UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
AMENDMENT #3
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2012
Commission File Number: 000-25301
SIERRA RESOURCE GROUP, INC.
(Exact name of registrant as specified in its charter)
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NEVADA
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88-0413922
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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9550 S. Eastern Ave., Suite 253, Las Vegas, NV 89123
(Address of principal executive offices)
Registrants telephone number, including area code: (702) 462-7285
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.
x
Yes
¨
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).
x
Yes
¨
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
¨
Yes
x
No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. As of September 20, 2012 the issuer had 347,833,085 issued shares of
Common Stock, $0.001 par value.
TABLE OF CONTENTS
2
Explanatory Note
This amendment No 3 on Form 10-Q/A amends the Quarterly Report on Form 10-Q of Sierra Resource Group, Inc. for the quarter ended June 30, 2012 filed
on August 21, 2012 (the Form 10-Q) to include the Review Report of the Companys Independent Registered Public Accountants on the Accompanying condensed financial statements for the three and six months ended June 30, 2012.
3
PART I
FINANCIAL INFORMATION
Item 1. Condensed financial statements
The accompanying reviewed interim condensed financial statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes
necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material
change in the information disclosed in the notes to the condensed financial statements included in the Companys Annual Report on Form 10-K for the year ended December 31, 2011. In the opinion of management, all adjustments considered
necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three and six months ended June 30, 2012 are not
necessarily indicative of the results that can be expected for the year ending December 31, 2012.
4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Sierra Resource Group, Inc.
We have reviewed the condensed balance sheet
of Sierra Resource Group, Inc. as of June 30, 2012, and the related condensed statements of operations, for three and six months ended June 30, 2012, and cash flows for the six months ended June 30, 2012. These financial statements are the
responsibility of the Companys management.
We conducted our review in accordance with the standards of the Public Company Accounting
Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the interim financial
statements for them to be in conformity with accounting principles generally accepted in the United States of America.
The accompanying
financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company is in the exploration stage and has suffered recurring losses from operations. This
raises substantial doubt about the Companys ability to continue as a going concern. Managements plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Marcum LLP
Miami, Florida
September 25, 2012
5
SIERRA RESOURCE GROUP, INC.
(An Exploration Stage Company)
CONDENSED BALANCE SHEETS
(Unaudited)
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June 30,
2012
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December 31,
2011
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ASSETS
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|
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|
|
|
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|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,951
|
|
|
$
|
132
|
|
Other Current Assets
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
TOTAL CURRENT ASSETS
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|
18,451
|
|
|
|
132
|
|
|
|
|
|
|
|
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|
OTHER ASSETS
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|
|
|
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Reclamation Bonds
|
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|
1,470
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|
|
|
|
|
Capitalized Mine Expenses
|
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|
52,379
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|
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|
|
|
Investment in Minority Interest
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|
6,500
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|
|
|
|
|
|
|
|
|
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|
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TOTAL OTHER ASSETS
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60,349
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|
|
|
|
|
|
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|
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TOTAL ASSETS
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|
$
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78,800
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|
|
$
|
132
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT
|
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|
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CURRENT LIABILITIES
|
|
|
|
|
|
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|
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Accounts payable and accrued expenses
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$
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411,282
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|
$
|
369,882
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|
Derivative liabilities
|
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|
103,000
|
|
|
|
2,262
|
|
Officer advances
|
|
|
90,573
|
|
|
|
90,573
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|
Obligation to issue Common Stock
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|
89,700
|
|
|
|
75,000
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|
Note payable - related party
|
|
|
|
|
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|
388,962
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|
Notes payable (net debt discount of $58,547)
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366,979
|
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413,001
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|
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|
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|
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TOTAL CURRENT LIABILITIES
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1,061,534
|
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|
1,339,680
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TOTAL LIABILITIES
|
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|
1,061,534
|
|
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|
1,339,680
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COMMITMENTS AND CONTINGENCIES
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STOCKHOLDERS DEFICIT
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Preferred stock, $0.001 par value: 10,000,000 shares authorized; none issued and outstanding at March 31, 2011 and
December 31, 2010, respectively
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Class A Common stock, $0.001 par value: 440,000,000 shares authorized; 335,620,287 and 206,804,004 issued and outstanding at
June 30, 2012 and December 31, 2011, respectively
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|
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335,620
|
|
|
|
206,804
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|
Class B Common stock, $0.001 par value: 10,000,000 shares authorized; Zero shares issued and outstanding at June 30, 2012
and December 31, 2011
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|
|
|
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Common stock subscribed, not issued $.001 par value 18,390,801 and 2,200,000 at June 30, 2012 and December 31, 2011,
respectively
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282,254
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|
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262,000
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|
Additional Paid-in capital
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8,641,638
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8,495,151
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Accumulated deficit
|
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(10,242,246
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)
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|
|
(10,303,503
|
)
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|
|
|
|
|
|
|
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|
TOTAL STOCKHOLDERS DEFICIT
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|
|
(982,734
|
)
|
|
|
(1,339,548
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
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|
$
|
78,800
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|
|
$
|
132
|
|
|
|
|
|
|
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|
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The accompanying notes are an integral part of these condensed financial statements.
6
SIERRA RESOURCE GROUP, INC.
(An Exploration Stage Company)
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
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For the Three Months Ended
June 30,
|
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|
For the Six Months Ended
June 30,
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December 21, 1992
(Inception) to
June 30, 2012
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2012
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2011
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2012
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2011
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REVENUE
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|
|
|
|
|
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|
|
|
|
|
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Revenue
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,275
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|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
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Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,972
|
|
Selling, general and administrative expenses
|
|
|
419,773
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|
|
|
300,963
|
|
|
|
643,771
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|
|
|
794,722
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|
|
|
2,244,083
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|
|
|
|
|
|
|
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|
|
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Total operating expenses
|
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|
419,773
|
|
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|
300,963
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|
|
|
643,771
|
|
|
|
794,722
|
|
|
|
2,256,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(419,773
|
)
|
|
|
(300,963
|
)
|
|
|
(643,771
|
)
|
|
|
(794,722
|
)
|
|
|
(2,254,780
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing costs including interest Amortization of discounts
|
|
|
112,186
|
|
|
|
(259,161
|
)
|
|
|
(65,179
|
)
|
|
|
(269,491
|
)
|
|
|
(827,601
|
)
|
Derivative Expense
|
|
|
(27,238
|
)
|
|
|
|
|
|
|
(27,238
|
)
|
|
|
|
|
|
|
(27,238
|
)
|
|
|
|
|
|
|
Forgiveness of debt and accrued interest
|
|
|
671,996
|
|
|
|
|
|
|
|
797,445
|
|
|
|
|
|
|
|
774,971
|
|
Loss on Impairment of goodwill and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,907,597
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
756,944
|
|
|
|
(259,161
|
)
|
|
|
705,028
|
|
|
|
(269,491
|
)
|
|
|
(7,987,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
337,171
|
|
|
|
(560,124
|
)
|
|
|
61,257
|
|
|
|
(1,064,213
|
)
|
|
|
(10,242,246
|
)
|
PROVISION FOR INCOME TAXES
|
|
|
337,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
|
|
|
|
$
|
(560,124
|
)
|
|
|
61,257
|
|
|
|
(1,064,213
|
)
|
|
|
(10,242,246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC NET INCOME (LOSS) PER COMMON SHARE
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
|
|
|
279,250,783
|
|
|
|
123,365,087
|
|
|
|
265,786,826
|
|
|
|
121,049,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
The accompanying notes are an integral part of these condensed financial statements.
7
SIERRA RESOURCE GROUP, INC.
(An Exploration Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
June 30,
|
|
|
December 21, 1992
(Inception) to
June 30, 2012
|
|
|
|
2012
|
|
|
2011
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss)
|
|
$
|
61,257
|
|
|
$
|
(1,064,213
|
)
|
|
$
|
(10,242,246
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for services
|
|
|
|
|
|
|
709,033
|
|
|
|
751,134
|
|
Stock options issued for services
|
|
|
73,276
|
|
|
|
|
|
|
|
73,726
|
|
Forgiveness of debt and accrued interest
|
|
|
(797,445
|
)
|
|
|
|
|
|
|
(797,445
|
)
|
Derivative expense
|
|
|
100,738
|
|
|
|
|
|
|
|
100,738
|
|
Interest expense for conversion of stock
|
|
|
|
|
|
|
204,449
|
|
|
|
373,357
|
|
Accrued Interest
|
|
|
73,554
|
|
|
|
33,700
|
|
|
|
143,481
|
|
Accrued Liability from Acquisition
|
|
|
|
|
|
|
|
|
|
|
262,000
|
|
Loss on Impairment
|
|
|
|
|
|
|
|
|
|
|
7,907,597
|
|
Amortization of discount on convertible debt and debt issuance costs
|
|
|
47,396
|
|
|
|
47,545
|
|
|
|
49,658
|
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
11,972
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Current Assets
|
|
|
(2,500
|
)
|
|
|
|
|
|
|
(2,500
|
)
|
Other Assets
|
|
|
(1,470
|
)
|
|
|
|
|
|
|
(1,470
|
)
|
Accounts payable and accrued expenses
|
|
|
56,443
|
|
|
|
(28,643
|
)
|
|
|
471,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(388,751
|
)
|
|
|
(98,129
|
)
|
|
|
(898,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization of Mine Expenses
|
|
|
(52,379
|
)
|
|
|
|
|
|
|
(52,379
|
)
|
Purchase of Minority Interest
|
|
|
(6,500
|
)
|
|
|
|
|
|
|
(6,500
|
)
|
Investment in oil and gas interests
|
|
|
|
|
|
|
|
|
|
|
(29,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(58,879
|
)
|
|
|
|
|
|
|
(88,379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock
|
|
|
10,000
|
|
|
|
|
|
|
|
142,580
|
|
Payments on Notes Payable
|
|
|
(18,750
|
)
|
|
|
(32,500
|
)
|
|
|
(51,250
|
)
|
Obligation to issue common stock
|
|
|
14,700
|
|
|
|
|
|
|
|
22,200
|
|
Proceeds from issuance of subscribed stock
|
|
|
66,666
|
|
|
|
|
|
|
|
95,254
|
|
Proceeds from officer advances
|
|
|
|
|
|
|
|
|
|
|
90,573
|
|
Proceeds from note payable-related party
|
|
|
|
|
|
|
120,000
|
|
|
|
29,500
|
|
Proceeds from note payable
|
|
|
390,833
|
|
|
|
|
|
|
|
674,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
463,449
|
|
|
|
87,500
|
|
|
|
1,002,89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
15,819
|
|
|
|
(10,629
|
)
|
|
|
15,951
|
|
Cash and cash equivalents at beginning of period
|
|
|
132
|
|
|
|
23,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
15,951
|
|
|
$
|
12,802
|
|
|
$
|
15,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Assignment and Quit Claim of Oil and Gas Leases
|
|
|
|
|
|
|
(32,330
|
)
|
|
|
|
|
Conversion of notes payable to common stock
|
|
|
|
|
|
|
(89,800
|
)
|
|
|
|
|
Investment in equipment
|
|
|
|
|
|
|
125,000
|
|
|
|
|
|
Investments in mining interests
|
|
|
|
|
|
|
767,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed financial statements.
8
SIERRA RESOURCE GROUP, INC.
(An Exploration Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2012
(UNAUDITED)
NOTE 1. DESCRIPTION OF BUSINESS
Sierra Resource Group, Inc. (the Company, we, us, and our ) was incorporated in the
state of Nevada on December 21, 1992, to engage in the lease, acquisition, exploration and development of interests in natural resource properties such as those involving oil and gas interests. The Company has not commenced significant
operations and, in accordance with ASC Topic 915, the Company is considered an exploratory stage company
Our business plan has been to lease,
acquire, explore and develop interests in natural resource properties since our inception.
NOTE 2. GOING CONCERN ISSUES
The accompanying financial statements have been prepared assuming that we will continue as a going concern, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of business. At June 30, 2012, we had an accumulated deficit of $10,242,246 and a working capital deficit of $1,043,083. During the six months ended June 30, 2012,
we had Net Income of $61,257. As we had no significant revenues or earnings from operations, the Net Income for the three month period and the six month period ended June 30, 2012 was derived from our recognition of Forgiveness of Debt. We
will in all likelihood sustain operating expense without corresponding revenues. This may result in us incurring a net operating loss, which will increase continuously unless and until we can achieve meaningful revenues.
These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties. In this regard, Management is planning to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will
be successful in raising additional capital.
The Companys ability to meet its obligations and continue as a going concern is dependent
upon its ability to obtain additional financing, achievement of profitable operations and/or the discovery, exploration, development and sale of mining reserves. The Company cannot reasonably be expected to earn revenue in the exploration stage of
operations. Although the Company plans to pursue additional financing, there can be no assurance that the Company will be able to secure financing when needed or to obtain such financing on terms satisfactory to the Company, if at all.
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows:
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions that
affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and
expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the
preparation of financial statements; accordingly, actual results could differ from these estimates.
These estimates and assumptions also
affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.
9
Exploration Stage Enterprise
The Companys financial statements are prepared pursuant to the provisions of Topic 26, Accounting for Development Stage Enterprises, as it devotes substantially all of its efforts to
acquiring and exploring mining interests that will eventually provide sufficient net profits to sustain the Companys existence. Until such interests are engaged in major commercial production, the Company will continue to prepare its financial
statements and related disclosures in accordance with entities in the development stage. Mining companies subject to Topic 26 are required to label their financial statements as an Exploratory Stage Company, pursuant to guidance provided
by SEC Guide 7 for Mining Companies.
Revenue Recognition
As the Company is continuing exploration of its mineral properties, no significant revenues have been earned to date. The Company recognizes revenues at the time of delivery of the product to the
customers.
Revenue includes sales value received for our principle product, silver, and associated by-product revenues from the sale of
by-product metals consisting primarily of gold and copper. Revenue is recognized when title to silver and gold passes to the buyer and when collectability is reasonably assured. The passing of title to the customer is based on terms of the sales
contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets for example, the London Bullion Market, an active and freely traded commodity market, for both gold and silver, in
an identical form to the product sold.
Pursuant to guidance in Topic 605, Revenue Recognition for Financial Statements, revenue
is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, no obligations remain and collectability is probable. The passing of title to the customer is based on the terms of the sales
contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets, for example the London Bullion Market for both gold and silver, in an identical form to the product sold.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of year ended or less to be cash equivalents. Cash equivalents include cash on hand and cash in the bank.
Property and Equipment
Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income
is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized.
The range of estimated useful lives used to calculated depreciation for principal items of property and equipment are as follow:
|
|
|
|
|
Asset Category
|
|
Depreciation/
Amortization
Period
|
|
Furniture and Fixture
|
|
|
3 Years
|
|
Office equipment
|
|
|
3 Years
|
|
Leasehold improvements
|
|
|
5 Years
|
|
Mine Exploration and Development Costs
All exploration costs are expensed as incurred. Mine development costs are capitalized after proven and probable reserves have been identified.
Amortization is calculated using the units-of-production method over the expected life of the operation based on the estimated recoverable mineral ounces.
10
Property Evaluations
Management of the Company will periodically review the net carrying value of its properties on a property-by-property basis. These reviews will consider the net realizable value of each property to
determine whether a permanent impairment in value has occurred and the need for any asset write-down. An impairment loss will be recognized when the estimated future cash flows (undiscounted and without interest) expected to result from the use of
an asset are less than the carrying amount of the asset. Measurement of an impairment loss will be based on the estimated fair value of the asset if the asset is expected to be held and used.
Although management will make its best estimate of the factors that affect net realizable value based on current conditions, it is reasonably possible that changes could occur in the near term which could
adversely affect managements estimate of net cash flows expected to be generated from its assets, and necessitate asset impairment write-downs.
Reclamation and Remediation Costs (Asset Retirement Obligations)
The Company had no operating properties at June 30, 2012 but the Companys mineral properties will be subject to standards for
mine reclamation that are established by various governmental agencies. For these non-operating properties, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they
are reasonably estimable. Costs of future expenditures for environmental remediation are not discounted to their present value. Such costs are based on managements current estimate of amounts that are expected to be incurred when the
remediation work is performed within current laws and regulations.
It is reasonably possible that due to uncertainties associated with
defining the nature and extent of environmental contamination, application of laws and regulations by regulatory authorities, and changes in remediation technology, the ultimate cost of remediation and reclamation could change in the future. The
Company continually reviews its accrued liabilities for such remediation and reclamation costs as evidence becomes available indicating that its remediation and reclamation liability has changed.
The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred, if a reasonable estimate
of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the associated long-lived assets and depreciated over the lives of the assets on a units-of-production basis. Reclamation costs are
accreted over the life of the related assets and are adjusted for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate on the underlying obligation.
Mineral property rights
All direct costs related to the acquisition of mineral property rights are capitalized. Exploration costs are charged to operations in the period incurred until such time as it has been determined that a
property has economically recoverable reserves, at which time subsequent exploration costs and the costs incurred to develop a property are capitalized.
The Company reviews the carrying values of its mineral property rights whenever events or changes in circumstances indicate that their carrying values may exceed their estimated net recoverable amounts.
An impairment loss is recognized when the carrying value of those assets is not recoverable and exceeds its fair value. As of December 31, 2010, management determined that the mining claim located in Arizona was impaired and as a result, was
written-down to zero.
At such time as commercial production may commence, depletion of each mining property will be provided on a
unit-of-production basis using estimated proven and probable recoverable reserves as the depletion base. In cases where there are no proven or probable reserves, depletion will be provided on the straight-line basis over the expected economic life
of the mine.
Asset retirement obligations
The Company plans to recognize liabilities for statutory, contractual or legal obligations, including those associated with the reclamation of mineral and mining properties and any plant and equipment,
when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a liability for an asset
11
retirement obligation will be recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement cost will be added
to the carrying amount of the related asset and the cost will be amortized as an expense over the economic life of the asset using either the unit-of-production method or the straight-line method, as appropriate. Following the initial recognition of
the asset retirement obligation, the carrying amount of the liability will be increased for the passage of time and adjusted for changes to the amount or timing of the underlying cash flows needed to settle the obligation.
Impairment of Long-Lived Assets
In accordance with ASC Topic 360,
long-lived assets
, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of
the asset.
Goodwill and Other Intangible Assets
In accordance with Accounting Standards Codification (ASC Topic 350)
Goodwill and Other Intangible Assets
, goodwill, which
represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method, acquired in business combinations is
assigned to reporting units that are expected to benefit from the synergies of the combination as of the acquisition date. Under this standard, goodwill and intangibles with indefinite useful lives are not amortized. The Company assesses goodwill
and indefinite-lived intangible assets for impairment annually during the fourth quarter, or more frequently if events and circumstances indicate impairment may have occurred in accordance with ASC Topic 350. If the carrying value of a reporting
units goodwill exceeds its implied fair value, the Company records an impairment loss equal to the difference. ASC Topic 350 also requires that the fair value of indefinite-lived purchased intangible assets be estimated and compared to the
carrying value. The Company recognizes an impairment loss when the estimated fair value of the indefinite-lived purchased intangible assets is less than the carrying value.
Income Taxes
Deferred income taxes are provided based on the provisions of ASC Topic 740,
Accounting for Income Taxes
, to reflect the tax consequences in future years of differences between the tax
bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company adopted the provisions of ASC
Topic 740; Accounting For Uncertainty In Income Taxes-An Interpretation Of ASC Topic 740 (Topic 740). Topic 740 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to
evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.
The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the Companys tax positions
and tax benefits, which may require periodic adjustments. At June 30, 2012 and December 31, 2011, respectively, the Company did not record any liabilities for uncertain tax positions.
12
Concentration of Credit Risk
The Company maintains its operating cash balances in banks in Fort Lauderdale, Florida. The Federal Depository Insurance Corporation (FDIC) insures accounts at each institution up to $250,000.
Share-Based Compensation
The Company applies Topic 718 Share-Based Payments (Topic 718) to share-based compensation, which requires the measurement of the
cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Compensation cost is recognized when the event occurs. The Black-Scholes option-pricing model is used to estimate the fair
value of options granted.
Basic and Diluted Net Loss Per Share
Net loss per share was computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The weighted average number of shares was calculated by taking the
number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted net loss per share for the Company is the same as basic net loss per share, as the inclusion of common stock equivalents would be antidilutive.
Fair Value of Financial Instruments
The company financial instruments consist primarily of cash, affiliate receivable, settlement receivable, accounts payable and accrued expenses and
debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value is not
necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.
The
Company adopted ASC Topic 820, Fair Value Measurements (ASC Topic 820), which defines fair value, establishes a framework for measuring fair value, and expands disclosure about fair value measurements. The standard provides a
consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard also
prioritizes, within the measurement of fair value, the use of market-based measurements.
The three-level hierarchy for fair value
measurements is defined as follows:
|
|
|
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;
|
|
|
|
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are
observable of the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active;
|
|
|
|
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
Reclassifications
Certain prior year amounts have been reclassified to conform to the current period presentation for comparative purposes.
Recent Accounting Pronouncements
ASU 2011-04 Amendments to achieve common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs
The amendments in ASU 2011-04 do not modify the requirements for when fair value measurements apply; rather, they generally represent clarifications on
how to measure and disclose fair value under ASC 820, Fair Value Measurement, including the following revisions:
|
|
|
The concepts of highest and best use and valuation premise are relevant only for measuring the fair value of nonfinancial assets and do not apply to
financial assets and liabilities.
|
|
|
|
An entity should measure the fair value of an equity-classified financial instrument from the perspective of the market participant that holds the
instrument as an asset.
|
13
|
|
|
An entity that holds a group of financial assets and financial liabilities whose market risk (that is, interest rate risk, currency risk, or other
price risk) and credit risk are managed on the basis of the entitys net risk exposure may apply an exception to the fair value requirements in ASC 820 if certain criteria are met. The exception allows such financial instruments to be measured
on the basis of the reporting entitys net, rather than gross, exposure to those risks.
|
|
|
|
Premiums or discounts related to the unit of account are appropriate when measuring fair value of an asset or liability if market participants would
incorporate them into the measurement (for example, a control premium). However, premiums or discounts related to size as a characteristic of the reporting entitys holding (that is, a blockage factor) should not be considered in a
fair value measurement.
|
The amendments to ASC 820, Fair Value Measurement, included in ASU 2011-04, Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, are effective prospectively for public entities for interim and annual periods beginning after December 15, 2011 (that is, the quarter ending March 31, 2012
for calendar-year entities). Early adoption is not permitted for public entities. The adoption of these amendments had no impact on the Companys financial position or results of operations.
ASU 2011-02 FASB amends creditor troubled debt restructuring guidance
This bulletin discusses ASU 2011-02, which was issued by the FASB to provide creditors with additional guidance in evaluating whether a restructuring of debt is a troubled debt restructuring. The new
guidance does not amend the guidance for debtors. It is generally effective for public entities in the quarter ended September 30, 2011. The adoption of this bulletin had no imapct on the Companys financial position or results of
operations.
ASU 2011-01 Troubled debt restructuring disclosures for public-entity creditors deferred
The FASB issued
Accounting Standards Update (ASU) 2011-01
, Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in
Update No. 2010-20, which temporarily defers the date when public-entity creditors are required to provide the new disclosures for troubled debt restructurings in
ASU 2010-20
, Disclosures about the Credit Quality of Financing Receivables
and the Allowance for Credit Losses. The deferred effective date will coincide with the effective date for the clarified guidance about what constitutes a troubled debt restructuring, which the Board is currently deliberating. The clarified guidance
is expected to apply for interim and annual periods ending after June 15, 2011.
When providing the new disclosures under ASU 2010-20,
public entities would be required to retrospectively apply the clarified guidance on what constitutes a troubled debt restructuring to restructurings occurring on or after the beginning of the year in which the proposed clarified guidance is
adopted.
14
The Company has implemented all new accounting pronouncements that are in effect and that may impact its
condensed financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 4 - NET EARNINGS (LOSS) PER SHARE
The net loss per common share is calculated by dividing the loss by the weighted average number of shares outstanding:
The following table represents the computation of basic and diluted losses per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
2012
|
|
|
June 30,
2011
|
|
|
June 30,
2012
|
|
|
June 30,
2011
|
|
Income (Loss) available for common shareholders
|
|
|
337,171
|
|
|
|
(560,124
|
)
|
|
|
61,257
|
|
|
|
(1,064,213
|
)
|
Weighted average common shares outstanding
|
|
|
279,250,783
|
|
|
|
123,365,087
|
|
|
|
265,786,826
|
|
|
|
121,049,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings (Loss) per share
|
|
|
.00
|
|
|
|
(.00
|
)
|
|
|
.00
|
|
|
|
(.001
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) per share is based upon the weighted average shares of common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 5. CHLORIDE COPPER PROJECT
On April 23, 2010, the Company entered into an Asset Purchase Agreement (the Purchase Agreement) with Medina Property
Group LLC, a Florida limited liability company (Medina). Pursuant to the Purchase Agreement, and upon the terms and subject to the conditions thereof, the Company agreed to purchase 80% of certain mining interests of Medina known as
the Chloride Copper Project, a former copper producer comprised of a mineral deposit and some infrastructure located near Kingston, Arizona (the Copper Mine).
The Companys acquisition of the Chloride Copper Project was accounted for in accordance with ASC 805 Business Combinations and the Company has allocated the purchase price based upon the fair value
of the net assets acquired and liabilities assumed.
The purchase price was $7,505,529 which, pursuant to the Purchase Agreement, The purchase
price included the issuance of 12,750,000 shares of common stock by the Company to Medina or its assignees, return of 5,358,000 share of common stock by Black Diamond and the payment of $125,000 to the original seller of certain equipment where the
Chloride Copper Mine is located, as designated by Medina in the Purchase Agreement. The purchase price was determined based on the Companys analysis of a recently completed comparable acquisition and based on the value of the associated
underlying shares of the Companys common stock which value of $1.00 per share represented the offering price of the Companys Common Stock in its most recently completed equity transaction prior to the date of the Purchase Agreement. The
Company recognized goodwill of $7,602,069 and assumed $384,540 in liabilities, which consisted of a $360,000 promissory note and $3,040 in accrued interest and $21,500 in accounts payable.
The following table summarizes the acquisition with a total purchase price of $7,505,529:
|
|
|
|
|
Mining Property
|
|
$
|
163,000
|
|
Equipment
|
|
$
|
125,000
|
|
Liabilities
|
|
$
|
(384,540
|
)
|
Goodwill
|
|
$
|
7,602,069
|
|
|
|
|
|
|
Net Assets
|
|
$
|
7,505,529
|
|
|
|
|
|
|
In addition, pursuant to the Purchase Agreement, Black Diamond Realty Management, LLC returned 5,348,000 shares of the Companys
Common Stock, and as a result, a change of our shareholder voting control occurred. The Acquisition formally closed on June 21, 2010. The shares of Common Stock constituting the equity portion of the purchase price were issued on August 9,
2010 to certain assignees of Medina, and although this issuance of shares approximately doubled our outstanding shares of Common Stock, no single person or cohesive group took a controlling interest in our Company as a result of this transaction.
The Company had impairment on the entire purchase price for the Medina Property acquisition and impairment on the Chloride Cooper Project
related to fixed assets and mining interests. During the year ended December 31, 2010 impairment was $7,890,069 was comprised of $7,602,069 write-off of goodwill, $163,000 write-off of mining interests and $125,000 for the write-down of fixed
assets. All these assets were acquired and recorded as part of the Chloride Copper Project.
15
NOTE 6 NOTES PAYABLE
The Company had the following notes payable outstanding as of June 30, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2012
|
|
|
December 31, 2011
|
|
Promissory note payable dated August 16, 2010 due to Brian Hebb including accrued interest.
|
|
$
|
|
|
|
|
42,055
|
|
Promissory note payable dated August 6, 2010 due to Black Diamond Realty Mgmt including accrued interest.
|
|
|
|
|
|
|
26,126
|
|
Promissory note payable dated May 5, 2010 due to Brian Hebb including accrued interest.
|
|
|
155,146
|
|
|
|
155,146
|
|
Notes payable Medina; acquisition as a part of the Chloride Copper Project dated March 22, 2010 including accrued
interest
|
|
|
|
|
|
|
413,001
|
|
Promissory note payable dated September 30, 2011 due to South Concord Corp including accrued interest
|
|
|
|
|
|
|
35,667
|
|
Promissory notes payable dated May 18, 2011 due to Black Pool Partners LLC including accrued interest.
|
|
|
-0-
|
|
|
|
6,857
|
|
Promissory notes payable dated June 8, 2011 due to Asher Enterprises including accrued interest
|
|
|
-0-
|
|
|
|
26.149
|
|
Promissory notes payable dated July 1, 2011 due to Asher Enterprises including accrued interest
|
|
|
-0-
|
|
|
|
26.002
|
|
Promissory notes payable dated August 30, 2011 due to Asher Enterprises including accrued interest
|
|
|
-0-
|
|
|
|
38,511
|
|
Promissory notes payable dated October 17, 2011 due to Tangiers Investors, LP including accrued interest
|
|
|
18,750
|
|
|
|
32,147
|
|
Promissory notes payable dated January 09, 2012 due to Asher Enterprises including accrued interest
|
|
|
38,922
|
|
|
|
-0-
|
|
Promissory notes payable dated February 16, 2012 due to Grand View Ventures including accrued interest
|
|
|
200,541
|
|
|
|
-0-
|
|
Promissory notes payable dated February 29, 2012 due to Asher Enterprises including accrued interest
|
|
|
30,802
|
|
|
|
-0-
|
|
Promissory notes payable dated May 3, 2012 due to Grand View Ventures including accrued interest
|
|
|
136,511
|
|
|
|
-0-
|
|
Notes Payable Current Portion
|
|
|
425,526
|
|
|
|
801,661
|
|
Less: Debt discount
|
|
|
(58,547
|
)
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
Total Notes Payable
|
|
|
366,979
|
|
|
|
801,661
|
|
|
|
|
|
|
|
|
|
|
The Company believes the promissory note to Brian Hebb dated August 16, 2010, the promissory note to Black Diamond Realty
Management dated August 6, 2010, the promissory note to Brian Hebb dated May 5, 2010 and the promissory note to South Concord Corp dated September 30, 2011 are not legitimate debt instruments of the Company. The Company has attempted
to acquire documented proof of these obligations but none has been obtained. The Company has contacted the creditors and the Companys prior Auditors for proper documentation but none has been provided. The Company has written-off these
presumed fictitious debt instruments and has recognized the resulting Forgiveness of debt and accrued interest as of June 30, 2012.
The
Company has obtained documentation from Medina Property Group, Inc. releasing the Companys obligation on the promissory note dated March 22, 2010. The Company has recognized the resulting Forgiveness of Debt Income as of June 30,
2012.
The Company entered into a demand Promissory Note with Blackpool Partners LLC; a company owned by the Companys CEO and a related
party, on May 18, 2011 in the amount of $6,700. The note has an interest rate of 4%. The Company has satisfied this obligation as of June 30, 2012.
16
The Company entered into a Convertible Promissory Note with Asher Enterprises Inc. on June 8, 2011 in
the amount of $32,500. The note has an interest rate of 8% with the maturity date of March 13, 2012. During the course of the year ended December 31, 2011 Asher Enterprises converted $10,000 in principle balance of the note to the
Companys common stock in accordance to the terms of the Agreement. This obligation has been satisfied as of June 30, 2012.
The
Company entered into a Convertible Promissory Note with Asher Enterprises Inc. on July 1, 2011 in the amount of $25,000. The note has an interest rate of 8% with the maturity date of April 5, 2012. This obligation has been satisfied as of
June 30, 2012.
The Company entered into a Convertible Promissory Note with Asher Enterprises Inc. on August 30, 2011 in the amount
of $37,500. The note has an interest rate of 8% with the maturity date of June 4, 2012. This obligation has been satisfied as of June 30, 2012.
The Company entered into a Convertible Promissory Note with Tangiers on October 14, 2011 in the amount of $31,500. The note has an interest rate of 10% with the maturity date of July 14, 2012.
The Company has renegotiated the terms of the note. The new terms require the Company to make two payments of $18,750, which one payment has been timely satisfied, and issue 3,000,000 shares of common stock to Tangiers. The second payment of $18,750
has not been paid as of June 30, 2012. In addition, as of June 30, 2012, the Company has not issued shares of common stock to Tangiers. During the three and six month period ended June 30, 2012 the Company recorded amortization of debt discount of
$6,382.
The Company entered into a Convertible Promissory Note with Asher Enterprises Inc. on January 9, 2012 in the amount of $37,500.
The note has an interest rate of 8% with the maturity date of October 11, 2012 (See Note 7).
The Company entered into a Convertible
Promissory Note with Asher Enterprises Inc. on February 29, 2012 in the amount of $30,000. The note has an interest rate of 8% with the maturity date of December 5, 2012 (See Note 7).
The Company entered into a Convertible Promissory Note with Grand View Ventures on February 16, 2012 in the amount of $190,000. The note has an interest rate of 15% with the maturity date of
February 16, 2013 (See Note 7).
The Company entered into a Convertible Promissory Note with Grand View Ventures on May 3, 2012 in
the amount of $133,000. The note has an interest rate of 15% with the maturity date of November 1, 2012 (See Note 7).
17
NOTE 7. Convertible Notes
8 % Convertible Notes
In January and February of 2012, the Company issued convertible notes with an aggregate face value of $67,500. The notes mature one year from the date of issuance, bear interest at an annual rate of 8%,
and are convertible into common stock of the Company at the option of the holder at a conversion rate equal to 51% of the average of the lowest three closing trading prices of the Companys common stock during the ten trading days immediately
preceding the conversion date. Because the convertible notes are convertible into an indeterminable number of shares of common stock, the fair value of the embedded conversion options are required to be presented as derivative liabilities and
adjusted to fair value at each reporting date, with changes in fair value reported in the statement of operations. The fair value of the embedded derivatives as of the dates of issuance was determined to be $97,000 by using Monte Carlo Simulations
and the following assumptions:
|
|
|
Volatility
|
|
261.06% - 264.35%
|
Risk Free Rate
|
|
0.11% - 0.18%
|
Expected Term
|
|
One Year
|
Dividend Rate
|
|
0%
|
On the date of issuance the Company a recorded a derivative liability of $97,000, a debt discount of $67,500 and initial derivative
liability expense of $29,500. The debt discount is being amortized into expense through the maturity dates of the convertible notes. During the six months ended June 30, 2012, the Company recorded amortization expense of $27,989. As of
June 30, 2012, the carrying value of the convertible notes was $27,989, net of remaining discounts of $39,511. In addition to the amortization of discounts the Company recognized $2,224 of interest expense on the convertible notes for the six
months ended June 30, 2012.
The fair value of the embedded derivatives as of the June 30, 2012 was determined to be $97,000 by
using Monte Carlo Simulations and the following assumptions:
|
|
|
Volatility
|
|
275.26% - 273.38%
|
Risk Free Rate
|
|
0.16%
|
Expected Term
|
|
0.52 - 0.65 Years
|
Dividend Rate
|
|
0%
|
18
15% Convertible Notes
In February 2012, the Company issued a convertible note with a face value of $190,000. The note matures on February 16, 2013, bears interest at an annual rate of 15%, and is convertible into common
stock of the Company at the option of the holder at a conversion price of $0.045 per share. The investor in the convertible debt also acquired 8,650,00 shares of common stock and warrants to acquire 6,900,000 share of common stock for an exercise
price of $0.015 per share over a four-year term for proceeds for $10,000. The Company allocated the proceeds from the sale of convertible debt, common stock, and warrants to their equity and liability components and recorded an additional debt
discount equal to the amount of proceeds allocated the warrants equal to $8,289 to be amortized into expense through the maturity date of the convertible note. During the three and six months ended June 30, 2012, the Company recorded
amortization expense of $999 and $2,067. As of June 30, 2012, the carrying value of the convertible notes was $200,541. In addition to the amortization of discounts the Company recognized $8,709 and $10,541 of interest expense on the
convertible note for the three and six months ended June 30, 2012, respectively.
In May 2012, the Company issued a convertible note with
a face value of $133,000. The note matures on November 1, 2012, bears interest at an annual rate of 15%, and is convertible into common stock of the Company at the option of the holder at a conversion price of $0.045 per share. In conjunction
with the issuance of convertible note, the Company also granted the holder of the convertible note the right to purchase a number of shares of common stock equal to 62.5% of the common stock issuable upon conversion of the convertible notes issued
in January and February of 2012, for an exercise price equal to the outstanding principal on the notes issued in January and February of 2012. The Company is required to use the proceeds of such exercise to settle the notes issued in January and
February of 2012. Because the exercise price and number of shares purchasable under the purchase option are indeterminable, the Company was required to record a derivative liability for the fair value of the purchase option. The fair value of the
embedded derivative as of the dates of issuance was determined to be $6,000 by using Monte Carlo Simulations and the following assumptions:
|
|
|
Volatility
|
|
275.26% - 273.38%
|
Risk Free Rate
|
|
0.16%
|
Expected Term
|
|
0.67 - 0.81 Years
|
Dividend Rate
|
|
0%
|
On the date of issuance the Company a recorded a derivative liability and debt discount of $6,000. The debt discount is being amortized
into expense through the maturity dates of the convertible notes.
19
The fair value of the embedded derivative as of the June 30, 2012 was determined to be $6,000 by using
Monte Carlo Simulations and the following assumptions:
|
|
|
Volatility
|
|
275.26% - 273.38%
|
Risk Free Rate
|
|
0.16%
|
Expected Term
|
|
0.52 - 0.65 Years
|
Dividend Rate
|
|
0%
|
The investor in the convertible debt also acquired 6,666,666 shares of common stock and warrants to acquire 6,666,666 share of common
stock for an exercise price of $0.012 per share over a four-year term for proceeds for $33,333. The Company allocated the proceeds from the sale of convertible debt, common stock, and warrants to their equity and liability components and recorded an
additional debt discount equal to the amount of proceeds allocated the warrants equal to $15,915 to be amortized into expense through the maturity date of the convertible note. During the three and six months ended June 30, 2012, the Company
recorded amortization expense of $10,958. As of June 30, 2012, the carrying value of the convertible notes was $122,043, net of remaining discounts of $10,958. In addition to the amortization of discounts the Company recognized $3,178 of
interest expense on the convertible note for the three and six months ended June 30, 2012.
NOTE 8. ADVANCE RELATED PARTY
In connection with consummation of the Share Purchase Agreement on March 17, 2010, Brian Hebb a related party advance the Company
$90,573 for working capital expenses. As of December 31, 2011 and June 30, 2012, an advance payable of $90,573 was due to Brian Hebb, a related party.
NOTE 9. S
TOCK
-B
ASED
C
OMPENSATION
On November 17, 2011 the Board of Directors approved the parameters for a Company Qualified Stock Option Plan (the
Plan). under which employees, directors and service providers of the Company may be granted awards to purchase shares of the Company's common stock at a price to be determined by the board of director's compensation committee. During the
six months ended June 30, 2012, the Company granted options to acquire 89,250,000 shares of common stock, with a weighted average grant date fair value of $0.002 to employees, directors and service providers. During the six months ended
June 30, 2012, the Company estimated the fair value of options issued using the Black-Scholes option-pricing model and the following assumptions:
|
|
|
Risk Free Rate
|
|
0.79% - 0.94%
|
Expected Term
|
|
5 Years
|
Expected Volatility
|
|
225.57% - 244.63%
|
Expected Dividends
|
|
None
|
20
Option activity for the period from inception through June 30, 2012 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
|
Remaining
|
|
|
|
# of shares
|
|
|
Price
|
|
|
Term
|
|
Outstanding January 1, 2011
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
72,338,356
|
|
|
|
0.049
|
|
|
|
4.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding December 31, 2011
|
|
|
72,338,356
|
|
|
|
0.049
|
|
|
|
4.40
|
|
Granted
|
|
|
89,250,000
|
|
|
|
0.050
|
|
|
|
4.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding June 30, 2012
|
|
|
161,588,356
|
|
|
|
0.050
|
|
|
|
4.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable June 30, 2012
|
|
|
21,338,356
|
|
|
|
0.047
|
|
|
|
4.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information about the stock options outstanding at June 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
Grant
|
|
|
|
|
|
|
Remaining
|
|
|
Date
|
|
Exercise Price
|
|
# of shares
|
|
|
Term
|
|
|
Fair Value
|
|
$ 0.0059
|
|
|
1,500,000
|
|
|
|
4.16
|
|
|
|
0.0057
|
|
$ 0.0510
|
|
|
3,838,356
|
|
|
|
4.69
|
|
|
|
0.0049
|
|
$ 0.0500
|
|
|
156,250,000
|
|
|
|
4.49
|
|
|
|
0.0026
|
|
As of June 30, 2012, there is $361,525 of unrecognized compensation cost (pre-tax) that will be recognized through 2013.
NOTE 10. EQUITY
As of March 31, 2012, the Company is authorized to issue 450,000,000 shares of common stock, $0.001 par value and 10,000,000
shares of preferred stock, $0.001 par value. The Companys common stock was divided into two classes of common stock with 440,000,000 shares to the Class A common stock and 10,000,000 shares to the Class B common stock.
On June 17, 2011 the Company amended its articles of incorporation (the Articles), to increase the number of shares of the
Companys common stock authorized for issuance to 460,000,000 shares, of which 10,000,000 shares were designated as blank check preferred stock. The amendment also created two classes of common stock of the corporation and
designated 250,000,000 shares to the Class A common stock and 200,000,000 shares to the Class B common stock.
21
On December 20, 2011, the Company amended its articles of incorporation as follows: The Company
Class A Common stock was changed from 250 million (250,000,000) to 440 million (440,000,000) and the number of Class B Common Stock was changed from 200 million (200,000,000) to 10 million (10,000,000). The
Total authorized common shares were 450,000,000 and the total authorized and Preferred Stock was 10,000,000 Preferred shares for the year ended December 31, 2011.
Common Stock
On December 21, 1992, we issued one thousand eight hundred and
sixty (1,860) shares of our common stock in consideration of $1,860 in cash.
On December 18, 1998, we amended and restated our
Articles of Incorporation, to increase our authorized capitalization from two thousand five hundred (2,500) common stock to twenty five million (25,000,000) common stock. The no par value was changed to $0.001 per share.
On December 18, 1998, our shareholders approved a forward split of our common stock at the ratio of one thousand (1,000) shares for every one
(1) share of the existing shares. The number of common stock outstanding increased from one thousand eight hundred and sixty (1,860) to one million eight hundred sixty thousand (1,860,000). Prior period information has been restated to
reflect the stock split, on a retroactive basis.
On July 14, 2006, our shareholders declared a five and one half (5.5) share
dividend for each one share of the issued and outstanding shares. The record date was July 28, 2006; payable July 31, 2006. The number of common stock outstanding increased from 1,860,000 to 12,090,000. Prior period information has
been restated to reflect the stock dividend on a retroactive basis.
See
Note 5. Chloride Copper Project Business Combination
for a discussion of an Asset Purchase Agreement (the Purchase Agreement) entered into by the Company together with Medina Property Group LLC, a Florida limited liability company (Medina), pursuant to which the Company agreed
to purchase 80% of certain assets of Medina known as the Chloride Copper Project and pursuant to which the purchase price consisted of the issuance of 12,750,000 shares of our common stock, which shares were issued on or about August 9,
2010, to Medina and certain of its designees. In connection with and pursuant to the terms of the Purchase Agreement, Black Diamond Realty Management, LLC returned 5,348,000 shares of the Companys Common Stock, which shares were returned on
June 23, 2010 and, as a result, a change of our shareholder voting control occurred. The net shared issued for this transactions is 7,402,000 shares. The Company recorded these issuance at the market value of the stock at that time which was $1
per share. The net value for this issuance was $7,402,000
On June 1, 2010, the Company issued Michael Doherty, our former Director,
President (Principal Executive Officer), Chief Financial Officer, and Secretary of the Company, 100,000 shares of the Companys Common Stock in consideration for his services to the Company which shares of common stock were valued at $3,00
based on the value of the associated underlying shares of the Companys common stock which value of $1.00 per share, represented the offering price of the Companys Common Stock in its most recently completed equity transaction prior to
the date of the Purchase Agreement and for which the Company recorded a debit to consulting expense in the amount of $100,000.
Effective
June 1, 2010, we amended our Certificate of Incorporation and declared a six (6) share stock split for each one share of the issued and outstanding shares. Total shares to be issued was six to 1. The record date and that date such shares
were issued was June 25, 2010. The number of common stock outstanding increased from 19,592,000 to 117,552,000.
22
At August 23, 2010, the Company entered into a subscription agreement with an investor in a private
placement exempt from the registration requirements of the Securities Act of 1933, as amended. The Company issued and sold to the investor an aggregate of 300,000 shares of its common stock. This issuance resulted in aggregate gross proceeds to the
Company of $75,000. At March 31, 2012 the 300,000 shares of common stock had not yet been issued and accordingly, the Company recorded a credit to subscribed shares.
On January 13, 2011 the Company issued Patrick Champney, our former Chief Executive Officer, and a Director of the Company, 1,000,000 shares of the Companys Common Stock in consideration for
his services to the Company and as per his employment agreement. The shares of common stock were valued at $510,000 based on the value of the associated underlying shares of the Companys common stock as per the trading price at issuance, which
was $.51 per share.
On January 19, 2011 the Company issued Brenda Hamilton, an attorney for the Company, 120,000 shares of the
Companys Common Stock in consideration for her services to the Company. The shares of common stock were valued at $62,400 based on the value of the associated underlying shares of the Companys common stock as per the trading price at
issuance, which was $.52 per share.
On January 19, 2011 the Company issued, Kathi Rodriguez a contractor for the Company, 10,000 shares
of the Companys Common Stock in consideration for her services to the Company. The shares of common stock were valued at $5,200 based on the value of the associated underlying shares of the Companys common stock as per the trading price
at issuance, which was $.52 per share.
On January 24, 2011 the Company issued Cella Lange and Cella, LLP an attorney for the Company,
100,000 shares of the Companys Common Stock in consideration for their services to the Company. The shares of common stock were valued at $53,000 based on the value of the associated underlying shares of the Companys common stock as per
the trading price at issuance, which was $.53 per share.
On February 2, 2011 the Company issued Cella Lange and Cella, LLP an attorney
for the Company, 100,000 shares of the Companys Common Stock in consideration for their services to the Company. The shares of common stock were valued at $19,000 based on the value of the associated underlying shares of the Companys
common stock as per the trading price at issuance, which was $.19 per share.
On February 2, 2011 the Company issued Bradley Hacker our
Chief Financial Officer for the Company, 100,000 shares of the Companys Common Stock in consideration for his services to the Company and terms for his appointment as Chief Financial Officer.
The shares of common stock were valued at $19,000 based on the value of the associated underlying shares of the Companys common stock as per the
trading price at issuance, which was $.19 per share.
On April 18, 2011 the Company issued Eduardo Munoz a consultant for the Company,
100,000 shares of the Companys Common Stock in consideration for his services and reimbursement of expenses to the Company. The Company recorded professional expenses and travel costs in the amount of $6,000 based on the market trading
value of the shares on the date of issuance.
From May, 12, 2011 through December 31, 2011 the Company issued Asher Enterprises during
seventeen dates a total of 86,672,004 shares of the Companys Common stock. The stock was issued in exchange for the conversion of notes payable totaling $538,493 issued during 2010 and 2011.
From May, 12, 2011 through December 31, 2011 the Company issued Asher Enterprises during seventeen dates a total of 86,672,004 shares of the
Companys Common stock. The stock was issued in exchange for the conversion of notes payable totaling $538,493 issued during 2010 and 2011.
On May 24, 2011 the Company issued First Capital Partners, Inc. a public relations firm for the Company, 750,000 shares of the Companys Common Stock in consideration for their services to the
Company. The Company recorded professional expenses of $15,000 based on the market trading value of the shares on the date of issuance.
On June 7, 2011 the Company issued Michael Rowland as consultant for the Company, 300,000 shares of the Companys Common Stock in consideration
for his services to the Company. The Company recorded professional expenses of $6,000 based on the market trading value of the shares on the date of issuance
23
On May 10, 2012, the Company issued Barton Budman a common stock purchase option to purchase 1,000,000
shares of common stock with an exercise price of $0.05 per share as outlined in the consulting agreement dated February 21, 2012 between Barton Budman, a consultant, and the Company,
During the quarter ended March 31, 2012, the Company entered into a subscription agreement with Grandview Ventures, whereas, for the value of $10,000 the company agreed to issue 8,650,000 shares of the
Companys common stock. The Company has received the $10,000 and has issued the common shares to the third party.
Common Shares
Subscribed, Not Issued
During the year ending December 31, 2010, the Company entered into a subscription agreement. Whereas for the
value of $75,000 the company agreed to issue 300,000 shares of the Companys common stock. The Company received the $75,000 however as of December 31, 2011 and 2010 the company had not issued the common shares to the third party. The
Company considers the value of the stock as subscribed stock, not issued and as a short term liability as of December 31, 2011 since as over twelve months have elapsed since the subscription agreement was entered into by the Company.
The Company entered into a demand Promissory Note with Blackpool Partners LLC; a company owned by the Companys CEO and a related party
on May 18, 2011 in the amount of $6,700. This note has been satisfied and converted into 2,857,467 shares of common stock; however as of this filing the Company has not issued these shares.
Effective March 10, 2011, the Company entered into a two month independent consulting agreement with J. Rod Martin, its current CEO, in
consideration for 200,000 shares of restricted Common Stock. The terms of the agreement were satisfied; however as of this filing the Company has not issued these shares. Effective May 11, 2011, the Company entered into a four month
independent consulting agreement with J. Rod Martin, its current CEO, in consideration for 2,000,000 shares of restricted Common Stock. The terms of the agreement were satisfied; however as of this filing the Company has not issued these shares. The
Company recorded a consulting expense on the date agreements were issued.
Effective May 3, 2012, the Company entered into subscription
agreements with Grand View Ventures, The Oak Street Trust and Shadow Capital. Whereas for the values of $33,333, $16,667 and $16,667 the company agreed to issue 6,666,666 shares, 3,333,334 shares and 3,333,334 shares, respectively, of the
Companys common stock. The Company received the $33,333, $16,667 and $16,667 however as of June 30, 2012 the company had not issued the common shares to the third parties. The Company also granted warrants to Grand View Ventures. The Oak
Street Trust and Shadow Capital to purchase 6,666,666, 3,333,334 and 3,333,334 for $.012 per share, respectively.
The Company entered into a
Convertible Promissory Note with Tangiers on October 14, 2011 in the amount of $31,500. The Company has renegotiated the terms of the note May, 2012. The new terms require the Company to make two payments of $18,750, which one payment has been
satisfied, and issue 3,000,000 shares of common stock valued at $14,700 to Tangiers; however as of this filing the Company has not issued these shares.
Preferred Stock
As of December 31, 2011 and June 30, 2012, respectively the
company had 10,000,000 shares authorized of Preferred Stock, none issued and outstanding; with a par value of $0.001 per share.
NOTE 11. INCOME TAXES
The Company adopted ASC Topic 740, which requires the recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.
24
For income tax reporting purposes, the Companys aggregate unused net operating losses approximate
$10,300,000, which expire in various years through 2030, subject to limitations of Section 382 of the Internal Revenue Code, as amended. The Company has provided a valuation reserve against the full amount of the net operating loss
benefit, because in the opinion of management based upon the earning history of the Company, it is more likely than not that the benefits will not be realized. The change in valuation allowance during the six months ended June 30, 2012 was
immaterial.
NOTE 12. OTHER EVENTS
On January 11, 2012, the Company Amended its Article of Incorporation and increased the authorized common stock of the
company from 450,000,000 to 1,500,000,000 shares. Subsequently, on April 13, 2012 the Company canceled the Amendment. Therefore, the company continues to operate with 450,000,000 common shares and 10,000,000 preferred shares of authorized
stock under its Articles of Incorporation.
On January 31, 2012 the Company filed for an amendment of its Articles of Incorporation
creating two classes of Preferred stock with 1,000,000 shares of Class A preferred Shares and 9,000,000 shares of Class B Preferred Shares.
25
Effective February 20, 2012 the board of directors approved the purchase of half of the minority
interest in the Chloride Copper Mine from the Medina Property Group, LLC under the terms of a letter of intent. The execution of this transaction would increase the Companys interests in the Chloride Copper Mine to 90%. The Company paid an
initial deposit in February 2012 of $6,500 for the additional interest. The letter of intent has been extended to October 1, 2012 at which time a definitive agreement is expected to be executed.
On March 9, 2012, former Director James Stonehouse and the Company entered in to a settlement agreement and general release of claims whereby all
debt of approximately $106,000 owed by the Company to Mr. Stonehouse were satisfied in exchange for 250,000 options at an exercise price of $0.05 per share.
NOTE 13. SUBSEQUENT EVENTS
The Company entered into a Convertible Promissory Note with Asher Enterprises Inc. on July 17, 2012 in the amount of $53,000. The
note has an interest rate of 8% with the maturity date of April 19, 2013.
The Company entered into a Promissory Note with Fogo, Inc. on
July 31, 2012 in the amount of $200,000. The note has an interest rate of 12% with the maturity date of January 27, 2013. In consideration of the Promissory Note, Fogo, Inc also received Warrants to purchase 1,000,000 shares of common
stock at an exercise price of $0.03 per share.
On August 24, 2012, the Company had paid in full the Asher Enterprises Inc. Convertible
Promissory Note dated February 29, 2012.
26
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, thereunto duly authorized.
|
|
|
|
|
SIERRA RESOURCE GROUP, INC.
|
|
|
|
|
|
|
|
Date: September 28, 2012
|
|
By:
|
|
/s/ J. Rod Martin
|
|
|
|
|
J. Rod Martin
|
|
|
|
|
President, Chief Executive Officer and Director
|
SIERRA RESOURCE GROUP, INC.
|
|
|
|
|
|
|
|
Date: September 28, 2012
|
|
By:
|
|
/s/ Barton R. Budman
|
|
|
|
|
Barton R. Budman
|
|
|
|
|
Chief Financial Officer
|
27