary
components of the net deferred tax liabilities include accrued reclamation, inventory reserves, depreciation, amortization, and
net operating loss carryforwards. The effective tax rate in 2011 and 2010 differs from the expected federal statutory rate primarily
due to change in valuation allowance, state income taxes, and deductions disallowed for tax purposes, primarily penalties, and
losses from transactions with related parties.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 8 - Income Taxes (continued)</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2011 and 2010, EGI had
federal net operating loss carryforwards of $1.9 million. These losses may be carried forward and will expire over the period from
2023 through 2030. As of December 31, 2011 and 2010, MTMI had federal net operating loss carryforwards of $6.8 million and $5.9
million, respectively. These losses may be carried forward and will expire over the period from 2018 through 2031. The annual utilization
of the net operating carryforwards may be subject to certain limitations under Section 382 of the Internal Revenue Code of 1986,
as amended, and other limitations under state tax laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2011 and 2010, the Company
has a valuation allowance on its deferred tax assets, since it cannot conclude that it is more likely than not that the deferred
tax assets will be fully realized on future income tax returns. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers
past history, the scheduled reversal of deferred tax liabilities, available taxes in carryback periods, future taxable income projections,
and tax planning strategies in making this assessment. The Company will continue to evaluate whether the valuation allowance is
needed in future reporting periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company did not have any unrecognized
tax benefits as of the years ended December 31, 2011 or 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 9 - Related Party Transactions</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During 2011, the Company entered into an
ore purchase agreement (&ldquo;Agreement&rdquo;) with an affiliate of the Parent to sell 80% of the first 41,700 ounces of gold
produced from the Golden Dream Mine for an up-front payment of $10,000,000 of consideration. The Agreement requires the Company
to pay all proceeds from the sale of gold in excess of $500 per ounce or the latest COMEX spot gold price, if any, to the related
party. Additionally, the related party may purchase 6.5% of the ounces produced by the mine after the mine has produced in excess
of 250,000 aggregate ounces for a purchase price of the lesser of $600 per ounce or the latest COMEX spot gold price. The term
of the Agreement is through the closure of the Golden Dream Mine. Currently the Company estimates reserves at approximately 258,000
ounces of gold. On that date, the Company entered into a security agreement with its Parent to secure the payment of EGI&rsquo;s
obligations under the Agreement pursuant to which EGI granted the Parent a continuing security interest in all of the assets and
property of EGI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.<BR>Notes to Combined Financial Statements</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 9 - Related Party Transactions</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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) April 15, 2011 measurement date, and (iv) and management&rsquo;s forecast to produce 41,700 ounces by December 2013. The
Company recognized a $13,025,932 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 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 December 31, 2011 resulted in a loss of $5,793,013, which
was recorded in the combined statements of operations in the change in fair value of the derivative instrument.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 10 - Commitments and Contingencies</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Litigation</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Environmental Matters</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Estimated future reclamation costs are
based principally on legal and regulatory requirements. At December 31, 2011 and 2010, approximately $22,800,000 and $21,500,000,
respectively, were accrued for reclamation costs relating to currently producing mineral properties in accordance with asset retirement
obligation guidance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><U>Property Taxes</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is not current with its 2010
and 2009 property taxes. The total amount past due as of December 31, 2011 is approximately $2,600,000.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><U>Note 11 - Subsequent Events</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During February 2012, the Company entered
into three convertible bridge loans with a related party for $1,800,000. The loans are unsecured and call for 12% annual interest
on the outstanding unpaid principal. The loans are convertible into common stock of the potential acquirer if the acquisition consummates
at $2.00 per share. The holder will receive one five-year warrant attached to each share of acquirer. Two warrants will acquire
an additional share of common stock for $3.00 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 (&ldquo;PPO&rdquo;) of acquirer or the next round of
funding of acquirer. If the share value is less than $2.50, 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. Assuming the public transaction completes, but the PPO or other equity financing is not completed
within six months, the holder may put the shares to the Company at $4.00 per share. The loans mature on August 29, 2012, and prior
to that date, but after the closing of the PPO.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EASTERN RESOURCES, INC. AND</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELECTED UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL DATA</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Explanatory Notes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The unaudited pro forma financial data set forth below at and
for the year ended December&nbsp;31, 2011 is based upon Eastern Resources, Inc (ERSI) historical financial statements, adjusted
to give effect to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 36pt"></TD><TD STYLE="width: 38.9pt">&bull;</TD><TD>The transaction with Elkhorn Goldfields, Inc. (EGI) and Montana Tunnels Mining Inc. (MTMI) and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 74.9pt; text-indent: -38.9pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 36pt"></TD><TD STYLE="width: 38.9pt">&bull;</TD><TD>The contemporaneous sale of the corporation to the purchasing corporation.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 6, 2012, we entered into an Agreement and Plan of Merger
with ESRI a public company. ERSI was merged into EGI and MTMI EGI and MTMI, as the Surviving Corporation, became a wholly-owned
subsidiary of ERSI.&nbsp;We issued 90,000,000 shares of our common stock and 10,000,000 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 after the consummation
of the Merger.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The pro forma financial information at and for the year ended
December&nbsp;31, 2011 has been developed from ESRI&rsquo;s audited financial statements and EGI and MTMI audited financial statements,
and the notes to those financial statements, which are included elsewhere in this document.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The unaudited pro forma consolidated financial data is provided
for illustrative purposes only and does not purport to represent what ESRI&rsquo;s actual consolidated results of operations or
ESRI&rsquo;s financial position would have been had the transaction and corporation sale occurred on the dates assumed, nor is
it necessarily indicative of future consolidated results of operations or financial position.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The unaudited pro forma combined financial data is based on
preliminary estimates and various assumptions that EGI and MTMI and ERSI believe are reasonable in these circumstances. Because
the former stockholders of EGI and MTMI will own approximately 92% of the combined company on completion of the exchange, calculated
on a fully diluted basis and ERSI is selling its existing operations in conjunction with the transaction, the transaction and corporation
sale will be accounted for as a recapitalization through a reverse acquisition, with no goodwill or other intangibles recorded.
As such, the pro forma financial information reflects the historical financial information of EGI and MTMI and the remaining assets
and liabilities of ERSI brought over at historical cost. Costs of the transaction will be charged to operations. ERSI does not
anticipate that any cost savings, revenue enhancements or synergies will be realized in connection with the transaction and corporation
sale. The unaudited pro forma financial statements reflect the EGI and MTMI accounting policies, as those accounting policies will
govern EGI and MTMI accounting after the transaction and corporation sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The summary consolidated statement of operations data for the
year ended December&nbsp;30, 2011 gives effect to the transaction and corporation sale as if each had occurred on January&nbsp;1,
2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EASTERN RESOURCES, INC. &amp; ELKHORN
GOLDFIELDS, INC. &amp; MONTANA TUNNELS MINING, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BALANCE SHEET </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">December 31,
    2011     Elkhorn<BR> Gold &amp; MTMI</FONT> </TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">December 31, 2011
    <BR>ERSI</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">December 31, 2011
    <BR>Total</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Adjustments to Reflect
    Reverse<BR> Acquisition</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Pro Forma Combined</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Assets</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Current assets</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 35%; text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Cash and cash equivalents</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 7pt">358,125</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 7pt">2,125</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 7pt">360,250</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 7pt">360,250</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Inventory, net</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">912,676</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">912,676</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">912,676</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Other current assets</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">12,433</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">12,433</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">12,433</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt"><FONT STYLE="font-size: 7pt">Total current assets</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">1,283,234</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">2,125</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">1,285,359</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">1,285,359</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 7pt">Non-current assets</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Buildings, equipment, and land, net</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5,621,186</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5,621,186</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5,621,186</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Mine development</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,869,342</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,869,342</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,869,342</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Mining properties and mineral interest, net</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">16,380,747</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">16,380,747</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">16,380,747</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Restricted cash</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">604,021</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">604,021</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">604,021</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Reclamation bonds</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">16,190,556</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">16,190,556</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">16,190,556</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Prepaid expenses</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">3,236</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">3,236</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">3,236</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt"><FONT STYLE="font-size: 7pt">Total non-current assets</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">42,665,852</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">3,236</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">42,669,088</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">42,669,088</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">Total assets</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 7pt">43,949,086</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 7pt">5,361</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 7pt">43,954,447</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 7pt">43,954,447</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Liabilities and Stockholders&rsquo; Deficit</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Current liabilities</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Accounts payable</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">282,141</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">79,423</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">361,564</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">361,564</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Accrued liabilities</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,247,232</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,247,232</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,247,232</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Current portion capital lease obligation</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">335,093</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">335,093</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">335,093</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Series A 8% bonds</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">1,399,779</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">1,399,779</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">1,399,779</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Deferred revenue, related party ore purchase
    agreement</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,237,410</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,237,410</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,237,410</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Push-down redeemable obligation of Parent and
    its affiliate</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">11,085,960</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">11,085,960</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(11,085,960</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(1)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Push-down interest of Parent and its affiliate</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">13,677,484</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">13,677,484</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(13,677,484</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(1)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Push-down debt of Parent and its affiliate</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">21,579,848</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">21,579,848</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(21,579,848</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(1)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt"><FONT STYLE="font-size: 7pt">Loan payable-stockholder</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">40,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">40,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(40,000</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(2)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Notes payable</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">297,388</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">297,388</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(297,388</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(2)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">8.25% Convertible debenture</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">54,820</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">54,820</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(54,820</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(2)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">10% Convertible debenture</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">139,270</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">139,270</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(139,270</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(2)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Compensation payable</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">355,462</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">355,462</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(355,462</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)(2)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt"><FONT STYLE="font-size: 7pt">Total current liabilities</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">54,844,947</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">966,363</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">55,811,310</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(47,230,232</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">8,581,078</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 7pt">Non-current liabilities</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Capital lease obligations, less current portion</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">39,719</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">39,719</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">39,719</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Reclamation liability</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">22,793,187</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">22,793,187</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">22,793,187</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Deferred revenue, related party ore purchase
    agreement less current portion</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">6,762,590</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">6,762,590</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">6,762,590</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Related party ore purchase derivative contract</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">18,818,945</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">18,818,945</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">18,818,945</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Notes payable, non-current</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">8,757</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">8,757</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(8,757</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(2)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 7pt">10% Convertible debenture, net discount of $845
    and $1,294 as of December 31, 2011 and 2010, respectively</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">82,599</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">82,599</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(82,599</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(2)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Derivative liability</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">471</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">471</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(471</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)(2)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt"><FONT STYLE="font-size: 7pt">Total non-current liabilities</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">48,414,441</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">91,827</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">48,506,268</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(91,827</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">48,414,441</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt"><FONT STYLE="font-size: 7pt">Total liabilities</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">103,259,388</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">1,058,190</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">104,317,578</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(47,322,059</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">56,995,519</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Preferred stock liability</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">60,000,000</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">60,000,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Commitments and contingencies</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Stockholders&rsquo; deficit</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt"><FONT STYLE="font-size: 7pt">Preferred stock, $.001 par value</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt"><FONT STYLE="font-size: 7pt">Common stock, $.001 par value</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">12,073,010</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">20,629</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">12,093,639</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">99,085</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">(3)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">99,085</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(20,629</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(2)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(12,073,010</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(3)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Additional paid-in capital</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">903,771</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">903,771</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(99,085</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(3)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5,443,155</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">20,629</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">(2)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(1,977,229</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(2)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">12,073,010</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">(3)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">978,767</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">(2)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">46,343,292</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">(1)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(60,000,000</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(1)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">7,200,000</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">(4)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(7,200,000</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)(4)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt"><FONT STYLE="font-size: 7pt">Accumulated deficit</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(71,383,312</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(1,977,229</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(73,360,541</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">1,977,229</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">(2)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(78,583,312</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt"><FONT STYLE="font-size: 7pt">Total stockholders&rsquo;
    deficit</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(59,310,302</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(1,052,829</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(60,363,131</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(12,677,941</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(73,041,072</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">Total liabilities and stockholders&rsquo;
    deficit</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 7pt">43,949,086</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 7pt">5,361</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 7pt">43,954,447</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD NOWRAP STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 7pt">43,954,447</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 117; Value: 25 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 0pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: bold 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EASTERN RESOURCES, INC. AND ELKHORN GOLDFIELDS,
INC. AND MONTANA TUNNELS MINING, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Statement of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">December&nbsp;31,&nbsp;2011<BR>
    Elkhorn&nbsp;Gold</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">December&nbsp;31,<BR>
    2011 <BR>ERSI</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">December&nbsp;31,<BR>
    2011 <BR>Total</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Adjustments&nbsp;to<BR>
    Reflect&nbsp;Reverse<BR> Acquisition</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD NOWRAP STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Pro&nbsp;Forma&nbsp;Combined</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">Cost of revenue</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 35%; text-align: left; padding-bottom: 1pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Impairment of
    capitalized film costs</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(1,284,866</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(1,284,866</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">1,284,866</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">(2)</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt"><FONT STYLE="font-size: 8pt">Total costs of revenue</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(1,284,866</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(1,284,866</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">1,284,866</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Gross profit</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(1,284,866</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(1,284,866</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">1,284,866</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Operating expenses</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 8pt">General and administrative</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">850,616</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">164,816</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,015,432</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(164,816</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)(2)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">850,616</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Accretion expense</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,327,721</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,327,221</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,327,221</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Mine care and maintenance</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,037,199</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,037,199</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,037,199</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Depreciation, depletion,
    and amortization</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">6,604</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">6,604</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">6,604</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt"><FONT STYLE="font-size: 8pt">Total operating expenses</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">3,221,640</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">164,816</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">3,386,456</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(164,815</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">3,221,640</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Loss from operations</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(3,221,640</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(1,449,682</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(4,671,322</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">1,449,682</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(3,221,640</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Other (expense) income</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Interest expense</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(8,083,445</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(46,486</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(8,129,931</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">46,486</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">(2)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(8,083,445</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Interest income</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">47,705</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">15</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">47,720</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(15</FONT></TD><TD NOWRAP STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)(2)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">47,705</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Other income</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">512,066</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">512,066</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">512,066</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Loss on related party ore purchase derivative</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(13,025,932</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(13,025,932</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(13,025,932</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Change in fair value of derivative instrument
    contract</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(5,793,013</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">924</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(5,792,089</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(924</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)(2)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(5,793,013</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt"><FONT STYLE="font-size: 8pt">Amortization of discount</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(1,625</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(1,625</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">1,625</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">(2)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt"><FONT STYLE="font-size: 8pt">Gain on forgiveness of debt</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">86,956</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">86,956</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(86,956</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)(2)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt"><FONT STYLE="font-size: 8pt">Total other (expense) income</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(26,342,619</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">39,784</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(26,302,835</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(39,784</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 8pt">(26.342.619</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Preferred stock dividend</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">(7,200,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)(4)</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right">(<FONT STYLE="font-size: 8pt">7,200,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">Net loss attributable to common stockholder</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(29,564,259</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(1,409,898</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(30,974,157</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(5,790,102</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(36,764,259</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">Basic and diluted loss per share</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">Basic and diluted net loss per common share</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(147,821.30</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(0,07</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">(0.37</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">Weighted average number of common shares outstanding</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">200</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">20,629,000</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"><FONT STYLE="font-size: 8pt">99,085,000</FONT></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: left; margin-bottom: 0pt"><B>Adjustment #1</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Additional paid-in capital</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">60,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Preferred stock liability</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">60,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Push-down redeemable obligation of Parent and its affiliate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">11,085,960</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Push down interest of Parent and its affiliate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">13,677,484</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Push down debt of Parent and its affiliate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">21,579,848</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">46,343,292</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Memo: To record the 60,000,000 shares of
redeemable preferred stock to the Company&rsquo;s parent. The preferred stock has a 12% per annum dividend and can be redeemed
for 1,000,000 shares per quarter ($6,000,000). The preferred stock is issued to provide cash flow to the Parent to service the
debt of the Parent, which is collateralized by the Company&rsquo;s assets. The debt, redeemable LLC interest and accrued interest
&ldquo;pushed down&rdquo; from the Parent of $46,343,292 is eliminated with the issuance of the preferred stock so that the debt
is not recorded twice.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Adjustment #2</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,977,229</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,977,229</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Accumulated deficit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">20,629</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Common stock, $0.001 par value (ERSI)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">20,629</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">978,767</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">ERSI liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">978,767</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Additional paid in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Memo: Elimination of ERSI liabilities,
equity, and common stock as well as its expenses. ERSI is the public shell. This is accounted for as a reverse acquisition and
none of the equity or liabilities of ERSI continue in the new entity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Adjustment #3</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%; text-align: left">Common stock, $0.001 par value (EGI and MTMI)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">12,073,010</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left"></TD><TD STYLE="width: 12%; text-align: right"></TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">12,073,010</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common stock, $0.001 par value</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">99,085</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Additional paid in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">99,085</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Memo: Elimination of EGI and MTMI common
stock and the issuance of 99,085,000 shares of common stock. Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc. assigns
100% of the stock to ERSI (or subsidiary). ERSI assigns 90M shares of common stock and 10M shares of preferred stock to Elkhorn
Goldfields Inc. and Montana Tunnels Mining, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Adjustment #4</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 70%">Accumulated deficit</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">7,200,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left"></TD><TD STYLE="width: 12%; text-align: right"></TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7,200,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Memo: Preferred stock dividend $60,000,000 at 12% interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>GLOSSARY OF RELEVANT MINING TERMS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Acre - </B>A measure of surficial area,
usually of land. The statute acre of the United States and England contains 43,560 ft<SUP>2</SUP> (4,840 yd<SUP>2</SUP>; 4,047
m<SUP>2</SUP> ; or 160 square rods).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Base Metal</B> - Any of the more common
and more chemically active metals, e.g., lead, zinc and copper.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>COMEX - </B>Commodity Exchange, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Commercial Production</B> - normally
considered to be the first day of the first ninety-day period throughout which the mill operated consistently at 60% capacity or
more.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Decline </B>&ndash; A tunnel driven
at a downward slope.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>D<FONT STYLE="font-family: Times New Roman, Times, Serif">or&eacute;</FONT>
Flat </B>&ndash; A mold of semi-pure alloy consisting of gold and silver created at the mine site.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Grade of ore </B>- The relative quantity
or the percentage of ore-mineral or metal content in an ore body</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Inferred Resource </B>- Resources from
which estimates are based on an assumed continuity beyond measured and/or indicated resources, for which there is geologic evidence.
Inferred resources may or may not be supported by samples or measurements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Life of Mine </B>- The time in which,
through the employment of the available capital, the ore reserves&mdash;or such reasonable extension of the ore reserves as conservative
geological analysis may justify&mdash;will be extracted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Metric Tonne </B>-a unit of weight equivalent
to 1,000 kilograms (or 2,204.6 pounds).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Mill Recovery</B> - that portion of
the metal contained in the ore that is successfully extracted by processing, expressed as a&nbsp;percentage.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Mine Plan </B>&ndash; A plan of the
mine operations detailing development and operating schedules and parameters.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Mineral Reserve</B> - The quantity of
mineral that is calculated to lie within given boundaries. It is described as total (or gross), workable, or probable working,
depending on the application of certain arbitrary limits in respect of deposit thickness, depth, quality, geological conditions,
and contemporary economic factors. Proved, probable, and possible reserves are other terms used in general mining practice.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Patented Mineral Claim </B>- A claim
to which a patent has been secured from the U.S. Government, in compliance with the laws relating to such claims.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Payable metals </B>&ndash; The amount
of metal - in ounces or pounds - paid out by the Smelter and/or Refiner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Poly-metallic </B>&ndash; holds significant
resources in more than one base metal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Precious Metal</B> - Any of several
relatively scarce and valuable metals, such as gold, silver, and the platinum-group metals.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Probable reserves</B> means reserves
for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites
for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although
lower than that for proven reserves, is high enough to assume continuity between points of observation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Recoverable Metal</B> &ndash; the portion
of metal contained in a whole ore or concentrated mineral product which is paid to the product supplier by a smelter or refiner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Refiner </B>-A facility in which relatively
crude smelter products are refined and emerge as acceptably pure products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Smelter </B>- An establishment where
ores are smelted to produce metal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Sulfide</B> - A mineral compound characterized
by the linkage of sulfur with a metal or semimetal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Ton </B>- a unit of weight equivalent
to 2,000 pounds (907 kg).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Unpatented Mineral Claim</B> - Mining
claim to which a deed from the U.S. Government has not been received. A claim is subject to annual assessment work, to maintain
ownership.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Volcanic Diatreme </B>- A breccia-filled
volcanic pipe that was formed by a gaseous explosion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">EASTERN RESOURCES, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">&nbsp;</TD>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 46%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Dated:&nbsp;&nbsp;April 11, 2012</TD>
    <TD>By:</TD>
    <TD STYLE="border-bottom: windowtext 1pt solid; padding-left: 27pt">/s/Patrick W. M. Imeson</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Name: Patrick W. M. Imeson</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Title: Chief Executive Officer</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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[{"type": "8-K", "sequence": "1", "filename": "v308961_8k.htm", "description": "FORM 8-K", "secsgml_size_bytes": 1102498}]
{"company-data": {"conformed-name": "Eastern Resources, Inc.", "cik": "0001429373", "assigned-sic": "7812", "irs-number": "450582098", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-54645", "film-number": "12755994"}, "business-address": {"street1": "166 EAST 34TH STREET", "street2": "SUITE 18K", "city": "NEW YORK", "state": "NY", "zip": "10016", "phone": "917 687 6623"}, "mail-address": {"street1": "166 EAST 34TH STREET", "street2": "SUITE 18K", "city": "NEW YORK", "state": "NY", "zip": "10016"}, "former-company": {"former-conformed-name": "EASTERN RESOURCES INC", "date-changed": "20080311"}}
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):  April
6, 2012
EASTERN RESOURCES, INC.
(Exact name of registrant as specified in
its charter)
Delaware
333-149850
45-0582098
(State or Other Jurisdiction
(Commission File
(I.R.S. Employer
of Incorporation)
Number)
Identification Number)
1610 Wynkoop Street, Suite 400
Denver, CO 80202
(Address of principal executive offices,
including zip code)
(303) 893-2334
(Registrant's telephone number, including
area code)
Copy to:
Adam S. Gottbetter, Esq.
Gottbetter & Partners, LLP
488 Madison Avenue, 12th Floor
New York, NY  10022
Phone:  (212) 400-6900
Facsimile:  (212) 400-6901
166 East 34th Street, Suite 18K
New York, NY 10016
(Former name or former address, if changed
since last report)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions
(see General Instruction A.2. below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Table of Contents
Forward-Looking Statements
3
Explanatory Note
5
Item 1.01
Entry into a Material Definitive Agreement
5
Item 2.01
Completion of Acquisition or Disposition of Assets
6
The Merger and Related Transactions
6
Description of Business
12
Description of Properties
37
Risk Factors
39
Management's Discussion and Analysis of Financial Condition and Plan of Operations
55
Security Ownership of Certain Beneficial Owners and Management
67
Directors, Executive Officers, Promoters and Control Persons
69
Executive Compensation
75
Summary Compensation Table
75
Certain Relationships and Related Transactions
77
Market Price of and Dividends on Common Equity and Related Stockholder Matters
81
Dividend Policy
81
Description of Securities
84
Legal Proceedings
86
Indemnification of Directors and Officers
86
Item 3.02
Unregistered Sales of Equity Securities
87
Item 5.01
Changes in Control of Registrant
88
Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
88
Item 9.01
Financial Statements and Exhibits
88
Glossary of Relevant Mining Terms
Signatures
2
FORWARD-LOOKING STATEMENTS
This Current Report contains forward-looking
statements, including, without limitation, in the sections captioned "Description of Business," "Risk Factors,"
and "Management's Discussion and Analysis of Financial Condition and Plan of Operations," and elsewhere. Any
and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements.
Terms such as "may," "might," "would," "should," "could," "project,"
"estimate," "pro-forma," "predict," "potential," "strategy," "anticipate,"
"attempt," "develop," "plan," "help," "believe," "continue,"
"intend," "expect," "future," and terms of similar import (including the negative of any of
the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain
one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding
(i) the plans and objectives of management for future operations, including plans or objectives relating to exploration programs,
(ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends,
capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a
discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and
regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii)
above.
In addition to the specific statements
referenced above and the factors identified under "
Item 1A. Risk Factors
" in this Current Report below, other
uncertainties that could affect the accuracy of our forward-looking statements include:
§
The effect of government regulations on our business;
§
Our ability to secure additional capital;
§
Unexpected changes in business and economic conditions, including the rate of inflation;
§
Changes in interest rates and currency exchange rates;
§
Timing and amount of production, if any;
§
Technological changes in the mining industry;
§
Our costs;
§
Changes in exploration and overhead costs;
§
Access and availability of materials, equipment, supplies, labor and supervision, power and water;
§
Results of current and future feasibility studies;
§
The level of demand for our products;
§
Changes in our business strategy, plans and goals;
§
Interpretation of drill hole results and the geology, grade and continuity of mineralization;
§
The uncertainty of mineralized material estimates and timing of development expenditures;
§
Commodity price fluctuations;
§
Operational and environmental risks associated with the mining industry; and
§
Lack of clear title to some of our mineral prospects.
3
The forward-looking statements are not
meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based
upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of
risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events
and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties.
Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ
materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, insufficient
cash flows and resulting illiquidity, our inability to expand our business, government regulations, lack of diversification, volatility
in the price of gold, zinc, silver, lead and copper, increased competition, results of arbitration and litigation, stock volatility
and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties
that could cause our actual results to differ materially from those described by the forward-looking statements in this Report
appears in the section captioned "Risk Factors" and elsewhere in this Report.
Readers are cautioned not to place undue
reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim
any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events
or circumstances or otherwise.
Readers should read this Report in conjunction
with the discussion under the caption "Risk Factors," our financial statements and the related notes thereto in this
Report, and other documents which we may file from time to time with the Securities and Exchange Commission (the "SEC").
4
EXPLANATORY NOTE
We were incorporated as Eastern Resources,
Inc., in Delaware on March 15, 2007.  Prior to the Merger (as defined below), our business was to engage in the acquisition,
production and distribution of independent films.
As used in this Current Report, unless
otherwise stated or the context clearly indicates otherwise, the term "ESRI" refers to Eastern Resources, Inc., before
giving effect to the Merger, the term "MTMI" refers to Montana Tunnels Mining, Inc., a Delaware corporation, the term
"EGI" refers to Elkhorn Goldfields, Inc., a Montana corporation, and the terms "Company," "we,"
"us," and "our" refer to Eastern Resources, Inc., and its wholly-owned subsidiaries, including MTMI and
EGI, after giving effect to the Merger.
On April 6, 2012, (i) MTMI Acquisition
Corp., a Delaware corporation formed on February 27, 2012 and a wholly-owned subsidiary of ESRI ("MTMI Acquisition Sub"),
merged with and into MTMI, a wholly-owned subsidiary of Elkhorn Goldfields LLC, a Delaware limited liability company ("EGLLC"),
with MTMI as the surviving corporation and (ii) EGI Acquisition Corp., a Montana corporation formed on February 27, 2012 and a
wholly-owned subsidiary of ESRI ("EGI Acquisition Sub"), merged with and into EGI, a wholly-owned subsidiary of EGLLC,
with EGI as the surviving corporation (collectively, the "Merger"). As a result of the Merger and the Split-Off (as
defined below), ESRI discontinued its pre-Merger business and acquired the business of MTMI and EGI, and will continue the existing
business operations of MTMI and EGI as a publicly-traded company under the name Eastern Resources, Inc.
This Current Report contains summaries
of the material terms of various agreements executed in connection with the transactions described herein. The summaries of these
agreements are subject to, and are qualified in their entirety by, reference to these agreements, all of which are incorporated
herein by reference.
This Current Report is being filed in connection
with a series of transactions consummated by the Company and certain related events and actions taken by the Company.
This Current Report responds to the following Items in Form
8-K:
Item 1.01
Entry into a Material Definitive Agreement
Item 2.01
Completion of Acquisition or Disposition of Assets
Item 3.02
Unregistered Sales of Equity Securities
Item 5.01
Changes in Control of Registrant
Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Item 9.01
Financial Statements and Exhibits
Item 1.01 Entry into a Material Definitive Agreement
On April 6, 2012, ESRI, MTMI Acquisition
Sub, EGI Acquisition Sub, MTMI, EGI and EGLLC entered into an Agreement and Plan of Merger and Reorganization (the "Merger
Agreement"), which closed on the same date.  Pursuant to the terms of the Merger Agreement, (i) MTMI Acquisition
Sub merged with and into MTMI with MTMI as the surviving corporation and (ii) EGI Acquisition Sub merged with and into EGI with
EGI as the surviving corporation. MTMI and EGI became wholly-owned subsidiaries of ESRI. For a description of the Merger and the
material agreements entered into in connection with the Merger, see the disclosures set forth in Item 2.01 to this Current Report,
which disclosures are incorporated into this Item by reference.
5
Item 2.01 Completion of Acquisition or Disposition of
Assets
THE MERGER AND RELATED TRANSACTIONS
Merger Agreement
On April 6, 2012, ESRI, MTMI Acquisition
Sub, EGI Acquisition Sub, MTMI, EGI and EGLLC entered into the Merger Agreement, which closed on the same date, and pursuant to
which (i) MTMI Acquisition Sub merged with and into MTMI with MTMI as the surviving corporation and (ii) EGI Acquisition Sub merged
with and into EGI with EGI as the surviving corporation. MTMI and EGI became wholly-owned subsidiaries of ESRI.
Pursuant to the Merger, we ceased to engage
in the acquisition, production and distribution of independent films and acquired the business of MTMI and EGI to engage in exploration
and production activities in the precious metals mining industry, as a publicly-traded company under the name Eastern Resources,
Inc.  See "Split-Off" below.
At the closing of the Merger, (i) each
of the 100 shares of MTMI's common stock issued and outstanding immediately prior to the closing of the Merger was converted
into 45,000,000 shares of common stock, par value $0.001 per share ("Common Stock"), and 5,000,000 shares of Series
A preferred stock, par value $0.001 per share ("Series A Preferred Stock" and, together with the Common Stock, the
"Capital Stock"), of the Company and (ii) each of the 100 shares of EGI's common stock issued and outstanding
immediately prior to the closing of the Merger was converted into 45,000,000 shares of Common Stock and 5,000,000 shares of Series
A Preferred Stock. As a result, an aggregate of 90,000,000 shares of our Common Stock 10,000,000 shares of our Series A Preferred
Stock were issued to EGLLC, as the sole stockholder of each of MTMI and EGI. MTMI and EGI did not have any stock options or warrants
to purchase shares of their capital stock outstanding at the time of the Merger.
The Merger Agreement contained customary
representations and warranties and pre- and post-closing covenants of each party and customary closing conditions. Breaches of
the representations and warranties will be subject to customary indemnification provisions, subject to specified aggregate limits
of liability.
The Merger will be treated as a recapitalization
of the Company for financial accounting purposes. MTMI and EGI will be considered the acquirers for accounting purposes, and the
historical financial statements of ESRI before the Merger will be replaced with the historical combined financial statements of
MTMI and EGI before the Merger in all future filings with the SEC.
The parties have taken all actions necessary
to ensure that the Merger is treated as a tax-free exchange under Section 368(a) of the Internal Revenue Code of 1986, as amended.
The issuance of shares of Common Stock
and Series A Preferred Stock to holders of MTMI's and EGI's capital stock in connection with the Merger was not registered
under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and
Regulation D promulgated by the SEC under that section. These securities may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirement.
6
Merger Related Agreements
At the closing of the Merger, Dylan Hundley,
a holder of 5,751,000 shares of our Common Stock prior to the Merger, surrendered to us for cancellation all of her shares. Ms.
Hundley agreed to the surrender of her shares to enhance our ability to complete the Merger and the Split-Off (discussed below).
Also at the closing of the Merger, holders
of approximately $270,000 of ESRI convertible promissory notes surrendered these notes to ESRI for cancellation. These note holders
agreed to release ESRI from any obligations to them relating to the notes.
Tri-Party Agreement; Security Interest in MTMI and EGI Assets;
and Pledge of Series A Preferred Stock
From time to time between 2006 and 2009,
EGLLC and MFPI Partners, LLC, a Delaware limited liability company whose sole members are Michael Feinberg and Patrick Imeson ("MFPI"),
raised approximately $6,000,000 and $13,000,000, respectively, through the sale of promissory notes to certain investors (the "Secured
Lenders"). The notes issued by EGLLC included a $5,000,000 secured note issued in 2006 and a $1,000,000 secured bridge note
issued in 2009 and subsequently repaid in April, 2011. The $5,000,000 secured note was revised in May of 2009 to include accrued
interest. The revised note is in the principal amount of $5,800,000. The notes issued by MFPI included an $8,000,000 note issued
in 2007 and a $5,000,000 note issued in 2008. The MFPI notes were revised in May of 2009 to include accrued interest. The revised
notes are in the principal amounts of $9,700,000 and $6,100,000 respectively. During that time, EGLLC raised an additional $16,500,000
from the sale of unsecured bonds issued at a 40% discount to face value to certain investors, including MFPI, which invested $8,000,000
in the unsecured EGLLC bonds from the proceeds of the $13,000,000 it borrowed from the Secured Lenders.
EGLLC used $5,000,000 from the 2006 notes
to purchase a loan and mortgage on property owned by an unrelated mining company and used $14,250,000 of the $16,500,000 in proceeds
from the issuance of the unsecured bonds to complete a joint venture with Apollo Gold, Inc. that entitled EGLLC to 50% of the assets
and distributions of Montana Tunnels Mine – See Description of Business for additional information. In October 2009, EGLLC
paid $250,000 in cash and in February 2010 assigned that loan and mortgage on the property owned by the unrelated mining company
to Apollo Gold, Inc. for 100% ownership in MTMI (owner of Montana Tunnels Mine) and, concurrently with the closing of that payment
and assignment, EGLLC and Apollo dissolved their joint venture.
In May 2009, as a condition to the additional
$1,000,000 bridge loan (that was subsequently repaid) from the Secured Lenders to EGLLC and as an inducement for the Secured Lenders
to stand still regarding an event of default on the part of EGLLC, (i) the $5,000,000 secured notes issued by EGLLC, (ii) the $8,000,000
loan to MFPI to purchase the unsecured bonds, (iii) a $5,000,000 loan to MFPI whose proceeds were used to make an unrelated investment
1
and (iv) a redemption right allowing the Secured Lenders to obligate MFPI to purchase from the Secured Lenders a $5,950,000 equity
investment made in one of the investment funds that is an owner of EGLLC and is managed by Black Diamond have been included under
a security agreement with the Secured Lenders.
1
MFPI invested $5,000,000 in Global VR, Inc. a private company managed by Black Diamond Holdings, LLC, which is managed by Patrick
Imeson and Eric Altman, principals of the Company
7
Currently, the notes and rights secured
by the Company's assets include (i) approximately $21,600,000 in principal amount of notes, including the $5,800,000 issued
by EGLLC in 2006, $9,700,000 issued by MFPI in 2007 and $6,100,000 issued by MFPI in 2008, plus accrued and unpaid interest thereon
through May 2009, and (ii) the redemption rights on the Secured Lenders' $5,950,000 equity investment in EGLLC. The approximate
amount of principal, accrued but unpaid interest and redemption rights as of December 31, 2011 was approximately $46,350,000. The
notes and rights have been secured by two first lien mortgages on all of the property and assets of EGI and MTMI. Under the terms
of these mortgages, the administrative agent representing the Secured Lenders was required to consent to the transfer by EGLLC
to ESRI of the capital stock of EGI and MTMI. Pursuant to the terms of a tri-party agreement by and among the Company, EGLLC and
the administrative agent dated as of the Merger closing date, the administrative agent consented to this transfer and ESRI acknowledged
and agreed to cause EGI and MTMI to perform and keep all the covenants and obligations set forth in the two mortgages.
Additionally, because certain of the secured
notes were in default prior to the Merger closing date, the administrative agent required that EGLLC and MFPI enter into a loan
reinstatement and modification agreement, effective as of the Merger closing date, pursuant to which EGLLC agreed to pledge, in
accordance with the terms of a separate pledge agreement, to the Secured Lenders all of its interest in the Series A Preferred
Stock. Under the tri-party agreement, the Company acknowledged and agreed to treat the administrative agent as the owner and holder
of the Series A Preferred Stock upon notice from the administrative agent of a default by EGLLC under the pledge agreement.
Under the Merger Agreement, EGLLC has covenanted
that, for so long as any of its payment obligations under the loan restatement and modification agreement remain outstanding, EGLLC
will designate all proceeds derived from the Series A Preferred Stock, including from preferential dividends that may be paid on
this stock, to repay principal and interest due on the secured loans.
Each of the tri-party agreement, loan reinstatement
and modification agreement and pledge agreement has been filed as Exhibit 10.4, 10.3, and 10.5, respectively,
to
this Current Report and is incorporated herein by reference.
The EGI Bridge Financing
Prior to the closing of the Merger, EGI
completed a number of closings of a bridge financing with Black Diamond Holdings
LLC ("BDH"), our beneficial
stockholder through holdings in EGLLC, and another investor. In this bridge financing, EGI sold an aggregate of $300,000 in principal
amount of its 12% unsecured convertible bridge notes (the "Bridge Notes") to BDH and $1,500,000 in principal amount
of these Bridge Notes to the other investor. The Bridge Notes mature on August 29, 2012 and, prior to that date but after the closing
of the Merger, may be converted, at the sole discretion of each of the note holders, including accrued but unpaid interest, into
units of the Company's securities (the "Units") at a conversion price of $2.00 per Unit, each Unit consisting
of: (i) one share of Common Stock, (ii) and a five year warrant to purchase one-half share of Common Stock, exercisable at a price
of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing of the Company's planned private placement,
provided the share price of the Common Stock offered in the private placement is less than $2.50 per share, so that the exercise
of the special warrant will reduce the lender's effective conversion price for the Common Stock at a 25% discount to the
private placement offering price, such special warrant exercisable at a price of $0.01 per share
Split-Off
In conjunction
with the Merger and concurrent with the closing of the Merger, ESRI split off (the "Split-Off") its wholly owned subsidiary,
Buzz Kill, Inc., a New York corporation ("Split Corp.").
Split Corp. had been formed to produce the feature
length film entitled "
BuzzKill
" and to market the film to distributors in the United States and abroad.
The
Split-Off was accomplished through the exchange of 5,793,000 shares of our Common Stock held by certain ESRI shareholders (the
"Split-Off Shareholders") for all of the issued and outstanding shares of common stock of Split Corp. Thomas H. Hanna,
Jr., our sole officer and director prior to the Merger, exchanged 5,755,000 shares of our Common Stock for Split Corp. shares as
part of the Split-Off.  We executed a Split-Off Agreement and General Release Agreement with Split Corp. and the Split-Off
Shareholders, copies of which are attached to this Current Report and are incorporated herein by reference.
8
As an inducement to the Split-Off Shareholders
to agree to the Split-Off, ESRI and Buzz Kill terminated and cancelled an investment agreement between them dated May 1, 2007.
Pursuant to this agreement cancellation, ESRI relinquished its right to recoup its $800,000 investment in Buzz Kill and Buzz Kill
no longer is required to share 50% of its net revenue from sales of the film
BuzzKill
with ESRI.
At the closing of the Merger, holders of
approximately $233,755 of Split Corp. promissory notes agreed to release ESRI from any obligations ESRI might have had with respect
to these notes having been the parent company of Split Corp. prior to the Split-Off.
2012 Equity Incentive Plan
Before the Merger, our Board of Directors
(sometimes referred to herein as the "Board") adopted, and our stockholders approved, the Company's 2012 Equity
Incentive Plan (the "2012 Plan"), which provides for the issuance of incentive awards of up to 10,000,000 shares of
Common Stock to officers, directors, employees and consultants of the Company and its affiliates. No awards have been granted under
the 2012 Plan.  See "Market Price of and Dividends on Common Equity and Related Stockholder Matters—Securities
Authorized for Issuance under Equity Compensation Plans" below for more information about the 2012 Plan.
Departure and Appointment of Directors and Officers
Our Board consists of five members. On
the Closing Date, Thomas H. Hanna, Jr., the sole director of the Company before the Merger, resigned his position as a director
of the Company, and Patrick Imeson, Robert Trenaman, Michael Feinberg and Kenneth Hamlet were appointed to the Company's
Board.   Pursuant to the terms of the Merger Agreement, the stockholders of ESRI before the Merger have the right to
designate one person as a director to fill the vacancy on the Board prior to the next annual meeting of stockholders of the Company.
Also on the Closing Date, Mr. Hanna, the
sole officer of the Company before the Merger, resigned his position as an officer of the Company, and Patrick Imeson was appointed
as our Chairman and Chief Executive Officer, Robert Trenaman was appointed as our President and Chief Operating Officer, Eric Altman
was appointed as our Chief Financial Officer, Treasurer and Vice President–Finance, and Timothy G. Smith was appointed as
a Vice President–General Manager–Montana Tunnels Mine. See "Management – Directors and Executive Officers."
Lock-up Agreements and Other Restrictions
In connection with the Merger, holders
(the "Pubco Holders") of the free trading shares of ESRI immediately prior to the Merger (the "Public Float Shares")
entered into lock-up agreements with ESRI whereby the Pubco Holders agreed that forty percent (40%) of their Public Float Shares
may not be sold for a period of twelve (12) months following the Merger closing date.
Further, for a period of twelve (12) months
after the Merger closing, the Public Holders have agreed to be subject to restrictions on engaging in certain transactions, including
effecting or agreeing to effect short sales, whether or not against the box, establishing any "put equivalent position"
with respect to the Public Float Shares, borrowing or pre-borrowing any shares of Common Stock, or granting other rights (including
put or call options) with respect to the Public Float Shares or with respect to any security that includes, relates to or derives
any significant part of its value from the Public Float Shares, or otherwise seeking to hedge their position in the Public Float
Shares.
9
In addition, all officers, directors, stockholders
holding ten percent (10%) or more of the Common Stock of ESRI after giving effect to the Merger and the Split-Off, and certain
key employees (the "Restricted Holders") have agreed that, for a period of twelve (12) months after the Merger closing
date, the Restricted Holders will be subject to restrictions on engaging in certain transactions, including effecting or agreeing
to effect short sales, whether or not against the box, establishing any "put equivalent position" with respect to shares
of our Common Stock, borrowing or pre-borrowing any shares of Common Stock, or granting other rights (including put or call options)
with respect to our Common Stock or with respect to any security that includes, relates to or derives any significant part of its
value from our Common Stock, or otherwise seeking to hedge their position in the Common Stock.
Pro Forma Ownership
Immediately after giving effect to (i)
the closing of the Merger and (ii) the cancellation of 5,793,000 shares of Common Stock in the Split-Off and an additional 5,751,000
shares of our Common Stock surrendered for cancellation by Dylan Hundley, there were 109,085,000 issued and outstanding shares
of Capital Stock, as follows:
·
EGLLC, as the sole stockholder of each of MTMI and EGI, held an aggregate of 90,000,000 shares
of Common Stock and 10,000,000 shares of Series A Preferred Stock; and
·
The stockholders of the Company prior to the Merger held an aggregate of 9,085,000 shares of Common
Stock.
In addition,
·
The 2012 Plan authorized issuance of up to 10,000,000 shares of Common Stock as incentive awards
to officers, directors, employees and consultants; awards totaling 5,445,000 shares of Common Stock have been granted under the
2012 Plan; and
·
The Bridge Notes, may be converted, at the sole discretion of each of the note holders, including
accrued but unpaid interest, into Units of the Company's securities at a conversion price of $2.00 per Unit, each Unit consisting
of: (i) one share of Common Stock, (ii) a warrant to purchase one-half share of Common Stock, exercisable at a price of $3.00 per
whole share, and (iii) a special warrant exercisable upon the closing of the Company's planned private placement, provided
the share price of the Common Stock offered in the private placement is less than $2.50 per share, so that the exercise of the
special warrant will reduce the lender's effective conversion price for the Common Stock at a 25% discount to the private
placement offering price, such special warrant exercisable at a price of $0.01 per share
No other securities convertible into or
exercisable or exchangeable for Common Stock (including options or warrants) are outstanding.
Our common stock is quoted on the OTC Bulletin
Board under the symbol "ESRI".
10
Accounting Treatment; Change of Control
The Merger is being accounted for as a
"reverse merger," and MTMI and EGI are deemed to be the acquirers in the reverse merger. Consequently, the assets and
liabilities and the historical operations that will be reflected in the financial statements prior to the Merger will be those
of MTMI and EGI and will be recorded at the historical cost basis of MTMI and EGI, and the consolidated financial statements after
completion of the Merger will include the assets and liabilities of MTMI and EGI, historical operations of MTMI and EGI and operations
of the Company and its subsidiaries from the closing date of the Merger. As a result of the issuance of the shares of Common Stock
and Series A Preferred Stock pursuant to the Merger, a change in control of the Company occurred as of the date of consummation
of the Merger. Except as described in this Current Report, no arrangements or understandings exist among present or former controlling
stockholders with respect to the election of members of our Board of Directors and, to our knowledge, no other arrangements exist
that might result in a change of control of the Company.
We continue to be a "smaller reporting
company," as defined under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), following the
Merger.
11
DESCRIPTION OF BUSINESS
Immediately following the Merger and the
Split-Off, the business of MTMI and EGI, to engage in the exploration and production activities in the precious and base metal
industry, became the business of the Company.
GENERAL BACKGROUND
Montana Tunnels Mining, Inc., a Delaware
corporation ("MTMI"), was formed in 1998 to own and operate the Montana Tunnels gold-zinc-silver-lead open pit mining
operation (the "Montana Tunnels Mine"). The Montana Tunnels Mine has been in operation since 1987. Elkhorn Goldfields,
Inc., a Montana corporation ("EGI"), was formed in 1998 and owns the Elkhorn Project, which includes the Golden Dream
mine – a planned gold-copper underground mining operation ("Golden Dream Mine"). Prior to the Merger, MTMI and
EGI were wholly-owned subsidiaries of Elkhorn Goldfields, LLC, a Delaware limited liability company ("EGLLC"). EGLLC
is a mining holding company and is owned by the private equity investment funds that are managed by Black Diamond Financial Group
LLC, a Delaware limited liability company ("Black Diamond").
Corporate History
Pegasus Gold Inc., a Province of British
Columbia corporation ("Pegasus"), had operations in Montana, Nevada and Australia. Pegasus commenced operations at
the Montana Tunnels Mine in 1987. In January 1998, due to struggling mine operations external to the Montana Tunnels Mine, Pegasus
was unable to service approximately $238 million in debt and filed for bankruptcy under Chapter 11 of the United States Bankruptcy
Code. Under the reorganization plan, Pegasus incorporated a holding company named Apollo Gold Inc., a Delaware corporation, and
Apollo Gold Inc. became the owner/operator of the Montana Tunnels Mine.
During the second quarter of 2002, Apollo
Gold Inc. was acquired by a Toronto Stock Exchange listed company – Nevoro Gold Inc. – which, upon closing of the acquisition,
changed its name to Apollo Gold Corporation ("Apollo") and traded publicly on the Toronto Stock Exchange as such.
On July 28, 2006, EGLLC earned a 50% interest
in the Montana Tunnels Mine and related assets by providing $14,250,000 to establish a joint venture with Apollo to remediate the
"L" Pit and put the Montana Tunnels Mine back into production. Montana Tunnels Mine is an open pit mine. Each pit expansion
shell is named in alphanumeric order. The "L" Pit was the south and west wall layback. Before that was the "K"
Pit which was the east wall layback.
In July 2006, EGLLC established, and owned
100% of, Elkhorn Tunnels, LLC to facilitate the joint venture with Apollo. The "L" pit was mined out in November 2008.
In June 2009, Apollo advised EGLLC that it intended to market its position in the joint venture. EGLLC optioned to purchase Apollo's
interest which it exercised in the fall of 2009 and paid $250,000 as the first installment on the purchase. In February 2010, EGLLC
and Apollo renegotiated the form of payment and the terms of the purchase of Apollo's 50% interest in MTMI was modified to
include the $250,000 cash already paid plus an assignment to Apollo of EGLLC's interest in a certain loan and mortgage on
a property owned by an unrelated mining company. Elkhorn Tunnels, LLC was dissolved following EGLLC's completion of its acquisition
of the remaining interest in MTMI.
EGI is the operator of the Golden Dream
Mine located at 2725-A Elkhorn Road, Boulder, Montana. The mine is located near the historic town of Elkhorn which dates back to
the 1870s. The Golden Dream Mine is located about 15 air miles south east of the Montana Tunnels Mine and the over-the-road distance
between the mines is approximately 30 miles. EGI was purchased by Calim Private Equity, LLC from Elkhorn Gold Mining Corporation,
a Canadian corporation, in October 2000. Calim Private Equity, LLC, a private equity company, later created EGLLC and assigned
its 100% interest in EGI to EGLLC.
12
montana tunnels mine
MTMI is an integrated mining company which
is seeking to recommence mining and milling operations at the Montana Tunnels Mine. Currently, MTMI's operations are limited
to care and maintenance functions. MTMI's staff engineers, in association with outside independent mining consultants, have
designed a mine plan around the "M" Pit deposit of the Montana Tunnels Mine incorporating a proven and probable mineral
reserve of 37.8 million tons (a ton is equal to 2,000 pounds) of ore containing 488,000 ounces of gold, 8.2 million ounces of silver,
358 million pounds of zinc and 124 million pounds of lead (the "M" Pit Mine Plan"), as documented in the Montana
Tunnels Technical Report dated November 2010 (the "Nov. 2010 MTTR"). Table 21.3 M-Pit Production Schedule below:
M-Pit Totals
TONS MOVED
Ore
20,166,779
Lowgrade Ore
17,562,688
Waste - Rock
136,143,834
Waste - Alluvium
-
Rehandle/Other/Topsoil
6,304,696
Total Tons Moved
180,177,997
TONS MILLED
37,820,640
Grade:   Au  (oz/ton)
0.0129
Ag  (oz/ton)
0.218
Pb   (%)
0.164
Zn   (%)
0.473
PRODUCTION (GROSS)
Gold (oz)
487,886
Silver (oz)
8,244,900
Lead  (lbs)
124,051,699
Zinc  (lbs)
357,783,254
PRODUCTION PAYABLE SOLD
Gold (oz)
346,681
Silver (oz)
4,651,964
Lead  (lbs)
87,971,673
Zinc  (lbs)
238,955,526
Source: Montana Tunnels Technical Report
– Table 21.3 (page 113)
During 2011, gold prices peaked at $1,895
per ounce on the London Metal Exchange ("LME") and silver prices reached levels not seen since 1980, exceeding $30
per ounce on the LME. As such, management believes that now is the ideal time to recommence development and production at the Montana
Tunnels Mine.
13
A common misconception is that the current
gold prices and predictions are in record territory; however, in 1980 gold traded at an average of $1,849 and peaked at $2,337
in 2011 dollars. The chart below reflects this inflation adjusted pricing.
The Montana Tunnels Mine lies within Jefferson
County, Montana – approximately 5 miles west of Jefferson City. Access to the mine site is from U.S. Highway #15 at the Jefferson
City exit approximately 19 miles south of Helena, Montana. From Jefferson City the mine is located 3.5 miles along Spring Creek
road.
14
Aerial view of the existing open pit Mine
at the Montana Tunnels Operation.
History of the Montana Tunnels Mine
To a large extent, mining activity developed
and settled much of Montana during the 1860s and 1870s, including the historic "Wickes-Corbin" silver district in which
the current Montana Tunnels Mine is centrally located. The Wickes-Corbin district thrived from the 1860s into the early 1890s,
at which time the U.S. Government repealed the Sherman Silver Purchase Act (1893) sending silver prices plummeting and spelling
the eventual demise of many silver producing mining camps, including the Wickes-Corbin camp.
In the early 1980s, with the price of silver
trading at $50 per ounce on the LME, many historic silver camps were re-examined employing modern exploration techniques. It was
during this period that the Montana Tunnels deposit – a named derived from the boring of two exploratory tunnels driven into
the deposit in the early 1900s – was discovered. By 1986 Pegasus had commenced development of the Montana Tunnels Mine and
construction of a 15,000 ton per day milling facility.
15
View of the Montana Tunnels Milling Facility,
Crushing Facility and Administrative offices.
The open pit mine is located to the top
and left of this photograph.
Since the commencement of production at
Montana Tunnels Mine in early 1987, the mine has produced, under its previous owners, 99.6 million tons of ore containing 1.7 million
ounces of gold, 30.9 million ounces of silver, 551,400 tons of zinc and 202,800 tons of lead, as reported through public filings
of the parent companies. Using average prices as of January 2012, the cumulative value of the metals mined from the Montana Tunnels
Mine since 1987 would total in excess of $4 billion. All metals mined at the Montana Tunnels Mine were sold prior to 2010.
16
The table below sets forth the Montana
Tunnels Mine production history from 1987 to 2009.
Montana Tunnels Technical Report - November 2010
Table 1.1 Montana Tunnels Production History (Page 2)
Mill Tons
Au
Oz Au
Ag
Oz A
Pb
Tons Pb
Zn
Tons Zn
Year
000's
oz Au/t
000's
oz Ag/t
000's
%
000's
%
000's
1987
2,018
0.0198
39.9
0.485
979.7
0.377
7.6
0.923
18.6
1988
3,982
0.0228
90.7
0.430
1,711.4
0.281
11.2
0.788
31.4
1989
4,047
0.0204
82.5
0.488
1,974.5
0.250
10.1
0.674
27.3
1990
4,149
0.0184
76.2
0.451
1,872.8
0.222
9.2
0.627
26.0
1991
4,271
0.0185
78.9
0.428
1,829.7
0.233
10.0
0.638
27.2
1992
4,573
0.0199
91.2
0.441
2,014.9
0.217
9.9
0.609
27.9
1993
5,045
0.0173
87.5
0.440
2,218.5
0.195
9.8
0.523
26.4
1994
5,411
0.0185
100.3
0.323
1,746.5
0.240
13.0
0.555
30.0
1995
5,474
0.0202
110.8
0.314
1,716.4
0.200
11.0
0.582
31.8
1996
5,467
0.0167
91.4
0.274
1,497.9
0.186
10.2
0.509
27.8
1997
5,145
0.0194
100.0
0.242
1,245.3
0.224
11.5
0.576
29.6
1998
4,833
0.0188
91.0
0.207
998.8
0.189
9.1
0.686
33.2
1999
5,078
0.0174
88.2
0.225
1,142.7
0.203
10.3
0.614
31.2
2000
5,384
0.0145
77.9
0.375
2,020.5
0.177
9.5
0.481
25.9
2001
5,424
0.0168
91.0
0.281
1,525.2
0.182
9.9
0.552
29.9
2002
2,881
0.0156
45.0
0.238
684.9
0.167
4.8
0.470
13.5
2003
4,695
0.0157
73.5
0.202
947.4
0.193
9.1
0.440
20.6
2004
5,394
0.0096
51.7
0.318
1,713.0
0.138
7.4
0.374
20.2
2005
4,955
0.0130
64.3
0.190
939.8
0.155
7.7
0.337
16.7
2006
1,427
0.0077
11.0
0.169
240.4
0.097
1.4
0.201
2.9
2007
3,971
0.0123
49.0
0.221
876.4
0.197
7.8
0.466
18.5
2008
4,510
0.0144
64.9
0.175
788.0
0.221
10.0
0.629
28.4
2009
1,430
0.0100
14.3
0.176
251.0
0.160
2.3
0.442
6.3
Totals
99,563
0.0164
1,671.4
0.30
30,935.6
0.20
202.8
0.54
551.4
Products
and mining industry trends
The deposit type currently being exploited
at the Montana Tunnels Mine is precious and base metal mineralization (gold, silver, zinc and lead) occurring as disseminated and
veined sulfides internal to a volcanic diatreme. Through the mining and treatment of the Montana Tunnels deposit, the mine will
produce (i) gold, (ii) silver, (iii) zinc and (iv) lead. Minor amounts of other metals are also contained within the deposit but
not of marketable quantities.
17
Cross section cartoon depicting the Montana
Tunnels deposit showing current Pit development.
I.
Gold
Under the "M" Pit Mine Plan,
over the 9 years that
MTMI is planning to mine and treat ore
at the Montana Tunnels Mine
(the
"
Life of Mine"), we expect that 37.8 million tons of ore containing 488,000 ounces of gold will be mined and
processed at the Montana Tunnels Mine, as documented in the Nov 2010 MTTR. Table 21.3 M-Pit Production Schedule. Considering associated
dilution and deletion, mill recovery losses and smelter losses and deductions which are all within industry standards, we estimate
that the Montana Tunnels Mine will produce 347,000 recoverable ounces of gold over the Life of Mine of the "M" Pit.
The Gold Market
The market for gold is large, liquid and
global. Gold continues to see demand in the jewelry, industrial and health science industries; however, gold's main demand
comes in the form of safe haven investment. From economic, political and social uncertainty to a hedge against inflation, gold
is, and has long been, considered by many a commodity of refuge from concerns with fiat currencies and their corresponding economies.
The World Gold Council ("WGC"),
a leading international gold industry research organization, published on its website that total gold demand for the fourth quarter
of 2011 rose 21% to 1,017 metric tonnes (a metric tonne is equal to 2,204.6 pounds) year-on-year. Of this increase, investment
demand posted the largest segment increase, more than offsetting the decline in gold jewelry demand.
18
Gold prices over the past five years (courtesy
Kitco).
II.
Silver
Over the planned Life of Mine for "M"
Pit, we expect to mine and process 37.8 million tons of ore containing 8.24 million ounces of silver at Montana Tunnels Mine, as
documented in the Nov. 2010 MTTR. (Source: Table 21.3 M-Pit Production Schedule). Taking Montana Tunnels Mine historical mine deletion,
mill recoveries and industry-standard smelter payment terms into consideration, we estimate recovering 4.65 million recoverable
ounces of silver (losses from reserve ounces to payable ounces are within industry standards).
The Silver Market
Unlike the gold market, demand within the
silver market has been predominantly for fabrication – mainly industrial application, photography and jewelry – with
investment making up only a small portion of total yearly demand.
Silver prices over the past five years (courtesy
Kitco).
19
III.
Zinc
Over the planned Life of Mine for "M"
Pit, we project total payable zinc production to be in excess of 239 million pounds, as documented in the Nov. 2010 MTTR. (Source:
Table 21.3 M-Pit Production Schedule). At planned production rates, Montana Tunnels Mine should produce approximately 0.2% of the
current annual global demand for zinc.
The Zinc Market
Zinc is fourth in terms of tonnage on the
list of metals produced globally on an annual basis. Zinc is mainly used as coating to protect iron and steel from corrosion, as
alloying metal to make bronze and brass, as zinc-based die casting alloy and as rolled zinc.
Pie chart depicting the various uses of
Zinc.
As documented by the International Lead
and Zinc Study Group, global zinc supply has been in a surplus situation since late 2007. This supply surplus is forecast to continue
through 2012. It is currently projected that a supply shortfall will occur during 2013 and continues until 2017. As a result, due
to the lengthy time to restart mine production, a zinc supply shortfall may likely exist for some years after Montana Tunnels Mine
is anticipating a restart of its operations.
20
Global Zinc supply and demand for years
2005 through 2010 (actual) and years 2011 through 2017 (forecast).
As of January 26, 2012, zinc prices are
trading at around U.S. $1.00 per pound on the LME which is slightly above zinc's 5-year average price as depicted in the
chart below:
Zinc prices over the past five years (courtesy
Kitco)
IV.
Lead
Over the planned Life of Mine for "M"
Pit, we project total recoverable lead production to be approximately 88 million pounds, as documented in the Nov. 2010 MTTR. Table
21.3 M-Pit Production Schedule.
21
The Lead Market
As with the other metals that the Montana
Tunnels Mine will produce, the market for lead is global in nature and active in terms of participants. This ensures that the metals
produced from the Montana Tunnels Mine will be competitively priced.
Lead has been mined and used in daily life
for at least 5,000 years, mainly for corrosion-resistant items such as roofs, pipes and windows. Lead's use increased through
the 1900s in items such as batteries and as an additive in gasoline until the mid-1980s when environmental regulations significantly
reduced the use of lead in non-battery products. Per various public research publications, by the early 2000s the total demand
for lead for use in battery-related items represented 88% of lead production. Other uses include ammunition, casting metals and
oxides in glass and ceramics.
As of January 26, 2012, lead prices are
trading at around U.S. $1.00 per pound on the LME which is slightly above lead's 5-year average price as depicted in the
chart below:
Lead prices over the past five years (courtesy
Kitco)
In total, we project that the Montana Tunnels
Mine "M" Pit deposit will produce 347,000 ounces of gold, 4.65 million ounces of silver, 239 million pounds of zinc
and 88 million pounds of lead over the planned Life of Mine, as documented in the Nov. 2010 MTTR.
OPERATIONS SUMMARY
Mission.
MTMI is an integrated mining
company focused on the exploration, development and mineral extraction of the Montana Tunnels Mine. MTMI has produced gold, silver,
zinc and lead from the Montana Tunnels Mine starting in 1987. We believe that extracting the remaining deposit will be more than
ample to provide sufficient mineral resources to establish a mine plan to continue profitable mining and milling operations on
the current target at Montana Tunnels Mine for approximately 9 years.
The Operations.
The Montana Tunnels
Mine is a fully integrated open-pit mine and concentrating facility. The goal in any successful metal mining operation is to take
a lower concentration of metals per ton of rock – raw ore – and upgrade the valuable metal content per ton –
while minimizing the loss of that metal content – thereby improving, or "concentrating" the value per ton.
22
This process is generally done in three
steps – (1) mining, (2) beneficiation (concentration) and (3) smelting.
1.           Mining
Operations at Montana Tunnels Mine.
There are four distinct stages to production mining at the Montana Tunnels Mine –
(i) drilling, (ii) blasting, (iii) loading and (iv) hauling.
(i)
Drilling
– Following directions provided by the engineering, geological and technical
staff, workers drill 6.75-inch diameter holes to depths of usually 20 feet on what are called "benches" using rotary
percussion drills as depicted below. Samples from the drill piles are taken for analysis at the onsite assay lab to determine the
ore value component of the rock to ensure, once the rock is blasted, that ore is being taken to the concentrator and waste is taken
to the waste areas.
(ii)
Blasting
– Once drilling is completed on a "bench", the drilled out holes
are filled with ANFO explosive (ammonium nitrate/fuel oil mixture) and, following a detonation pattern, are blasted.
(iii)
Loading
– The blasted rock material is loaded by 21 yard shovels or by 13 yard front-end
loaders into waiting haul trucks.
23
(iv)
Hauling
– A fleet of haul trucks capable of hauling between 85 to 150 tons of ore
or waste material per load work in unison with the loaders to quickly remove the blasted rock to the crushing facility, in the
case of ore or, in the case of waste, to the waste rock dump for eventual reclamation. Once the blasted material is removed, the
next cycle of drilling commences again.
2.           Beneficiation
Operations at Montana Tunnels.
Beneficiation is the act of crushing and separating ore into valuable substances by any of a
variety of techniques so that metal can be recovered at a profit. Montana Tunnels Mine beneficiation plant is rated at 15,000 tons
per day and consists of three distinct stages – (i) crushing, (ii) grinding and (iii) flotation & filtration.
(i)
Crushing
– Ore grade material from the mine is delivered to the crushing circuit where
primary and secondary "jaw crushers", used in series, crush the rock to between 5" and 7" in size. At times,
ore from the open-pit is too large to enter the mouth of the jaw crusher and pneumatic rock breakers are employed to reduce the
size to enable the rock to enter the jaw crusher. The crushed rock is stored on the "coarse ore stockpile" awaiting
entry into the grinding circuit.
24
Ore leaving the crushing circuit going to
the coarse ore stockpile
(ii)
Grinding
– From the coarse ore stockpile apron feeders draw the ore onto conveyor
belts and deliver the coarse ore to a semi-autogenous grinding mill where it is mixed with water and 5" steel balls and ground
to create coarse slurry. This slurry discharges from the semi-autogenous mill and, dependent upon size, is either sent to a cone
crusher if oversized, or sent to the ball mill for further size reduction. The oversized material, once treated by the cone crusher,
re-enters the semi-autogenous mill for additional grinding before being directed to the ball mill for additional size reduction.
The ground ore material/slurry
from the ball mill is pumped to the gravity circuit where gravity cyclones
(funnel-shaped devices that
separate particles entering the funnel by density)
, Knelson concentrators
(
machines that
utilize the principles of a centrifuge to enhance gravitational force experienced by feed particles to effect separation based
on particle density)
, sluices (
troughs with riffles in the bottom that provide a lodging place
for heavy or dense material such as gold)
and separating tables work to separate the coarse gold-silver particles
from the slurry. This gold-silver concentrated product is smelted onsite to produce d
oré
bullion bars or flats.
Material passes from the gravity
circuit to hyrocyclones where it is once again separated. The oversized material from this separation reports back to the ball
mill for further grinding while the fine slurry or pulp material is pumped to the lead flotation circuit to commence the flotation
and filtration process.
25
Montana Tunnels Semi-Autogenous Mill (left)
and Ball Mill (right).
(iii)
Flotation and filtration
– The flotation circuit is made up of a series of large tanks,
or cells, with each cell containing an agitator and air blower. There is a set of cells for concentrating the lead minerals and
an independent set of cells for concentrating the zinc minerals.
The process for concentrating
the minerals occurs as the mineralized pulp enters the first in this series of tanks. At this point two reagents – a frothing
reagent and a collecting reagent – are added to the pulp. These reagents create the conditions within the tanks to compel
the lead and lead-associated minerals to attach to "bubbles" created by the frothing reagent mixed with air from the
air blower. These mineral-ladened bubbles are collected through this series of cells, cleaned, thickened and filtered using a drum
filter to make a final lead concentrate. Historically, the Montana Tunnels Mine lead concentrates contain 50% to 55% lead, 2.0
to 3.5 ounces per ton gold and 20 to 50 ounces per ton silver. Moisture content is between 8% and 10%.
After the pulp exits the final
lead cell, reagents are again introduced to the pulp which activates the zinc minerals to attach to bubbles. As with the lead circuit,
these zinc-ladened bubbles are collected, cleaned, thickened and filtered – this time using a pressure filter – to
make a final zinc concentrate. The Montana Tunnels Mine final zinc concentrate traditionally have contained 52% to 56% zinc, 0.1
to 0.3 ounces per ton gold, 5 to 20 ounces per ton silver with a moisture content of between 8% and 10%.
Finally, with this pulp denuded
of minerals it is pumped to
a designed and approved area for storing the treated waste fraction of an
ore
or the "Tailings Impoundment Area" for eventual reclamation.
26
Schematic of Montana Tunnels beneficiation
operations
3.           Smelting
and Refining of the Montana Tunnels Mine Products.
We project that for the Life of Mine of the "M" Pit deposit,
annual production of lead concentrate will be 16,000 tons and annual production of zinc concentrate will be approximately 46,000
tons, based upon historical production and the Nov. 2010 MTTR. Smelting of these concentrates has traditionally been carried out
at a smelter facility in Trail, British Columbia, Canada which is owned by mining conglomerate Teck Corp. While we anticipate competitively
shopping for alternative smelter facilities, we have identified Teck Corp. as the best situated smelting facility for the Montana
Tunnels Mine.
From the Montana Tunnels Mine, lead and
zinc concentrates are loaded separately into over-the-road haul trucks and delivered to railheads near Helena, Montana. From there,
the concentrate products are delivered to Teck Corp.'s lead and zinc smelter approximately 400 miles via rail from Helena,
Montana where they are smelted and refined into saleable lead and zinc products. Teck Corp. charges MTMI a smelting charge per
metric tonne which is within industry standards.
A third product produced from the Montana
Tunnels Mine is gold d
oré flats (a mold of
semi-pure alloy consisting of gold and silver created at the mine site). Historically, between 8% to 12% of the gold recovered
at Montana Tunnels reports to the gravity circuit and is smelted onsite into
d
oré
flats. In the past, these
d
oré flats
have been refined into gold bars by Johnson Matthey Inc.'s refining facility in Salt Lake City, Utah.
Montana Tunnels Mine "M"
Pit Expansion
In December 2008, Montana Tunnels Mine
was placed into a care and maintenance operational mode at the completion of the "L" Pit permit. The newly permitted
"M" Pit is an expansion of the existing "L" Pit to enable the Company to continue to mine an additional
37.8 million tons of ore as an extension to the same ore body that has been previously mined since the inception of the Montana
Tunnels Mine operation. The expansion plan will "layback" or expand the perimeter of the current pit making it wider,
and making an additional 7.0 years of ore available to be mined from the bottom of the expanded pit.
27
We have completed ore-delineation drilling
beneath the current pit elevation and have identified proven and probable reserves of the "M" Pit expansion as detailed
in the table below:
Proven and Probable Reserves
Montana Tunnels Technical Report
Montana Tunnels Mining, Inc.
Grade
Pit Design
Classification
Tons
Gold
Silver
Lead
Zinc
M – Pit
Proven
27,673,000
0.0129
0.212
0.164
%
0.487
%
M – Pit
Probable
10,105,000
0.0129
0.211
0.160
%
0.434
%
Total 2P Reserves
37,778,000
0.0129
0.212
0.163
%
0.474
%
Gold and Silver grades in ounces per ton,
Lead and Zinc grades as percentage mineral content.
In 2004, MTMI commenced the process of
permitting the "M" Pit expansion by filing a major amendment to the Montana Tunnels Operating Permit #00113 to expand
the open pit and process ores from the "M" Pit mine design. An updated Environmental Impact Statement was completed
and Records of Decisions to mine and process the "M" Pit were finally received in November 2008, subject to the addition
of approximately $16 million to the current $18 million of reclamation bonds pledged by MTMI with the Montana Department of Environmental
Quality ("MDEQ"). The reclamation bond can be in the form of cash, surety bond, letter of credit, company-owned land
or a combination of any of these subject to the approval of the MDEQ.
The "M" Pit Mine Plan calls
for an 18 to 24 month period of pit expansion development in which 53 million tons of waste rock will be removed to access the
ore below the waste rock. The "M" Pit Mine Plan is contingent on the Company obtaining the capital required to begin
the expansion development. The Company will seek to obtain funding from debt and the capital markets. If the Company is unable
to secure acceptable terms from these markets the expansion development will begin only when the cash flow from the Golden Dream
Mine (discussed below) can support the capital needs of the Plan.
Although we expect that some fringe ores
will be encountered during the pit expansion, this ore will be stockpiled during the pit expansion phase. Only after primary ores
are being mined from the pit on a continuous and sufficient basis to maintain continuous operation of the concentrator, will ore
processing through the concentrator begin. It is planned that this will occur approximately 18 to 20 months after commencement
of "M" Pit expansion development. Cash flow is expected to begin the month after the concentration mill is restarted.
Currently, MTMI has eight staff individuals
working at the mine site conducting care and maintenance of the mine. This team also supports operations at the Golden Dream Mine
(see discussion below). These individuals occupy the key positions in management, engineering, environmental, human resources and
accounting. Upon financing, MTMI will quickly increase the number of full-time hourly employees to approximately 160 and 190 individuals.
Being within commuting distance from Montana's capital city – Helena – and the major mining communities of Butte
and Whitehall should allow for a quick filling of these hourly positions. In August 2006, when MTMI re-commenced operations, it
took approximately 4 weeks to hire 125 qualified mine equipment operators and mechanics. In August 2006, the unemployment rate
in Montana was 3.3%. As of December 2011, unemployment in Montana was approximately 6.6%, according to the United States Department
of Labor, Bureau of Labor Statistics.
The existing Montana Tunnels Mine mining
equipment has been in use since the early-to-mid 1990s and, as such, now is prone to maintenance costs and associated downtime.
We plan to use the existing mining fleet at Montana Tunnels Mine augmented with new equipment as it becomes available. The existing
and new planned equipment are listed in the tables below:
28
Existing Equipment Description
Size
Quantity
Caterpillar 5230 Hydraulic Front Shovel
21 cubic yard
2
Caterpillar 992 Loader
13.5 cubic yard
3
Caterpillar 785 Truck
150 ton
12
Caterpillar 777 Truck
85 ton
2
Caterpillar D9N Bulldozer
370 Horsepower
2
Ingersoll-Rand DN45E Drill
6.75 inch hole
3
Caterpillar 16-G Motor Grader
16 foot blade
2
Caterpillar 950 F11 Loader
1
Caterpillar 325B Excavator
1
Existing Montana Tunnels Mining Equipment
New Equipment Description
Size
Quantity
Shovel – Terex, Komatsu, Caterpillar
20 cubic yard
2
Caterpillar 993K Loader
15 cubic yard
1
Caterpillar 785D Truck
150 ton
9
Caterpillar D10T Bulldozer
1
Caterpillar D9T Bulldozer
1
Caterpillar D25KS Drill
2
Caterpillar 16-M Motor Grader
10.1 foot blade base
2
Light Plant
4
Lube Truck
2
Stemming Truck
1
Caterpillar 777D/Water Truck
1
New Equipment planned for Montana Tunnels
Mine "M" Pit expansion
As described above under the beneficiation
section, the existing Montana Tunnels Mine concentrating and processing facility equipment consists of a number of components used
in the crushing, grinding, flotation and filtration of gold, zinc, silver, lead and copper ores. In April 2009, the MTMI concentrator
was turned off in a systematic way over a period of three weeks to ensure that recommencement of the facility would be seamless.
All components of the MTMI concentrating facility are intact and the only piece of equipment contemplated to be replaced is the
zinc pressure filter. Replacement of this component will be carried out in conjunction with the restart of the MTMI concentrating
facility.
The Montana Tunnels Mine operation has
been through several phases of exploration, development and production since the mid-1980s. Through this quarter century of operational
experience, our management team has acquired the skills and knowledge to accurately plan and project development and operations
timelines and costs.
The operational and cost components with
the greatest influence relate to: (i) grade of the ore; (ii) mill recoveries; (iii) development and mining costs; and (iv) smelting
and outside treatment costs. The grade of Montana Tunnels Mine "M" Pit has been delineated to standards employing defined
requirements as set by the mining industry.
29
Historical – 1988 through 2009 –
Montana Tunnels Mine mill recoveries for each of the payable metals are compiled in the table below (mill recovery is a calculation
showing the percentage of recovered metals by analyzing the grade of pre-processed rock (heads) and comparing that with the grade
of the same post-processed rock (tails)):
Metal
Gold
Silver
Lead
Zinc
Mill Recovery
79.9
%
73.7
%
86.0
%
84.7
%
Montana Tunnels Mine Historical Mill Recoveries
(1988 through 2009)
MTMI's engineering and management
staff have projected development and operating costs combining a mix of the planned new equipment and existing equipment applying
each particular piece of equipment's operating specifications.
Over the 20-plus years of operations at
Montana Tunnels Mine, various smelting and outside treatment options have been explored and utilized. Because of its relative proximity
and its smelter payment terms, the most appropriate smelter for Montana Tunnels' zinc and lead concentrates, found to date,
is Teck Corp.'s Trail, B.C. Smelter. World benchmark smelter treatment charges are established annually between miners and
smelters for both zinc and lead concentrates.
A
gold
d
oré flat ready for shipment to
Johnson
Matthey Inc. (2006)
The ELKHORN project
and the Golden Dream Mine
The Golden Dream Mine lies within the boundaries
of EGI's Elkhorn Project approximately 35 road miles to the south-east of the Montana Tunnels Mine. The Elkhorn Project consists
of a collection of patented and unpatented mineral claims totaling approximately 4,500 acres.
30
The Elkhorn Project and Golden Dream Mine
are located approximately 35 road miles from Montana Tunnels.
Similar to the area in which the Montana
Tunnels Mine is located, the area in which the Golden Dream Mine is located was extensively explored and settled during the 1870s
through the 1890s. The present ghost town of Elkhorn, which lays just outside the Elkhorn Project property boundaries, once boosted
a population in excess of 2,000 people in the 1880s. The major operating mine during this period was the Elkhorn Mine, a silver-lead
mine, but several smaller silver, gold and copper mines were also being worked in the area. By 1894, the town's population
had diminished to 600 people and mining activity – due in large part to the collapse in silver prices – steadily declined
through the 1890s.
During the early 1980s reconnaissance exploration
started on the Elkhorn Project. Over the next decade extensive core drilling, analysis, planning and design work was carried out
by Gold Fields Corp. (NYSE: GFI) and Santa Fe Pacific Gold Corp ("Santa Fe") on the Elkhorn Project. In 1997 Newmont
Corp (NYSE: NEM) acquired Santa Fe thereby creating the opportunity for EGI to acquire the Elkhorn Project.
At the time EGI acquired the Elkhorn Project
from Newmont in 1998, exploration work performed by Santa Fe Pacific Gold Corporation had identified a geologic resource containing
1.653 million ounces of gold located within four deposits – Carmody, Gold Hill, East Butte and Golden Dream .
During EGI's ownership of the Elkhorn
Project it has focused its ore delineation drilling, analysis, design, planning and permitting on the Golden Dream deposit. EGI
staff engineers have outlined in an internal feasibility study of the Golden Dream deposit a probable underground mineral reserve
of 1.17 million tons containing 258,000 ounces of gold and 8.3 million pounds of copper and designed a Mine Plan around this mineral
reserve as depicted below in computer-generated Mine Plan model.
31
Computerized schematic of the Golden Dream
Mine showing planned tunnels and actual drill holes and ore blocks.
Unlike the Montana Tunnels Mine, the Golden
Dream Mine is an underground mine with tunnels being approximately 14 feet high and 14 feet wide. The solid green bands in the
above computer model represent the tunnels accessing the initial ore and the various other ore levels. It will be through these
tunnels that the mined ore will be transported to the surface and then transported by haul trucks to the Montana Tunnels Mill Facility
for processing (once the Montana Tunnels Mill Facility is up and running). Prior to the restart of the Montana Tunnels Mine Facility
the ore may be shipped to other regional mills for processing.
Production mining will be undertaken using
two different methods – cut-and-fill and sub-level stopping. The cut-and-fill method will be utilized on the upper levels
of the Golden Dream Mine which are more oxidized or weathered.
Although the cut-and-fill method of mining
is more expensive on a per ton basis, it is used in mining situations where waste rock, or country rock, around the ore to be mined
is weaker and subject to falling in and diluting the ore. In the cut-and-fill mining method, ore is mined or "cut"
along strike by driving a tunnel to remove the ore. This "cut" is then backfilled with cemented "fill"
and another cut in the ore is driven alongside or above the cemented fill. The cemented backfill provides additional support to
the country rock. Utilizing this mining method in the oxidized portions of the Golden Dream Mine should reduce dilution to the
ore and provide a stable pillar that will not collapse or subside as the deeper sub-level areas are opened and mined.
As the mine reaches a depth below the first
150 feet of ore, the country rock turns from an oxidized, or weathered, material to a more solid, competent rock. At this point
production mining will move from the cut-and-fill method to a sub-level stopping method. In the sub-level mining method, two drifts
are driven, one at the top and one at the bottom of a block of ore 45 to 60 feet thick. Holes can then be drilled between the two
levels and loaded with explosives and the ore blasted out. The mined out areas remaining from this procedure would be backfilled
with loose rock or cemented backfill, if needed, for ground support.
32
The broken ore from either method of mining
will be loaded into underground haul trucks and transported to the surface where it will be transferred into 30 ton covered over-the-road
haul trucks and transported to the Montana Tunnels Mill Facility for processing (once the Montana Tunnels Mill Facility is up and
running). Prior to the restart of the Montana Tunnels Mine Facility the ore may be shipped to other regional mills for processing.
Whereas in an open-pit operation the general
goal is to move material for the lowest cost per ton – a bulk mining exercise – the general goal in an underground
operation is to move fewer tons of material with the highest grade – an ore control exercise. Using the geologic model determined
by core drilling analysis, staff engineers and geologists completed a production model and associated financial pro-forma employing
capital and operating costs, mill recoveries and outside smelting and refining charges.
The current Golden Dream Mine Plan extends
only to a depth of approximately 850 feet below surface. Drill intercepts by the prior owners of the Elkhorn Project have intersected
ore grade mineralization on the Golden Dream deposit to depths of 1,400 feet below surface. EGI has also completed drilling and
analysis laterally along the Golden Dream Mine deposit mineralized structure with positive results. Although the drill density
in these locations is insufficient to define them as mineral reserves, there is a strong likelihood that additional mineable reserves
will be identified upon commencement of mining operations at the Golden Dream Mine.
In addition to the mineralization in and
around the Golden Dream Mine deposit, EGI and the property's predecessors have completed drilling on the other mineralized
deposits on the Elkhorn Project, namely Gold Hill, East Butte and Carmody. The current Elkhorn Project reserves and resources,
as reported in the Santa Fe prefeasibility and EGI feasibility studies, including all deposits are outlined in the table below:
33
Golden Dream Project Underground Development
During the third quarter of 2011, EGI commenced
development of the Golden Dream deposit. As of April 6, 2012, EGI has developed approximately 650 feet of 14' X 14'
main underground access tunnel and 350 feet of 12' X 12' underground ore access tunnel to reach a specific level of
the ore body. We are currently completing underground and surface water treatment and disposal infrastructure pursuant to our Operating
Permit and, upon completion of this work we will commence development of the next stage at the decline into the lower level ore
zones.
Golden Dream Main Access Decline (September
2011)
Company's Two-Boom Jumbo working in
6500 level ore access ramp at Golden Dream Deposit (November 2011)
34
Trench being completed for Golden Dream
water disposal (January 2012).
Golden Dream Main Access Decline and Mine
shop buildings in background
Compliance
with Government and Environmental Regulation
The Company's mining, processing
operations and exploration activities are subject to various laws and regulations governing the protection of the environment (federal
regulator is the Bureau of Land Management ("BLM") and state regulator is the Montana Department of Environmental Quality
("MDEQ"), exploration (BLM and MDEQ), mine safety, development and production (federal regulator is the Mine Safety
and Health Administration ("MSHA"), exports, taxes, labor standards, occupational health (MSHA), waste disposal (BLM
and MDEQ), toxic substances, water rights (federal regulator is the Department of Natural Resources and Conservation ("DNRC"),
explosives (federal regulator is the Bureau of Alcohol, Tobacco, Firearms and Explosives ("ATF") and other matters.
New laws and regulations, amendments to existing laws and regulations or more stringent implementation of existing laws and regulations
could have a material adverse impact on the Company, increase costs, cause a reduction in levels of, or suspension of, production
and/or delay or prevent the development of new mining properties.
The Company believes it is currently in
compliance in all material respects with all applicable environmental laws and regulations. Such compliance requires significant
expenditures and increases mine development and operating costs. Mining is subject to potential risks and liabilities associated
with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production.
Environmental liability may result from mining activities conducted by others prior to the Company's ownership of a property.
To the extent the Company is subject to uninsured environmental liabilities, the payment of such liabilities would reduce the Company's
otherwise available earnings and could have a material adverse effect on the Company. Should the Company be unable to fully fund
the cost of remedying an environmental problem, it might be required to suspend operations or enter into interim compliance measures
pending completion of the required remedy, which could have a material adverse effect on the Company. In addition, the Company
does not have coverage for certain environmental losses and other risks as such coverage cannot be purchased at a commercially
reasonable cost.
35
Licenses
and Permits
The Company's operations require
licenses and permits from various governmental authorities. The Company believes it holds all material licenses and permits required
under applicable laws and regulations and believes it is presently complying in all material respects with the terms of such licenses
and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that
the Company will be able to obtain or maintain all necessary licenses and permits that may be required to explore and develop its
properties, commence construction or operation of mining facilities and properties under exploration or development or to maintain
continued operations that economically justify the cost.
Mine
Safety and Health Administration Regulations
We consider health, safety and environmental
stewardship to be a core value for the Company.
Pursuant to Section 1503(a) of the recently
enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, issuers that are operators, or that have a subsidiary that is
an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC
information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and
mining-related fatalities. During the fiscal year ended December 31, 2011, the Company reported no lost time accidents. During
this same fiscal year the Company incurred nine MSHA citations, seven of which have been cleared. The remaining two citations are
being contested. All of the citations are covered by Section 104 (a) of the Mine Safety Act.
Competition
Because the life of a mine is limited by
its mineral reserves, the Company is continually seeking to replace and expand its reserves through the exploration of existing
properties as well as through acquisitions of interests in new properties or of interests in companies which own such properties.
The Company encounters competition from other mining companies in connection with the acquisition of properties and with the engaging
and maintaining of qualified industry experienced personnel. This competition may increase the cost of acquiring suitable properties
and retaining qualified industry experienced personnel.
Employees
As of December 31, 2011, we had 18 full-time
employees and two part-time employees, including our executive officers.  We believe the relationship we have with our
employees is good.  In 2012 we anticipate the need to hire additional technical, mining and administrative personnel.
Although demand for quality staff is high in the mining industry, we believe we will be able to fill these positions in a timely
manner.
Financial
Statements and "Going Concern" Opinion
The auditor's report accompanying
our audited financial statements for the years ended December 31, 2011 and 2010, included in Item 9.01 of this Current Report,
contained an explanation that our financial statements were prepared assuming that we will continue as a going concern.  The
report cites the generation of significant losses from operations, an accumulated stockholders' deficit, and a working
capital deficit.  Our ability to continue operating as a going concern will depend on our ability to derive sufficient
funds from sales of equity and/or debt securities or our creation of a source of recurring revenue, to generate operating
capital in excess of our required cash expenditures and, thereafter, to generate sufficient funds to allow us to effectuate our
business plan.  Further, to the extent that funds for our operations and business plan are required that exceed our gross
revenues, our ability to continue operating as a going concern will also depend on our ability to obtain sufficient financing,
whether in the form of debt or equity.  We cannot provide any assurance that we will have sufficient sales or that sufficient
financing will be available to us on terms or at times that we may require.  Failure in any of these efforts may
materially and adversely affect our ability to continue our operations or for you to receive any positive return on your investment
in us.
36
DESCRIPTION OF PROPERTIES
Montana Tunnels Mine, Jefferson City,
Montana
The Montana Tunnels Mine is an open pit
poly-metallic mine located about five miles west of Jefferson City, Montana and operated between 1987 and 2009. The mine is located
in the historic "Wickes-Corbin" mining district in Section 8 of Township 7 North, Range 4 West, with approximate latitude
of 46° 22' and longitude 112° 8'. The administrative offices are located at 270 Montana Tunnels Road, Jefferson
City, Montana.
The total land area controlled by the Montana
Tunnels Mine is 9,293 acres consisting of 2,404 acres of wholly or partially owned Patented Mineral Claims
2
, 45 acres
of leased Patented Mineral Claims, 2,584 acres of fee land, and 4,260 acres of Unpatented Mineral Claims.
The area encompassed
in MTMI's M-Pit Permit Boundary and outlying facilities is 2,385 acres of which greater than 90% is privately owned by MTMI.
Within this Permit Boundary 332 acres are designated for the M-Pit Mine open-pit area and perimeter of which greater than 99% is
overlain by private property wholly owned by MTMI. Within the M-Pit Mine open-pit area lays one 0.3 acre Unpatented Mineral Claim
(MF-1) and three leased Patented Mineral Claims (Mineral Survey numbers 6758, 6634 and 6640). The three leased Patented Mineral
Claims carry a 4.5% Net Smelter royalty but overlie minor amounts of mineralization and i
nsignificant royalty payments are
anticipated when this area is eventually mined.
In October and November, 2008
MTMI was granted positive Records of Decisions by the lead government regulating agencies – the Montana Department of
Environmental Quality ("MDEQ") and the Bureau of Land Management ("BLM") – approving a major amendment
– the M-Pit Expansion Plan – to Operating Permit #00113, subject to the placement of a Reclamation Bond pursuant to
the approved Mining and Reclamation Plan.
Mortgages on MTMI Property
A Mortgage, Security Agreement, Assignment
of Leases and Rents, and Fixture Filing in favor of the administrative agent of certain Secured Lenders to EGLLC and MFPI has been
executed and delivered by MTMI, as mortgagor for the benefit of the Secured Lenders, recorded on February 22, 2010 in the official
records of Jefferson County, Montana as documents numbered 236384 (mortgage) and 236385 (UCC filing).
Elkhorn Project – The Golden Dream
Mine, Boulder, Montana
The Elkhorn Project consists of four known
gold and gold-copper mineral deposits which we are planning to operate using underground mining methods. The property is located
22 miles southeast of Helena, Montana and occupies portions of Sections 9, 10, 11, 14, 15 and 16 in Township 6 North, Range 3 West
with approximate latitude of 45° 15' and longitude of 111° 55'. The administrative offices are located at 2725-A
Elkhorn Road, Boulder, Montana.
2
A Patented Mineral Claim is
a claim on which a patent has been secured from the United States Government and exclusive title has passed to the claimant. It
gives the owner title to the surface rights, locatable minerals and other resources. An Unpatented Mineral Claim is a parcel
of Federal land on which the claimant is provided rights to locatable minerals but no land ownership rights are conveyed to the
claimant.
37
The Elkhorn Project consists of 236 Unpatented
Mineral Claims encompassing approximately 4,000 acres and 35 wholly or partially owned Patented Mineral Claims encompassing an
additional 573 acres.
In 2007 EGI applied for a Mine Operating
Permit to allow for the extraction of between 500 and 1,000 tons per day from an underground mine located on its 100% owned Golden
Dream Mineral Claim (US Mineral Survey #7176). The Company's application sought a Mine Permit boundary consisting of 382.5
acres of Patented Mineral Claims surrounding the Golden Dream Claim. Approximately 40% of the Patented Mineral Claims contained
within the Mine Permit boundary are subject to a Mining Lease Agreement with Mt. Heagan Development Inc. whereby EGI leases the
Mineral Claims from Mt. Heagan subject to a "3% Net Return royalty from any ores, mineral or other products removed"
from the Mineral Claims covered under the terms of the Agreement. EGI pays to Mt. Heagan an "advanced minimum royalty"
of $5,000 per month which is "creditable and recoupable" against any production royalty payments. The remaining 60%
of the Patented Mineral Claims contained within the Mine Permit Boundary are 100% owned by EGI.
In July, 2008 the Company was
granted an Operating Permit by the lead government regulating agency – the MDEQ – subject to the placement of a Reclamation
Bond pursuant to the approved Mining and Reclamation Plan.  In November 2011, upon EGI posting the necessary Reclamation Bond
in the amount of $591,474, the MDEQ approved the Golden Dream Operating Permit #00173.
Mortgages on EGI Property
A Mortgage, Security Agreement, Assignment
of Leases and Rents, and Fixture Filing in favor of the administrative agent of certain Secured Lenders to EGLLC and MFPI has been
executed and delivered by EGI, as mortgagor for the benefit of the Secured Lenders, recorded on May 29, 2009 in the official records
of Jefferson County, Montana as documents numbered 233612 (mortgage) and 233614 (First Priority UCC filing).
In connection with a Minerals Product Receivables
Purchase Agreement (the "MPRPA") dated as of April 15, 2011, by and among EGI, EGLLC and BDH and a related security
agreement of the same date by and between EGI and BDH, a UCC-1 (#584640340) was filed with Montana Secretary of State on November
17, 2011 with BDH as the secured party. This UCC-1 covers certain of EGI's assets and property pursuant to the security agreement
dated April 15, 2011.
Description of Corporate Offices
The Company's corporate offices are
located at 1610 Wynkoop Street, Suite 400, Denver, Colorado 80202 in space provided by Black Diamond Financial Group, LLC ("Black
Diamond"). The corporate offices are maintained by two of the Company's officers and accounting, finance and administrative
support staff. Currently, the Company's cost for this office space is covered under its Management Services Agreement with
Black Diamond pursuant to which it pays Black Diamond $15,000 per month. See Executive Compensation – Management Services
Agreement for additional information.
38
RISK FACTORS
Our business is to engage in exploration
and production activities in the precious minerals mining industry, which is a highly speculative activity. An investment in our
securities involves a high degree of risk. You should not invest in our securities if you cannot afford to lose your entire investment.
In deciding whether you should invest in our securities, you should carefully consider the following information together with
all of the other information contained in this Current Report. Any of the following risk factors can cause our business, prospects,
financial condition or results of operations to suffer and you to lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS AND FINANCIAL
CONDITION
Estimates of mineralized material
are based on interpretation and assumptions and may yield less mineral production under actual conditions than is currently estimated.
There are numerous uncertainties inherent
in estimating quantities of mineralized material such as gold, zinc, lead, copper and silver, including many factors beyond our
control and no assurance can be given that the recovery of mineralized material will be realized. In general, estimates of mineralized
material are based upon a number of factors and assumptions made as of the date on which the estimates were determined, including:
§
geological and engineering estimates that have inherent uncertainties and the assumed effects of
regulation by governmental agencies;
§
the judgment of the engineers preparing the estimates;
§
estimates of future metals prices and operating costs;
§
the quality and quantity of available data;
§
the interpretation of that data; and
§
the accuracy of various mandated economic assumptions, all of which may vary considerably from
actual results.
Until mineralized material is actually
mined and processed, it must be considered an estimate only.  These estimates are imprecise and depend on geological
interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable.  We
cannot assure you that these mineralized material estimates will be accurate or that this mineralized material can be mined or
processed profitably.  Any material changes in estimates of mineralized material will affect the economic viability of
placing a property into production and such property's return on capital.  There can be no assurance that minerals
recovered in small scale metallurgical tests will be recovered at production scale.
We may have difficulty meeting our
current and future capital requirements.
Our management and our board of directors
monitor our overall costs and expenses and, if necessary, adjust our programs and planned expenditures in an attempt to ensure
we have sufficient operating capital.
We continue to evaluate our costs and planned expenditures for our on-going
development and care and maintenance efforts at our mineral properties. We raised in excess of $10 million during our 2011 fiscal
year from that certain MPRPA dated as of April 15, 2011 between EGI, EGLLC and BDH, and increased our cash and cash equivalent
assets by $296,774. In February 2012, we raised an additional $1.8 million in bridge financing. However, the continued development
and care and maintenance of our mineral properties will require significant amounts of additional capital.  As a result, we
may need to explore raising additional capital during fiscal 2012 and beyond so that we can continue to fully fund our planned
activities.  Our ability to obtain this financing will depend upon, among other things, the price of gold and the industry's
perception of its future price. The extraordinary conditions in the global financial and capital markets have currently limited
the availability of this funding.  Therefore, availability of funding is dependent largely upon factors outside of our
control, and cannot be accurately predicted. If the disruptions in the global financial and capital markets continue, debt or equity
financing may not be available to us on acceptable terms, if at all.  If we are unable to fund future operations by way of
financing, including public or private offerings of equity or debt securities, our business, financial condition and exploration
activities will be adversely impacted.
39
The outstanding debt instruments
of our largest shareholder (EGLLC) and its affiliate (MFPI) contains restrictive covenants relating to our operations.
Pursuant
to secured mortgages encumbering all of the assets and property of EGI and MTMI, the secured lenders to our largest shareholder,
EGLLC, and its affiliate, MFPI, imposed restrictions on us that affect our ability to incur additional debt. Further, the Tri-Party
Agreement by and among EGLLC, the Secured Lenders and the Company requires us to comply with various financial covenants set forth
in the mortgages encumbering all of the assets and property of EGI and MTMI. A breach of the covenants could result in an acceleration
of the debt obligations of EGLLC and MFPI and if a waiver or modification is not agreed upon with the Secured Lenders, our ability
to continue as a going concern would be affected and the Secured Lenders would be able to foreclose on the assets and property
of EGI and MTMI as provided for in the loan reinstatement and modification agreement by and among EGLLC and the Secured Lenders.
The volatility of the price of gold,
zinc, lead, copper or silver could adversely affect our future operations and, if warranted, our ability to develop our properties
.
The potential for profitability of our
operations, the value of our properties and our ability to raise funding to conduct continued exploration and development, if warranted,
are directly related to the market prices of gold, zinc, lead, copper, silver and other precious metals.  The prices
of such metals fluctuate widely and are affected by numerous factors beyond our control, including interest rates, expectations
for inflation, speculation, currency values (in particular the strength of the U.S. dollar), global and regional demand, political
and economic conditions and production costs in major metal producing regions of the world. The price of gold may also have a significant
influence on the market price of our common stock and the value of our properties.  Our decision to put a mine into production
and to commit the funds necessary for that purpose must be made long before the first revenue from production would be received.  A
decrease in the prices of gold, zinc, lead, copper or silver may prevent our property from being economically mined or result in
the write-off of assets whose value is impaired as a result of lower gold, zinc, lead, copper or silver prices.  The
prices of gold, zinc, lead, copper and silver is affected by numerous factors beyond our control, including inflation, fluctuation
of the United States dollar and foreign currencies, global and regional demand, the sale of gold, zinc, lead, copper and silver
by central banks, and the political and economic conditions of major gold and silver producing countries throughout the world.
The volatility in gold, silver and copper
prices is illustrated by the following table, which sets forth for each of the past five calendar years, the average annual market
prices in U.S. dollars per ounce of gold and silver, based on the daily London P.M. fixing, and per ounce of copper, based on the
Mundi Index:
Mineral
2007
2008
2009
2010
2011
Gold
$
695.39
$
871.96
$
972.35
$
1,224.52
$
1,571.52
Silver
$
13.41
$
15.00
$
14.69
$
20.20
$
35.26
Copper
$
3.23
$
3.16
$
2.34
$
3.42
$
4.00
The volatility of mineral prices represents
a substantial risk which no amount of planning or technical expertise can fully eliminate.  In the event gold prices
decline or remain low for prolonged periods of time, we might be unable to develop our properties, which may adversely affect our
results of operations, financial performance and cash flows
40
The nature of mineral exploration
and production activities involves a high degree of risk and the possibility of uninsured losses
.
Exploration for and the production of minerals
is highly speculative and involves greater risk than many other businesses.  Many exploration programs do not result
in the discovery of mineralization, and any mineralization discovered may not be of sufficient quantity or quality to be profitably
mined.  Our operations are, and any future development or mining operations we may conduct will be, subject to all of
the operating hazards and risks normally incident to exploring for and development of mineral properties, such as, but not limited
to:
§
Economically insufficient mineralized material;
§
Fluctuation in production costs that make mining uneconomical;
§
Labor disputes;
§
Unanticipated variations in grade and other geologic problems;
§
Environmental hazards;
§
Water conditions;
§
Difficult surface or underground conditions;
§
Industrial accidents;
§
Metallurgic and other processing problems;
§
Mechanical and equipment performance problems;
§
Failure of pit walls or dams;
§
Unusual or unexpected rock formations;
§
Personal injury, fire, flooding, cave-ins and landslides; and
§
Decrease in the value of mineralized material due to lower gold, zinc, lead, copper or silver prices.
Any of these risks can materially and adversely
affect, among other things, the development of properties, production quantities and rates, costs and expenditures, potential revenues
and production dates.  We currently have limited insurance to guard against some of these risks.  If we determine
that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a writedown
of our investment in these interests.  All of these factors may result in losses in relation to amounts spent which are
not recoverable, or result in additional expenses.
Difficult conditions in the global
capital markets and the economy generally may materially adversely affect our business and results of operations, and we do not
expect these conditions to improve in the near future
.
Our results of operations are materially
affected by conditions in the domestic capital markets and the economy generally. The stress experienced by domestic capital markets
that began in the second half of 2007 has continued and substantially increased into the present. Recently, concerns over inflation,
energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining real estate market
in the U.S. have contributed to increased volatility and diminished expectation for the economy and the markets going forward.
These factors, combined with volatile oil and gas prices, declining business and consumer confidence and increased unemployment,
have precipitated an economic slowdown and fears of a continued recession. In addition, the fixed-income markets are experiencing
a period of extreme volatility which has negatively impacted market liquidity conditions.
41
Initially, the concerns on the part of
market participants were focused on the subprime segment of the mortgage-backed securities market. However, these concerns have
since expanded to include a broad range of mortgage and asset-backed and other fixed income securities, including those rated investment
grade, the U.S. and international credit and interbank money markets generally and a wide range of financial institutions and markets,
asset classes and sectors. As a result, capital markets have experienced decreased liquidity, increased price volatility, credit
downgrade events, and increased probabilities of default. These events and the continuing market upheavals may have an adverse
effect on us because our liquidity and ability to fund our capital expenditures is dependent in part upon our access to the private
and public capital markets. In addition, in the event of extreme prolonged market events, such as the global credit crisis, we
could incur significant losses. Even in the absence of a market downturn, we are exposed to substantial risk of loss due to market
volatility. The forgoing factors may have a negative impact on the value of our company, our assets, and our common stock resulting
in illiquidity of our shares and potentially a total loss to our shareholders and a failure of our business.
Failure to extend the life of the
Montana Tunnels Mine or Golden Dream Mine would significantly reduce our gold production.
Although our Montana Tunnels Mine has been
in production from 1987 through 2008 the mine is currently on care and maintenance awaiting financing to recommence production.
During its productive period the Montana Tunnels Mine produced in excess of 1.7 million ounces of gold. As of December 2011, we
declared reserves of approximately 450,000 ounces of gold remaining at the Montana Tunnels Mine and 260,000 ounces of gold at the
Golden Dream Mine recoverable by open pit or underground mining methods. Development of these reserves is dependent upon financing
at reasonable terms and a sufficient gold price to provide a reasonable return on investment. The ultimate success of both mines
depends largely on our ability to raise the necessary capital to recommence mining activities on the current mine lives (9 years
for Montana Tunnels Mine and 5 years for Golden Dream Mine) and, in due course, expand the mine lives of both operations.
Title to our properties may be challenged
or defective.
Our planned future operations, including
our activities at the Golden Dream Mine and Montana Tunnels Mine projects and other exploration activities, may require amendments
to our currently approved permits from various governmental authorities. Our operations are and will continue to be governed by
laws and regulations governing prospecting, mineral exploration, exports, taxes, labor standards, occupational health, waste disposal,
toxic substances, land use, environmental protection, mine safety, mining royalties and other matters. There can be no assurance
that we will be able to acquire all required licenses, permits, amendments or property rights on reasonable terms or in a timely
manner, or at all, and that such terms will not be adversely changed, that required extensions will be granted, or that the issuance
of such licenses, permits or property rights will not be challenged by third parties.
We attempt to confirm the validity of our
rights of title to, or contract rights with respect to, each mineral property in which we have a material interest. However, we
cannot guarantee that title to our properties will not be challenged. Our mineral properties may be subject to prior unregistered
agreements, interests or native land claims, and title may be affected by undetected defects. There may be valid challenges to
the title of any of the claims comprising our mineral properties that, if successful, could impair possible development and/or
operations with respect to such properties in the future. Challenges to permits or property rights, whether successful or unsuccessful;
changes to the terms of permits or property rights; or a failure to comply with the terms of any permits or property rights that
have been obtained, could have a material adverse effect on our business by delaying or preventing or making continued operations
economically unfeasible.
42
A title defect could result in EGI or MTMI
losing all or a portion of its right, title, and interest in and to the properties to which the title defect relates. Title insurance
generally is not available, and our ability to ensure that we have obtained secure title to individual mineral properties or mining
concessions may be severely constrained. In addition, we may be unable to operate our properties as permitted or to enforce our
rights with respect to our properties. We regularly monitor the official land records in the counties in which our mineral properties
lie to determine if there are annotations indicating the existence of a legal challenge against the validity of any of our concessions.
As of December 31, 2011, there were no such annotations, nor are we aware of any challenges from the government or from third parties.
We are subject to complex environmental
and other regulatory risks, which could expose us to significant liability and delay, and potentially the suspension or termination
of our development efforts.
Compliance with environmental quality requirements
and reclamation laws imposed by federal, state, provincial, and local governmental authorities may:
§
require significant capital outlays;
§
materially affect the economics of a given property;
§
cause material changes or delays in our intended activities; and
§
expose us to lawsuits.
These regulations mandate, among other
things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation,
transportation, storage and disposal of solid and hazardous waste. Applicable authorities may require us to prepare and present
data pertaining to the effect or impact that any proposed exploration for or production of minerals may have upon the environment.
The requirements imposed by any such authorities may be costly, time consuming, and may delay operations. Future legislation and
regulations designed to protect the environment, as well as future interpretations of existing laws and regulations, may require
substantial increases in equipment and operating costs and delays, interruptions, or a termination of operations. We cannot accurately
predict or estimate the impact of any such future laws or regulations, or future interpretations of existing laws and regulations,
on our operations.
Historic mining activities have occurred
on certain of our properties. If such historic activities have resulted in releases or threatened releases of regulated substances
to the environment, potential for liability may exist under federal or state remediation statutes. Such liability would include
remediating any damage that we may have caused, including costs for removing or remediating the release and damage to natural resources,
including ground water, as well as the payment of fines and penalties. Except as discussed in our periodic filings with the SEC,
we are not aware of any such claims under these statutes at this time, and cannot predict whether any such claims will be asserted
in the future.
We may produce air emissions and
pollutions that could fall under the jurisdiction of U.S. federal laws.
Under the U.S. Resource Conservation and
Recovery Act, mining companies may incur costs for generating, transporting, treating, storing, or disposing of hazardous waste,
as well as for closure and post-closure maintenance once they have completed mining activities on a property. Our mining operations
may produce air emissions, including fugitive dust and other air pollutants, from stationary equipment, storage facilities, and
the use of mobile sources such as trucks and heavy construction equipment which are subject to review, monitoring and/or control
requirements under the Federal Clean Air Act and state air quality laws. Permitting rules may impose limitations on our production
levels or create additional capital expenditures in order to comply with the rules.
43
Legislation has been proposed that
would significantly affect the mining industry.
Periodically, members of the U.S. Congress
have introduced bills which would supplant or alter the provisions of the General Mining Law of 1872, which governs the unpatented
claims that we control with respect to our U.S. properties. One such amendment has become law and has imposed a moratorium on the
patenting of mining claims, which reduced the security of title provided by unpatented claims such as those on our U.S. properties.
If additional legislation is enacted, it could substantially increase the cost of holding unpatented mining claims by requiring
payment of royalties, and could significantly impair our ability to develop mineral estimates on unpatented mining claims. Such
bills have proposed, among other things, to make permanent the patent moratorium, to impose a federal royalty on production from
unpatented mining claims and to declare certain lands as unsuitable for mining. Although it is impossible to predict at this time
what royalties may be imposed in the future, the imposition of such royalties could adversely affect the potential for development
of such mining claims, and the economics of existing operating mines on federal unpatented mining claims. Passage of such legislation
could adversely affect our business.
Our operations are subject to permitting
requirements which could require us to delay, suspend or terminate our operations on our mining properties.
Our operations, including ongoing exploration
drilling programs, require permits from the state and federal governments, including permits for the use of water and for drilling
wells for water. We may be unable to obtain these permits in a timely manner, on reasonable terms or on terms that provide us sufficient
resources to develop our properties, or at all. Even if we are able to obtain such permits, the time required by the permitting
process can be significant. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits,
our timetable and business plan for exploration of our properties will be adversely affected, which may in turn adversely affect
our results of operations, financial condition and cash flows.
We may face a shortage of water.
Water is essential in all phases of the
exploration, development and operation of mineral properties. With the nature of our operations, water is used in such processes
as exploration, drilling, testing, dust suppression, milling and tailings disposal. Although currently both of our contemplated
operations have adequate water supplies under permit for use in the operations, the lack of available water and the cost of acquisition
may make an otherwise viable project economically impossible to complete.
Global climate change is an international
concern, and could impact our ability to conduct future operations
.
Global climate change is an international
issue and receives an enormous amount of publicity. We would expect that the imposition of international treaties or federal, state
or local laws or regulations pertaining to mandatory reductions in energy consumption or emissions of greenhouse gasses could affect
the feasibility of our mining projects and increase our operating costs.
Because access to the mineral property
may be restricted by inclement weather or other hazards, we may be delayed in our development efforts.
We are subject to risks and hazards, including
environmental hazards, the encountering of unusual or unexpected geological formations, cave-ins, flooding, earthquakes and periodic
interruptions due to inclement or hazardous weather conditions. As a result, access to our mineral properties may be restricted
during parts of the year. The properties are in a mountainous area in the Jefferson County and Broadwater County, Montana which
is accessible by county roads, BLM roads, and private roads. Although these roads have been used for exploration, forestry and
mining operations in the past, they are best traveled by four-wheel drive vehicles from spring to the beginning of winter. During
the winter months, heavy snowfall can make it difficult to undertake work programs. We do not currently plan exploration drilling
operations in the winter months. Frequent inclement weather in the winter months can make development and mining activities difficult
for short periods of time.
44
We may face a shortage of supplies,
equipment and materials.
The mineral industry has experienced from
time to time shortages of certain supplies, equipment and materials necessary in the exploration, evaluation, development and production
of mineral deposits. The prices at which such supplies and materials are available have also greatly increased. Our planned operations
could be subject to delays due to such shortages and further price escalations could increase our costs for such supplies, equipment
and materials. Our experience and that of others in the industry is that suppliers are often unable to meet contractual obligations
for supplies, equipment, materials, and services, and that alternate sources of supply do not exist.
The market for obtaining desirable
properties, investment capital, and outside engineers and consultants is highly competitive.
Presently, we employ a limited number of
full-time employees, utilize outside consultants, and in large part rely on the personal efforts of our officers and directors.
Our success will depend, in part, upon the ability to attract and retain qualified outside engineers and other professionals to
develop and operate our mineral properties, in addition to obtaining investment capital to conduct our mining operations. We believe
that we will be able to attract competent employees and consultants, but no assurance can be given that we will be successful in
this regard as competition for these professionals is highly competitive. If we are unable to engage and retain the necessary personnel,
our business would be materially and adversely affected.
We depend upon a limited number of
personnel and the loss of any of these individuals could adversely affect our business
.
If any of our current executive employees
were to die, become disabled or leave our company, we would be forced to identify and retain individuals to replace them.  Messrs.
Patrick W.M Imeson, Robert Trenaman, Eric Altman and Timothy Smith are our critical employees at this time. In addition to the
executives, our company relies heavily on a several staff people that have extensive knowledge of our properties and mine plans.
  There is no assurance that we can find suitable individuals to replace them or to add to our employee base if that becomes
necessary.  We are entirely dependent on these individuals as our critical personnel at this time.  We have
no life insurance on any of our employees, and we may be unable to hire a suitable replacement for them on favorable terms, should
that become necessary.
Some of our directors may have conflicts
of interest as a result of their involvement with other natural resource companies or with equity, preferred equity, or lost positions
in the company.
Some of our directors are directors or
officers of other natural resource or mining-related companies, or may be involved in related pursuits that could present conflicts
of interest with their roles at the Company. These associations may give rise to conflicts of interest from time to time.
In the event that any such conflict of
interest arises, a director who has such a conflict is required to disclose the conflict to the board of directors of the company
in question and to abstain from voting for or against approval of any matter in which such director may have a conflict. In appropriate
cases, we will establish a special committee of independent directors to review a matter in which any director or member of management
may have a conflict.
45
We have incurred substantial losses
since our inception and may never be profitable.
We have accumulated substantial losses,
and we have very limited revenue from operations since the previous owners of Montana Tunnels Mine shut down the mill in 2009.  During
the fiscal years ended 2011 and 2010, we have reported net losses of approximately $30 million and $10 million, respectively.  We
had an accumulated deficit of approximately $59 million as of December 31, 2011.  We expect to continue to incur losses
unless and until we generate sufficient revenue from production to fund continuing operations including exploration and development
costs.  There is no assurance we will be profitable for any quarterly or annual period.  Our failure to report
profits may adversely affect the price of our common stock and you may lose all or part of your investment.
Except for the MPRPA (discussed below),
we currently have not entered into forward sales, commodity, derivatives or hedging arrangements with respect to our gold production
and as a result we are exposed to the impact of any significant decrease in the gold, zinc, lead, copper and silver prices
.
We expect to sell the gold, zinc, lead,
copper and silver we expect to be producing at prevailing market prices. Currently, we have not entered into forward sales, commodity,
derivative or hedging arrangements to establish a price in advance for the sale of future production, although we may do so in
the future. As a result, we may realize the benefit of any short-term increase in the gold price, but we are not protected against
decreases in gold, zinc, lead, copper and silver prices, and if gold, zinc, lead, copper and silver prices decrease significantly,
our expected future revenues may be materially adversely affected.
If we are unable to achieve mineral
production levels anticipated from our Montana Tunnels Project and Elkhorn Goldfields Project, our financial condition and results
of operation will be adversely affected
.
We are proceeding with the development
of the Montana Tunnels open-pit mine expansion and the development of the Golden Dream
underground
mine based on
estimates of mineralized material identified in our drilling programs and estimates of mineral
recovery based on, in the
case of Montana Tunnels, historical operating results and, in the case of the Golden Dream Mine, test work developed during our
internal feasibility studies.  However, risks related to metallurgy are inherent when working with extractable minerals.  Sales
of minerals, if any, that we realize from future mining activity will be less than anticipated if the mined material does not contain
the concentration of minerals predicted by our geological exploration.  This risk may be increased since we have not
sought or obtained a feasibility study or reserve report with regard to any of our properties.  If sales of our minerals
are less than anticipated, we may not be able to recover our investment in our property and our operations may be adversely affected.  Our
inability to realize production based on quarterly or annual projections may adversely affect the price of our common stock and
you may lose all or part of your investment.
Our existing planned production is
limited to two properties and our ability to become and remain profitable over the long term will depend on our ability to identify,
explore and develop additional properties
.
Gold, zinc, lead, copper and silver properties
are wasting assets.  They eventually become depleted or uneconomical to continue mining.  Under our current
production plan and design at our open pit Montana Tunnels Mine, there are approximately eight years of commercial production from
operations commencement.  Accordingly, our ability to become and remain profitable over the long term depends on our
ability to finalize the design, permit, development and profitable extraction and recovery of mineral resources beyond the current
planned nine year mine life for the Montana Tunnels Mine. At the Golden Dream Mine our current permitted production plan encompasses
approximately five years of commercial production from operations commencement. As with the Montana Tunnels Mine our ability to
become and remain profitable over the long term depends on our ability to finalize the design, permit, development and profitable
extraction and recovery of mineral resources beyond the current five year mine life. If our ability to expand the operations beyond
their current planned mined lives doesn't occur we may seek to acquire other precious and base metals properties beyond our
current properties. The acquisition of precious and base metals properties and their exploration and development are subject to
intense competition.  Companies with greater financial resources, larger staff, more experience and more equipment for
exploration and development may be in a better position than us to compete for such mineral properties.  If we are unable
to find, develop, and economically mine new properties, we most likely will not be profitable on a long term basis and the price
of our common stock may suffer.
46
Since we have a very limited operating
history, investors have little basis to evaluate our ability to operate
.
Our activities to date have been focused
on raising financing, exploring our properties and preparing those properties for production.  Although our mine and
concentrating facilities at the Montana Tunnels operation have operated from 1987 through to 2009, these operations were carried
out under different ownership and, as a consequence we face all of the risks commonly encountered by other businesses that lack
an established operating history, including the need for additional capital and personnel, and intense competition.  There
is no assurance that our business plan will be successful.
The construction of our mines and
optimization and continued operation of our mills are subject to all of the risks inherent in construction, start-up and operations
.
These risks include potential delays, cost
overruns, shortages of material or labor, construction defects, breakdowns and injuries to persons and property.  We
expect to engage self-employed personnel, subcontractors and material suppliers in connection with the construction and development
of the Montana Tunnels Mine and Golden Dream Mine projects.  While we anticipate taking all measures which we deem reasonable
and prudent in connection with construction of the mines and the operation of the mills, there is no assurance that the risks described
above will not cause delays or cost overruns in connection with such construction or operation.  Any delays would postpone
our anticipated receipt of revenue and adversely affect our operations, which in turn may adversely affect the price of our stock.
Our operations are subject to permitting
requirements which could require us to delay, suspend or terminate our operations
.
Our operations require permits from the
State of Montana and the U.S. federal government.  If we cannot obtain or maintain the necessary permits, or if there
is a delay in receiving future permits, our timetable and business plan will be adversely affected.
We do not insure against all of the
risks to which we may be subject in our operations.
While we currently maintain insurance against
general commercial liability claims and the physical assets at our projects, we do not maintain insurance to cover all of the potential
risks associated with our operations.  We might be subject to liability for environmental, pollution or other hazards
associated with mineral exploration and development, which risks may not be insured against, which may exceed the limits of our
insurance coverage, or which we may elect not to insure against because of premium costs or other reasons.  We may also
not be insured against interruptions to our operations.  Losses from these or other events may cause us to incur significant
costs which could materially adversely affect our financial condition and our ability to fund activities on our property.  A
significant loss could force us to reduce or terminate our operations.
47
We may require significant additional
capital to fund our business plan.
We will be required to expend significant
funds to determine if proven and probable mineral reserves exist at some of our properties, to continue exploration and if warranted,
develop our existing properties and to identify and acquire additional properties to diversify our property portfolio.  There
can be no assurance that any of the development properties we now hold, or which we may acquire, will contain a commercial ore
reserve, and therefore, no assurance that we will ever generate a positive cash flow from the sale of production on such properties.
In addition, once we decide to place a property into production, risks still exist that the amount and grade of the reserves may
be significantly less than predicted. We have spent and will be required to continue to expend significant amounts of capital for
drilling, geological and geochemical analysis, assaying and feasibility studies with regard to the results of our exploration.  We
may not benefit from these investments if we are unable to identify commercially exploitable mineralized material.  If
we do locate commercially mineable material or decide to put additional properties into production, we may be required to upgrade
our milling facility at the Montana Tunnels Mill Complex or construct new milling facilities.
Our ability to obtain necessary funding
for these purposes, in turn, depends upon a number of factors, including the status of the national and worldwide economy and the
prices of gold and other precious and base metals.  Capital markets worldwide have been adversely affected by substantial
losses by financial institutions, in turn caused by investments in asset-backed securities.  We may not be successful
in obtaining the required financing, or if we can obtain such financing, such financing may not be on terms that are favorable
to us.  Failure to obtain such additional financing could result in delay or indefinite postponement of further mining
operations or exploration and development and the possible partial or total loss of our potential interest in our properties.
We have significant obligations at
the Montana Tunnels Mine, which may adversely impact liquidity.
Our Montana Tunnels Mine in Montana operates
under a number of permits issued by local, state and federal agencies. Those agencies require us to post a total of $33.6 million
in reclamation bonds in order to commence development of our "M" Pit expansion. We have partially collateralized the
surety bonds at the Montana Tunnels Mine with $16 million in cash and reclamation bonds, $3.6 million in a security interest in
real property mineral interests. In addition, the Golden Dream Mine has provided the regulatory agencies $604,021 in cash for its
reclamation obligations pursuant to our operating and exploration permits.
Our operating costs could be adversely
affected by inflationary pressures especially to labor and fuel costs.
The global economy is currently in a period
of high commodity prices and as a result the mining industry is attempting to increase production. This has caused significant
upward price pressures in the operating costs of mining companies especially in the area of skilled labor. The skilled labor needed
by the mining industry is in tight supply and its cost is increasing. Many of our competitors have lower costs and their mines
are located in better locations that may give them a competitive advantage in employee hiring and retention.
The cost of fuel to run machinery and generate
electricity is closely correlated to the price of oil and energy. Over the past two years the price of oil has risen significantly
and has increased the operating cost of mines dependent on fuel to run their business. Continued upward price pressures in our
operating costs may cause us to generate significantly less operating cash flows than expected which would have an adverse impact
to our business.
48
Our continuing reclamation obligations
at the Montana Tunnels Mine and our other properties could require significant additional expenditures.
We are responsible for the reclamation
obligations related to disturbances located on all of our mineral properties. We have posted bonds in the amount of the estimated
reclamation obligation at the properties. The reclamation bond amount is an estimation based upon mine closure plans which have
been designed by our employees and consultants and submitted to, and approved by, the Bureau of Land Management ("BLM")
and the Montana Department of Environmental Quality ("MDEQ"). Every five years the regulatory authorities review the
reclamation plans and apply new costs based upon inflation rates and updated rates and costs for reclamation activities. There
is a risk that we will be unable to fund these additional bonding requirements, and further that increase reclamation and bonding
requirements may increase to such a degree that it would not be commercially reasonable to continue exploration activities, which
may adversely affect our results of operations, financial performance and cash flows.
We will continue to incur losses
for the foreseeable future.
Prior
to completion of the development and pre-production stage, we anticipate that we will incur increased operating expenses without
realizing any revenues. We expect to incur continuing and significant losses until such time as we achieve commercial production
from our mining operations on our mineral claims.  As a result of continuing losses, we may exhaust all of our resources
and be unable to complete development of our planned mining operations. Our accumulated deficit will continue to increase as we
continue to incur losses. We may not be able to generate profits or continue operations if we are unable to generate significant
revenues from future mining of the mineral claims and our business will most likely fail.
RISKS RELATED TO OUR COMMON STOCK
There currently is no public market
for our Common Stock. Failure to develop or maintain a trading market could negatively affect the value of our Common Stock and
make it difficult or impossible for you to sell your shares.
There is currently no public market for
shares of our Common Stock and one may never develop. Our Common Stock is quoted on the OTC Bulletin Board operated by the Financial
Industry Regulatory Authority, Inc. The OTC Bulletin Board is a thinly traded market and lacks the liquidity of certain other public
markets with which some investors may have more experience. We may not ever be able to satisfy the listing requirements for our
Common Stock to be listed on an exchange, which are often a more widely-traded and liquid market. Some, but not all, of the factors
which may delay or prevent the listing of our Common Stock on a more widely-traded and liquid market include the following: our
stockholders' equity may be insufficient; the market value of our outstanding securities may be too low; our net income from
operations may be too low; our Common Stock may not be sufficiently widely held; we may not be able to secure market makers for
our Common Stock; and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our
Common Stock listed.
We cannot assure you that the Common
Stock will become liquid or that it will be listed on a securities exchange.
Until our Common Stock is listed on a national
securities exchange such as the New York Stock Exchange or the Nasdaq Stock Market, we expect our Common Stock to remain eligible
for quotation on the OTC Bulletin Board, or on another over-the-counter quotation system such as OTC Markets, Inc. In those venues,
however, an investor may find it difficult to obtain accurate quotations as to the market value of our Common Stock. In addition,
if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who
sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter
broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of the Common Stock. This
would also make it more difficult for us to raise capital.
49
Our Common Stock is subject to the
"Penny Stock" rules of the SEC and the trading market in the securities is limited, which makes transactions in the
stock cumbersome and may reduce the value of an investment in the stock.
The SEC has adopted Rule 15g-9 which establishes
the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price
of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, the rules require:
·
that a broker or dealer approve a person's account for transactions in penny stocks; and
·
the broker or dealer receive from the investor a written agreement to the transaction, setting
forth the identity and quantity of the penny stock to be purchased.
In order to approve a person's account
for transactions in penny stocks, the broker or dealer must:
·
obtain financial information and investment experience objectives of the person; and
·
make a reasonable determination that the transactions in penny stocks are suitable for that person
and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions
in penny stocks.
The broker or dealer must also deliver,
prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which,
in highlight form sets forth:
·
the basis on which the broker or dealer made the suitability determination; and
·
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing
to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors
to dispose of common stock and cause a decline in the market value of stock.
Disclosure also has to be made about the
risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both
the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available
to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price
information for the penny stock held in the account and information on the limited market in penny stocks.
Our common stock is controlled by
one shareholder.
EGLLC beneficially
owns approximately 88.2% of our capital stock, on a fully diluted basis. Such concentrated control of the Company may adversely
affect the price of our Common Stock. Investors who acquire Common Stock may have no effective voice in the management of the Company.
Sales by this stockholder, along with any other market transactions, could affect the market price of the Common Stock. In addition,
the Pubco Holders
of our free trading shares of Common Stock immediately prior to the Merger, the Public Float Shares, entered
into lock-up agreements with ESRI whereby the Pubco Holders agreed that forty percent (40%) of their Public Float Shares may not
be sold for a period of twelve (12) months following the Merger closing date. These lock ups may also
adversely
affect the price of our Common Stock
50
The price of our Common Stock may
become volatile, which could lead to losses by investors and costly securities litigation.
The trading price of our Common Stock is
likely to be highly volatile and could fluctuate in response to factors such as:
·
actual or anticipated variations in our operating results;
·
announcements of developments by us or our competitors;
·
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint
ventures or capital commitments;
·
adoption of new accounting standards affecting our Company's industry;
·
additions or departures of key personnel;
·
sales of our Common Stock or other securities in the open market; and
·
other events or factors, many of which are beyond our control.
The stock market is subject to significant
price and volume fluctuations. In the past, following periods of volatility in the market price of a company's securities,
securities class action litigation has often been initiated against the company. Litigation initiated against us, whether or not
successful, could result in substantial costs and diversion of our management's attention and resources, which could harm
our business and financial condition.
Compliance with Sarbanes-Oxley may
result in our inability to achieve profitability
.
The Sarbanes-Oxley Act of 2002 was enacted
to increase corporate responsibility and accountability, to provide for enhanced penalties for accounting and auditing improprieties
relating to publicly-traded companies, and to protect investors by improving the accuracy and reliability of corporate disclosures
pursuant to U.S. federal securities laws. The Sarbanes-Oxley Act generally applies to all companies that file or are required to
file periodic reports with the SEC, under the Securities Exchange Act of 1934, as amended. Upon becoming a publicly reporting company,
we are required to comply with the Sarbanes-Oxley Act and its costs to remain in compliance with the federal securities regulations.
The enactment of the Sarbanes-Oxley Act has resulted in a series of rules and regulations by the SEC that increase responsibilities
and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes
may make it more costly to attract or may deter qualified individuals from accepting these roles. If we are unable to attract and
retain qualified officers, directors and board committee members, which are required pursuant to the Sarbanes-Oxley Act, we may
not be able to provide effective management or comply with federal law. Additionally, significant costs incurred as a result of
being a public company could divert the use of finances from our operations resulting in our inability to achieve profitability.
51
We are required to annually evaluate
our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from
such evaluation could result in a loss of investor confidence in our financial reports and have a material adverse effect on the
price of our common stock.
Under Section 404 of the Sarbanes-Oxley
Act, we are additionally required to furnish a report by our management on internal control over financial reporting.  Such
a report must contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting,
including a statement as to whether or not our internal control over financial reporting is effective.  This assessment
must include disclosure of any material weaknesses in our internal control over financial reporting identified by our management.  In
addition, our evaluation of the effectiveness of our internal controls will be subject to an annual audit by our independent registered
public accounting firm and there is no assurance that they will agree with our assessment.  If we are unable to maintain
and to assert that our internal control over financial reporting is effective, or if we disclose material weaknesses in our internal
control over financial reporting, or if our independent registered public accounting firm does not agree with our assessment, investors
could lose confidence in the accuracy and completeness of our financial reports, which could have a material adverse effect on
our stock price.
Furthermore, if our efforts to comply with new or changed laws, regulations, and standards
differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities
may initiate legal proceedings against us and our business may be harmed.
Compliance with U.S. securities laws,
including the Sarbanes-Oxley Act, will be costly and time-consuming.
After completion of the Merger, we will
continue as a reporting company under U.S. securities laws, and we will be obliged to comply with the provisions of applicable
U.S. laws and regulations, including the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 and the related rules
of the SEC, and the rules and regulations of the relevant U.S. market. Preparing and filing annual and quarterly reports and other
information with the SEC, furnishing audited reports to stockholders and other compliance with these rules and regulations will
involve a material increase in regulatory, legal and accounting expenses and the attention of management, and there can be no assurance
that we will be able to comply with the applicable regulations in a timely manner, if at all.
We do not anticipate dividends to
be paid on our Common Stock, and investors may lose the entire amount of their investment.
Cash dividends have never been declared
or paid on the Common Stock, and we do not anticipate such a declaration or payment for the foreseeable future. Furthermore, in
accordance with the terms of our outstanding Series A Preferred Stock, we cannot pay dividends on the Common Stock so long as the
Series A Preferred remains outstanding. We expect to use future earnings, if any, to fund business growth and pay our obligations
under our Series A Preferred Stock. Therefore, stockholders will not receive any funds absent a sale of their shares. We cannot
assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will
not lose the entire amount of their investment.
If securities analysts do not initiate
coverage or continue to cover our Common Stock or publish unfavorable research or reports about our business, this may have a negative
impact on the market price of our Common Stock.
The trading market for the Common Stock
will depend on the research and reports that securities analysts publish about our business and the Company. We do not have any
control over these analysts. There is no guarantee that securities analysts will cover the Common Stock. If securities analysts
do not cover the Common Stock, the lack of research coverage may adversely affect its market price. If we are covered by securities
analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one
or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility
in the financial markets, which could cause our stock price or trading volume to decline.
52
State Blue Sky registration: potential
limitations on resale of the shares.
The holders of the shares of the Company
and persons who desire to purchase the shares in any trading market that might develop in the future, should be aware that there
may be significant state law restrictions upon the ability of investors to resell the securities. Accordingly, investors should
consider the secondary market for the Company's securities to be a limited one. It is the intention of our management to
seek coverage and publication of information regarding the Company in an accepted publication which permits a "manuals exemption."
This manuals exemption permits a security to be sold by shareholders in a particular state without being registered if the company
issuing the security has a listing for that security in a securities manual recognized by that state. The listing entry must contain
(i) the names of issuers, officers, and directors, (ii) an issuer's balance sheet, and (iii) a profit and loss statement
for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. The principal accepted
manuals are those published by Standard and Poor's and Mergent, Inc. Many states expressly recognize these manuals. A smaller
number of states declare that they recognize securities manuals, but do not specify the recognized manuals. Among others, the following
states do not have any provisions and, therefore, do not expressly recognize the manuals exemption: Alabama, California, Georgia,
Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont, and Wisconsin.
You may experience dilution of your
ownership interests because of the future issuance of additional shares of our Common Stock.
In the future,
we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of
our present stockholders.  We are currently authorized to issue an aggregate of 310,000,000 shares of capital stock,
consisting of 300,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock with preferences and rights to be determined
by our Board of Directors. As of April 6, 2012, there were 99,085,000 shares of our Common Stock (including an aggregate of 90,000,000
shares entitled to be received by EGLLC in the Merger) and 10,000,000 shares of our Series A Preferred Stock (all entitled to be
received by EGLLC in the Merger) issued and outstanding. There are 10,000,000 shares of our Common Stock reserved for issuance
under our 2012 Equity Incentive Plan. As of the Merger Closing Date, stock options exercisable for 5,445,000 shares of our Common
Stock have been granted under the 2012 Plan. There are also, $1,800,000 of EGI bridge loans outstanding that have the right to
convert into 900,000 shares of Common Stock, warrants to purchase 450,000 shares of Common Stock at $3.00 per share and special
warrants to purchase an indeterminate number of additional shares of Common Stock
exercisable upon the closing of the Company's
next private placement, provided the share price of the Common Stock offered in that private placement is less than $2.50 per share,
so that the exercise of the special warrant will reduce the lender's effective conversion price of the bridge loan for the
Common Stock by a 25% discount to the private placement offering price, such special warrant exercisable at a price of $0.01 per
share.
53
Any future issuance of our equity or equity-backed
securities may dilute then-current stockholders' ownership percentages and could also result in a decrease in the fair market
value of our equity securities, because our assets would be owned by a larger pool of outstanding equity. As described above, we
may need to raise additional capital through public or private offerings of our common or preferred stock or other securities that
are convertible into or exercisable for our common or preferred stock. We may also issue such securities in connection with hiring
or retaining employees and consultants (including stock options issued under our equity incentive plans), as payment to providers
of goods and services, in connection with future acquisitions or for other business purposes. Our Board of Directors may at any
time authorize the issuance of additional common or preferred stock without common stockholder approval, subject only to the total
number of authorized common and preferred shares set forth in our articles of incorporation. The terms of equity securities issued
by us in future transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior
voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect. Also, the
future issuance of any such additional shares of common or preferred stock or other securities may create downward pressure on
the trading price of the common stock. There can be no assurance that any such future issuances will not be at a price (or exercise
prices) below the price at which shares of the common stock are then traded.
RISKS RELATED TO OUR PREFERRED STOCK
We have issued 10,000,000 shares
of our Series A Preferred Stock, which may limit your rights as a holder of our Common Stock.
We currently have 10,000,000 shares of
our Series A Preferred Stock issued and outstanding. These shares carry, among other things, liquidation preferences redemption
rights and dividend rights that prelude the issuance of dividends on our Common Stock so long as any shares of Series A Preferred
Stock remain outstanding. These terms of the Series A Preferred Stock could adversely affect the rights of the holders of our Common
Stock and, therefore, reduce the value of the Common Stock.
If we are unable to generate sufficient
funds or obtain financing for future capital commitments, we may not be able to pay for redeemed Series A Preferred Stock, which
could have a material adverse effect on us.
EGLLC, as the sole shareholder of the Series
A Preferred Stock has the option, exercisable in whole or in part at any time and from time to time prior to the third anniversary
of the issuance of the Series A Preferred Stock as provided in the certificate of designation, to require us to purchase for cash,
out of legally available funds, any or all of the then-outstanding shares of Series A Preferred Stock at a price equal to $6.00
per share of an aggregate total of $60,000,000, subject to certain limitations. If we are unable to pay for EGLLC's redeemed
shares, such failure could result in an event of default under the loan reinstatement and modification agreement and a potential
remedy of the Secured Lenders would be a foreclosure on all of the assets and property of EGI and MTMI.
Our
inability to fund these future commitments could have a material adverse effect on us.
54
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND PLAN OF OPERATIONS
The following management's discussion
and analysis should be read in conjunction with MTMI's and EGI's historical combined financial statements and the related
notes. The management's discussion and analysis contains forward-looking statements that involve risks and uncertainties,
such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical
fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate,"
"target," "estimate," "expect" and the like, and/or future tense or conditional constructions
("will," "may," "could," "should," etc.), or similar expressions, identify certain
of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual
results or events to differ materially from those expressed or implied by the forward-looking statements in this Current Report.
The Company's actual results and the timing of events could differ materially from those anticipated in these forward-looking
statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to
reflect events or circumstances occurring after the date of this Current Report. Please see "Forward-Looking Statements"
and "Risk Factors" for a discussion of the uncertainties, risks and assumptions associated with these forward-looking
statements.
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,
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 report.
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.
55
Results from Operations
Revenue from the Sale of Gold
Elkhorn had no revenues from the sale of
gold from the Golden Dream or the Montana Tunnels Mines in 2011 or 2010. In August, 2011, The Company did realize revenue (net
of ore processing costs) of approximately $440,000 from the sale of 874 tons of stockpile of rock from past mining (resulting in
303 oz. of Gold) from the East Butte mine. The net revenue is included in other income for 2011.
Operating Expenses
Mine care and maintenance for the year
ended December 31, 2011 were $1,037,199, compared to $1,236,832 for the year ended December 31, 2010. The decrease is a result
of lower repairs and maintenance costs in 2011 as compared to 2010.
General and administrative expenses for
the year ended December 31, 2011 were $850,616, compared to $1,580,991 for the year ended December 31, 2010. In June, 2011, development
of the Golden Dream Mine commenced which resulted in the capitalization of payroll and related costs.
Accretion expense for the year ended December
31, 2011 were $1,327,221, compared to $1,535,632 for the year ended December 31, 2010. The decrease in 2011 as compared to 2010
is due to a reduction in accretion expense for the L-Pit at Montana Tunnels Mine. Management re-evaluates annually the timing of
the deferred site closure and reclamation costs related to Montana Tunnels Mining mill and mine sites. They anticipate that reclamation
of the mine and mill would be completed in 2024 which is extended several years from previous estimates. This extension is due
to management pursuing financing to commence development of the M-Pit, which would extend the mine life by 9 years. The total cost
of reclamation is consistent with previous estimates, however by extending the timeline, has reduced the related accretion expense.
Depreciation, depletion and amortization
expenses for the year ended December 31, 2011 were $6,604, compared to $11,129 for the year ended December 31, 2010. Depreciation,
depletion and amortization is calculated on the units of production basis over the remaining proven and probable reserves of the
mine. Montana Tunnels Mine ceased mining during 2008 after completion of the L-Pit and completed milling of stockpiled ore during
April, 2009 at which time the mine was placed on care and maintenance. Accordingly, there was no depreciation expense related to
Montana Tunnels Mine for the years ended December 31, 2011 and 2010. For the year ended, December 31, 2011, $60,100 of depreciation
expense for EGI was capitalized.
Total operating expenses for the year ended
December 31, 2011 were $3,221,640, compared to $4,364,584 for the year ended December 31, 2010.
Other Income and Expense
Interest expense for the year ended December
31, 2011 was $8,083,445, compared to $5,546,184 for the year ended December 31, 2010. The increase from 2010 to 2011 of interest
expense is a result annual compounding of accrued interest.
56
Interest
income for the year ended December 31, 2011 was $47,705, compared to $33,384 for the year ended December 31, 2010. 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 year. Slightly higher interest
rates in 2011 resulted in addition interest income as compared to 2010.
Other income for the year ended December
31, 2011 was $512,066, compared to $6,628 for the year ended December 31, 2010. The increase in other income is primarily due to
the one – time sale of stockpile of rock from past mining from the East Butte Mine totaling $440,000, net of processing costs.
Loss on related party ore purchase agreement
for the year ended December 31, 2011 was $13,025,932, compared to nil for the year ended December 31, 2010. The loss relates to
MPRPA as the Company recognized the difference fair value of gold at the agreement date and the contract price of gold in the agreement.
The change in fair value of the embedded
derivative for the year ended December 31, 2011 was $5,793,013, compared to nil for the year ended December 31, 2010. The loss
relates to the
change in the fair value of the commodity future prices of the MPRPA from the date
of closing to December 31, 2011
to reflect the loss in the change in fair value of the derivative instrument.
Going Concern
The attached annual report of contains
explanatory language that substantial doubt exists about Elkhorn's ability to continue as a going concern. This means that
there is substantial doubt that Elkhorn 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 completion of the proposed $7.5M Private Placement will be sufficient
to get the company into a position that the Golden Dream Deposit will begin extracting and selling mineral and providing sufficient
cash flow for operations of the Golden Dream Mine, care and maintenance of the Montana Tunnels Mine and other general and administrative
expenses; however, since we have not generated revenues since Montana Tunnels Mine shuttered mining in 2008, there is no assurance
we will ever reach that point.
Financing Operations and Capital Plan
In addition to the bridge financing we
completed prior to the closing of the Merger, we will need to raise additional capital to move the Golden Dream Mine into full
operations and commence the expansion and restart of the Montana Tunnels Mine. To accomplish this, we expect to engage in two private
placement offerings to raise approximately $7.5 million and approximately $30 million for our two ongoing mining projects, respectively.
Completed Bridge Financing
In February of 2012, prior to the closing
of the Merger, EGI completed a number of closings of a bridge financing with BDH, one of our beneficial stockholders through their
holdings in EGLLC, and another investor. In this bridge financing, EGI sold an aggregate of $300,000 in principal amount of its
12% unsecured convertible Bridge Notes to BDH and $1,500,000 in principal amount of these Bridge Notes to the other investor. The
Bridge Notes mature on August 29, 2012 and, prior to that date but after the closing of the Merger, may be converted, at the sole
discretion of each of the note holders, including accrued but unpaid interest, into Units of the Company's securities at
a conversion price of $2.00 per Unit, each Unit consisting of: (i) one share of Common Stock, (ii) and a warrant to purchase one-half
share of Common Stock, exercisable at a price of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing
of the Company's planned private placement, provided the share price of the Common Stock offered in the private placement
is less than $2.50 per share, so that the exercise of the special warrant will reduce the lender's effective conversion price
for the Common Stock at a 25% discount to the private placement offering price, such special warrant exercisable at a price of
$0.01 per share. Funds raised through this financing are being used by EGI to advance Golden Dream Mine operations and for general
working capital purposes.
57
We believe we will be successful in our
capital raising efforts; however, there can be no assurance we will be successful in raising additional debt or equity financing
to fund our operations on terms agreeable to us.
Plan of Operations and Capital Requirements
For the remainder of 2012, we plan to continue
mine development at the Golden Dream Mine, refurbishment of the Diamond Hill mill and maintenance of our equipment in advance of
beginning the M- Pit Expansion at the Montana Tunnels Mine. At the Montana Tunnels Mine, we plan to begin the M- Pit Expansion
with the existing haul fleet and equipment, and then augment our current equipment as new equipment and financing become available.
Our 2012 budget will require approximately $37.5 million in new capital which we expect to raise through the proposed private placement
offerings discussed above.
Our operating projections for the three
years beginning 2012 are set forth below. These projections are based on certain assumptions including, but not limited to, our
success in raising the required capital in our planned private placements. There can be no assurance that we will be successful
in our capital raising efforts. Failure to reach our capital targets could adversely affect our ability to achieve our three-year
target projections.
Operating Projections
Elkhorn Goldfields, Inc.
3 Year Budget
Metal Sales & Production
2012
2013
2014
Gold Production (k oz)
15.0
46.1
46.5
Gold Sales ($ million)
$
14.1
$
54.2
$
69.8
Copper Production (k lbs)
-
2.966.4
6.544.4
Copper Sales ($ million)
$
0.0
$
3.0
$
6.5
Financial Projection
2012
2013
2014
Revenue
$
14.1
$
57.2
$
76.3
Mine Operating Costs
$
15.7
$
27.3
$
20.4
General & Administrative Costs
$
1.7
$
3.3
$
3.9
EBITDA
$
(3.3
)
$
26.6
$
52.0
Interest Expense (Capital Lease)
$
0.3
$
0.5
$
0.4
Loss on related party ore purchase derivative
$
2.6
$
4.6
$
0.0
Depreciation/Amortization/Accretion
$
0.8
$
1.7
$
2.0
Net Income
$
(7.0
)
$
19.7
$
49.6
Preferred Dividends
$
1.8
$
7.2
$
7.2
58
2012 & 2013 Gold Sales: EGI entered
into an MPRPA with a related party to sell 80% of the first 41,700 ounces of gold produced from the Golden Dream Mine for an up-front
payment of $10,000,000. The agreement requires the Company to pay all proceeds from the sale of gold in excess of $500 per ounce
to the related party. EGI received the up-front payment in 2011 and recognized it as deferred revenue for the first 33,333 ounces
of gold sales (80% of the first 41,700 ounces per the agreement). As a result, Gold Sales in 2012 and 2013 reflect 80% of the first
41,700 ounces at $800 per ounce and 20% at market price. Thereafter, all gold sales are at market prices.
Subject to successfully completing the
$7.5M private placement offering, Management projects that the Golden Dream Mine should be in full production by the 3rd quarter
of 2012. As a result, the above reflects metal sales commencing in September, 2012. The sales projections listed above assume a
$1,500 per ounce market price for gold and a $3.75 per pound market price for copper.
Montana Tunnels Mining, Inc. 3 Year
Plan
Expansion of the mine in order to resume
full mining operations at MTMI is contingent upon raising sufficient capital to fund the M-Pit expansion, refurbishing the mill
and existing equipment and fund additional reclamation bonding requirements. Successfully raising the required capital in the second
half of 2012 would put the Montana Tunnels Mine on track to be in full operations in 2014. Once in full operations, the Montana
Tunnels Mine is projected to produce approximately 50,000 ounces of gold and 34 million pounds of zinc annually, resulting in average
net income of $49 million annually.
Liquidity and Capital Resources
Overview
We have funded our operations primarily
through issuances of debt and equity securities and will be required to raise additional proceeds through the further issuance
of debt and equity securities until at least one of our two mining properties generates positive cash flow from production.
59
At December 31, 2011, our total assets
were $43.9 million compared to $38.2 million at December 31, 2010. The increase in total assets is primarily attributable to the
$3.9 million invested in mine development of the Golden Dream Mine and $1 million in additions to equipment at EGI
At December 31, 2011, we had restricted
cash totaling $604,000 compared to $285,000 at December 31, 2010. Restricted cash represents cash held for the bonding requirements
imposed by the MDEQ that relates to the future reclamation costs on the Company's properties.
At December 31, 2011 we had a reclamation
bond totaling $16.2 million compared to $15.8 million at December 31, 2010. Reclamation bonds consist of cash held directly by
a surety for the reclamation of the Montana Tunnels and Elkhorn Project. The restriction will be released when the reclamation
is completed, which the Company expects to be in 2024 and 2018, respectively.
Cash
To date, the Company has funded its exploration,
development and operations primarily through issuances of debt and equity securities. At December 31, 2011, the Company had cash
of $358,125, compared to cash of $61,351 at December 31, 2010. The increase in cash since December 31, 2010 included operating
cash inflows of $9,473,607, investing cash outflows of $5,181,276, financing cash outflows of $3,995,557. The primary source of
cash inflows in 2011 was from the MPRPA with consideration of $10,000,000.
Liabilities
At December 31, 2011, the Company had liabilities
of $103,259,388, compared to $65,126,180 at December 31, 2010. Liabilities increased during 2011 primarily due to the Company recognizing
a MPRPA liability totaling $10,000,000 and $18,818,945 embedded derivative based on the contract terms, projected future gold prices
and discount rate commensurate with estimates of contemporary credit risk using a discounted cash flow model. The increase in liabilities
from 2010 to 2011 is also attributable to an increase in push down debt, interest and the redeemable obligation of parent and its
affiliate of $6,655,104. The remainder of the increase is from the reclamation liability of $1,327,221.
During 2011, the Company entered into an
MPRPA with a related party to sell 80% of the first 41,700 ounces of gold produced from the Golden Dream Mine for an up-front payment
of $10,000,000. The agreement requires the Company sell 80% of the first 41,700 ounces of gold produced for $500 per ounce, if
any, to the related party. Additionally, the related party may purchase 6.5% of the ounces produced after the mine has produced
in excess of 250,000 aggregate ounces for a purchase price of $600 per ounce. The term of this agreement runs through the closure
of the Golden Dream Mine, which is expected at least 5 years following the start of production.
The related party ore purchase liability
is comprised of $10,000,000 of up-front consideration, a recognized loss of $13,025,932 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 change in fair value
of the embedded derivative of $5,793,013 is a reflection of the change in the fair value of the derivative instrument contract
from the date of closing to December 31, 2011.
The Company's assets serve as collateral
for multiple loans and a redemption obligation of EGLLC and MFPI. Although the Company is not a maker or guarantor on the secured
loans or redemption obligation, these loans and obligation have been "pushed down" to the Company as reflected in its
audited financial statements. The redemption obligation was extended by MFPI to compensate and induce certain of its lenders who
are also the Secured Lenders of EGLLC, obligating MFPI to purchase, at the Secured Lenders' option, the $5,950,000 equity
investment made in an investment fund that is an owner of EGLLC and is managed by Black Diamond. The Company's mining properties
and equipment have been pledged as collateral to the Secured Lenders under two filed and recorded mortgages. The loans of the EGLLC
and MFPI are accruing interest between 15% and 18% per year. At December 31 2011 and 2010, the outstanding principal and interest
was $46,343,292 and $39,688,188.
60
EGI also owes $1,399,779 in Series A 8%
bonds. The bonds mature during July 2012, with interest accruing at 8%. In the case of default, interest on the bonds accrues at
12%. The Company recorded accrued interest of $106,358 as of December 31, 2011.
On May 24, 2010, the Environmental Protection
Agency (the "EPA") issued an "Action Memorandum" which documented the determination that soil removal was
necessary to mitigate threats posed by soils containing elevated levels of lead and arsenic located in historic mining areas near
the MTMI property (the "Site"). Site clean-up commenced in June 2010 and was completed by August 2010 at a total cost
to the EPA of approximately $1,700,000. On August 26, 2010, MTMI and the EPA entered into an Access and Compensation Agreement
("A&C Agreement") pursuant to which MTMI has agreed to pay to the EPA a total of $380,000. MTMI will remit $2,500
per month with a balloon payment due at month 36. The total amount due to the EPA is included in Accrued Liabilities in the audited
financial statements. It is expected that MTMI will start making these monthly payments by the third quarter of 2012.
Recent Developments
The EGI Bridge Financing
In February of 2012, prior to the closing
of the Merger, EGI completed a bridge financing, wherein it sold an aggregate of $1,800,000 in principal amount of its 12% unsecured
convertible Bridge Notes to two accredited investors, one of whom is an affiliate of the Company. The Bridge Notes mature on August
29, 2012 and, prior to that date but after the closing of the Merger, may be converted, along with accrued but unpaid interest,
at the sole discretion of the lender, into Units of the Company's securities at a conversion price of $2.00 per Unit, each
Unit consisting of: (i) one share of Common Stock, (ii) and a warrant to purchase one-half share of Common Stock, exercisable at
a price of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing of the Company's planned private
placement, provided the share price of the Common Stock offered in the private placement is less than $2.50 per share, so that
the exercise of the special warrant will reduce the lender's effective conversion price for the Common Stock at a 25% discount
to the private placement offering price, such special warrant exercisable at a price of $0.01 per share.
Series A Preferred Stock
As of the closing of the Merger and pursuant
to the Merger Agreement, we issued 10,000,000 shares of our designated Series A Preferred Stock to EGLLC (as more fully described
in the certificate of designations). EGLLC is entitled to receive, out of funds legally available therefor, cumulative non-compounding
preferential dividends at the rate of 12% of the stated value of $6.00 per share
per annum
(the "Preferential Dividend").
In the event of any defined liquidation event,
no distribution can be made to holders of shares of our
capital stock ranking junior to the Series A Preferred Stock, including the Common Stock, unless, prior thereto, EGLLC shall have
received an amount per share equal to $6.00 (the "Liquidation Amount") per share,
plus the amount of any accrued
and unpaid Preferential Dividend
owed to EGLLC. EGLLC
has the option, exercisable in whole or
in part at any time and from time to time prior to the third anniversary of the issuance of the Series A Preferred Stock, to require
us to purchase for cash, out of legally available funds, any or all of the then-outstanding shares of Series A Preferred Stock
at a price equal to $6.00 per share. We have the option, exercisable in whole or in part at any time and from time to time prior
to the third anniversary of the issuance of the Series A Preferred Stock, to redeem any or all of the then-outstanding shares of
Series A Preferred Stock at a price equal to $7.00 per share.
61
Provided that neither EGLLC nor the Company
has exercised its redemption options in full by the third anniversary of the issuance of the Series A Preferred Stock, each share
of then-outstanding Series A Preferred Stock shall automatically and immediately convert into one fully paid and non-assessable
share of Common Stock of the Company.
Pursuant to the loan reinstatement and
modification agreement between EGLLC and the Secured Lenders, EGLLC has informed us that it may exercise its redemption rights
in accordance to the following schedule:
Date
Series A Convertible Preferred
Stock
9/30/2012
500,000
12/31/2012
583,333
3/31/2013
666,667
6/30/2013
750,000
9/30/2013
833,333
12/31/2013
916,667
3/31/2014
1,000,000
6/30/2014
1,000,000
9/30/2014
1,000,000
12/31/2014
1,000,000
2/28/2015
1,000,000
We believe our cash on hand, anticipated
operating cash flow from the Golden Dream Mine, proceeds from the potential sale of mineral interests pursuant to the MPRPA and
the proceeds from the EGI bridge financing and proposed private placements will be sufficient to meet EGLLC's redemption
exercises over the next year.
Capital Needs - Availability of Additional
Funds
We expect to be engaging in two private
placement offerings to raise approximately $7.5 million and approximately $30 million for our two ongoing mining projects. The
successful completion of the $7.5 million private placement will be critical to reaching full operations at the Golden Dream Mine,
completing the necessary maintenance and restart protocols at the smaller of the Company's two mill circuits and repaying
certain debt that is due in 2012. In addition, some of these proceeds may be used to complete safety and maintenance checks and
engine rebuilds, if necessary of the haul trucks, loaders and shovels in anticipation of the Montana Tunnels Mine restart. Once
the Golden Dream Mine reaches full production, we believe the expected cash flow from that operation will significantly diminish
our need to rely on further issuance of debt and equity securities.
If these assumptions prove correct, our
second, planned private placement to raise up to $30 million will become less critical, because proceeds from the Golden Dream
Mine would be used to develop the Montana Tunnels Mine. However, proceeds from a second private placement would enable us to advance
the development of the Montana Tunnels Mine on a pace more accelerated than we could achieve from waiting for the cash flow to
be generated from the Golden Dream Mine.
62
We plan to continue raising capital in
order to meet our liquidity needs. However, we may be unable to raise sufficient additional capital when we need it or to raise
capital on favorable terms. If we are unable to obtain adequate funds on reasonable terms, we may be required to significantly
curtail or discontinue operations or obtain funds by entering into financing agreements on unattractive terms.
Off-Balance Sheet Arrangements
We have no off-balance sheets arrangements.
Critical Accounting Policies
Inventory
Doré inventory is stated at the
lower of weighted-average production cost and net realizable value. Production costs for doré inventory include direct production
costs, attributable overhead, and depreciation incurred to bring the material to its current point in the processing cycle. Stockpiled
ore inventory represents ore that has been mined and is available for further processing. Work-in-process inventory, including
stockpiled ore and in-circuit gold inventory, is valued at the lower of weighted average production cost and net realizable value.
Materials and supplies are valued at the lower of average direct cost of acquisition and net realizable value.
Buildings and Equipment
MTMI buildings and equipment are recorded
at acquisition cost and amortized on a units-of production basis over the remaining proven and probable reserves of the mine. Equipment
under capital lease is valued at the lower of fair market value or net present value of the minimum lease payments at the inception
of the lease. Equipment that is mobile is amortized on a straight-line basis over the estimated useful life of the equipment ranging
from five to ten years, not to exceed the related estimated mine lives.
EGI buildings and equipment are stated
at cost. Repair and maintenance costs are expensed as incurred. Depreciation is provided utilizing the straight-line method over
the estimated useful lives for owned assets taking into account estimated salvage values, ranging from 3 to 39 years.
Mine Development
The costs of removing overburden and waste
materials to access the ore prior to the production phase are referred to as "mine development costs." Mine development
costs are capitalized during the development of the mine. Mine development costs are amortized using the units-of-production method
based on estimated recoverable tons of proven and probable reserves. To the extent that these costs benefit the mine, they are
amortized over the estimated life of the mine. Development costs incurred after the first saleable ore is extracted from the mine
(i.e. post-production costs) are a component of mineral inventory cost. All post-production costs are considered variable production
costs that are included in the costs of the inventory produced during the period that the mining costs are incurred.
Mining Properties and Mine Development
For new projects without established reserves,
all costs, other than acquisition costs, are expensed prior to the establishment of proven and probable reserves. Reserves designated
as proven and probable are supported by a feasibility study, indicating that the reserves have had the requisite geologic, technical,
and economic work performed and are legally extractable at the time of reserve determination. Once proven and probable reserves
are established, all development and other site-specific costs are capitalized, including general and administrative charges for
actual time and expenses incurred in connection with site supervision. Development drilling costs incurred to infill mineralized
material to increase the confidence level in order to develop or increase proven and probable reserves are capitalized. If subsequent
events or circumstances arise which would preclude further development of the reserves under the then existing laws and regulations,
additional costs are expensed until the impediments have been removed and the property would be subject to ongoing impairment reviews.
When a mine is placed into production, the capitalized acquisition and mine development costs are reclassified to mining properties
and are amortized to operations using the units-of-production method based on the estimated metals that can be recovered.
63
Mineral Interests
Mineral interests include the cost of obtaining
patented and unpatented mining claims and the initial cost of acquiring mineral interests. If a mineable ore body is discovered,
such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If
no mineable ore body is discovered or such rights are otherwise determined to have no value, such costs are expensed in the period
in which it is determined the property has no future economic value. For the years ended December 31, 2011 and 2010, there are
no mineral interest impairments.
Reclamation Liability
The Company's mining and exploration
activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws
and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations to protect
public health and the environment and believes its operations are in compliance with applicable laws and regulations in all material
respects. The company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot
predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory
requirements. Estimated future costs are discounted to their present value using a 12% discount rate. Reclamation obligations are
secured by cash held directly by a surety or certificates of deposit. The following table summarizes the activity for the Company's
asset retirement obligation for the years ended December 31, 2011 and 2010:
December 31,
2011
2010
Asset retirement obligations at January 1
$
21,465,966
$
19,930,334
Accretion expense
1,327,221
1,535,632
Liabilities incurred
-
-
Liabilities assumed
-
-
Liabilities settled
-
-
Revision in estimates
-
-
Asset retirement obligations at December 31
22,793,187
21,465,966
Less current portion of asset retirement obligations
-
-
Asset retirement obligations at December 31, less current portion
$
22,793,187
$
21,465,966
Fair Value of Financial Instruments
The carrying amounts of financial instruments
including cash, accounts payable and accrued liabilities approximated fair value as of December 31, 2011 and 2010, because of the
relatively short maturity of these instruments.
64
The Company applies the guidance to non-financial
assets and liabilities measured at fair value on a non-recurring 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:
Level 1: Quoted prices in active markets
for identical assets or liabilities;
Level 2: Quoted prices in active markets
for similar assets and liabilities and inputs that are observable for the asset or liability; or
Level 3: Unobservable inputs in which there
is little or no market data, which requires the reporting entity to develop its own assumptions.
The following assets are measured at fair value as of December
31, 2011:
Description
Level 1
Level 2
Level 3
Total
Certificate of deposits
$
604,021
$
-
$
-
$
604,021
Reclamation bonds
$
-
$
-
$
16,190,556
$
16,190,556
Embedded derivative
$
-
$
-
$
(18,818,945
)
$
(18,818,945
)
The following assets are measured at fair value as of December
31, 2010:
Description
Level 1
Level 2
Level 3
Total
Certificate of deposits
$
284,467
$
-
$
-
$
284,467
Reclamation bonds
$
-
$
-
$
15,842,403
$
15,842,403
Certificates of deposit: Recorded at cost, which approximates
fair value due to the short duration of the investment.
Reclamation Bonds: Recorded at the amount provided by the Montana
Department of Environmental Quality, which is based upon the fair value of the cash underlying the bond.
Embedded Derivatives: Based on contract
terms, projected future gold prices, and discount rate commensurate with estimates of contemporary credit risk using a discounted
cash flow model. The model is most sensitive to the future price of gold.
There were no changes to the valuation techniques used during
the year ended December 31, 2011.
Recent Accounting Pronouncements
In May 2011, the Financial Accounting Standards
Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011- 04,
"Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards ("IFRS")."
This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure
requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and changes
the disclosure requirements to include quantitative information about unobservable inputs used for level 3 fair value measurements.
This pronouncement is effective for reporting periods beginning on or after December 15, 2011 (early adoption is prohibited). The
Company is evaluating the potential impact of adopting this guidance on its combined financial position, results of operations,
cash flows, and disclosures.
65
In June 2011, the FASB issued ASU No. 2011-05,
"Presentation of Comprehensive Income."
ASU 2011-05 eliminates the option to report other comprehensive income
and its components in the statement of changes in stockholders' equity and requires an entity to present the total of comprehensive
income, the components of net income and the components of other comprehensive income either in a single continuous statement or
in two separate but consecutive statements. This pronouncement is effective for fiscal years, and interim periods within those
years, beginning after December 15, 2011 (early adoption is permitted). The Company is evaluating the potential impact of adopting
this guidance on its combined financial position, results of operations, cash flows, and disclosures.
In December 2011, the FASB issued ASU No.
2011-12
, "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated
Other Comprehensive Income in Accounting Standards Update No. 2011-05."
ASU 2011-12 indefinitely defers certain provisions
of ASU 2011-05 relating to the presentation of reclassification adjustments out of accumulated other comprehensive income by component.
This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.
66
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND
MANAGEMENT
The following tables sets forth information
with respect to the beneficial ownership of our Common Stock and our Series A Preferred Stock as of April 6, 2012, by (i) each
stockholder known by us to be the beneficial owner of more than 5% of our Common Stock or our Series A Preferred Stock, (ii) each
of our directors and executive officers, and (iii) all of our directors and executive officers as a group. We have two classes
of voting securities - the Common Stock and the Series A Preferred Stock. To the best of our knowledge, except as otherwise indicated,
each of the persons named in the table has sole voting and investment power with respect to the shares of Common Stock beneficially
owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed
below are held under a voting trust or similar agreement. Other than the Merger, to our knowledge, there is no arrangement, including
any pledge by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result
in a change in control of the Company.
Unless otherwise indicated in the following
tables, the address for each person named in the tables is c/o Eastern Resources, Inc., 1610 Wynkoop Street, Suite 400, Denver,
CO 80202.
Title of Class: Common Stock
Name and Address of Beneficial Owner
Amount
of
Beneficial
Ownership
1
Percentage
of
Class
2
Patrick Imeson
3,177,000
(3)(4)
3.21
%
Robert Trenaman
—
—
Eric Altman
144,000
(3)(5)
*
Tim Smith
—
—
Michael Feinberg
45,441,000
(6)
45.86
%
Kenneth Hamlet
—
—
All directors and officers as a group (6 persons)
48,762,000
49.21
%
Elkhorn Goldfields, LLC
90,000,000
(3)
90.84
%
* Less than 1%.
Title of Class: Series A Preferred Stock
Name and Address of Beneficial Owner
Amount
of
Beneficial
Ownership
1
Percentage
of
Class
8
Patrick Imeson
353,000
(3)(4)
3.53
%
Robert Trenaman
—
—
Eric Altman
16,000
(3)(5)
*
Tim Smith
—
—
Michael Feinberg
5,049,000
(6)
50.49
%
Kenneth Hamlet
—
—
All directors and officers as a group (6 persons)
5,418,000
54.18
%
Elkhorn Goldfields, LLC
10,000,000
(7)
100.0
%
* Less than 1%.
67
1
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes
having or sharing voting or investment power with respect to securities. Shares of Common Stock or Series A Preferred Stock, as
the case may be, subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days
of April 6, 2012, are deemed outstanding for computing the percentage of the person holding such option or warrant but are not
deemed outstanding for computing the percentage of any other person.
2
Percentages are based upon 99,085,000 shares of Common Stock issued and outstanding as of April
6, 2012, after giving effect to the Merger, the Split Off and the cancellation of 5,751,000 shares of our Common Stock surrendered
by Dylan Hundley.
3
Patrick Imeson and Eric Altman are the managers of
Black Diamond. Black
Diamond is the manager of
BDH. BDH is the owner of ninety-nine percent (99%) of the membership interests of EGLLC.
As
such, Patrick Imeson and Eric Altman have sole voting and investment power with respect to our Common Stock and Series A Preferred
Stock owned by EGLLC and may be deemed to beneficially own all of that stock owned by EGLLC. Messrs. Imeson and Altman disclaim
beneficial ownership of this stock.
4
Patrick Imeson owns indirectly, through certain investment funds that comprise BDH, 3.53% of the
membership interests of EGLLC. As such, Mr. Imeson is deemed to beneficially own 3.21% of the Common Stock of ESRI (3,177,000 shares)
and 3.53% of Series A Preferred Stock of ESRI (353,000 shares) owned by EGLLC.
5
Eric Altman owns indirectly, through certain investment funds that comprise BDH, 0.16% of the membership
interests of EGLLC. As such, Mr. Altman is deemed to beneficially own 0.15% of the Common Stock of ESRI (144,000 shares) and 0.16%
of the Series A Preferred Stock of ESRI (16,000 shares) owned by EGLLC.
6
Michael Feinberg owns directly 0.49% and indirectly, through certain investment funds that comprise
BDH, 50% of the membership interests of EGLLC, for a total of 50.49%. As such, Mr. Feinberg is deemed to beneficially own 45.86%
of the Common Stock of ESRI (45,441,000 shares) and 50.49% of the Series A Preferred Stock of ESRI (5,049,000 shares) owned by
EGLLC.
7
Percentages are based upon 10,000,000 shares of Series A Preferred Stock issued and outstanding
as of April 6, 2012, after giving effect to the Merger.
68
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
Directors and Executive Officers
Below are the names and certain information
regarding the Company's executive officers and directors who were appointed effective upon the closing of the Merger:
Name
Age
Position(s)
Date Named to
Board of Directors
Patrick Imeson
63
Chief Executive Officer and Director
April 6, 2012
Robert Trenaman
51
Chief Operating Officer, President and Director
April 6, 2012
Eric Altman
42
Chief Financial Officer, Vice President-Finance and Treasurer
Timothy G. Smith
55
Vice President – Operations and General Manager – Montana Tunnels Mine
Michael Feinberg
67
Director
April 6, 2012
Kenneth Hamlet
67
Director
April 6, 2012
Directors are elected to serve until the
next annual meeting of stockholders and until their successors are elected and qualified. Pursuant to the terms of the Merger Agreement,
the parties agreed that the Company's Board of Directors, as of the closing of the Merger, would consist of five members.
Our Board of directors is now comprised of four members, all of whom have been designated by EGLLC. One member of the Board of
Directors remains to be appointed. That person shall be designated by the stockholders of ESRI prior the Merger, pursuant to the
terms of the Merger Agreement. Executive officers are appointed by the Board of Directors and serve at its pleasure.
The principal occupation and business experience
during the past five years for our executive officers and directors is as follows:
Patrick Imeson
has served as our
Chief Executive Officer and Chairman of our Board of Directors since April 6, 2012. Mr. Imeson began assembling the Elkhorn properties
and management team in 2000. Mr. Imeson draws upon a diverse career in finance and company operations. As a senior vice president
of a midsized asset management firm, he led initiatives in sales and marketing of alternative investments as well as building international
relationships. He has also held senior executive and entrepreneurial responsibilities in sectors including engineering, regional
airlines, insurance, food & beverage, and mining. Imeson was educated at New Mexico Military Institute and attended two years
at the U.S. Naval Academy at Annapolis, MD prior to leaving to pursue a career in business and finance.
Robert Trenaman
has served as our
President, Chief Operating Officer and a director since April 6, 2012. Mr. Trenaman brings over 25 years of experience within the
mining industry. Mr. Trenaman has spent over 12 years in Montana initially acquiring the Elkhorn Project nearby the Montana Tunnels
Mine for Treminco Resources Ltd from Newmont in 1998. Mr. Trenaman was part of the team that successfully completed the U.S. $14.25
million investment in MTMI in 2006 on behalf of EGLLC. As a result, MTMI restarted commercial production in March 2007 with EGLLC
being a 50% Joint Venture partner. In February 2010, EGLLC acquired a full interest in the Montana Tunnels Mine through the 100%
acquisition of the MTMI.
69
From 1986 through to 2000, Mr. Trenaman
was involved in building Treminco Resources, Ltd. Under his leadership, Treminco evolved from an exploration company listed on
the Vancouver Stock Exchange, to a two-operation, 120-employee, underground-focused mining company listed on the Toronto Stock
Exchange. He has successfully managed corporate, financial and operational affairs, negotiated smelter contracts, union contracts,
term lending facilities and public company financings. Mr. Trenaman is a graduate of the University of British Columbia.
Eric Altman
has served as our Chief
Financial Officer, Vice President – Finance and Treasurer since April 6, 2012. Mr. Altman brings experience in financing
companies that are the developmental stage along with public, tax and industry accounting/finance experience. In his career as
the CFO and Portfolio Manager of a private equity firm and as a senior accountant with Coopers & Lybrand, Fidelity Investments,
and several smaller firms, he has worked with companies in sectors such as software, biotechnology, energy consulting, construction,
real estate and lodging, mutual funds, and venture capital. Altman holds a BS in industrial economics from Union College and a
joint MS/MBA degree from the Graduate School of Professional Accounting at Northeastern University.
Timothy G. Smith
has served as our
Vice President – Operations and General Manager – Montana Tunnels Mine since April 2011. Mr. Smith also serves
as Chief Operating Officer for Fire River Gold Corporation. Previous to these appointments, Mr. Smith was Vice President –
U.S. and Canadian Operations of Apollo Gold and, before that, was Vice President and General Manager of Montana Tunnels Mining,
Inc. Mr. Smith has over 35 years of mine operations experience in gold, copper, coal and lead and zinc mining. Mr. Smith holds
a Bachelor of Engineering –Metallurgical, from McGill University and is a Professional Engineer registered in British Columbia.
Michael Feinberg
has served as a
director since April 6, 2012. Mr. Feinberg, draws on a 40 year experience as a property developer and owner and investor in growth
companies. He has owned and/or developed residential and office buildings in the greater metropolitan New York and South Florida
areas. Additionally, Mr. Feinberg currently as a director of Rackwise Inc. (a public company) and Transnetyx Inc. (a privately
held company) and is the owner and designed the course at The Club at Emerald Hills in Hollywood, Florida, was one of the earlier
financiers of Ultimate Software, a leading provider of end-to-end strategic human resources, payroll, and talent management solutions;
invested in the 2006 recapitalization of the Indian Wells Tennis Tournament and is an investor in the funds managed by Black Diamond
Financial Group.
Kenneth Hamlet
has served as a director
since April 6, 2012. Mr. Hamlet
has a wide spectrum of executive experience, notably his tenure as president
and CEO of Holiday Inns Inc. Hotel Group. After the sale of Holiday Inns, Inc., Mr. Hamlet founded, in 1990, and became chairman
and CEO of Hamlet Holdings LLC, which held interests in a diverse set of industries including: real estate development, manufacturing,
services, retail, investment banking, agriculture and computer-based entertainment in hotel rooms. Mr. Hamlet has also served in
a variety of leadership roles of not-for-profit organizations including the co-chairman of the U.S. Olympic Committee for the Mid-South
Region, president of the Boy's Club of Memphis, vice chairman of the United Way's mid-South fundraising campaign, club
master for the Boy Scouts of America, board member of the UCSD Graduate School of International Relations and Pacific Studies.
He has been an active board member of the Conrad Foundation since July 2009, a Senior Advisor at Crestview Partners since July
2010, an advisory board member of BDH since October 2011 and is also currently the co-managing member of Monalex Partners, LLC.
70
Key Employees
John Schaefer
, Environmental Manager
– Montana Tunnels Mine. Mr. Schaefer has 40 years of experience in the mining and manufacturing industries with more than
20 years focused on environmental compliance and management. Mr. Schaefer has been employed at the Montana Tunnels Mine for 23
years while managing the facility's environmental programs for the past 14 years. Holding a Bachelor of Science degree in
chemistry, Mr. Schaefer brings a wide range of experience in environmental matters, analytical chemistry and manufacturing production
management from past employment with Kaiser Aluminum and Chemical Corporation, Rockwell International, Alunite Metallurgical Center,
Hazen Research and Northern Testing Laboratories. From 2004 through 2008, Mr. Schaefer managed the Environmental Impact Statement
process for a major permit amendment to the Montana Tunnels' Mine plan that resulted in favorable Records of Decision from
regulatory agencies for the next expansion phase of mine operations. In addition to environmental affairs, Mr. Schaefer oversees
land matters, reclamation bonding, laboratory operations and all operating licenses for MTMI.
Chris
Frank
,
Chief
Engineer – Golden Dream Mine. After studying mining engineering at the Montana College of Mineral Sciences and Technology
Mr. Frank commenced his career with Diamond Hill Mines, Inc. as an engineering tech at the Diamond Hill mine near Townsend, MT. 
The Diamond Hill mine was a 500 ton-per-day underground gold mine producing from a skarn deposit utilizing long-hole open stopping. 
After Diamond Hill closed Mr. Frank became the Senior Mine Engineer at the Montana Tunnels mine:  a 15,000 ton per day open
pit gold, zinc, silver and lead operation where he was responsible for grade control, short to medium term planning, mine budgeting,
drill and blast design, and cost tracking.  After operations were suspended at Montana Tunnels, Frank became the Senior Mine
Engineer at the Black Fox mine near Matheson, Ont.  The Black Fox mine is a 2,000 metric tonne per day underground and open-pit
gold operation.  Frank was responsible for short to medium term planning, drill and blast design, locating and collapsing
underground workings within the pit, ore grade control, updating the block model with definition drilling, and assisting in the
design and building of infrastructure at the mine site to support open pit and underground operations.
Shane
Hanninen
,
Mine Operations Manager – Golden Dream
Mine. Mr. Hanninen commenced his career in the mining industry with Newmont Mining Corp. in 1992 where he expanded upon
his hands-on knowledge operating all aspects of open-pit mine equipment as well as gaining field supervisory experience. In 2005,
Mr. Hanninen oversaw open pit mine operations at the molybdenum mine owned by Montana Molybdenum Corp.'s in the capacity
of Mine Foreman. In 2006 he joined Montana Tunnels Mining, Inc. as Safety Director and in 2011 became Mine Operations Manager for
the Golden Dream Mine. Mr. Hanninen is a Certified Mine Safety and Health Administration ("MSHA") instructor.
Shane Parrow
, Advisor. Mr. Parrow
led the team that developed the Golden Dream Mine plan and obtained the operating permit. He has over 15 years of mining experience
and has established excellent public relations within the local community. Mr. Parrow will bring his extensive knowledge regarding
rock mechanics, blasting, materials handling, mine valuation, ventilation, environmental considerations, mine safety, and the design
and operation of surface and underground mines. This includes: project management for start-up underground mining operations; general
manager responsible for underground mine planning, designs, budgeting, permitting, and exploration; production foreman/mine engineer
with task of short and long-range mine planning; production engineer for oil and gas company; and underground mine manager/mill
process production foreman. In addition to serving as an advisor to us, Mr. Parrow is an Associate Professor in the Mine Engineering
department of Montana Tech.
We intend to hire independent geologists,
engineers, landmen and various subcontractors on an as-needed basis.  We have not entered into any negotiations or contracts
with any such persons.
71
Involvement in Certain Legal Proceedings
During the past ten (10) years, none of
the above individuals has:
·
been subject to a petition under the federal bankruptcy laws or any state insolvency law, filed
by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person,
or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation
or business association of which he was an executive officer at or within two years before the time of such filing;
·
been convicted in a criminal proceeding or is a named subject of a pending criminal proceeding
(excluding traffic violations and other minor offenses);
·
been the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
·
acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity
pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission,
or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as
an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company,
or engaging in or continuing any conduct or practice in connection with such activity;
·
engaging in any type of business practice; or
·
engaging in any activity in connection with the purchase or sale of any security or commodity or
in connection with any violation of Federal or State securities laws or Federal commodities laws;
·
been the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated,
of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to act
as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of
the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct
or practice in connection with such activity, or to be associated with persons engaged in any such activity;
·
been found by a court of competent jurisdiction in a civil action or by the Commission to have
violated any federal or state securities law, and the judgment in such civil action or finding by the Commission has not been subsequently
reversed, suspended, or vacated; or
·
been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading
Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed, suspended or vacated.
72
Director Independence
We are not currently listed on any national
securities exchange or quoted on an inter-dealer quotation system that has a requirement that certain of the members of the Board
of Directors be independent. However, the Board of Directors has made a determination as to which of its members are independent.
In evaluating the independence of its members and the composition of the committees of the Board of Directors, the Board utilizes
the definition of "independence" developed by the Nasdaq Stock Market and in SEC rules, including the rules relating
to the independence standards in audit committee members and the non-employee director definition of Rule 16b-3 promulgated under
the Exchange Act.
The Board of Directors expects to continue
to evaluate whether and to what extent the members of the Board and its committees are independent. The Company intends to appoint
persons to the Board and committees of the Board who will meet the corporate governance requirements imposed by a national securities
exchange. Therefore, the Company expects that a majority of its directors will be independent directors of which at least one director
will qualify as an "audit committee financial expert," within the meaning of SEC rules.
Additionally, the Board of Directors is
expected to appoint an audit committee, governance committee and compensation committee and to adopt charters relative to each
such committee.
We believe that Mr. Hamlet is currently
an "independent" director as that term is defined in the listing standards of the Nasdaq Stock Market and SEC rules,
including the rules relating to the independence standards for audit committee members and the non-employee director definition
of Rule 16b-3 promulgated under the Exchange Act.
Board Committees
The Company currently has not established
any committees of the Board of Directors.  Our Board of Directors may designate from among its members an executive committee
and one or more other committees in the future.  We do not have a nominating committee or a nominating committee charter.  Further,
we do not have a policy with regard to the consideration of any director candidates recommended by security holders.  To
date, no security holders have made any such recommendations.  The entire Board of Directors performs all functions that
would otherwise be performed by committees.  Given the present size of our board it is not practical for us to have committees.  If
we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities
accordingly.
Audit Committee Financial Expert
We have no separate audit committee at
this time.  The entire Board of Directors shall oversee our audits and auditing procedures.
Shareholder Communications
Currently, we do not
have a policy with regard to the consideration of any director candidates recommended by security holders. To date, no security
holders have made any such recommendations.
73
Code of Ethics
We have adopted a written Code of Ethics.
We believe that the Code of Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full,
fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting
of code violations; and provide accountability for adherence to the code. A copy of our Code of Ethics will be provided to any
person requesting same without charge. To request a copy of our Code of Ethics, please make written request to our Chief Executive
Officer, c/o Eastern Resources, Inc., 1610 Wynkoop Street, Suite 400, Denver, CO 80202.
Compliance with Section 16(a) of the
Exchange Act
Our Common Stock is not
registered pursuant to Section 12 of the Exchange Act. Accordingly, our officers, directors and principal shareholders are not
subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange Act.
74
EXECUTIVE COMPENSATION
The following table sets forth information
concerning the total compensation paid or accrued by us during the fiscal year ended December 31, 2011 to (i) all individuals that
served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended December
31, 2011; (ii) all individuals that served as our principal financial officer or acted in a similar capacity for us at any time
during the fiscal year ended December 31, 2011; and (iii) all individuals that served as executive officers of ours at any time
during the fiscal year ended December 31, 2011 that received annual compensation during the fiscal year ended December 31, 2011
in excess of $100,000.
Summary Compensation Table
Name and
Principal Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive
Plan
Compen-
sation
($)
Non-qualified
Deferred
Compen-
sation
Earnings
($)
All Other
Compensation
($)
Total
($)
Patrick Imeson, Chief
2011
0
0
0
0
0
Executive Officer and Chairman
2010
0
0
0
0
0
Eric Altman, Chief
2011
0
0
0
0
0
Financial Officer
2010
0
0
0
0
0
Robert Trenaman, President
2011
132,500
0
0
132,500
and Chief Operating Officer
2010
90,000
0
0
90,000
Outstanding Equity Awards at Fiscal
Year-End
We have one compensation plan approved
by our stockholders, the 2012 Plan.  As of the closing of the Merger, we have granted option awards under the 2012 Plan
to certain of our officers, directors and employees for a total of 5,320,000 shares of our Common Stock. We have also granted options
for a total 50,000 shares of our Common Stock to our independent director and option for a total of 75,000 shares to certain contractors
and advisors.
We have no plans in place and have never
maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement
including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred
contribution plans and nonqualified deferred contribution plans.
Except as indicated below, we have no contracts,
agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers listed
above.
Employment Agreements
Robert Trenaman salary for 2010 and 2011
was paid by EGLLC pursuant to an offer of employment letter dated July 1, 2011 according to which EGLLC agreed to pay Mr. Trenaman
an annual base salary of $180,000. This letter was modified as of that same date by a side agreement between EGLLC and Mr. Trenaman,
which reduced Mr. Trenaman's monthly salary, beginning July 1, 2011, to $12,500, until the Gold Dream Mine enters commercial
production.
75
We have entered into employment agreements
with certain of our executive officers effective April 6, 2012, upon the closing of the Merger.
On April 6, 2012, we entered into executive
employment agreements with (i) Patrick Imeson, our Chief Executive Officer and Chairman, (ii) Robert Trenaman, our President and
Chief Operating Officer, (iii) Eric Altman, our Chief Financial Officer and Treasurer, and (iv) Tim Smith, our Vice President –
Operations and General Manager of MTMI. The term of each of these employment agreements is three (3) years. Mr. Imeson's
agreement provides for annual compensation of $60,000 and an option grant of 1,000,000 shares of our Common Stock under our 2012
Plan; Mr. Altman's agreement also provide for annual compensation of $60,000 and an option grant of 500,000 shares of our
Common Stock under the 2012 Plan; Mr. Trenaman's agreement provides for compensation that includes an annual base salary
of $225,000 and an option grant under the 2012 Plan of 3,000,000 shares; and Mr. Smith's agreement provides for compensation
that includes an annual base salary of $100,000 and an option grant under the 2012 Plan of 500,000 shares.
Base salaries will be subject to annual
review by our Board of Directors and increase (but not decrease) as the Board determines. Our Board shall determine in its sole
discretion, following the closing of the Merger, what bonuses, if any, our executive officers shall be entitled to, based on milestones
to be agreed upon by the Board and each of the executives. Each of our executive officers shall be eligible to participate in any
other bonus or incentive program established by us for executives of the Company and shall be entitled to other benefits as may
be adopted by us from time to time for the benefit of our executives, as determined by our Board.
The employment agreements with each of
Messrs. Imeson, Altman, Trenaman and Smith are filed as Exhibits to this Current Report and are incorporated herein by reference.
Management Services Agreement
Effective April 6, 2012 upon the closing
of the Merger, Black Diamond, owned and managed by Messrs. Imeson and Altman, entered into a management services agreement with
us pursuant to which Black Diamond has agreed to provide certain management, financial and accounting services to us and to make
available Messrs. Imeson and Altman to serve as our Chief Executive Officer and Chief Financial Officer, respectively. The agreement
has an initial term of three years and may be extended thereafter for successive one-year terms. The agreement may be terminated
(i) by either party upon thirty (30) days' notice prior to the end of the then-current term or earlier if one of the parties
commits a material breach of the agreement and (ii) by us for any reason provided that we pay Black Diamond all fees due through
the end of the then-current term. Under this agreement, we have agreed to pay Black Diamond $15,000 per month plus further compensation
at a rate of $200 per hour for each additional hour that Black Diamond renders services to us under the agreement in excess of
125 hours. We have also granted to certain employees of Black Diamond options to purchase up to 50,000 shares of our Common Stock
under the 2012 Plan. The agreement also provides for the provision of office space for our executive offices at 1610 Wynkoop Street,
Suite 400, Denver, Colorado 80202, our deemed principal place of business. This agreement replaces and supersedes a similar agreement
dated November 1, 2010 between Black Diamond and EGLLC.
This management services agreement has
been filed as Exhibit 10.21
to this Current Report and is incorporated herein by reference.
76
Director Compensation
Prior to the Merger, ESRI did not pay its
directors any cash compensation for services on its Board of Directors.
Following the consummation of the Merger,
our directors will be entitled to receive compensation as follows: Each non-employee director will receive an initial grant under
our 2012 Plan of options to purchase 50,000 shares of our Common Stock. Each non-employee director will also receive an annual
retainer of $25,000. The Chairman of the Board of Directors, if a non-employee, will receive an additional annual retainer of $15,000.
The audit committee chairman will receive an annual fee of $10,000 and other committee chairpersons will receive $5,000 annually,
once these committees are established. Members of the Board of Directors will receive a fee of $750 for each Board meeting that
they attend in person and $500 for a meeting attended telephonically. Each director will receive a travel fee of $500 per day,
not including the day of the Board meeting, and related travel and out-of-pocket expenses will be reimbursed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions involving ESRI and/or ESRI Stockholders
Split-Off and Release
Concurrent with the closing of the Merger,
ESRI exchanged with certain of our former stockholders all of the outstanding shares of common stock of Split Corp that it previously
held for 5,793,000 shares of our Common Stock .
Related to the Split-Off, ESRI and Buzz
Kill terminated and cancelled an investment agreement between them dated May 1, 2007. Pursuant to this agreement cancellation,
ESRI relinquished its right to recoup its $800,000 investment in Buzz Kill and Buzz Kill no longer is required to share 50% of
its net revenue from sales of the film
BuzzKill
with ESRI.
At the closing of the Merger, holders of
approximately $233,000 of Split Corp. promissory notes agreed to release ESRI from any obligations ESRI might have had with respect
to these notes having been the parent company of Split Corp. prior to the Split-Off.
Employment Agreements
On April 6, 2012, we entered into executive
employment agreements with (i) Patrick Imeson, our Chief Executive Officer and Chairman, (ii) Robert Trenaman, our President and
Chief Operating Officer, (iii) Eric Altman, our Chief Financial Officer and Treasurer, and (iv) Tim Smith, our Vice President –
Operations and General Manager of MTMI. The term of each of these employment agreements is three (3) years. Mr. Imeson's
agreement provides for annual compensation of $60,000 and an option grant of 1,000,000 shares of our Common Stock under our 2012
Plan; Mr. Altman's agreement also provides for annual compensation of $60,000 and an option grant of 500,000 shares of our
Common Stock under the 2012 Plan; Mr. Trenaman's agreement provides for compensation that includes an annual base salary
of $225,000 and an option grant under the 2012 Plan of 3,000,000 shares; and Mr. Smith's agreement provides for compensation
that includes an annual base salary of $100,000 and an option grant under the 2012 Plan of 500,000 shares.
77
Lock-up Agreements
In connection with the Merger, the Pubco
Holders entered into lock-up agreements with ESRI whereby they agreed that forty percent (40%) of their Public Float Shares may
not be sold for a period of twelve (12) months following the Merger closing date.
Forgiveness of Debt; Share Surrender and Cancellation
At the closing of the Merger
,
holders of ESRI promissory notes discharged and forgave notes, including all accrued but unpaid interest, in the aggregate principal
amount of approximately $276,000.
Additionally, Dylan Hundley, a holder of
5,751,000 shares of ESRI Common Stock prior to the Merger, surrendered to us for cancellation all of her shares.
Transactions involving EGLLC and/or EGLLC Related Parties
Minerals Product Receivables Purchase Agreement
On April 15, 2011, EGI, EGLLC and BDH entered
into a Minerals Product Receivables Purchase Agreement (the "MPRPA") pursuant to which EGI agreed to sell a certain
percentage of the gold output from the Golden Dream Mine to BDH for the life of the Golden Dream Mine. On that date, EGI and BDH
also entered into a security agreement
to secure the payment of EGI's obligations under the MPRPA
pursuant to which EGI granted BDH a continuing security interest in all of the assets and property of EGI.
In accordance with the terms of the MPRPA,
EGI has agreed to sell BDH eighty percent (80%) of the first 41,700 ounces and six and one-half percent (6.5%) of the ounces produced
over 250,000, of the gold produced from the Golden Dream Mine, subject to certain specified reductions, free and clear of any liens
and encumbrances. Under this agreement, BDH paid EGI "pre-closing payments" of $525,000 and additional "balance
payments" of $9,475,000 to meet EGI's cash flow needs prior to the commencement of commercial production at the Golden
Dream Mine.
For each ounce of gold delivered to BDH
under the MPRPA, BDH will pay EGI, subject to certain adjustments, (i) with respect to 80% of the first 41,700 ounces sold to BDH,
the lesser of $500 per ounce or the latest COMEX spot gold price at the time of sale and (ii) with respect to each ounce of gold
over 250,000 ounces, the lesser of $600 or the latest COMEX spot gold price at the time of sale. All pricing is subject to adjustment
by an agreed upon inflation factor.
The MPRPA and related security agreement
have been filed as Exhibits 10.23, and 10.25, respectively,
to this Current Report and are incorporated
herein by reference.
Employee Leasing Agreement between
EGI and MTMI
On August 1, 2011, EGI and MTMI entered
into an employee leasing agreement pursuant to which EGI retained the services of certain employees of MTMI so that these MTMI
employees could work on properties and projects owned by EGI. Pursuant to the terms of this agreement, EGI agreed to pay a certain
percentage of MTMI's wages and employee benefit costs associated with the MTMI employees identified in the agreement.
78
Management Services Agreement with
Black Diamond
Effective April 6, 2012 upon the closing
of the Merger, Black Diamond Financial Group, LLC ("Black Diamond"), owned and managed by Messrs. Imeson and Altman,
entered into a management services agreement with us pursuant to which Black Diamond has agreed to provide certain management,
financial and accounting services to us and to make available Messrs. Imeson and Altman to serve as our Chief Executive Officer
and Chief Financial Officer, respectively. The agreement has an initial term of three years and may be extended thereafter for
successive one-year terms. The agreement may be terminated (i) by either party upon thirty (30) days' notice prior to the
end of the then-current term or earlier if one of the parties commits a material breach of the agreement and (ii) by us for any
reason provided that we pay Black Diamond all fees due through the end of the then-current term. Under this agreement, we have
agreed to pay Black Diamond $15,000 per month plus further compensation at a rate of $200 per hour for each additional hour that
Black Diamond renders services to us under the agreement in excess of 125 hours. We have also agreed to grant to certain principals
and employees of Black Diamond options to purchase up to 100,000 shares of our Common Stock under the 2012 Plan. The agreement
also provides us with office space allocation at 1610 Wynkoop Street, Suite 400, Denver, Colorado 80202 for our principal place
of business. This agreement replaces and supersedes a similar agreement dated November 1, 2010 between Black Diamond and EGLLC.
Contributions and Distribution between
EGLLC and its subsidiaries (EGI and MTMI)
In 2011 and 2010, EGLLC made equity contributions
of $260,000 and $870,000 to EGI and MTMI, respectively. Also, EGI and MTMI made distributions to EGLLC of $4,377,779 and 964,091,
respectively. These distributions were to repay certain bridge loans and accrued operating expenses of EGLLC.
EGI 2010 Private Placement –
Series A Bonds Outstanding
During 2010 and 2011, EGI issued an 8%
Series A Bond to Black Diamond Bridge Capital Fund I, LLC (an entity controlled by Black Diamond) in the principal amount of $1,199,779.
This bond matures in July, 2012 and accrues interest at a rate of 8% per annum.
The EGI Bridge Financing
Prior to the closing of the Merger, EGI
completed a number of closings of a bridge financing with BDH, one of our beneficial stockholders through holdings in EGLLC, and
another investor. In this bridge financing, EGI sold an aggregate of $300,000 in principal amount of its 12% unsecured convertible
Bridge Notes to BDH and $1,500,000 in principal amount of these Bridge Notes to the other investor. The Bridge Notes mature on
August 29, 2012 and, prior to that date but after the closing of the Merger, may be converted, at the sole discretion of each of
the note holders, including accrued but unpaid interest, into Units of the Company's securities at a conversion price of
$2.00 per Unit, each Unit consisting of: (i) one share of Common Stock, (ii) and a warrant to purchase one-half share of Common
Stock, exercisable at a price of $3.00 per whole share, and (iii) a special warrant exercisable upon the closing of the Company's
planned private placement, provided the share price of the Common Stock offered in the private placement is less than $2.50 per
share, so that the exercise of the special warrant will reduce the lender's effective conversion price for the Common Stock
at a 25% discount to the private placement offering price, such special warrant exercisable at a price of $0.01 per share.
Tri-Party Agreement; Security Interest in MTMI and EGI Assets;
and Pledge of Series A Preferred Stock
From time to time between 2006 and 2009,
EGLLC and MFPI Partners, LLC, a Delaware limited liability company whose sole members are Michael Feinberg and Patrick Imeson ("MFPI"),
raised approximately $6,000,000 and $13,000,000, respectively, through the sale of promissory notes to certain investors (the "Secured
Lenders"). The notes issued by EGLLC included a $5,000,000 secured note issued in 2006 and a $1,000,000 secured bridge note
issued in 2009. The notes issued by MFPI included an $8,000,000 note issued in 2007 and a $5,000,000 note issued in 2008. During
that time, EGLLC raised an additional $16,500,000 from the sale of unsecured bonds issued at a 40% discount to face value to certain
investors, including MFPI, which invested $8,000,000 in the unsecured EGLLC bonds from the proceeds of the $13,000,000 it borrowed
from the Secured Lenders.
79
EGLLC used $5,000,000 from the 2006
notes to purchase a loan and mortgage on property owned by an unrelated mining company and used $14,250,000 of the
$16,500,000 in proceeds from the issuance of the unsecured bonds to complete a joint venture with Apollo Gold, Inc. that
entitled EGLLC to 50% of the assets and distributions of Montana Tunnels Mine – See Description of Business for
additional information. In October 2009, EGLLC paid $250,000 in cash and in February 2010 assigned that loan and mortgage
on the property owned by the unrelated mining company to Apollo Gold, Inc. for 100% ownership in MTMI (owner of Montana
Tunnels Mine) and, concurrently with the closing of that payment and assignment, EGLLC and Apollo dissolved their joint
venture.
In May 2009, as a condition to the additional
$1,000,000 bridge loan (that was subsequently repaid) from the Secured Lenders to EGLLC and as an inducement for the Secured Lenders
to stand still regarding an event of default on the part of EGLLC, (i) the $8,000,000 loan to MFPI to purchase the unsecured bonds,
(ii) a $5,000,000 loan to MFPI whose proceeds were used to make an unrelated investment
3
and (iii) a redemption right
allowing the Secured Lenders to obligate MFPI to purchase from the Secured Lenders a $5,950,000 equity investment made in one of
the investment funds that is an owner of EGLLC and is managed by Black Diamond have been included under a security agreement with
the Secured Lenders.
Currently, the notes and rights secured
by the Company's assets include (i) $21,600,000 in principal amount of notes, including the $5,800,000 issued by EGLLC in
2006, $9,700,000 issued by MFPI in 2007 and $6,100,000 issued by MFPI in 2008, plus accrued and unpaid interest thereon through
May 2009, and (ii) the redemption rights on the Secured Lenders' $5,950,000 equity investment in EGLLC. The approximate amount
of principal, accrued but unpaid interest and redemption rights as of December 31, 2011 was $46,350,000. The notes and rights have
been secured by two first lien mortgages on all of the property and assets of EGI and MTMI. Under the terms of these mortgages,
the administrative agent representing the Secured Lenders was required to consent to the transfer by EGLLC to ESRI of the capital
stock of EGI and MTMI. Pursuant to the terms of a tri-party agreement by an among the Company, EGLLC and the administrative agent
dated as of the Merger closing date, the administrative agent consented to this transfer and ESRI acknowledged and agreed to cause
EGI and MTMI to perform and keep all the covenants and obligations set forth in the two mortgages
Additionally, because certain of the secured
notes were in default prior to the Merger closing date, the administrative agent required that EGLLC and MFPI enter into a loan
reinstatement and modification agreement, effective as of the Merger closing date, pursuant to which EGLLC agreed to pledge, in
accordance with the terms of a separate pledge agreement, to the Secured Lenders all of its interest in the Series A Preferred
Stock. Under the tri-party agreement, the Company acknowledged and agreed to treat the administrative agent as the owner and holder
of the Series A Preferred Stock upon notice from the administrative agent of a default by EGLLC under the pledge agreement.
Under the Merger Agreement, EGLLC has covenanted
that, for so long as any of its payment obligations under the loan restatement and modification agreement remain outstanding, EGLLC
will designate all proceeds derived from the Series A Preferred Stock, including from preferential dividends that may be paid on
this stock, to repay principal and interest due on the secured loans.
3
MFPI invested $5,000,000 in Global VR, Inc. a private company managed by Black Diamond Holdings, LLC, which is managed by Patrick
Imeson and Eric Altman, principals of the Company
80
MARKET PRICE OF AND DIVIDENDS ON COMMON
EQUITY
AND RELATED STOCKHOLDER MATTERS
Our Common Stock
is currently eligible for quotation on the
OTC Bulletin Board
under the symbol "ESRI.OB."  The
trading of our common stock began on September 2, 2008.  There has been very limited trading in our Common Stock to date.  As
of the date of this Current Report, we had 99,085,000 shares of Common Stock outstanding held by approximately 11 stockholders
of record. To date, we have not paid dividends on our common stock. As of the date of this Current Report, we have 10,000,000 outstanding
shares of our Series A Preferred Stock held by one stockholder of record.
Trades in our Common Stock may be subject
to Rule 15g-9 under the Exchange Act, which imposes requirements on broker/dealers who sell securities subject to the rule to persons
other than established customers and accredited investors. For transactions covered by the rule, broker/dealers must make a special
suitability determination for purchasers of the securities and receive the purchaser's written agreement to the transaction
before the sale.
The SEC also has rules that regulate broker/dealer
practices in connection with transactions in "penny stocks." Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities listed on certain national exchanges, provided that the current price and volume information
with respect to transactions in that security is provided by the applicable exchange or system). The penny stock rules require
a broker/dealer, before effecting a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in
the penny stock market. The broker/dealer also must provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker/dealer and its salesperson in the transaction, and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer quotations, and the broker/dealer and salesperson
compensation information, must be given to the customer orally or in writing before effecting the transaction, and must be given
to the customer in writing before or with the customer's confirmation. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for shares of Common Stock. As a result of these rules, investors
may find it difficult to sell their shares.
Dividend Policy
We have never paid any cash dividends on
our capital stock and do not anticipate paying any cash dividends on the Common Stock in the foreseeable future.  Also,
the terms of the Series A Preferred Stock restrict our ability to pay dividends.  (See "Description of Securities—Series
A Preferred Stock" below.) We intend to retain future earnings to fund ongoing operations and future capital requirements.
Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon financial
condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.
81
Securities Authorized for Issuance under Equity Compensation
Plans
Plan Category
Number of shares
to be issued upon
exercise of
outstanding
options, warrants
and rights
Weighted-
average exercise
price of
outstanding
options,
warrants and
rights
Number of shares
remaining
available for
future issuance
under equity
compensation
plans (excluding
shares reflected in
the first column)
Equity compensation plans approved by security holders
5,445,000
$
2.00
4,555,000
Equity compensation plans not approved by security holders
—
—
—
Total
5,445,000
$
2.00
4,555,000
The Company had no equity compensation
plans as of the end of fiscal year 2011.
2012 Equity Incentive Plan
On February 1, 2012, our Board of Directors
of the Company adopted, and on February 29, 2012, our stockholders approved, the 2012 Equity Incentive Plan, which reserves a total
of 10,000,000 shares of our Common Stock for issuance under the 2012 Plan. If an incentive award granted under the 2012 Plan expires,
terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares
subject to such award and the surrendered shares will become available for further awards under the 2012 Plan.
In addition, the number of shares of Common
Stock subject to the 2012 Plan, any number of shares subject to any numerical limit in the 2012 Plan, and the number of shares
and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding Common Stock by reason
of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation,
liquidation, business combination or exchange of shares or similar transaction.
Administration
The compensation committee of the Board,
or the Board in the absence of such a committee, will administer the 2012 Plan. Subject to the terms of the 2012 Plan, the compensation
committee has complete authority and discretion to determine the terms of awards under the 2012 Plan.
Grants
The 2012 Plan authorizes the grant to participants
of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended
to comply with Section 162(m) of the Internal Revenue Code (as amended, the "Code") and stock appreciation rights,
as described below:
·
Options granted under the 2012 Plan entitle the grantee, upon exercise, to purchase a specified
number of shares from us at a specified exercise price per share. The exercise price for shares of Common Stock covered by an option
cannot be less than the fair market value of the Common Stock on the date of grant unless agreed to otherwise at the time of the
grant.
82
·
Restricted stock awards and restricted stock units may be awarded on terms and conditions established
by the compensation committee, which may include performance conditions for restricted stock awards and the lapse of restrictions
on the achievement of one or more performance goals for restricted stock units.
·
The compensation committee may make performance grants, each of which will contain performance
goals for the award, including the performance criteria, the target and maximum amounts payable, and other terms and conditions.
·
The 2012 Plan authorizes the granting of stock awards. The compensation committee will establish
the number of shares of Common Stock to be awarded and the terms applicable to each award, including performance restrictions.
·
Stock appreciation rights ("SARs") entitle the participant to receive a distribution
in an amount not to exceed the number of shares of Common Stock subject to the portion of the SAR exercised multiplied by the difference
between the market price of a share of Common Stock on the date of exercise of the SAR and the market price of a share of Common
Stock on the date of grant of the SAR.
Duration, Amendment, and Termination
The Board has the power to amend, suspend
or terminate the 2012 Plan without stockholder approval or ratification at any time or from time to time. No change may be made
that increases the total number of shares of Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum
exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders
within one year. Unless sooner terminated, the 2012 Plan would terminate ten years after it is adopted.
As of the closing of the Merger, we have
granted option awards under the 2012 Plan to certain of our officers, directors and employees for a total of 5,320,000 shares of
our Common Stock. We have also granted options for 50,000 shares of our Common Stock to our independent director and 75,000 to
certain advisors and consultants.  Each of these options has been granted with a term of ten years and an exercise price
of $2.00 per share, which price the Board of Directors has deemed to be the fair market value of the Company's stock on the
date of grant. Each option vests in three equal installments on the first, second and third anniversary of the Merger closing date.
83
DESCRIPTION OF SECURITIES
We have authorized capital stock consisting
of 300,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of preferred stock, $0.001 par value. As of the
date of this Report, we had 99,085,000 shares of common stock issued and outstanding and 10,000,000 shares of Series A preferred
stock issued and outstanding.
Common Stock
The holders of outstanding shares of common
stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and
in such amounts as the board from time to time may determine. Holders of common stock are entitled to one vote for each share held
on all matters submitted to a vote of shareholders. There is no cumulative voting of the election of directors then standing for
election. The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation,
dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably
among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims
of creditors. Each outstanding share of common stock is duly and validly issued, fully paid and non-assessable.
Preferred Stock
Shares of preferred stock may be issued
from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by
our Board of Directors prior to the issuance of any shares thereof. Preferred stock will have such voting powers, full or limited,
or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class
or series of preferred stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares
thereof. The number of authorized shares of preferred stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then outstanding shares of
our capital stock entitled to vote generally in the election of the directors, voting together as a single class, without a separate
vote of the holders of the preferred stock, or any series thereof, unless a vote of any such holders is required pursuant to any
preferred stock designation.
We are authorized to issue 10,000,000 shares
of "blank check" preferred stock, par value $0.001 per share. As of the closing of the Merger and pursuant to the Merger
Agreement, we issued 10,000,000 shares of our designated Series A Preferred Stock to EGLLC with the following terms (as more fully
described in the certificate of designations):
·
Voting Rights
. Each share of Series A Preferred Stock entitles the holder to one vote on
all matters submitted to a vote of the holders of our common stock;
·
Dividends
. The holder of the Series A Preferred Stock is entitled to receive, out of funds
legally available therefor, cumulative non-compounding preferential dividends at the rate of 12% of the stated value of $6.00 per
share
per annum
(the "Preferential Dividend"). 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 Series A Preferred Stock remain outstanding;
·
Liquidation Preference
. In the event of any defined liquidation event,
no
distribution can be made to holders of shares of our capital stock ranking junior to the Series A Preferred Stock, unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received an amount per share equal to $6.00 (the "
Liquidation
Amount
") per share,
plus the amount of any accrued and unpaid Preferential Dividend
owed
to holders of shares of the Series A Preferred Stock;
84
·
Holder Optional Redemption
. The holder of the Series A Preferred Stock has the option, exercisable
in whole or in part at any time and from time to time prior to the third anniversary of the issuance of the Series A Preferred
Stock, to require us to purchase for cash, out of legally available funds, any or all of the then-outstanding shares of Series
A Preferred Stock at a price equal to $6.00 per share ;
·
Company Optional Redemption
. We have the option, exercisable in whole or in part at any
time and from time to time prior to the third anniversary of the issuance of the Series A Preferred Stock, to redeem any or all
of the then-outstanding shares of Series A Preferred Stock at a price equal to $7.00 per share;
·
Automatic Conversion
. Provided that neither the holder not the Company has exercised their
redemption options in full, by the third anniversary of the issuance of the Series A Preferred Stock, each share of then-outstanding
Series A Preferred Stock shall automatically and immediately convert into one fully paid and non-assessable share of common stock
of the Company; and
·
Protection Provisions
. So long as any shares of the Series A Preferred Stock are outstanding,
the Company cannot take any of the following corporate actions (whether by merger, consolidation or otherwise) without first obtaining
the approval of the holder of the Series A Preferred Stock: encumber the assets of the Corporation; alter or change the rights,
preferences or privileges of the Series A Preferred Stock, or increase the authorized number of shares of Series A Preferred Stock;
alter or change the rights, preferences or privileges of any capital stock of the Corporation so as to affect adversely the Series
A Preferred Stock; create or issue any securities senior to or
Pari Passu
with the Series A Preferred Stock; issue any additional
shares of Series A Preferred Stock; issue any debt securities, incur any indebtedness or enter into any other agreement or arrangement
that would entitle any third party to any preferences over the Series A Preferred Stock upon the occurrence of a Liquidation Event;
enter into any agreement, commitment, understanding or other arrangement to take any of the foregoing actions; or cause or authorize
any subsidiary of the Corporation to engage in any of the foregoing actions
The certificate of designations,
preferences and rights of the Series A Preferred Stock is filed as Exhibit 4.1  to this Current Report and is incorporated
herein by reference.
Options under the Plan
The Company has adopted its 2012 Equity
Incentive Plan pursuant to which 10,000,000 shares of the Company's Common Stock are reserved for issuance to employees,
directors, consultants, and other service providers of the Company and its affiliates. On April 6, 2012, we authorized for issuance
an aggregate of
5,445,000
options exercisable at $2.00 per share to certain of our executive
officers, directors, employees and advisors. Each of these options has been granted with a term of ten years and an exercise price
of $2.00 per share, which price the Board of Directors has deemed to be the fair market value of the Company's stock on the
date of grant. Each option vests in three equal installments on the first, second and third anniversary of the Merger closing date.
Warrants
As of the date hereof, the Company has
no warrants outstanding.
85
Convertible Securities
As of the date hereof, the Company has
not issued any convertible securities other than the convertible notes issued by ESRI prior to, and cancelled upon, the closing
of the Merger.
Transfer Agent
The transfer agent for the Common Stock
is Continental Stock Transfer & Trust Company. The transfer agent's address is 17 Battery Place, New York, New York 10004,
and its telephone number is (212) 845-3212.
LEGAL PROCEEDINGS
From time to time, we may become involved
in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.
Except for the matter described below,
we are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject,
nor are we aware of any such proceedings that are contemplated by any governmental authority. Although there can be no assurance
as to the ultimate outcome, we have denied liability in the case pending against us, and we intend to defend vigorously such case.
Based on information currently available, we believe the amount, or range, of reasonably possible losses in connection with the
action against us not to be material to our consolidated financial condition or cash flows. However, losses may be material to
our operating results for any particular future period, depending on the level of income for such period.
On May 24, 2010, the EPA issued an "Action
Memorandum" which documented the determination that soil removal was necessary to mitigate threats posed by elevated levels
of lead and arsenic in the soil located on property in close proximity to MTMI. The 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, MTMI and the EPA entered into an
"Access and Compensation Agreement" which detailed the responsibilities of both the EPA and MTMI with respect to the
clean-up and disposal of contaminated soils from the Site. On October 26, 2011 the EPA proposed a settlement of $380,000. On November
04, 2011, MTMI agreed to the EPA proposed amount of $380,000 but added a stipulation that the amount be payable over time depending
upon the status of MTMI's operations. On February 21, 2012, MTMI heard back from the EPA tacitly agreeing to the total amount
of $380,000 on a monthly schedule of $2,500 per month with a balloon payment at month 36.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware General Corporation Law and our
Certificate of Incorporation allow us to indemnify our officers and directors from certain liabilities and our Bylaws state that
we shall indemnify every (i) present or former director, advisory director or officer of us, (ii) any person who while serving
in any of the capacities referred to in clause (i) served at our request as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authority granted by)
the Board of Directors or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii) (each an "Indemnitee").
86
Our Bylaws provide that we shall indemnify
an Indemnitee against all judgments, penalties (including excise and similar taxes), fines, amounts paid in settlement and reasonable
expenses actually incurred by the Indemnitee in connection with any proceeding in which he was, is or is threatened to be named
as defendant or respondent, or in which he was or is a witness without being named a defendant or respondent, by reason, in whole
or in part, of his serving or having served, or having been nominated or designated to serve, if it is determined that the Indemnitee
(a) conducted himself in good faith, (b) reasonably believed, in the case of conduct in his official capacity, that his conduct
was in our best interests and, in all other cases, that his conduct was at least not opposed to our best interests, and (c) in
the case of any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful; provided, however, that
in the event that an Indemnitee is found liable to us or is found liable on the basis that personal benefit was improperly received
by the Indemnitee, the indemnification (i) is limited to reasonable expenses actually incurred by the Indemnitee in connection
with the proceeding and (ii) shall not be made in respect of any proceeding in which the Indemnitee shall have been found liable
for willful or intentional misconduct in the performance of his duty to us.
Other than in the limited situation described
above, our Bylaws provide that no indemnification shall be made in respect to any proceeding in which such Indemnitee has been
(a) found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an
action taken in the Indemnitee's official capacity, or (b) found liable to us. The termination of any proceeding by judgment,
order, settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself determinative that the Indemnitee
did not meet the requirements set forth in clauses (a) or (b) above. An Indemnitee shall be deemed to have been found liable in
respect of any claim, issue or matter only after the Indemnitee shall have been so adjudged by a court of competent jurisdiction
after exhaustion of all appeals therefrom. Reasonable expenses shall, include, without limitation, all court costs and all fees
and disbursements of attorneys for the Indemnitee. The indemnification provided shall be applicable whether or not negligence or
gross negligence of the Indemnitee is alleged or proven.
Other than discussed above, neither our
Bylaws nor our Certificate of Incorporation includes any specific indemnification provisions for our officers or directors against
liability under the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions,
or otherwise, the small business issuer has been advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
Item 3.02   Unregistered
Sales of Equity Securities
Shares Issued in Connection with the
Merger
On the closing date of the Merger, EGLLC,
the sole holder of common stock of MTMI and EGI, surrendered all of its 100 issued and outstanding MTMI shares and 100 issued and
outstanding EGI shares, and received an aggregate of 90,000,000 shares of the Company's Common Stock and 10,000,000 shares
of the Company's Series A Preferred Stock.
The ESRI stockholders retained 9,085,000
shares of Common Stock in the Merger.
The transactions described above were exempt
from registration under Section 4(2) of the Securities Act and Rule 506 of Regulation D as promulgated by the SEC. None of the
securities were sold through an underwriter and, accordingly, there were no underwriting discounts or commissions involved.
87
Item 5.01  Changes in Control
of Registrant.
See Item 1.01 and Item 2.01.
Item 5.02  Departure of
Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
See Item 1.01 and Item 2.01.
Item 9.01  Financial Statements
and Exhibits.
(a)  Financial statements of
business acquired.
In accordance with Item 9.01(a), audited
combined financial statements of MTMI and EGI as of, and for the years ended, December 31, 2011 and 2010 are included in this Report
beginning on Page F-1.
(b)  Pro forma financial information.
In accordance with Item 9.01(b), unaudited
pro forma combined financial statements of MTMI and EGI as of, and for the year ended, December 31, 2011 are included in this Report
beginning on Page F-26.
(d)  Exhibits
Exhibit
Number
SEC
Report
Reference
Number
Description
2.1
2.1
Agreement and Plan of Merger and Reorganization,
        dated as of April 6, 2012, by and among the Registrant, MTMI Acquisition Corp., (a Delaware corporation), EGI Acquisition Corp.,
        (a Montana corporation), Elkhorn Goldfields LLC, (a Delaware limited liability company), Montana Tunnels Mining, Inc. (a Delaware
        corporation) and Elkhorn Goldfields, Inc. (a Montana Corporation) (1)
2.2
2.2
Certificate of Merger dated as of April 5, 2012,filed with Delaware Secretary of State for the merger of MTMI Acquisition Corp. into Montana Tunnels Mining, Inc. (1)
2.3
2.3
Articles of Merger dated as of April 6 2012, filed with Montana
        Secretary of State for the merger of EGI Acquisition Corp. into Elkhorn Goldfields LLC (1)
3.1
3.1
Certificate of Incorporation of the Registrant
        (2)
3.2
3.2
Certificate of Amendment to Certificate
        of Incorporation of the Registrant, filed with the Delaware Secretary of State on April 4, 2012 (1)
3.3
3.2
Bylaws of the Registrant (2)
4.1
4.1
Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of the Registrant (2)
4.2
*
Form of 2012 Bridge 12% Unsecured Convertible Promissory Note of Elkhorn Goldfields, Inc.
88
4.3
*
Form of 8% Series A Bond due July 31, 2012 of Elkhorn Goldfields, Inc.
10.1
*
Share Cancellation Agreement dated April 6, 2012 between the Registrant and Dylan Hundley
10.2
*
Form of Note Cancellation and General Release Agreement dated April 6, 2012 by and between the Registrant and certain note holders
10.3
10.1
Loan Reinstatement and Modification Agreement between Gordon Snyder as Administrative Agent of Certain Note Holders, MFPI Partners, LLC, a Delaware limited liability company, and Elkhorn Goldfields, LLC (1)
10.4
10.2
Tri-Party Agreement by and among the Registrant, Elkhorn Goldfields LLC and Gordon Snyder as Administrative Agent of Certain Note Holders (1)
10.5
10.3
Pledge Agreement between Gordon Snyder as Administrative Agent of Certain Note Holders, MFPI Partners, LLC, a Delaware limited liability company, and Elkhorn Goldfields, LLC (1)
10.6
*
Split-Off Agreement dated as of April 6,
        2012, by and among the Registrant, Buzz Kill, Inc. (a New York corporation) and the Buyers listed on Exhibit A thereto
10.7
*
General Release Agreement dated as of April
        6, 2012, by and among the Registrant, Buzz Kill, Inc. and the Buyers listed on Exhibit A thereto
10.8
*
Termination of Investment Agreement dated April 6, 2012 by and between the Registrant and Buzz Kill, Inc.
10.9
*
Form of General Release of the Registrant by Certain Note Holders of Buzz Kill, Inc.
10.10
*
Form of Public Float Shares Lock-Up Agreement
        between the Registrant and certain stockholders
10.11
*
Form of Public Float Shares Escrow Agreement
        between the Registrant and certain stockholders
10.12
*
Form of No Short Selling Agreement between the Registrant and the officers, directors, certain employees and certain stockholders
10.13
*
Form of Indemnification Escrow Agreement
        between the Registrant. and the officers, directors and employees party thereto
10.14
10.4
Registrant's 2012 Equity Incentive Plan (1)
10.15
*
Form of Incentive Stock Option Agreement
10.16
*
Form of Non-Qualified Stock Option Agreement
89
10.17
*
Executive Employment Agreement for Patrick
        Imeson
10.18
*
Executive Employment Agreement for Robert Trenaman
10.19
*
Executive Employment Agreement for Eric Altman
10.20
*
Executive Employment Agreement for Tim Smith
10.21
*
Management Services Agreement between the Registrant and Black Diamond Financial Services Group, LLC
10.22
*
Form of Subscription Agreement for 8% Series A Bond of Elkhorn Goldfields, Inc.
10.23
*
Mineral Product Receivables Purchase Agreement dated April 15, 2011 by and among Elkhorn Goldfields, Inc., Elkhorn Goldfields, LLC and Black Diamond Holdings LLC
10.24
*
Mining Lease with Option to Purchase between Mt. Heagan Development, Inc. and Elkhorn Goldfields, Inc. and Extension Letter
10.25
*
Security Agreement dated April 15, 2011 between Elkhorn Goldfields, Inc. and Black Diamond Holdings LLC
10.26
*
Employee Leasing Agreement dated August 1, 2011 by and between Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc.
14.1
14.1
Code of Ethics (3)
21.1
*
List of Subsidiaries
* Filed herewith.
(1)
Incorporated by reference to the exhibit numbered as indicated above to the Registrant's
Form 8-A, File Number 000-54645, filed with the SEC on April 6, 2012.
(2)
Incorporated by reference to the exhibit numbered as indicated above to the Registrant's
Form S-1, File Number 333-149850, filed with the SEC on March 21, 2008.
(3)
Incorporated by reference to the exhibit numbered as indicated above to the Registrant's
Annual Report Form 10-K for the fiscal year ended December 31, 2008, File Number 333-149850, filed with the SEC on March 31, 2009.
90
ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.
Table of Contents
Combined Financial Statements
and
Independent Auditors' Report
December 31, 2011 and 2010
Page
Independent Auditors' Report
F-2
Combined Financial Statements
Combined Balance Sheets
F-3
Combined Statements of Operations
F-4
Combined Statement of Changes in Stockholders' Deficit
F-5
Combined Statements of Cash Flows
F-6
Notes to Combined Financial Statements
F-8
EASTERN RESOURCES, INC. AND
ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.
SELECTED UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL DATA
Explanatory Notes
F-26
Balance Sheet
F-27
Statement of Operations
F-28
Adjustments
F-29
F-
1
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Elkhorn Goldfields, Inc. and Montana Tunnels
Mining, Inc.
Denver, Colorado
We have audited the accompanying combined
balance sheets of Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc. (collectively the "Company") as of December
31, 2011 and 2010 and the related combined statements of operations, changes in stockholders' deficit, and cash flows for
the years then ended. These combined financial statements are the responsibility of the Company's management. Our responsibility
is to express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with
auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statements and assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
The accompanying combined financial statements
have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the combined financial statements,
the Company has not generated any revenues to fund operations and has a working capital deficit and a stockholders' deficit
of $53,561,713 and $59,310,302, respectively, which raises substantial doubt about the ability of the Company to continue as a
going concern. Management's plans regarding those matters also are described in Note 2. The combined financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
In our opinion, the combined financial
statements referred to above present fairly, in all material respects, the combined financial position of Elkhorn Goldfields, Inc.
and Montana Tunnels Mining, Inc. as of December 31, 2011 and 2010 and the results of their operations and their cash flows for
the years then ended in accordance with accounting principles generally accepted in the United States of America.
Ehrhardt Keefe Steiner & Hottman PC
March 15, 2012
Denver, Colorado
F-
2
ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.
Combined Balance Sheets
December 31,
2011
2010
Assets
Current assets
Cash and cash equivalents
$
358,125
$
61,351
Inventory, net
912,676
1,038,524
Other current assets
12,433
9,242
Total current assets
1,283,234
1,109,117
Non-current assets
Buildings, equipment, and land, net
5,621,186
4,588,602
Mine development
3,869,342
-
Mining properties and mineral interests, net
16,380,747
16,358,839
Restricted cash
604,021
284,467
Reclamation bonds
16,190,556
15,842,403
Total non-current assets
42,665,852
37,074,311
Total assets
$
43,949,086
$
38,183,428
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable
$
282,141
$
86,040
Accrued liabilities
3,247,232
2,650,486
Current portion of capital lease obligation
335,093
-
Series A 8% bonds
1,399,779
1,235,500
Deferred revenue, related party ore purchase agreement
3,237,410
-
Push-down redeemable obligation of Parent and its affiliate
11,085,960
10,117,659
Push-down interest of Parent and its affiliate
13,677,484
7,071,953
Push-down debt of Parent and its affiliate
21,579,848
22,498,576
Total current liabilities
54,844,947
43,660,214
Non-current liabilities
Capital lease obligations, less current portion
39,719
-
Reclamation liability
22,793,187
21,465,966
Deferred revenue, related party ore purchase agreement, less current portion
6,762,590
-
Related party ore purchase derivative contract
18,818,945
-
Total non-current liabilities
48,414,441
21,465,966
Total liabilities
103,259,388
65,126,180
Commitments and contingencies
Stockholders' deficit
(59,310,302
)
(26,942,752
)
Total liabilities and stockholders' deficit
$
43,949,086
$
38,183,428
See notes to combined financial statements.
F-
3
ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.
Combined Statements of Operations
December 31,
2011
2010
Operating expenses
General and administrative
$
850,616
$
1,580,991
Accretion expense
1,327,221
1,535,632
Mine care and maintenance
1,037,199
1,236,832
Depreciation, depletion, and amortization
6,604
11,129
Total operating expenses
3,221,640
4,364,584
Loss from operations
(3,221,640
)
(4,364,584
)
Other (expense) income
Interest expense
(8,083,445
)
(5,546,184
)
Interest income
47,705
33,384
Other income
512,066
6,628
Loss on related party ore purchase derivative
(13,025,932
)
-
Change in fair value of derivative instrument contract
(5,793,013
)
-
Total other expense
(26,342,619
)
(5,506,172
)
Net loss
$
(29,564,259
)
$
(9,870,756
)
See notes to combined financial statements.
F-
4
ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.
Combined Statement of Changes in Stockholders'
Deficit
For the Years Ended December 31, 2011
and 2010
Total
Capital
Accumulated
Stockholders'
Stock
Amount
Deficit
Deficit
Balance - December 31, 2009
200
$
11,280,392
$
(31,948,297
)
$
(20,667,905
)
Non-cash contributions
-
3,690,000
-
3,690,000
Cash distributions
-
(964,091
)
-
(964,091
)
Cash contributions
-
870,000
-
870,000
Net loss
-
-
(9,870,756
)
(9,870,756
)
Balance - December 31, 2010
200
14,876,301
(41,819,053
)
(26,942,752
)
Non-cash contribution
-
1,314,488
-
1,314,488
Cash distributions
-
(4,377,779
)
-
(4,377,779
)
Cash contributions
-
260,000
-
260,000
Net loss
-
-
(29,564,259
)
(29,564,259
)
Balance - December 31, 2011
200
$
12,073,010
$
(71,383,312
)
$
(59,310,302
)
See notes to combined financial statements.
F-
5
ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.
Combined Statements of Cash Flows
For the Years Ended
December 31,
2011
2010
Cash flows from operating activities
Net loss
$
(29,564,259
)
$
(9,870,756
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Inventory reserve
242,329
601,241
Depreciation, depletion, and amortization
6,604
11,129
Accretion expense
1,327,221
1,535,632
Loss on related party ore purchase derivative contract
13,025,932
-
Change in fair value of derivative instrument
5,793,013
-
Push-down redeemable obligation of Parent and its affiliate
968,301
3,240,579
Push-down interest of Parent and its affiliate
7,001,291
2,254,375
Changes in operating assets and liabilities
Mineral sales receivable
-
111,704
Inventory
(116,481
)
5,570
Other current assets
(3,191
)
56,414
Accounts payable
196,101
(517,592
)
Accrued liabilities
596,746
1,570,400
Deferred revenue, related party
    ore  purchase agreement
10,000,000
-
39,037,866
8,869,452
Net cash provided by (used in) operating activities
9,473,607
(1,001,304
)
Cash flows from investing activities
Purchase of building and equipment
(682,419
)
(79,480
)
Cash received from acquisition of the remaining 50% interest in Montana Tunnels Mine
-
44,044
Additions to mine development
(3,809,242
)
-
Additions to mining properties and mineral interests
(21,908
)
(41,149
)
Change in restricted cash
(319,554
)
(478
)
Change in reclamation bonds
(348,153
)
(92,687
)
Net cash used in investing activities
(5,181,276
)
(169,750
)
Cash flows from financing activities
Proceeds from Series A 8% bonds
164,279
1,235,500
Payments on capital lease obligations
(42,057
)
(80,197
)
Proceeds from stockholder contributions
260,000
870,000
Payments of distributions to stockholders
(4,377,779
)
(964,091
)
Net cash (used in) provided by financing activities
(3,995,557
)
1,061,212
Net increase (decrease) in cash and cash equivalents
296,774
(109,842
)
Cash and cash equivalents - beginning of period
61,351
171,193
Cash and cash equivalents - end of period
$
358,125
$
61,351
(Continued on the following page)
See notes to combined financial statements.
F-
6
ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.
Combined Statements of Cash Flows
(Continued from the previous page)
Supplemental disclosure of cash flow information:
Cash paid for interest for the
years ended December 31, 2011 and 2010 was $45,708 and $13,017, respectively.
Supplemental disclosure of non-cash investing
and financing activity:
During 2011, the Company acquired
$416,869 of equipment through a capital lease.
During 2011, $60,100 of depreciation
expense was capitalized to mine development.
During 2011, Elkhorn Goldfields,
LLC (the "Parent") paid on behalf of the Company $1,314,488 of accrued pushed-down interest and debt.
During 2010, the Parent transferred
the value of its Calais Resources, Inc. investment for the remaining 50% interest of the net assets of Montana Tunnels. The following
is the allocation of the remaining 50% interest of the assets and liabilities acquired of Montana Tunnel as of December 31, 2011:
Cash and cash equivalents
$
44,044
Mineral sales receivable
78,704
Inventory
822,456
Other current assets
543
Buildings and equipment, net
2,210,717
Mining properties, mine development, and mineral interests, net
3,123,652
Restricted cash and reclamation bonds
8,184,845
Accounts payable
(306,398
)
Accrued liabilities
(471,698
)
Capital lease obligations
(35,716
)
Reclamation liability
(9,961,149
)
Investment in debt securities, at estimated fair value
$
3,690,000
See notes to combined financial statements.
F-
7
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 1 - Description of Business
and Summary of Significant Accounting Policies
Elkhorn Goldfields, Inc. ("EGI")
and Montana Tunnels Mining, Inc. ("MTMI") (collectively, the "Company") 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. The Company's objective is to operate mines and expand its interests through acquisition and exploration.
The Company 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 in the process of installing required infrastructure to allow the Company
to access the lower levels of ore. In addition, a second property has completed the permitting, except for posting the required
reclamation bonding. Lastly, the Company 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.
The Company maintains its principal executive office in Denver, Colorado.
During July 2006, Elkhorn Goldfields, LLC
(the entity that wholly owns the Company) (the "Parent") entered into a 50% joint venture interest (the "JV")
with the former owner of MTMI). The JV agreement called for the Parent to contribute $14,250,000 in return for a 50% interest in
the assets relating to Montana Tunnels, including the mining equipment and mill. Montana Tunnels is an open pit mine that produced
gold doré, lead-gold, and zinc-gold concentrates. Montana Tunnels ceased mining in an area referred to as the L Pit and
completed milling of stockpiled ore at the end of April 2009, at which time the mine was placed on care and maintenance. The Company
is currently completing plans to enlarge the L Pit. The enlargement and further mine development is referred as the M Pit.
On February 1, 2010, the Parent acquired
the remaining 50% interest in Montana Tunnels and the related assets, plus acquired Diamond Hill Mine and Mill and has pushed-down
the assets to the Company as of February 1, 2010 (Note 3).
Principles of Combination
For the years ended December 31, 2011 and
2010, the accompanying combined financial statements include the accounts of EGI and MTMI. EGI includes the property and equipment
relating to the Golden Dream Mine and the mineralized targets of the Elkhorn Project. MTMI includes the property, mill, and equipment
relating to Montana Tunnels and Diamond Hill Mine. All intercompany accounts and transactions have been eliminated.
F-
8
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)
Cash and Cash Equivalents
The Company considers all highly liquid
instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors
its positions with, and the credit quality of, the financial institutions with which it invests. As of the balance sheet dates,
and periodically throughout the years, the Company has maintained balances in various operating accounts in excess of federally
insured limits.
Inventory
Doré inventory is stated at the
lower of weighted-average production cost and net realizable value. Production costs for doré inventory include direct production
costs, attributable overhead, and depreciation incurred to bring the material to its current point in the processing cycle. Stockpiled
ore inventory represents ore that has been mined and is available for further processing. Work-in-process inventory, including
stockpiled ore and in-circuit gold inventory, is valued at the lower of weighted-average production cost and net realizable value.
Materials and supplies are valued at the lower of average direct cost of acquisition and net realizable value.
Buildings and Equipment
MTMI buildings and equipment are recorded
at acquisition cost and amortized on a units-of-production basis over the remaining proven and probable reserves of the mine. Equipment
under capital lease is valued at the lower of fair market value or net present value of the minimum lease payments at the inception
of the lease. Equipment that is mobile is amortized on a straight-line basis over the estimated useful life of the equipment ranging
from five to ten years, not to exceed the related estimated mine lives.
EGI buildings and equipment are stated
at cost. Repair and maintenance costs are expensed as incurred. Depreciation is provided utilizing the straight-line method over
the estimated useful lives for owned assets taking into account estimated salvage values, ranging from 3 to 39 years.
Mine Development
The costs of removing overburden and waste
materials to access the ore prior to the production phase are referred to as "mine development costs." Mine development
costs are capitalized during the development of the mine. Mine development costs are amortized using the units-of-production method
based on estimated recoverable tons of proven and probable reserves. To the extent that these costs benefit the mine, they are
amortized over the estimated life of the mine. Development costs incurred after the first saleable ore is extracted from the mine
(i.e., post-production costs) are a component of mineral inventory cost. All post-production costs are considered variable production
costs that are included in the costs of the inventory produced during the period in which the mining costs are incurred.
F-
9
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)
Mining Properties and Mineral Interests
Mining Properties
For new projects without established reserves,
all costs, other than acquisition costs, are expensed prior to the establishment of proven and probable reserves. Reserves designated
as proven and probable are supported by a feasibility study, indicating that the reserves have had the requisite geologic, technical,
and economic work performed and are legally extractable at the time of reserve determination. Once proven and probable reserves
are established, all development and other site-specific costs are capitalized, including general and administrative charges for
actual time and expenses incurred in connection with site supervision as mine development costs. Development drilling costs incurred
to infill mineralized material to increase the confidence level in order to develop or increase proven and probable reserves are
also capitalized as mine development costs. If subsequent events or circumstances arise that would preclude further development
of the reserves under the then existing laws and regulations, additional costs are expensed until the impediments have been removed
and the property would be subject to ongoing impairment reviews. When a mine is placed into production, the capitalized acquisition
and mine development costs are reclassified to mining properties and are amortized to operations using the units-of-production
method based on the estimated metals that can be recovered.
Mineral Interest
s
Mineral interests include the cost of obtaining
patented and unpatented mining claims and the initial cost of acquiring mineral interests. If a mineable ore body is discovered,
such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If
no mineable ore body is discovered or such rights are otherwise determined to have no value, such costs are expensed in the period
in which it is determined the property has no future economic value. For the years ended December 31, 2011 and 2010, there are
no mineral interest impairments.
Restricted Cash
Restricted cash consists of cash held in
certificates of deposit for the reclamation of the Elkhorn Project. The restriction will be released when the reclamation is completed,
which the Company does not expect to happen prior to 2018.
Bond Reclamation
Bond reclamation consists of cash held
directly by a surety for reclamation of Montana Tunnels and the Elkhorn Project. The restriction will be released when the reclamation
is completed, which the Company expects to be in 2024 and 2018, respectively.
F-
10
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)
Long-Lived Assets
The Company reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered.
The Company looks primarily to the estimated undiscounted future cash flows in its assessment of whether or not long-lived assets
have been impaired. If impairment has occurred, the long-lived assets are written down to its estimated fair value.
Fair Value of Financial Instruments
The carrying amounts of financial instruments,
including cash, accounts payable, and accrued liabilities, approximated fair value as of December 31, 2011 and 2010 because of
the relatively short maturity of these instruments.
The Company applies the guidance to non-financial
assets and liabilities measured at fair value on a non-recurring 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:
Level 1:
Quoted prices in active markets for identical assets or liabilities;
Level 2:
Quoted prices in active markets for similar assets and liabilities and inputs that are observable
for the asset or liability; or
Level 3:
Unobservable inputs in which there is little or no market data, which requires the reporting entity
to develop its own assumptions.
The following assets are measured at fair
value as of December 31, 2011:
Description
Level 1
Level 2
Level 3
Total
Certificate of deposits
$
604,021
$
-
$
-
$
604,021
Reclamation bonds
$
-
$
-
$
16,190,556
$
16,190,556
Embedded derivative
$
-
$
-
$
(18,818,945
)
$
(18,818,945
)
F-
11
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)
Fair Value of Financial Instruments (continued)
The following assets are measured at fair
value as of December 31, 2010:
Description
Level 1
Level 2
Level 3
Total
Certificate of deposits
$
284,467
$
-
$
-
$
284,467
Reclamation bonds
$
-
$
-
$
15,842,403
$
15,842,403
Certificates of Deposit:
Recorded at cost, which approximates fair value due to the short duration of the investment.
Reclamation Bonds
: Recorded
at the amount provided by the Montana Department of Environmental Quality, which is based upon the fair value of the cash underlying
the bond.
Embedded Derivatives:
Based on contract terms, projected future gold prices, and discount rate commensurate with estimates of contemporary credit risk
using a discounted cash flow model. The model is most sensitive to the future price of gold.
There were no changes to the valuation
techniques used during the year ended December 31, 2011.
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 period ended December 31, 2011:
Embedded
Derivative
Reclamation
Bonds
Beginning balance
$
-
$
15,842,403
Issuances
(13,025,932
)
-
Total gains or losses (realized/unrealized)
Included in earnings
(5,793,013
)
-
Included on the balance sheet
-
348,153
Transfers in and/or out of Level 3
-
-
Ending balance
$
(18,818,945
)
$
16,190,556
F-
12
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)
Reclamation Liability
The Company's mining and exploration
activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws
and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations to protect
public health and the environment and believes its operations are in compliance with applicable laws and regulations in all material
respects. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot
predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory
requirements. Estimated future costs are discounted to their present value using a 12% discount rate. Reclamation obligations are
secured by cash held directly by a surety or certificates of deposit.
The following table summarizes the activity
for the Company's asset retirement obligations:
For the Years Ended
December 31,
2011
2010
Asset retirement obligations at January 1
$
21,465,966
$
19,930,334
Accretion expense
1,327,221
1,535,632
Liabilities incurred
-
-
Asset retirement obligations at December 31
22,793,187
21,465,966
Less current portion of asset retirement obligations
-
-
Asset retirement obligations at December 31, less current portion
$
22,793,187
$
21,465,966
Income Taxes
The Company recognizes deferred tax liabilities
and assets based on the differences between the tax basis of assets and liabilities and the reported amounts in the combined financial
statements that will result in taxable or deductible amounts in future years. The Company's temporary differences result
primarily from net operating losses and depreciation. A valuation allowance is established for deferred tax assets to the extent
there is uncertainty regarding the ultimate utilization. To date, no deferred tax assets have been recognized in the accompanying
combined financial statements because of the uncertainty of the realization of those assets.
F-
13
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 1 - Description of Business
and Summary of Significant Accounting Policies (continued)
Income Taxes (continued)
The Company applies guidance on accounting
for uncertainty in income taxes. Under this guidance, the Company recognizes the tax benefit from an uncertain tax position if
it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical
merits of the position. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous
and are often ambiguous. As such, the Company is required to make many subjective assumptions and judgments regarding income tax
exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes
to its subjective assumptions and judgments that can materially affect amounts recognized in its combined balance sheets and statements
of operations.
Interest and penalties associated with
tax positions are recorded in the period assessed as general and administrative expenses. No interest or penalties have been assessed
for the years ended December 31, 2011 and 2010. The Company's returns for tax years subject to examination by tax authorities
include 2007 and 2008 through the current period for state and federal tax reporting purposes, respectively.
Revenue Recognition
The Company recognizes revenue from the
sale of gold and co-products when the following conditions are met: persuasive evidence of an arrangement exists, delivery has
occurred in accordance with the terms of the arrangement, the price is fixed or determinable, and collectibility is reasonably
assured.
Revenue for gold bullion is recognized
at the time of delivery and transfer of title to counterparties.
The Company received an up-front payment
of $10,000,000 to sell 80% of the first 41,700 ounces of gold and 6.5% of the gold produced after 250,000 ounces to a related party.
The $10,000,000 payment has been recognized as deferred revenue until the gold is sold. The Company will recognize revenue of $800
per ounce as the 80% of the first 41,700 ounces is sold.
Use of Estimates
The preparation of combined 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 combined financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-
14
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 2 - Management's Plan
At December 31, 2011, 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 likely involve the issuance
of debt and/or equity securities. These factors raise substantial doubt as to the Company's ability to continue as a going
concern. The combined financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 3 - Acquisition of the Remaining
50% in Montana Tunnels
On February 1, 2010, the Parent acquired
the remaining 50% interest in MTMI, from Apollo Gold ("Apollo") in exchange for certain promissory notes from Calais
Resources, Inc. ("Calais") held by the Parent and certain investors in the Parent or its affiliates with an aggregate
outstanding face balance and a carrying value of $3,440,000 and $250,000 deposit reflected in mining properties. Such value was
based upon the
appraised value
of the real estate collateralizing the notes. The acquisition allows the Company to
own and develop Montana Tunnels. The acquisition of the remaining 50% has been "pushed down" and reflected as a non-cash
contribution as on February 1, 2010 in the combined financial statements.
The Company ascribed a value of $3,690,000
to the remaining 50% interest and the net assets acquired from MTMI representing the value of the Calais investment. The following
is the allocation of the remaining 50% interest of the assets and liabilities acquired at February 1, 2010:
Cash and cash equivalents
$
44,044
Mineral sales receivable
78,704
Inventory
822,456
Other current assets
543
Buildings and equipment, net
2,210,717
Mining properties, mine development, and mineral interests, net
3,123,652
Restricted cash and reclamation bonds
8,184,845
Accounts payable
(306,398
)
Accrued liabilities
(471,698
)
Capital lease obligations
(35,716
)
Reclamation liability
(9,961,149
)
$
3,690,000
The results of operations related to the
50% interest of MTMI has been included in the combined statements of operations from the date of acquisition, February 1, 2010,
and summarized in the
pro forma information for the 12 months ended December 31, 2010. January 2010 has been omitted as
there were no mining operations during the month. The pro forma information reflects
the push-down basis of accounting for
the fair values of these transactions from the Parent to the subsidiary, EGI.
F-
15
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 4 - Consolidated Balance Sheet
Disclosures
Inventory
Inventory is summarized as follows:
December 31,
2011
2010
Materials and supplies
$
2,136,302
$
2,168,717
Stockpiled ore
693,700
544,804
Allowance for obsolete materials and supplies inventory
(1,917,326
)
(1,674,997
)
$
912,676
$
1,038,524
There were no mineral inventory impairments
during 2011 or 2010.
Buildings, Equipment, and Land
Buildings, equipment, and land consist
of the following:
December 31,
2011
2010
Mining equipment
$
8,886,851
$
8,886,851
Crushers
2,371,808
2,371,808
Buildings
871,703
871,703
Equipment
1,380,173
280,885
Land
164,752
164,752
Office equipment
113,542
113,542
Vehicles
117,830
117,830
Software
39,899
39,899
Computer equipment
17,972
17,972
13,964,530
12,865,242
Less accumulated depreciation
(8,343,344
)
(8,276,640
)
$
5,621,186
$
4,588,602
Depreciation expense for the years ended
December 31, 2011 and 2010 was $6,604 and $11,129, respectively. For the year ended December 31, 2011, $60,100 of depreciation
expense was capitalized.
F-
16
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 4 - Consolidated Balance Sheet
Disclosures (continued)
Montana Tunnels ceased mining during November
2008, after completion of the L-Pit, and completed milling of stockpiled ore at the end of April 2009, at which time the mine was
placed on care and maintenance until finances are secured to initiate the mine pit (M-Pit) expansion. Accordingly, there was no
depreciation expense relating to Montana Tunnels for the years ended December 31, 2011 and 2010.
Net Mining Properties, Mine Development, and Mineral Interests
Mine development and mineral interests
consist of the following:
December 31,
2011
2010
Mine
Development
Mining
Properties
and Mineral
Interest
Total Book
Value
Mine
Development
Mining
Properties
and Mineral
Interest
Total Book
Value
Montana Tunnels
$
-
$
13,129,669
$
13,129,669
$
-
$
13,167,893
$
13,167,893
Golden Dream Mine
3,869,342
2,615,195
6,484,537
-
2,615,195
2,615,195
Gold Hill/Mount Heagan
-
635,883
635,883
-
575,751
575,751
Total mine development and mineral interest, net
$
3,869,342
$
16,380,747
$
20,250,089
$
-
$
16,358,839
$
16,358,839
Depletion expense related to MTMI mining
properties for the years ended December 31, 2011 and 2010 was zero. MTMI ceased mining during November 2008 and completed milling
of stockpiled ore at the end of April 2009, at which time the mine was placed on care and maintenance. Accordingly, there was no
depletion for the years ended December 31, 2011 and 2010.
Other Mine Development and Mineral Interests
EGI owns the Elkhorn Project, located in
the Elkhorn Mountains of Jefferson County, Montana. The Elkhorn Project consists of one permitted mine and three known gold mineralized
deposits – Golden Dream Mine (formerly referred to as the Sourdough Mine), and the Elkhorn Project mineralized deposits.
The Company developed a five-year mine plan on the Golden Dream Mine deposit, which is projected to mine and process 1.2 million
tons of gold and copper bearing ore. The permit process has been completed, and the Company has initiated mine development activities.
The Elkhorn Project are in the preliminary stages of drilling to define the ore body, developing the mine plan, and applying for
the required permits from the regulatory agencies before proceeding with mining operations.
The costs associated with the Mount Heagan
mineral property are net smelter royalty payments with a monthly minimum to allow for the development of the property. The monthly
minimum payments are $5,000. The total payments made under the agreement from the inception of the agreement are $640,000 and will
not exceed $1,500,000.
F-
17
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 4 - Consolidated Balance Sheet
Disclosures (continued)
Other Mine Development and Mineral Interests (continued)
The costs associated with the Golden Dream
Mine property were used to establish the viability of the mine site. These include all direct costs of development since the Company's
internal evaluation established proven and probable reserves.
Accrued
Liabilities
Accrued liabilities consist of the following:
December 31,
2011
2010
Property and mining taxes payable
$
2,630,365
$
2,502,663
Environmental remediation
380,000
-
Payroll and related expenses
130,509
109,610
Other expenses
106,358
38,213
$
3,247,232
$
2,650,486
F-
18
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 5 - Notes Payable
Series A 8% Bonds
December 31,
2011
2010
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 during 2010 and $164,279 was funded during 2011. The bonds mature during July 2012, with interest accruing at 8%. In the case of 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 Company has not made the quarterly interest payments on the bonds; thus, an event of default is present. Because of the non-payment of interest, the Company has classified the bonds as current.
The holders each received five-year warrants to purchase 0.67 membership units of the Parent per $50,000 bond at a purchase price of $37,500 per membership unit. If the 2010 issuance is not paid prior to July 31, 2011, then the Company will issue separate four-year warrants to purchase 0.67 equity units per $50,000 bond at a purchase price of $37,500 per membership unit. The warrants expire July 31, 2015.
$
1,399,779
$
1,235,500
Less current portion
(1,399,779
)
(1,235,500
)
$
-
$
-
Current Notes Payable Maturities
Maturities of notes payable obligations
are as follows:
Year Ending December 31,
Related Party
Other
2012
$
1,199,779
$
200,000
F-
19
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 6 - Push-Down Debt, Interest
and Redemption Obligation of Parent and Its Affiliate
The Company's assets serve as collateral
for multiple loans of the Parent. Although the Company is not a maker or guarantor on the loans, the loans have been "pushed
down" to the Company in the accompanying combined financial statements in accordance with Statement of Accounting Bulletin
No. 54. The following is a summary of the loans as of December 31, 2011 and 2010.
Series A Convertible Notes
December 31,
2011
2010
$5,000,000, 12% Series A convertible notes.  These notes were due in December 2007.  The notes pay interest at the rate of 12% per annum, payable on the maturity date or within 30 days after conversion.  In the case of default, interest on the notes accrues at 18%.  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 November 2013.  Interest only payments equivalent to 12% of the face amount commenced during April 2010 and were to be made quarterly.  At the election of the holder, principal amounts of the notes are convertible into membership units at $50,000 per membership unit or into membership interests of the Parent.  The Company's mining properties and equipment have been pledged as collateral to these notes.
$
5,791,701
$
5,791,701
On May 14, 2007, an affiliate of the parent entered into a loan for $8,050,000.  The loan was due May 2009.  The loan pays interest at the rate of 12% per annum, payable monthly.  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 November 2013.  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 that is held by the affiliate.  The Company's mining properties and equipment have been pledged as collateral to this note.
9,680,125
9,680,125
F-
20
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 6 - Push-Down Debt, Interest
and Redemption Obligation of Parent and Its Affiliate (continued)
Series A Convertible Notes (continued)
December 31,
2011
2010
On January 22, 2008, an affiliate of the Parent entered into a loan for $5,000,000.  The loan was due January 2009.  The loan pays interest at the rate of 12% per annum, payable monthly.  During May 2009, as part of the $1,000,000 note agreement, 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 November 2013.  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 $1,350,000 of Series A Convertible Bond, 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.
6,108,022
6,108,022
On May 13, 2009 the Company entered into a promissory note ("Promissory Note") for a total of $1,000,000.  As of December 31, 2011, the Promissory Note and accrued interest were paid in full.
-
918,728
Total push-down debt of Parent and its affiliate
21,579,848
22,498,576
An affiliate of the Parent offered redeemable options to certain debt holders ("Optionee") to purchase membership units in a 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, whereupon the affiliate shall have the obligation to purchase the put units at the Optionees' cost plus 15% annualized return, less cash distributions or the fair market value of in-kind distributions, which shall first be deducted from the 15% annualized return from each Optionee's date of acquisition of the units.  The affiliate will satisfy the put by executing and delivering to each Optionee the affiliates' fully amortized 60-month note in the amount of the put price bearing interest at 12% per annum.  The Optionees have the right to exercise the put at any time until 60 days after all push-down debt and related interest have been repaid in full.   The Company's mining properties and equipment have been pledged as collateral to the redeemable interest.
11,085,960
10,117,659
Push-down accrued interest of Parent and its affiliate
13,677,484
7,071,953
$
46,343,292
$
39,688,188
During 2011, the Company has not made the
interest payments on the notes or bonds; thus, an event of default is present. Because of the non-payment of interest, the Company
has classified the notes and bonds as current.
F-
21
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 7 - 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 included
in depreciation expense.
The assets under capital lease have cost
and accumulated amortization as follows at December 31, 2011:
Equipment
$
416,869
Less accumulated depreciation
(9,993
)
$
406,876
Maturities of capital lease obligations
are as follows:
Year Ending December 31,
2012
$
385,358
2013
49,780
Total minimum lease payments
435,138
Amount representing interest
(60,326
)
Present value of net minimum lease payments
374,812
Less current portion
(335,093
)
Long-term capital lease obligation
$
39,719
Note 8 - Income Taxes
Deferred income taxes have been provided
for temporary differences that exist between the financial reporting and income tax bases of assets and liabilities and have been
classified as either current or non-current based upon the related assets or liabilities. As of December 31, 2011 and 2010, primary
components of the net deferred tax liabilities include accrued reclamation, inventory reserves, depreciation, amortization, and
net operating loss carryforwards. The effective tax rate in 2011 and 2010 differs from the expected federal statutory rate primarily
due to change in valuation allowance, state income taxes, and deductions disallowed for tax purposes, primarily penalties, and
losses from transactions with related parties.
F-
22
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 8 - Income Taxes (continued)
As of December 31, 2011 and 2010, EGI had
federal net operating loss carryforwards of $1.9 million. These losses may be carried forward and will expire over the period from
2023 through 2030. As of December 31, 2011 and 2010, MTMI had federal net operating loss carryforwards of $6.8 million and $5.9
million, respectively. These losses may be carried forward and will expire over the period from 2018 through 2031. The annual utilization
of the net operating carryforwards may be subject to certain limitations under Section 382 of the Internal Revenue Code of 1986,
as amended, and other limitations under state tax laws.
As of December 31, 2011 and 2010, the Company
has a valuation allowance on its deferred tax assets, since it cannot conclude that it is more likely than not that the deferred
tax assets will be fully realized on future income tax returns. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers
past history, the scheduled reversal of deferred tax liabilities, available taxes in carryback periods, future taxable income projections,
and tax planning strategies in making this assessment. The Company will continue to evaluate whether the valuation allowance is
needed in future reporting periods.
The Company did not have any unrecognized
tax benefits as of the years ended December 31, 2011 or 2010.
Note 9 - Related Party Transactions
During 2011, the Company entered into an
ore purchase agreement ("Agreement") with an affiliate of the Parent to sell 80% of the first 41,700 ounces of gold
produced from the Golden Dream Mine for an up-front payment of $10,000,000 of consideration. The Agreement requires the Company
to pay all proceeds from the sale of gold in excess of $500 per ounce or the latest COMEX spot gold price, if any, to the related
party. Additionally, the related party may purchase 6.5% of the ounces produced by the mine after the mine has produced in excess
of 250,000 aggregate ounces for a purchase price of the lesser of $600 per ounce or the latest COMEX spot gold price. The term
of the Agreement is through the closure of the Golden Dream Mine. Currently the Company estimates reserves at approximately 258,000
ounces of gold. On that date, the Company entered into a security agreement with its Parent to secure the payment of EGI's
obligations under the Agreement pursuant to which EGI granted the Parent a continuing security interest in all of the assets and
property of EGI.
F-
23
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 9 - Related Party Transactions
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) April 15, 2011 measurement date, and (iv) and management's forecast to produce 41,700 ounces by December 2013. The
Company recognized a $13,025,932 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 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 December 31, 2011 resulted in a loss of $5,793,013, which
was recorded in the combined statements of operations in the change in fair value of the derivative instrument.
Note 10 - 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 December 31, 2011 and 2010, approximately $22,800,000 and $21,500,000,
respectively, were accrued for reclamation costs relating to currently producing mineral properties in accordance with asset retirement
obligation guidance.
Property Taxes
The Company is not current with its 2010
and 2009 property taxes. The total amount past due as of December 31, 2011 is approximately $2,600,000.
F-
24
ELKHORN GOLDFIELDS, INC. AND MONTANA TUNNELS MINING, INC.
Notes to Combined Financial Statements
Note 11 - Subsequent Events
During February 2012, the Company entered
into three convertible bridge loans with a related party for $1,800,000. The loans are unsecured and call for 12% annual interest
on the outstanding unpaid principal. The loans are convertible into common stock of the potential acquirer if the acquisition consummates
at $2.00 per share. The holder will receive one five-year warrant attached to each share of acquirer. Two warrants will acquire
an additional share of common stock for $3.00 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 $2.50, 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. Assuming the public transaction completes, but the PPO or other equity financing is not completed
within six months, the holder may put the shares to the Company at $4.00 per share. The loans mature on August 29, 2012, and prior
to that date, but after the closing of the PPO.
F-
25
EASTERN RESOURCES, INC. AND
ELKHORN GOLDFIELDS, INC. AND MONTANA
TUNNELS MINING, INC.
SELECTED UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL DATA
Explanatory Notes
The unaudited pro forma financial data set forth below at and
for the year ended December 31, 2011 is based upon Eastern Resources, Inc (ERSI) historical financial statements, adjusted
to give effect to:
•
The transaction with Elkhorn Goldfields, Inc. (EGI) and Montana Tunnels Mining Inc. (MTMI) and
•
The contemporaneous sale of the corporation to the purchasing corporation.
On April 6, 2012, we entered into an Agreement and Plan of Merger
with ESRI a public company. ERSI was merged into EGI and MTMI EGI and MTMI, as the Surviving Corporation, became a wholly-owned
subsidiary of ERSI. We issued 90,000,000 shares of our common stock and 10,000,000 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 after the consummation
of the Merger.
The pro forma financial information at and for the year ended
December 31, 2011 has been developed from ESRI's audited financial statements and EGI and MTMI audited financial statements,
and the notes to those financial statements, which are included elsewhere in this document.
The unaudited pro forma consolidated financial data is provided
for illustrative purposes only and does not purport to represent what ESRI's actual consolidated results of operations or
ESRI's financial position would have been had the transaction and corporation sale occurred on the dates assumed, nor is
it necessarily indicative of future consolidated results of operations or financial position.
The unaudited pro forma combined financial data is based on
preliminary estimates and various assumptions that EGI and MTMI and ERSI believe are reasonable in these circumstances. Because
the former stockholders of EGI and MTMI will own approximately 92% of the combined company on completion of the exchange, calculated
on a fully diluted basis and ERSI is selling its existing operations in conjunction with the transaction, the transaction and corporation
sale will be accounted for as a recapitalization through a reverse acquisition, with no goodwill or other intangibles recorded.
As such, the pro forma financial information reflects the historical financial information of EGI and MTMI and the remaining assets
and liabilities of ERSI brought over at historical cost. Costs of the transaction will be charged to operations. ERSI does not
anticipate that any cost savings, revenue enhancements or synergies will be realized in connection with the transaction and corporation
sale. The unaudited pro forma financial statements reflect the EGI and MTMI accounting policies, as those accounting policies will
govern EGI and MTMI accounting after the transaction and corporation sale.
The summary consolidated statement of operations data for the
year ended December 30, 2011 gives effect to the transaction and corporation sale as if each had occurred on January 1,
2011.
F-
26
EASTERN RESOURCES, INC. & ELKHORN
GOLDFIELDS, INC. & MONTANA TUNNELS MINING, INC.
BALANCE SHEET
December 31,
    2011     Elkhorn
Gold & MTMI
December 31, 2011
ERSI
December 31, 2011
Total
Adjustments to Reflect
    Reverse
Acquisition
Pro Forma Combined
Assets
Current assets
Cash and cash equivalents
$
358,125
$
2,125
$
360,250
$
-
$
360,250
Inventory, net
912,676
-
912,676
-
912,676
Other current assets
12,433
-
12,433
-
12,433
Total current assets
1,283,234
2,125
1,285,359
-
1,285,359
Non-current assets
Buildings, equipment, and land, net
5,621,186
-
5,621,186
-
5,621,186
Mine development
3,869,342
-
3,869,342
-
3,869,342
Mining properties and mineral interest, net
16,380,747
-
16,380,747
-
16,380,747
Restricted cash
604,021
-
604,021
-
604,021
Reclamation bonds
16,190,556
-
16,190,556
-
16,190,556
Prepaid expenses
-
3,236
3,236
-
3,236
Total non-current assets
42,665,852
3,236
42,669,088
-
42,669,088
Total assets
$
43,949,086
$
5,361
$
43,954,447
$
-
$
43,954,447
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable
$
282,141
$
79,423
$
361,564
$
-
$
361,564
Accrued liabilities
3,247,232
-
3,247,232
-
3,247,232
Current portion capital lease obligation
335,093
-
335,093
-
335,093
Series A 8% bonds
1,399,779
-
1,399,779
-
1,399,779
Deferred revenue, related party ore purchase
    agreement
3,237,410
-
3,237,410
-
3,237,410
Push-down redeemable obligation of Parent and
    its affiliate
11,085,960
-
11,085,960
(11,085,960
)(1)
-
Push-down interest of Parent and its affiliate
13,677,484
-
13,677,484
(13,677,484
)(1)
-
Push-down debt of Parent and its affiliate
21,579,848
-
21,579,848
(21,579,848
)(1)
-
Loan payable-stockholder
-
40,000
40,000
(40,000
)(2)
-
Notes payable
-
297,388
297,388
(297,388
)(2)
-
8.25% Convertible debenture
-
54,820
54,820
(54,820
)(2)
-
10% Convertible debenture
-
139,270
139,270
(139,270
)(2)
-
Compensation payable
-
355,462
355,462
(355,462
)(2)
-
Total current liabilities
54,844,947
966,363
55,811,310
(47,230,232
)
8,581,078
Non-current liabilities
Capital lease obligations, less current portion
39,719
-
39,719
-
39,719
Reclamation liability
22,793,187
-
22,793,187
-
22,793,187
Deferred revenue, related party ore purchase
    agreement less current portion
6,762,590
-
6,762,590
-
6,762,590
Related party ore purchase derivative contract
18,818,945
-
18,818,945
-
18,818,945
Notes payable, non-current
-
8,757
8,757
(8,757
)(2)
-
10% Convertible debenture, net discount of $845
    and $1,294 as of December 31, 2011 and 2010, respectively
-
82,599
82,599
(82,599
)(2)
-
Derivative liability
-
471
471
(471
)(2)
-
Total non-current liabilities
48,414,441
91,827
48,506,268
(91,827
)
48,414,441
Total liabilities
103,259,388
1,058,190
104,317,578
(47,322,059
)
56,995,519
Preferred stock liability
-
-
-
60,000,000
60,000,000
Commitments and contingencies
Stockholders' deficit
Preferred stock, $.001 par value
-
-
-
-
-
Common stock, $.001 par value
12,073,010
20,629
12,093,639
99,085
(3)
99,085
(20,629
)(2)
(12,073,010
)(3)
Additional paid-in capital
-
903,771
903,771
(99,085
)(3)
5,443,155
20,629
(2)
(1,977,229
)(2)
12,073,010
(3)
978,767
(2)
46,343,292
(1)
(60,000,000
)(1)
7,200,000
(4)
(7,200,000
)(4)
Accumulated deficit
(71,383,312
)
(1,977,229
)
(73,360,541
)
1,977,229
(2)
(78,583,312
)
Total stockholders'
    deficit
(59,310,302
)
(1,052,829
)
(60,363,131
)
(12,677,941
)
(73,041,072
)
Total liabilities and stockholders'
    deficit
$
43,949,086
$
5,361
$
43,954,447
$
-
$
43,954,447
F-
27
EASTERN RESOURCES, INC. AND ELKHORN GOLDFIELDS,
INC. AND MONTANA TUNNELS MINING, INC.
Statement of Operations
December 31, 2011
Elkhorn Gold
December 31,
2011
ERSI
December 31,
2011
Total
Adjustments to
Reflect Reverse
Acquisition
Pro Forma Combined
Cost of revenue
Impairment of
    capitalized film costs
$
-
$
(1,284,866
)
$
(1,284,866
)
$
1,284,866
(2)
$
-
Total costs of revenue
-
(1,284,866
)
(1,284,866
)
1,284,866
-
Gross profit
-
(1,284,866
)
(1,284,866
)
1,284,866
-
Operating expenses
General and administrative
850,616
164,816
1,015,432
(164,816
)(2)
850,616
Accretion expense
1,327,721
-
1,327,221
-
1,327,221
Mine care and maintenance
1,037,199
-
1,037,199
-
1,037,199
Depreciation, depletion,
    and amortization
6,604
-
6,604
-
6,604
Total operating expenses
3,221,640
164,816
3,386,456
(164,815
)
3,221,640
Loss from operations
(3,221,640
)
(1,449,682
)
(4,671,322
)
1,449,682
(3,221,640
)
Other (expense) income
Interest expense
(8,083,445
)
(46,486
)
(8,129,931
)
46,486
(2)
(8,083,445
)
Interest income
47,705
15
47,720
(15
)(2)
47,705
Other income
512,066
-
512,066
512,066
Loss on related party ore purchase derivative
(13,025,932
)
(13,025,932
)
(13,025,932
)
Change in fair value of derivative instrument
    contract
(5,793,013
)
924
(5,792,089
)
(924
)(2)
(5,793,013
)
Amortization of discount
-
(1,625
)
(1,625
)
1,625
(2)
-
Gain on forgiveness of debt
-
86,956
86,956
(86,956
)(2)
-
Total other (expense) income
(26,342,619
)
39,784
(26,302,835
)
(39,784
)
(26.342.619
)
Preferred stock dividend
(7,200,000
)(4)
(
7,200,000
)
Net loss attributable to common stockholder
$
(29,564,259
)
$
(1,409,898
)
$
(30,974,157
)
$
(5,790,102
)
$
(36,764,259
)
Basic and diluted loss per share
Basic and diluted net loss per common share
$
(147,821.30
)
$
(0,07
)
$
(0.37
)
Weighted average number of common shares outstanding
200
20,629,000
99,085,000
F-
28
Adjustment #1
Additional paid-in capital
$
60,000,000
Preferred stock liability
$
60,000,000
Push-down redeemable obligation of Parent and its affiliate
$
11,085,960
Push down interest of Parent and its affiliate
$
13,677,484
Push down debt of Parent and its affiliate
$
21,579,848
Additional paid-in capital
$
46,343,292
Memo: To record the 60,000,000 shares of
redeemable preferred stock to the Company's parent. The preferred stock has a 12% per annum dividend and can be redeemed
for 1,000,000 shares per quarter ($6,000,000). The preferred stock is issued to provide cash flow to the Parent to service the
debt of the Parent, which is collateralized by the Company's assets. The debt, redeemable LLC interest and accrued interest
"pushed down" from the Parent of $46,343,292 is eliminated with the issuance of the preferred stock so that the debt
is not recorded twice.
Adjustment #2
$
1,977,229
Additional paid-in capital
$
1,977,229
Accumulated deficit
$
20,629
Common stock, $0.001 par value (ERSI)
$
20,629
Additional paid-in capital
$
978,767
ERSI liabilities
$
978,767
Additional paid in capital
Memo: Elimination of ERSI liabilities,
equity, and common stock as well as its expenses. ERSI is the public shell. This is accounted for as a reverse acquisition and
none of the equity or liabilities of ERSI continue in the new entity.
Adjustment #3
Common stock, $0.001 par value (EGI and MTMI)
$
12,073,010
Additional paid-in capital
$
12,073,010
Common stock, $0.001 par value
$
99,085
Additional paid in capital
$
99,085
Memo: Elimination of EGI and MTMI common
stock and the issuance of 99,085,000 shares of common stock. Elkhorn Goldfields, Inc. and Montana Tunnels Mining, Inc. assigns
100% of the stock to ERSI (or subsidiary). ERSI assigns 90M shares of common stock and 10M shares of preferred stock to Elkhorn
Goldfields Inc. and Montana Tunnels Mining, Inc.
Adjustment #4
Accumulated deficit
$
7,200,000
Additional paid-in capital
$
7,200,000
Memo: Preferred stock dividend $60,000,000 at 12% interest.
F-
29
GLOSSARY OF RELEVANT MINING TERMS
Acre -
A measure of surficial area,
usually of land. The statute acre of the United States and England contains 43,560 ft
2
(4,840 yd
2
; 4,047
m
2
; or 160 square rods).
Base Metal
- Any of the more common
and more chemically active metals, e.g., lead, zinc and copper.
COMEX -
Commodity Exchange, Inc.
Commercial Production
- normally
considered to be the first day of the first ninety-day period throughout which the mill operated consistently at 60% capacity or
more.
Decline
– A tunnel driven
at a downward slope.
D
oré
Flat
– A mold of semi-pure alloy consisting of gold and silver created at the mine site.
Grade of ore
- The relative quantity
or the percentage of ore-mineral or metal content in an ore body
Inferred Resource
- Resources from
which estimates are based on an assumed continuity beyond measured and/or indicated resources, for which there is geologic evidence.
Inferred resources may or may not be supported by samples or measurements.
Life of Mine
- The time in which,
through the employment of the available capital, the ore reserves—or such reasonable extension of the ore reserves as conservative
geological analysis may justify—will be extracted.
Metric Tonne
-a unit of weight equivalent
to 1,000 kilograms (or 2,204.6 pounds).
Mill Recovery
- that portion of
the metal contained in the ore that is successfully extracted by processing, expressed as a percentage.
Mine Plan
– A plan of the
mine operations detailing development and operating schedules and parameters.
Mineral Reserve
- The quantity of
mineral that is calculated to lie within given boundaries. It is described as total (or gross), workable, or probable working,
depending on the application of certain arbitrary limits in respect of deposit thickness, depth, quality, geological conditions,
and contemporary economic factors. Proved, probable, and possible reserves are other terms used in general mining practice.
Patented Mineral Claim
- A claim
to which a patent has been secured from the U.S. Government, in compliance with the laws relating to such claims.
Payable metals
– The amount
of metal - in ounces or pounds - paid out by the Smelter and/or Refiner.
Poly-metallic
– holds significant
resources in more than one base metal.
Precious Metal
- Any of several
relatively scarce and valuable metals, such as gold, silver, and the platinum-group metals.
Probable reserves
means reserves
for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites
for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although
lower than that for proven reserves, is high enough to assume continuity between points of observation.
Recoverable Metal
– the portion
of metal contained in a whole ore or concentrated mineral product which is paid to the product supplier by a smelter or refiner.
Refiner
-A facility in which relatively
crude smelter products are refined and emerge as acceptably pure products.
Smelter
- An establishment where
ores are smelted to produce metal.
Sulfide
- A mineral compound characterized
by the linkage of sulfur with a metal or semimetal.
Ton
- a unit of weight equivalent
to 2,000 pounds (907 kg).
Unpatented Mineral Claim
- Mining
claim to which a deed from the U.S. Government has not been received. A claim is subject to annual assessment work, to maintain
ownership.
Volcanic Diatreme
- A breccia-filled
volcanic pipe that was formed by a gaseous explosion.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
EASTERN RESOURCES, INC.
Dated:  April 11, 2012
By:
/s/Patrick W. M. Imeson
Name: Patrick W. M. Imeson
Title: Chief Executive Officer