ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Cautionary Statement Regarding Forward-Looking
Information
The statements in this quarterly report that are not reported
financial results or other historical information are forward-looking
statements within the meaning of the
Private Securities Litigation Reform
Act of 1995
, as amended. These statements appear in a number of different
places in this report and can be identified by words such as estimates,
projects, expects, intends, believes, plans, or their negatives or
other comparable words. Also look for discussions of strategy that involve risks
and uncertainties. Forward-looking statements include, among others, statements
regarding our business plans and availability of financing for our business.
You are cautioned that any such forward-looking statements are
not guarantees and may involve risks and uncertainties. Our actual results may
differ materially from those in the forward-looking statements due to risks
facing us or due to actual facts differing from the assumptions underlying our
estimates. Some of these risks and assumptions include those set forth in
reports and other documents we have filed with or furnished to the United States
Securities and Exchange Commission (SEC). We advise you that these cautionary
remarks expressly qualify in their entirety all forward-looking statements
attributable to us or persons acting on our behalf. Unless required by law, we
do not assume any obligation to update forward-looking statements based on
unanticipated events or changed expectations. However, you should carefully
review the reports and other documents we file from time to time with the SEC.
Presentation of Information
As used in this quarterly report, the terms "we", "us", "our"
and the Company mean Tierra Grande Resources Inc. and its subsidiaries, unless
the context requires otherwise.
All dollar amounts in this quarterly report refer to US dollars
unless otherwise indicated.
Overview
We were incorporated as a Nevada company on April 4, 2006. We
have been engaged in the acquisition and exploration of mineral properties since
our inception. We have not generated any revenues and have incurred losses since
inception.
We currently own a 100% interest in the Dome mineral
properties, located in the Province of British Columbia, Canada. In addition, we
own a 100% interest in two mineral properties (known as the Byng and Tramp
claims) also located in the Province of British Columbia, Canada. We owned an
option to acquire a 100% interest in the Lady Ermalina mineral properties,
located in the Province of British Columbia, Canada, which has expired. As the
Byng and Tramp claims are located adjacent to the Lady Ermalina claims, we plan
to dispose of our interest in these properties going forward. We have conducted
limited exploration work on our mineral properties and none of our properties
has been determined to contain any mineral resources or reserves of any
kind.
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Our strategy is to identify, acquire and develop assets that
present near term cash-flow opportunities with the emphasis on creating early
cash flow to enable our company to consider other corporate opportunities.
We continue reviewing what we believe to be opportunities with
potential in Peru, South America through our strategic alliance with ExploAndes
S.A.C. (ExploAndes). ExploAndes is a leading firm of geology consultants and
project logistics managers located in Peru assisting in the identification,
assessment and development of projects in South America. ExploAndes has a proven
track record of delivering professional services to the South American mining
industry from mineral project review and assessment to project management.
We expect our strategic alliance with ExploAndes to lead to
potential opportunities in South America in line with our strategy. In that
regard, in February 2013, we acquired all of the outstanding shares of Tierra
Grande Resources S.A.C., a Peruvian company, through which we plan to conduct
operations in South America.
In July 2013, we entered into a Letter of Intent to acquire the
Buldibuyo Gold Project in Peru. The Buldibuyo Gold Project offers us the
opportunity to deliver near term gold production and cash flow. It is our
intention to acquire 100% of the gold project, which has produced high grade ore
in the past. With support from our strategic relationships and personnel in
Peru, we are currently engaged in due diligence to qualify future expectations
and timelines.
We have also entered a strategic alliance with Mining Plus Pty
Ltd (Mining Plus), a leading firm of mining and geoscience consultants with
offices in Australia, Canada and Peru, to assist in the identification,
assessment and development of projects. We expect the alliance with Mining Plus
to lead to other potential opportunities in line with our strategy. Via the
strategic alliance with Mining Plus, we have ready access to over 50 seasoned
mining industry professionals to assist in the potential development of
projects.
See our Annual Report on Form 10-K for the year ended May 31,
2013 for more information regarding our business.
Our plan of operations for the next 12 months is to continue to
seek out, acquire, explore and potentially develop projects with an emphasis on
creating early cash flow for our business, whether by way of acquisition of full
ownership, joint venture or other acceptable structure. We also plan to dispose
of the Byng and Tramp claims and may conduct a small exploration project on our
Dome mineral claims. We anticipate we will require approximately $5 million to
carry out our plans over the next 12 months. As of August 31, 2013, we had cash
of $23,398 and working capital of $10,552 and will require significant financing
to pursue our exploration plans. There can be no assurance that we will obtain
the required financing, on terms acceptable to us or at all. In the event we are
unable to obtain the required financing, our business may fail. An investment in
our securities involves significant risks and you could lose your entire
investment.
Results of Operations
The following discussion and analysis of our results of
operations and financial condition for the three months ended August 31, 2013
should be read in conjunction with our unaudited interim consolidated financial
statements and related notes included in this report, as well as our most recent
annual report on Form 10-K for the year ended May 31, 2013 filed with the SEC.
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Three Months Ended August 31, 2013 Compared to Three
Months Ended August 31, 2012
Lack of Revenues
We have earned no revenues and have sustained operational
losses since our inception on April 4, 2006 to August 31, 2013. As of August 31,
2013, we had an accumulated deficit of $9,042,613. We anticipate that we will
not earn any revenues during the current fiscal year as we are an exploration
stage company.
Expenses
From April 4, 2006 (date of inception) to August 31, 2013, our
total expenses were $3,932,160 comprised of $714,940 in professional fees,
$187,131 in mineral property costs and $3,030,089 in general and administrative
expenses.
Our total expenses decreased to $26,059 for the three months
ended August 31, 2013 from $187,503 for the three months ended August 31, 2012
mainly due to lower general and administrative expenses. General and
administrative expenses decreased to $20,623 in the current period from $166,751
in the prior period, primarily resulting from reduced expenses relating to
potential acquisitions of mineral property interests in the current period. In
that regard, professional fees for the three months ended August 31, 2013
decreased to $5,436 from $20,752 in the prior period.
Net Loss
For the three months ended August 31, 2013, we recognized a net
loss of $26,059, compared to $187,503 for the three months ended August 31,
2012.
Liquidity and Capital Resources
As of August 31, 2013, we had cash of $23,398, working capital
of $10,552, total assets of $30,338, total liabilities of $12,846 and an
accumulated deficit of $9,042,613.
Financing Activities
We have funded our operations primarily by a combination of
private placements, advances from related parties and loans. From April 4, 2006
(date of inception) to August 31, 2013, financing activities provided cash of
$5,546,053, primarily from the sale of our common stock and loans.
During the three months ended August 31, 2013, financing
activities provided cash of $0, compared to $30,000 in the prior period from the
sale of our common stock.
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Operating Activities
Operating activities used cash of $16,585 for the three months
ended August 31, 2013, compared to $256,716 for the three months ended August
31, 2012. An increase in accounts payable and accrued liabilities provided cash
of $9,263 in the three months ended August 31, 2013, compared to a decrease in
same using cash of $74,572 in the prior period. An increase in other receivables
used cash of $0 in the current period, compared to $217 in the prior period. A
decrease in amounts due to/from related parties used cash of $0 in the current
period, compared to $40,640 in the prior period.
Investing Activities
Investing activities used cash of $0 in the three months ended
August 31, 2013, compared to $1,273 in the prior period relating to the purchase
of property and equipment.
We expect that our total expenses will increase over the next
year as we increase our business operations. We do not anticipate generating any
revenues over the next year. Our plan of operations for the next 12 months is to
continue to seek out, acquire, explore and potentially develop projects with an
emphasis on creating early cash flow for our business, whether by way of
acquisition of full ownership, joint venture or other acceptable structure. We
also plan to dispose of the Byng and Tramp claims and may conduct a small
exploration project on our Dome mineral claims. We anticipate we will require
approximately $5 million to carry out our plans over the next 12 months. As at
August 31, 2013, we had cash of $23,398 and working capital of $10,552 and will
require significant financing to pursue our exploration plans.
There can be no assurance that we will obtain any additional
financing, on terms acceptable to us or at all. In the event we are unable to
obtain the required financing, our business may fail. An investment in our
securities involves significant risks and you could lose your entire investment.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to stockholders.
Going Concern
Our consolidated financial statements for the period ended
August 31, 2013 have been prepared on a going concern basis and Note 2 to the
statements identifies issues that raise substantial doubt about our ability to
continue as a going concern. Our consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
We have not generated any revenues, have achieved losses since
our inception, and rely upon the sale of our common stock and loans from related
and other parties to fund our operations. We do not anticipate generating any
revenues in the foreseeable future, and if we are unable to raise equity or
secure alternative financing, we may not be able to pursue our plans and our
business may fail.
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ITEM 4. CONTROL AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this report, an
evaluation was carried out by our principal executive officer and principal
financial officer of the effectiveness of our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934 (the Exchange Act)) as of August 31, 2013. Disclosure controls and
procedures are designed to ensure that information required to be disclosed in
reports filed or submitted under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the SECs rules
and forms, and that such information is accumulated and communicated to
management to allow timely decisions regarding required disclosures.
Based on that evaluation, and the material weaknesses outlined
below, our principal executive officer and principal financial officer
concluded, as of the end of the period covered by this report, that our
disclosure controls and procedures were not effective in recording, processing,
summarizing and reporting information required to be disclosed, within the time
periods specified in the SECs rules and forms, and that such information may
not be accumulated and communicated to our principal executive officer and
principal financial officer to allow timely decisions regarding required
disclosures.
A material weakness is a deficiency, or combination of
deficiencies, such that there is a reasonable possibility that a material
misstatement of the Companys annual or interim financial statements will not be
prevented or detected on a timely basis. Based on the assessment of the
effectiveness of disclosure controls and procedures as of August 31, 2013, the
following deficiencies were identified:
1. Lack of proper segregation of duties due to limited
personnel.
2. Lack of a formal review process that includes multiple
levels of review, resulting in adjustments related to related party other
receivable.
Management is currently evaluating remediation plans for the
above control deficiencies.
In light of these control deficiencies, management concluded
that there is a reasonable possibility that a material misstatement of the
annual or interim financial statements will not be prevented or detected on a
timely basis by the companys disclosure controls or internal controls.
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Changes in Internal Control
During the quarter ended August 31, 2013, there were no other
changes in our internal control over financial reporting that materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.