Attached files
Commission File No. 000-25301
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended: December 31, 2009
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition Period From __ to __
SIERRA RESOURCE GROUP, INC.
_________________________________________________________________
(Exact Name of Small Business Issuer as Specified in its Charter)
NEVADA 88-0413922
_______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6767 Tropicana Avenue, Suite 207
Las Vegas, Nevada 89103
________________________________________ __________
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (406) 270-4158
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
$.001 Common Stock
__________________
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]
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. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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 definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
________________________________________________________________________________
Non-accelerated filer Smaller
Large accelerated (Do not check if a smaller reporting
filer Accelerated filer reporting company) company
[ ] [ ] [ ] [X]
________________________________________________________________________________
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [ ]
The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant (without admitting that any person whose shares
are not included in such calculation is an affiliate) computed by reference to
the price at which the common stock was last sold as of the last business day of
the Registrant's most recently completed second fiscal quarter was $0.
As of December 31, 2009 and as of the date hereof, the Registrant had
12,090,000 shares of Common Stock, $0.001 par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
2.
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 4
Item 1A. Risk Factors 4
Item 1B. Unresolved Staff Comments 9
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 11
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 15
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 18
Item 9A. Controls and Procedures 18
Item 9B. Other Information 19
PART III
Item 10. Directors, Executive Officers and Corporate Governance 19
Item 11. Executive Compensation 21
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 21
Item 13. Certain Relationships and Related Transactions, and Director
Independence 22
Item 14. Principal Accountant Fees and Services 23
PART IV
Item 15. Exhibits and Financial Statement Schedules 24
Signatures 25
3.
PART I
ITEM 1. BUSINESS.
Introduction
Sierra Resource Group, Inc. (sometimes the "Company") was incorporated on
December 21, 1992 under the laws of the State of Nevada to engage in any lawful
corporate activity. Since March 31, 1993, we have been in the developmental
stage and have had no operations. We originally intended to engage in the
acquisition of oil and natural gas leases, primarily in East Texas. It was our
intent to enter into lease option agreements for leasehold interests in both
developed and undeveloped acres. In the event any leasehold interests were
acquired, we intended to enter into exploration and development agreements with
third parties wherein said third parties would, at its risk and expense,
operate, develop and explore the property thereby relieving us of any future
significant operating, exploration and development costs. We contemplated
negotiating or retaining a small volumetric overriding royalty interest above
the royalty leasehold interest and/or a retention of a working interest. If we
needed additional funds, an offering of the Company's securities was
contemplated.
On April 30, 2008, we entered into an "Assignment and Quit Claim of Oil and
Gas Leases" agreement (the "Agreement") with Sierra Asset Holdings LLC (the
"Assignor") and closed the Agreement whereby the Assignor assigned 100% of
Assignor's right, title and interest in and to the leasehold estate in the oil
and gas leases located in Louisiana and Kansas for a note in the amount of
$29,500 secured by the oil and gas interests assigned. According to the
Agreement, the Assignor conveyed 100% of .04% working interests with a .03% net
revenue interest in one well and conveyed 100% of .035% working interests with a
.03% net revenue interest in three wells. We incurred an obligation for $29,500
for the interests to the Assignor, all due and payable in April 2010. The
Assignor paid cash in the amount of $29,500 to Natural Gas & Oil "Choice"
Development Fund I, LP and Team Resources, Inc. during the period ended June 30,
2009 for the acquired interests assigned.
The Assignor is an affiliate of an officer and director of the Company. The
note to the Assignor is in the amount of $29,500 and is secured by a security
interest in the acquired interests assigned. The note is due and payable in
April 2010. Giving effect to the transaction, we are directly or indirectly
obligated to the officers and directors in the total sum of $123,031. It is our
present intent to surrender our interest in the leasehold estates in
cancellation of this indebtedness.
ITEM 1A. RISK FACTORS.
The following risk factors should be considered carefully in evaluating our
business before purchasing any of our shares of common stock. A purchase of our
common stock is speculative and involves a lot of risks. No purchase of our
common stock should be made by any person who is not in a position to lose the
entire amount of his investment.
1. We are reliant upon third parties.
We are wholly dependent, at the present time, upon the efforts and
abilities of Natural Gas & Oil "Choice" Development Fund I, LP and Team
Resources, Inc. (and other unrelated interest holders) for the drilling, testing
and completion of the wells. We also have other unrelated third parties who are
drilling and operating the wells pursuant to agreements with Natural Gas & Oil
"Choice" Development Fund I, LP. Natural Gas & Oil "Choice" Development Fund I,
LP has assumed all of our future and contingent obligations relating to our
interest, inclusive of drilling, testing and completion of the wells and/or
costs associated with the abandonment of the well and shut-in costs. If either
fails to perform, our business would be materially and adversely affected.
4.
2. There may not be any oil or gas on our property.
The search for oil and gas is risky. We will not know what is underground
until the wells have been drilled and completed. As such, there may be no oil
and gas under our leases. Accordingly, we may not discover any oil or gas or if
we discover oil or gas, it may not be in an amount to be of commercial value.
3. Competition for prospects and producing properties is intense.
We will be competing with a number of other potential purchasers of
prospects and producing properties, most of which will have greater financial
resources than us or our co-interest holders. In the oil and gas industry, the
bidding for prospects has become particularly intense with different bidders
evaluating potential acquisitions with different product pricing parameters and
other criteria that result in widely divergent bid prices. In the current oil
and gas lease environment, there can be no assurance that there will be a
sufficient number of suitable prospects available for acquisition by us or that
we can sell prospects or obtain financing for or participants with others to
join in the development of prospects.
4. Title to our wells may not be perfected.
It is customary in the oil and gas industry that upon acquiring an interest
in a property, that only a preliminary title investigation be done at that time.
We believe that our co-interest holders follow this custom. If the title to our
leases should prove to be defective, we could lose the costs of acquisition.
Further, our legal interests in the wells will be assigned to us after the
completion of the wells.
5. There may exist adverse federal and state taxation laws.
Federal and state income tax laws are of particular significance to the oil
and gas industry. Recent legislation has eroded previous benefits to oil and gas
producers, and any subsequent legislation may continue this trend. The states in
which we may conduct oil and gas activities may also impose taxes upon the
production of oil and gas located within such states. There can be no assurance
that the tax laws will not be changed or interpreted in the future in a manner
which may adversely affect us.
6. There is substantial government regulation.
The oil and gas business is subject to substantial governmental regulation,
including the power to limit the rates at which oil and gas are produced and to
fix the prices at which oil and gas are sold. It cannot be accurately predicted
whether additional legislation or regulation will be enacted or become
effective.
7. We may have future needs for additional funds in order to finance our
proposed business operations.
Although our agreements with others provide for the funding of our current
projects, we believe that we do not have adequate funds available to acquire
future prospects or to drill and complete wells on future leases (without other
participants). Our continued operation therefore depends upon our ability to
raise additional funds through bank borrowings or equity or debt financing.
There is no assurance that we will be able to obtain additional funding when
needed, or that such funding, if available, can be obtained on terms acceptable
to us. If we cannot obtain needed funds, we may be forced to curtail or cease
future activities. We have no present ability to pay our obligation for our
present leasehold interests.
5.
8. Because the probability on an individual prospect ever having oil and gas
is extremely remote, any future funds spent on exploration may be lost.
The probability of an individual prospect ever having oil and gas is
extremely remote. In all probability, the property does not contain any oil and
gas. As such, all future funds spent on exploration may be lost which result in
a loss of your investment.
9. Because our auditors have issued a going concern opinion, there is
substantial uncertainty that we will continue operations in which case you
could lose your investment.
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an ongoing business for the next
twelve months. The financial statements do not include any adjustments that
might result from the uncertainty about our ability to continue in business. As
such, we may have to cease operations and you could lose your investment.
Further, we have not considered and will not consider any activity beyond our
current exploration program until we have completed this exploration program, if
we continue to own the leasehold interests.
10. We lack a current operating history, have only had very limited revenues,
have limited prospectus for additional future revenues, and have losses
which expect to continue into the future. As a result, we may have to
suspend or cease operations.
We have no current operating history upon which an evaluation of our future
success or failure can be made. Our net loss since inception is $122,952 as of
December 31, 2009. We have never had any historical revenues and we have
limited current prospects for future revenues.
Based upon current plans, we expect to incur operating losses in future
periods. This will happen because there are expenses associated with the
research and exploration of our properties. As a result, we may not generate
revenues in the future. Failure to generate revenues will cause us to suspend or
cease operations.
Further, we have not considered and will not consider any activity beyond
our current exploration program. We do not have the ability to pay our note of
$29,500 that is due and payable in April 2010.
6.
11. Because we are small and do not have capital, we have had to limit our
drilling activity which may result in a loss of your investment.
Because we are small and do not have capital, we have limited our
drilling activity and have relied on others. Further, we have not considered and
will not consider any activity beyond our current drilling program until we have
completed production on our existing leases. Further, we do not have the ability
to pay our note of $29,500 that is due and payable in April 2010.
12. Because our officers and directors have other outside business activities
and each will only be devoting 10% of their time or approximately four
hours per week to our operations, our operations may be sporadic which may
result in periodic interruptions or suspensions of exploration.
Because our officers and directors have other outside business activities
and each will only be devoting 10% of their time or four hours per week to our
operations, our operations may be sporadic and occur at times which are
convenient to them. As a result, exploration of the property may be periodically
interrupted or suspended.
13. Because officers and directors own more than 70% of the outstanding shares,
they will be able to decide who will be directors and you may not be able
to elect any directors.
Our officers and directors own 70.4% shares and have and will continue to
control us. Our officers and directors will still be able to elect all of our
directors and control our operations.
14. FINRA sales practice requirements may limit a stockholder's ability to buy
and sell our stock.
The FINRA has adopted rules that require that in recommending an investment
to a customer, a broker-dealer must have reasonable grounds for believing that
the investment is suitable for that customer. Prior to recommending speculative
low priced securities to their non-institutional customers, broker-dealers must
make reasonable efforts to obtain information about the customer's financial
status, tax status, investment objectives and other information. Under
interpretations of these rules, the FINRA believes that there is a high
probability that speculative low priced securities will not be suitable for at
least some customers. The FINRA requirements make it more difficult for
broker-dealers to recommend that their customers buy our common stock, which may
have the effect of reducing the level of trading activity and liquidity of our
common stock. Further, many brokers charge higher transactional fees for penny
stock transactions. As a result, fewer broker-dealers may be willing to make a
market in our common stock, reducing a stockholder's ability to resell shares of
our common stock.
7.
15. Because there is no active public trading market for our common stock, you
may not be able to resell your stock.
Although a market maker has obtained the approval to have our securities
quoted for trading in the OTC Bulletin Board System, there is currently no
active public trading market for our common stock. Therefore, there is no
central place, such as a stock exchange or electronic trading system, to resell
your shares. If you do want to resell your shares, you may have to locate a
buyer and negotiate your own sale. Our trading symbol for the OTC Bulletin Board
System is SIRG.
16. In addition to having no full time management and lack of experience in the
business, if we lose Paul Andre, our business could be impaired.
Our success is heavily dependent upon the continued participation of our
secretary and treasurer, Paul Andre. Loss of his services could have a material
adverse effect upon our business development. We do not maintain "key person"
life insurance on Paul Andre's life. We do not have a written employment
agreement with Paul Andre. There can be no assurance that we will be able to
recruit or retain other qualified personnel, should it be necessary to do so.
17. You will receive no dividends on your investment.
We have never paid cash dividends. We do not anticipate declaring or paying
cash dividends in the foreseeable future. Our retained earnings, if any, will
finance the development and expansion of our business. Our dividends will be at
our board of directors' discretion and contingent upon our financial condition,
earnings, capital requirements and other factors. Therefore, there can be no
assurance that cash dividends of any kind will ever be paid.
18. If we issue future shares, present investors' per share value will be
diluted.
We are authorized to issue a maximum of 25,000,000 shares of common shares.
As of the date hereof, there are 12,090,000 shares issued and outstanding. The
board of directors' authority to issue common stock without shareholder consent
may dilute the value of your common stock.
19. Our shareholders may face significant restrictions on the resale of our
common stock due to state "blue sky" laws.
There are state regulations that may adversely affect the transferability
of our common stock. We have not registered our common stock for resale under
the securities or "blue sky" laws of any state. We may seek qualification or
advise our shareholders of the availability of an exemption. We are under no
obligation to register or qualify our common stock in any state or to advise the
shareholders of any exemptions.
Current shareholders and persons who desire to purchase the common stock in
any trading market that may develop in the future, should be aware that there
might be significant state restrictions upon the ability of new investors to
purchase the securities.
Any secondary trading market that may develop may only be conducted in
those jurisdictions where an applicable exemption is available or where the
shares have been registered.
8.
20. Our common stock may be subject to significant restriction on resale due to
federal penny stock restrictions.
The Securities and Exchange Commission has adopted rules that regulate
broker or dealer practices in connection with transactions in penny stocks.
Penny stocks generally are equity securities with a price of less than $5.00
(other than securities registered on certain national securities exchanges or
quoted on the NASDAQ system, provided that current price and volume information
with respect to transactions in such securities is provided by the exchange
system). The penny stock rules require a broker or dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Securities and Exchange
Commission that provides information about penny stocks and the nature and level
of risks in the penny stock market. The broker or dealer also must provide the
customer with bid and offer quotations for the penny stock, the compensation of
the broker or dealer, and its salesperson in the transaction, and monthly
account statements showing the market value of each penny stock held in the
customer's account. The penny stock rules also require that prior to a
transaction in a penny stock not otherwise exempt from such rules, the broker or
dealer must make a special written determination that a penny stock is a
suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in any secondary market for our stock that becomes subject to
the penny stock rules, and accordingly, customers in our securities may find it
difficult to sell their securities, if at all.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
We do not have any unresolved staff comments from the Securities and
Exchange Commission.
ITEM 2. PROPERTIES.
Our executive offices is a mailing address located at 6767 West Tropicana
Avenue, Suite 207, Las Vegas, Nevada 89103-4754 supplied by our registered
agent. We feel that this arrangement is adequate for our needs at this time, and
we feel that we will be able to locate adequate space in the future, if needed,
on commercially reasonable terms.
We hold leasehold interest estates in the oil and gas leases located in
Louisiana and Kansas. We have a .04% working interest with a .03% net revenue
interest in one well and a 0.035% working interest with a .03% net revenue
interest in three wells.
Our Working Interest and Net Revenue Interest in the Snapper #2 Well is as
follows:
Net Revenue
Working Interest Interest
0.04% 0.03%
9.
The balance of the Working Interest and Net Revenue Interest in the Snapper
#2 Well is allocated to each participant in the well as follows:
Interest Holder Net Revenue
Working Interest Interest
Natural Gas and Oil & 3.75% 2.625%
"Choice" Development
Fund 1, LP
Team Resources, Inc. 1.50% 1.050%
Cypress Drilling, LLC 91.00% 63.700%
Et.al.
Crestwood Energy 2.00% 1.400%
Others 1.75% 1.225%
Snapper Lease Landowner 0.00% 30.000%
Total 100.00% 100.00%
Our Working Interest and Net Revenue Interest in the Smith A #2, Schomaker
#2, and Boger #2 Wells is as follows:
Net Revenue
Working Interest Interest
0.035% 0.03%
The balance of the Working Interest and Net Revenue Interest in the Smith A
#2, Schomaker #2, and Boger #2 Wells is allocated to each participant in the
wells as follows:
Interest Holder Net Revenue
Working Interest Interest
Natural Gas and Oil & 35.00% 26.2500%
"Choice" Development
Fund 1, LP
Team Resources, Inc. 11.25% 8.4375%
Indian Oil Company 18.75% 14.0625%
Crestwood Energy 10.00% 7.5000%
Others 25.00% 18.7500%
Smith, Shomaker & Boger 0.00% 25.0000%
Lease Landowners
Total 100.00% 100.00%
Although our principal executive offices are located in Las Vegas, Nevada,
the officers and directors do not intend to conduct any business at said
offices.
ITEM 3. LEGAL PROCEEDINGS.
There is no litigation pending or threatened by or against the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
There have been no matters submitted to the Company's security holders.
10.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
(a) Market Price.
There is no established trading market in our Common Stock as of the date
of this Form 10-K. A market maker has applied for and has obtained approval for
our securities to be quoted in the OTC Bulletin Board system. Our symbol is
SIRG.
The Securities and Exchange Commission adopted Rule 15g-9, which
established the definition of a "penny stock," for purposes relevant to the
Company, as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require: (i) that a broker or dealer approve a person's account for
transactions in penny stocks; and (ii) the broker or dealer receive from the
investor a written agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased. In order to approve a person's
account for transactions in penny stocks, the broker or dealer must (i) obtain
financial information and investment experience and objectives of the person;
and (ii) make a reasonable determination that the transactions in penny stocks
are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the transaction. Disclosure also has to be
made about the risks of investing in penny stock in both public offering and in
secondary trading, and about commissions payable to both the broker-dealer and
the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.
For the initial listing in the NASDAQ SmallCap market, a company must have
net tangible assets of $4 million or market capitalization of $50 million or a
net income (in the latest fiscal year or two of the last fiscal years) of
$750,000, a public float of 1,000,000 shares with a market value of $5 million.
The minimum bid price must be $4.00 and there must be 3 market makers. In
addition, there must be 300 shareholders holding 100 shares or more, and the
company must have an operating history of at least one year or a market
capitalization of $50 million.
For continued listing in the NASDAQ SmallCap market, a company
must have net tangible assets of $2 million or market capitalization of $35
million or a net income (in the latest fiscal year or two of the last fiscal
years) of $500,000, a public float of 500,000 shares with a market value of $1
million. The minimum bid price must be $1.00 and there must be 2 market makers.
In addition, there must be 300 shareholders holding 100 shares or more.
11.
Management intends to strongly consider undertaking a transaction with any
merger or acquisition candidate that will allow our securities to be traded
without the aforesaid limitations. However, there can be no assurances that,
upon a successful merger or acquisition, we will qualify its securities for
listing on NASDAQ or some other national exchange, or be able to maintain the
maintenance criteria necessary to insure continued listing. The failure of the
Company to qualify its securities or to meet the relevant maintenance criteria
after such qualification in the future may result in the discontinuance of the
inclusion of the Company's securities on a national exchange. In such events,
trading, if any, in our securities may then continue in the non-NASDAQ
over-the-counter market. As a result, a shareholder may find it more difficult
to dispose of, or to obtain accurate quotations as to the market value of, the
Company's securities.
(b) Holders.
There are thirty five (35) holders of the Company's Common Stock. On
December 24, 1992, we issued 12,090,000, (as adjusted for a prior forward stock
split and/or dividend) of our Common Stock, for cash. All of the issued and
outstanding shares of the Company's Common Stock were issued in accordance with
the exemption from registration afforded by Section 4(2) of the Securities Act
of 1933, as amended.
Currently, all of our issued and outstanding shares of Common Stock held by
non-affiliates are eligible for sale pursuant to a registration statement filed
with the Securities and Exchange Commission on November 14, 2008 and declared
effective on February 9, 2009 and/or under Rule 144 promulgated under the
Securities Act of 1933, as amended, subject to certain limitations included in
said Rule. In general, under Rule 144, a person (or persons whose shares are
aggregated), who has satisfied a six month holding period, under certain
circumstances, has unlimited public resales under said Rule if the seller
complies with said Rule.
In summary, Rule 144 applies to affiliates (that is, control persons) and
nonaffiliates when they resell restricted securities (those purchased from the
issuer or an affiliate of the issuer in nonpublic transactions) issued by a
shell company. Nonaffiliates reselling restricted securities, as well as
affiliates selling restricted or nonrestricted securities, are not considered to
be engaged in a distribution and, therefore, are not deemed to be underwriters
as defined in Section 2(11) if the seller complies with said Rule.
(c) Dividends.
On July 14, 2006, we declared a 5.5 for 1 stock dividend to our
stockholders of record as of July 28, 2006. The 1,860,000 shares of stock then
outstanding became 12,090,000 shares. No fractional shares were issued and the
dividend shares were delivered to our stockholders entitled thereto on August 1,
2006. We do not intend to declare or pay any further stock dividends or cash
dividends in the immediate future.
(d) Application of California law.
Section 2115 of the California General Corporation law provides that a
corporation incorporated under the laws of a jurisdiction other than California,
but which has more than one-half of its "outstanding voting securities" and
which has a majority of its property, payroll and sales in California, based on
the factors used in determining its income allocable to California on its
franchise tax returns, may be required to provide cumulative voting until such
time as the Company has its shares listed on certain national securities
12.
exchanges, or designated as a national market security on NASDAQ (subject to
certain limitations). Accordingly, holders of our Common Stock may be entitled
to one vote for each share of Common Stock held and may have cumulative voting
rights in the election of directors. This means that holders are entitled to one
vote for each share of Common Stock held, multiplied by the number of directors
to be elected, and the holder may cast all such votes for a single director, or
may distribute them among any number of all of the directors to be elected.
Our existing directors who are also shareholders, acting in harmony, will
be able to elect all of the members of the board of directors even if Section
2115 is applicable.
(e) Purchases of Equity Securities.
We (and affiliated purchasers) have made no purchases or repurchases of any
securities of the Company or any other issuer.
(f) Securities Authorized for Issuance under an Equity Compensation Plan.
We have not authorized the issuance of any of our securities in connection
with any form of equity compensation plan.
(g) Recent Sale of Unregistered Securities
We have not had any recent sale of unregistered securities.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable to smaller reporting companies.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION and
RESULTS OF OPERATIONS.
The discussion contained herein contains "forward looking statements" that
involve risk and uncertainties. These statements may be identified by the use of
terminology such as "believes," "expects," "may," "should" or "anticipates" or
expressing this terminology negatively or similar expressions or by discussions
of strategy. The cautionary statements made in this Form 10K should be read as
being applicable to all related forward-looking statements wherein they appear
in this Form 10K. Our actual results could differ materially from those
discussed in this report.
(a) Generally.
Sierra Resource Group, Inc. (sometimes the "Company") currently has limited
assets or operations. We originally intended to engage in the acquisition of oil
and natural gas leases, primarily in East Texas. It was our intent to enter into
lease option agreements primarily for leasehold interests in both developed and
undeveloped acreage. In the event any leasehold interests were acquired, we
intended to enter into exploration and developmental agreements with third
parties wherein said third parties would at its risk and expenses, operate,
develop and explore the property thereby relieving us of any future significant
operating, exploration and developmental costs. We contemplated negotiating or
retaining a small overriding royalty interest above the royalty leasehold
interest and/or retention of a working interest. If we needed additional funds,
an offering of the Company's securities was contemplated. On March 31, 1993, the
Company was still deemed to be a developmental stage company and all funds
raised in order to fulfill our initial objective had been expended and we,
thereafter, became dormant.
13.
On April 30, 2008, we entered and completed our acquisition of certain
assets as described in the "Assignment and Quit Claim of Oil and Gas Leases"
agreement (the "Agreement") with Sierra Asset Holdings LLC (the "Assignor")
whereby the Assignor assigned 100% of Assignor's right, title and interest in
and to the leasehold estate in the oil and gas leases located in Louisiana and
Kansas for a note of $29,500 secured by the oil and gas interests assigned. We
do not have the ability to pay this obligation.
Pursuant to the Agreement, the Assignor conveyed 100% of .04% working
interest with a .03% net revenue interest in one well and conveyed 100% of .035%
working interest with a .03% net revenue interest in three wells. The Assignor
paid $29,500 for the interest to Natural Gas & Oil "Choice" Development Fund I,
LP and Team Resources, Inc. during the year ended December 31, 2009.
Paul W. Andre, an officer and director of the Company, provided the funds
to Sierra Asset Holdings LLC to acquire the working and net revenue interests in
the wells from Natural Gas & Oil "Choice Development Fund I, LP, an unrelated
party.
Natural Gas & Oil "Choice" Development Fund I, LP and Team Resources, Inc.
(with the other interest holders) have assumed all future and contingent
obligations of the Assignor relating to the interests, inclusive of drilling,
testing and completion of the wells and/or associated with the abandonment of
the well and shut-in costs.
As of the date hereof, we can also be defined as a "shell" company.
(b) Shell Issues.
The Securities and Exchange Commission has adopted a rule (Rule 419) which
defines a blank check company as (i) a developmental stage company, that is (ii)
offering penny stock, as defined by Rule 3a51-1, and (iii) that has no specific
business plan or purpose or has indicated that it's business plan is to engage
in a merger or acquisition with an unidentified company or companies. We have
not been informed that the Securities and Exchange Commission position is that
the securities issued by all blank check companies that are issued in
unregistered offerings must be registered with the Commission before resale. At
the time that our shareholders acquired our stock in 1992, we had a specific
business plan and purposes. In addition, Rule 419 is applicable only if a
registration statement is filed covering an offering of a penny stock by a blank
check company.
On June 29, 2005, the Securities and Exchange Commission adopted rules
amending the Form S-8 and the Form 8-K for shell companies like us. The
amendments expand the definition of a shell company to be broader than a company
with nominal operations/assets or assets consisting of cash and cash
equivalents. The amendments prohibit the use of a Form S-8 (a form used by a
corporation to register securities issued to an employee, director, officer
consultant or advisor, under certain circumstances), and review the Form 8-K to
require a shell company to include current Form 10 information, including
audited financial statements, in the filing on Form 8-K that the shell company
files to report the acquisition of the business opportunity. The rules are
designed to assure that investors in shell companies that acquire operations or
assets have access on a timely basis to the kind of information as is available
to investors on public companies with continuing operations.
On February 15, 2008, the Securities and Exchange Commission adopted final
rules amending Rule 144(and Rule 145) for shell companies like us. The
amendments currently in full force and effect provide that the current holding
periods applicable to affiliates and non-affiliates is now available for
securities currently issued by either a reporting or non-reporting shell
company, unless certain conditions are met. An investor will be able to resell
securities issued by a shell company subject to Rule 144 conditions if the
reporting or non-reporting issuer (i) had ceased to be a shell (ii) is subject
to the Exchange Act reporting obligations (iii) has filed all required Exchange
Act reports during the proceeding twelve months, and (iv) at least 90 days has
elapsed from the time the issuer has filed the "Form 10 Information" reflecting
the fact that it had ceased to be a shell company before any securities were
sold under Rule 144. The amendment to Rule 144(i)(1)(i) was not intended to
capture a "start-up company," or a company with limited operating history or the
shares originally issued by us in 1992, except for the shares of stock currently
held by our officers and directors (affiliates).
14.
(c) Plan of Operation.
We intend to acquire assets or shares of an entity actively engaged in a
business that generates revenues in exchange for our securities. We are
currently focusing our efforts on entering into a business combination with
existing businesses.
We plan to investigate and attempt to attract possible merger or business
acquisition candidates through the issuance of additional shares of our common
stock. This will be a continuous effort.
The acquisition of a merger or business combination requires an extensive
review. We are unable at this time, to determine with any degree of accuracy the
amount of time that it would take for us to locate a suitable acquisition or
merger candidate and to complete such a transaction.
In order to obtain further financing, we believe that debt financing will
not be an alternative for funding as we do not have tangible assets to secure
any debt financing. We anticipate that any additional funding will be in the
form of equity financing from the sale of our common stock. However, we do not
have any financing arranged and we cannot provide investors with any assurance
that we will be able to raise sufficient funding from the sale of our common
stock.
(d) Financial Condition.
Our auditor's going concern opinion and the notation in the financial
statements indicate that we do not have sufficient cash or other material assets
and that we are relying on advances from shareholders, officers and directors to
meet limited operating expenses. We do not have sufficient cash or other
material assets nor do we have sufficient operations or an established source of
revenue to cover our operational costs that would allow us to continue as a
going concern. We are insolvent in that we are unable to pay our debts in the
ordinary course of business as they become due.
Since the Company has had no operating history nor any significant revenues
or earnings from operations, with no significant assets or financial resources,
we will in all likelihood sustain operating expense without corresponding
revenues, at least until the consummation of a business combination. This may
result in the Company incurring a net operating loss which will increase
continuously until the Company can consummate a business combination with a
profitable business.
(e) Liquidity and Operational Results.
The Company has no current operating history and has minimal revenues or
earnings from operations. The Company has limited financial resources. We will,
in all likelihood, sustain operating expenses without corresponding revenues, at
least until the consummation of a business combination. This may result in the
Company incurring a net operating loss that will increase continuously until the
Company can consummate business combination with a profitable business
opportunity. There is no assurance that the Company can identify such a business
opportunity or consummate such a business combination.
We are dependent upon officers to meet any de minimis costs that may occur.
Paul W. Andre, an officer and director of the Company, has agreed to provide the
necessary funds, without interest, for the Company, to comply with the
Securities Exchange Act of 1934, as amended provided he is an officer and
director of the Company when the obligation is incurred. All advances are
interest free.
(f) Liquidity.
As of December 31, 2009, we had total assets of $1,939 and total
liabilities of $123,031 and we had a negative net worth of $121,092. As of
December 31, 2008, we had assets of $14,374 and total liabilities of $108,539
and a negative net worth of $94,165.
We have had nominal revenues of $1,275 from inception (December 21, 1992)
through December 31, 2009. We have an accumulated deficit from inception through
December 31, 2009, of $122,952.
We had officer advances as of December 31, 2009 of $90,573 and $77,851 as
of December 31, 2008. As of December 31, 2009, the total outstanding notes
payable including accrued interest is $32,458, which is due to an affiliate of
an officer and giving effect to the note and accrued interest, the Company was
obligated to the officer as of December 31, 2009 for $123,031.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable to smaller reporting companies.
15.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
SIERRA RESOURCE GROUP, INC.
(A Development Stage Enterprise)
FINANCIAL REPORTS
(AUDITED)
DECEMBER 31, 2009
DECEMBER 31, 2008
16.
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONTENTS
______________________________________________________________________________
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm F-1
Balance Sheets F-2
Statements of Operations F-3
Statement of Stockholders' Deficit F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6-10
______________________________________________________________________________
17.
DE JOYA GRIFFITH & COMPANY, LLC
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Stockholders
Sierra Resource Group, Inc.
Las Vegas, NV
We have audited the accompanying balance sheets of Sierra Resource Group, Inc.
(A Development Stage Enterprise) as of December 31, 2009 and 2008, and the
related statements of operations, stockholders' deficit, and cash flows for the
years then ended and from inception (December 21, 1992) to December 31, 2009.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based on
our audit.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sierra Resource Group, Inc. (A
Development Stage Enterprise) as of December 31, 2009 and 2008, and the results
of their operations and cash flows for the years then ended and from inception
(December 21, 1992) to December 31, 2009 in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations, which
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
DE JOYA GRIFFITH & COMPANY, LLC
/s/ DE JOYA GRIFFITH & COMPANY, LLC
___________________________________
De Joya Griffith & Company, LLC
Henderson, Nevada
February 25, 2010
________________________________________________________________________________
2580 Anthem Village Drive, Henderson, NV 89052
Telephone (702) 563-1600 * Facsimile (702) 920-8049
F-1
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
As of As of
December 31, December 31,
2009 2008
(Audited) (Audited)
_____________ ____________
ASSETS
CURRENT ASSETS
Cash $ 1,811 $ 1,563
Account receivable 128 174
_____________ ____________
Total current assets 1,939 1,737
Oil & Gas interests - net - 12,637
_____________ ____________
Total assets $ 1,939 $ 14,374
============= ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Officer advances $ 90,573 $ 77,851
Interest accrued - related party 2,958 1,188
Note payable - related party 29,500 -
_____________ ____________
Total current liabilities 123,031 79,039
_____________ ____________
LONG-TERM LIABILITIES
Note payable - related party - 29,500
_____________ ____________
Total long-term liabilities - 29,500
_____________ ____________
Total liabilities 123,031 108,539
_____________ ____________
STOCKHOLDERS' DEFICIT
Common stock: $.001 par value;
authorized 25,000,000 shares;
issued and outstanding: 12,090,000
shares at December 31, 2009 and December 31, 2008 12,090 12,090
Accumulated deficit during development stage (133,182) (106,255)
_____________ ____________
Total stockholders' deficit (121,092) (94,165)
_____________ ____________
Total liabilities and stockholders' deficit $ 1,939 $ 14,374
============= ============
See Accompanying Notes to Financial Statements.
F-2
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(AUDITED)
Dec. 21, 1992
Year Ended Year Ended (inception) to
December 31, December 31, December 31,
2009 2008 2009
____________ _____________ ____________
Revenues $ 288 $ 987 $ 1,275
Cost of revenue - - -
____________ _____________ ____________
Gross profit 288 987 1,275
General, selling and
administrative expenses 12,808 16,538 91,769
Amortization 5,416 6,556 11,972
____________ _____________ ____________
Operating loss (18,224) (22,107) (103,741)
Other (expense)
Interest expense (1,770) (1,188) (2,958)
Impairment loss on Oil and Gas interest (7,221) (10,307) (17,528)
____________ _____________ ____________
Total other (expense) (8,991) (11,495) (20,486)
____________ _____________ ____________
Net loss $ (26,927) $ (33,602) $ (122,952)
============ ============= ============
Net loss per share, basic $ (0.00) $ (0.00)
============ =============
Average number of shares
of common stock outstanding 12,090,000 12,090,000
============ =============
See Accompanying Notes to Financial Statements.
F-3
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' DEFICIT
Accumulated
Deficit
Common Stock During
_______________________________ Development
Shares Amount Stage Total
______________ _____________ _____________ ____________
December 21, 1992, issue
common stock 12,090,000 $ 12,090 $ (10,230) $ 1,860
Net loss, December 31, 1992 - - (1,860) (1,860)
______________ _____________ _____________ ____________
Balance, December 31, 1992 12,090,000 12,090 (12,090) -
Net loss, December 31, 1993 - - - -
______________ _____________ _____________ ____________
Balance, December 31, 1993 12,090,000 12,090 (12,090) -
Net loss, December 31, 1994 - - - -
______________ _____________ _____________ ____________
Balance, December 31, 1994 12,090,000 12,090 (12,090) -
Net loss, December 31, 1995 - - - -
______________ _____________ _____________ ____________
Balance, December 31, 1995 12,090,000 12,090 (12,090) -
Net loss, December 31, 1996 - - - -
______________ _____________ _____________ ____________
Balance, December 31, 1996 12,090,000 12,090 (12,090) -
Net loss, December 31, 1997 - - - -
______________ _____________ _____________ ____________
Balance, December 31, 1997 12,090,000 12,090 (12,090) -
Net loss, December 31, 1998 - - (450) (450)
______________ _____________ _____________ ____________
Balance, December 31, 1998 12,090,000 12,090 (2,540) (450)
Net loss, December 31, 1999 - - (22,668) (22,668)
______________ _____________ _____________ ____________
Balance, December 31, 1999 12,090,000 12,090 (35,208) (23,118)
Net loss, December 31, 2000 - - (8,394) (8,394)
______________ _____________ _____________ ____________
Balance, December 31, 2000 12,090,000 12,090 (43,602) (31,512)
Net loss, December 31, 2001 - - (4,888) (4,888)
______________ _____________ _____________ ____________
Balance, December 31, 2001 12,090,000 12,090 (48,490) (36,400)
Net loss, December 31, 2002 - - (3,156) (3,156)
______________ _____________ _____________ ____________
Balance, December 31, 2002 12,090,000 12,090 (51,646) (39,556)
Net loss, December 31, 2003 - - (85) (85)
______________ _____________ _____________ ____________
Balance, December 31, 2003 12,090,000 12,090 (51,731) (39,641)
Net loss, December 31, 2004 - - (2,840) (2,840)
______________ _____________ _____________ ____________
Balance, December 31, 2004 12,090,000 12,090 (54,571) (42,481)
Net loss, December 31, 2005 - - (8,415) (8,415)
______________ _____________ _____________ ____________
Balance, December 31, 2005 12,090,000 12,090 (62,986) (50,896)
Net loss, December 31, 2006 - - (4,387) (4,387)
______________ _____________ _____________ ____________
Balance, December 31, 2006 12,090,000 12,090 (67,373) (55,283)
Net loss, December 31, 2007 - - (5,280) (5,280)
______________ _____________ _____________ ____________
Balance, December 31, 2007 12,090,000 $ 12,090 $ (72,653) $ (60,563)
Net loss, December 31, 2008 - - (33,602) (33,602)
______________ _____________ _____________ ____________
Balance, December 31, 2008 12,090,000 $ 12,090 $ (106,255) $ (94,165)
Net loss, December 31, 2009 - - (26,927) (26,927)
______________ _____________ _____________ ____________
Balance, December 31, 2009 12,090,000 $ 12,090 $ (133,182) $ (121,092)
(audited) ============== ============= ============= ============
See Accompanying Notes to Financial Statements
F-4
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(AUDITED)
Dec. 21, 1992
Year Ended Year Ended (inception) to
December 31, December 31, December 31,
2009 2008 2009
____________ _____________ ____________
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (26,927) $ (33,602) $ (122,952)
Adjustments to reconcile net loss to net cash
used in operating activities;
Amortization 5,416 6,556 11,972
Impairment of oil and gas interest 7,221 10,307 17,528
Changes in operating assets and liabilities
(Increase) in accounts receivable 46 (174) (128)
Increase in interest accrued - related party 1,770 1,188 2,958
____________ _____________ ____________
Net cash used in operating activities (12,474) (15,725) (90,622)
____________ _____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in oil and gas interests - (29,500) (29,500)
____________ _____________ ____________
Net cash used in investing activities - (29,500) (29,500)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock - - 1,860
Increase in officer advances 12,722 17,288 90,573
Proceeds from note payable - related party - 29,500 29,500
____________ _____________ ____________
Net cash provided by financing activities 12,722 46,788 121,933
____________ _____________ ____________
Net increase in cash 248 - 1,811
Cash, beginning of period 1,563 - -
____________ _____________ ____________
Cash, end of period $ 1,811 $ 1,563 $ 1,811
============ ============= ============
SUPPLEMENTAL CASH FLOW INFORMATION
Impairment of oil and gas interest $ 7,441 $ - $ 17,528
============ ============= ============
See Accompanying Notes to Financial Statements.
F-5
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Sierra Resource Group, Inc. ("Company") was organized December 21, 1992 under
the laws of the State of Nevada. The Company currently has start-up operations
and, in accordance with the Financial Accounting Standards Board, FASB ASC
915-10, "DEVELOPMENT STAGE ENTITIES," is considered a Development Stage
Enterprise.
A summary of the Company's significant accounting policies is as follows:
YEAR END
The Company has adopted December 31 as its fiscal year end.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH
For the statements of cash flows, all highly liquid investments with maturity of
three months or less are considered to be cash equivalents. There were no cash
equivalents as of December 31, 2009 and December 31, 2008.
INCOME TAXES
The Company follows FASB ASC 740-10, "Income Taxes" for recording the provision
for income taxes. Deferred tax assets and liabilities are computed based upon
the difference between the financial statement and income tax basis of assets
and liabilities using the enacted marginal tax rate applicable when the related
asset or liability is expected to be realized or settled. Deferred income tax
expenses or benefits are based on the changes in the asset or liability each
period. If available evidence suggests that it is more likely than not that some
portion or all of the deferred tax assets will not be realized, a valuation
allowance is required to reduce the deferred tax assets to the amount that is
more likely than not to be realized. Future changes in such valuation allowance
are included in the provision for deferred income taxes in the period of change.
Deferred income taxes may arise from temporary differences resulting from income
and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current,
depending on the classification of assets and liabilities to which they relate.
Deferred taxes arising from temporary differences that are not related to an
asset or liability are classified as current or non-current depending on the
periods in which the temporary differences are expected to reverse.
SHARE BASED EXPENSES
In December 2004, the Financial Accounting Standards Board ("FASB") issued FASB
ASC 505-50 "EQUITY BASED PAYMENTS TO NON-EMPLOYEES". This statement requires a
public entity to expense the cost of employee services received in exchange for
an award of equity instruments. This statement also provides guidance on valuing
and expensing these awards, as well as disclosure requirements of these equity
arrangements. The Company adopted FASB ASC 505-50 upon creation of the company
and expenses share based costs in the period incurred.
F-6
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER COMMON SHARE
Net loss per share is calculated in accordance with FASB ASC 260-10, "EARNING
PER SHARE." The weighted-average number of common shares outstanding during each
period is used to compute basic loss per share. The calculation of diluted net
loss per share gives effect to common stock equivalents; however, potential
common shares are excluded if their effect is antidilutive. Basic loss per
common share is based on the weighted average number of shares of common stock
outstanding of 12,090,000 for the periods ended December 31, 2009 and December
31, 2008. For the periods ended December 31, 2009 and December 31, 2008, the
Company had no dilutive potential common stock.
GOING CONCERN
The Company's financial statements are prepared in accordance with generally
accepted accounting principles applicable to a going concern. This contemplates
the realization of assets and the liquidation of liabilities in the normal
course of business. Currently, the Company does not have adequate cash, or
significant material assets, nor does it have substantial operations or a source
of revenue sufficient to cover its operation costs and allow it to continue as a
going concern. The Company has an accumulated deficit of ($133,182). The Company
will be dependent upon the raising of additional capital through placement of
our common stock in order to implement its business plan. There can be no
assurance that the Company will be successful in either situation in order to
continue as a going concern. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might result from
this uncertainty.
The officers and directors have committed to advancing certain operating costs
of the Company.
RECENT ACCOUNTING PRONOUNCMENTS
In June 2009, the Financial Accounting Standards Board ("FASB") issued FASB ASC
105-10, "Generally Accepted Accounting Principles." FASB ASC 105-10 sets forth
the level of authority to a given accounting pronouncement or document by
category. Where there might be conflicting guidance between two categories, the
more authoritative category will prevail. FASB ASC 105-10 will be effective for
financial statements issued for reporting periods that end after September 15,
2009.
In June 2009, the Financial Accounting Standards Board ("FASB") issued FASB ASC
810-10, "Consolidation". The amendments include: (1) the elimination of the
exemption for qualifying special purpose entities, (2) a new approach for
determining who should consolidate a variable-interest entity, and (3) changes
to when it is necessary to reassess who should consolidate a variable-interest
entity. SFAS 167 is effective for the first annual reporting period beginning
after November 15, 2009 and for interim periods within that first annual
reporting period. The Company will adopt FASB ASC 810-10 in fiscal 2010. The
Company does not expect that the adoption of FASB ASC 810-10 will have a
material impact on the financial statements.
In June 2009, the Financial Accounting Standards Board ("FASB") issued FASB ASC
860-10, "Transfers of and Servicing", which eliminates the concept of a
"qualifying special-purpose entity," changes the requirements for derecognizing
financial assets, and requires additional disclosures in order to enhance
information reported to users of financial statements by providing greater
transparency about transfers of financial assets, including securitization
transactions, and an entity's continuing involvement in and exposure to the
risks related to transferred financial assets. FASB ASC 860-10 is effective for
fiscal years beginning after November 15, 2009. The Company will adopt FASB ASC
860-10 in fiscal 2010. The Company does not expect that the adoption of FASB ASC
860-10 will have a material impact on the financial statements.
F-7
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCMENTS (CONTINUED)
In June 2009, the Financial Accounting Standards Board ("FASB") issued FASB ASC
855-10 "Subsequent Events," FASB ASC 855-10 establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. FASB
ASC 855-10 applies to both interim financial statements and annual financial
statements. FASB ASC 855-10 is effective for interim or annual financial periods
ending after June 15, 2009. FASB ASC 855-10 did not have a material impact on
our financial statements.
2. RECLASSIFICATION: STOCK SPLIT ADJUSTMENT
Certain reclassifications have been made in the current year's financial
statements.
On December 18, 1998 and July 14, 2006, the Company executed a forward stock
split, effected as a stock dividend, which was originally recorded as a debit to
Additional Paid-in Capital and a corresponding credit to Common Stock, in the
amount of $10,230. During the year ended December 31, 2009, the Company recorded
an adjustment, whereby the Company recorded a debit to Retained Earnings and a
credit to Additional Paid-in Capital, in the amount of $10,230. This adjustment
did not change total stockholders' equity. (See Note 3 for more information
regarding the stock split).
3. STOCKHOLDERS' DEFICIT
COMMON STOCK
The authorized common stock of the Company consists of 25,000,000 shares with
par value of $0.001. On December 21, 1992 the Company authorized and issued
1,860 shares of its no par value common stock in consideration of $1,860 in
cash.
On December 18, 1998, the State of Nevada approved the Company's restated
Articles of Incorporation, which increased its capitalization from 2,500 common
shares to 25,000,000 common shares. The no par value was changed to $0.001 per
share.
On December 18, 1998, the Company's shareholders approved a forward split of its
common stock at one thousand shares for one share of the existing shares. The
number of common shares outstanding increased from 1,860 to 1,860,000. Prior
period information has been restated to reflect the stock split, on a
retroactive basis.
On July 14, 2006, the Company's shareholders declared a 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 shares 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.
The Company has not authorized any preferred stock.
There are no warrants or options outstanding to acquire additional shares of
common stock of the Company.
F-8
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
4. RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. An officer
and resident agency of the corporation provides office services without charge.
Such costs are immaterial to the financial statements and accordingly, have not
been reflected therein. The officers and directors for the Company are involved
in other business activities and may in the future, become involved in other
business opportunities. If a specific business opportunity becomes available,
such persons may face a conflict in selecting between the Company and their
other business interest. The Company has not formulated a policy for the
resolution of such conflicts. As of December 31, 2009 and December 31, 2008, the
Company owed an officer $90,573 and $77,851, respectively.
During the year ended December 31, 2008, the Company entered into an "Assignment
and Quit Claim of Oil and Gas Leases" agreement (the "Agreement") with Sierra
Asset Holdings LLC (the "Assignor") whereby the Assignor assigned 100% of
Assignor's right, title and interest in and to the leasehold estate in the oil
and gas leases located in Louisiana and Kansas for a note in the amount of
$29,500 secured by the oil and gas interests assigned. The Company is amortizing
the oil and gas interest on a 3 year straight line method. Total amortization
expense for the periods ended December 31, 2009 and December 31, 2008 was $5,416
and $6,556, respectively. According to the Agreement, the Assignor conveyed 100%
of the .04% working interests with a .03% net revenue interest in one well and
conveyed 100% of .035% working interests with a .03% net revenue interest in
three wells. The Company incurred an obligation of $29,500 for the interests to
the Assignor, all due and payable in April 2010. The note bears no interest;
however the Company has decided to impute interest based on APB 21 "INTEREST ON
RECEIVABLES AND PAYABLES" by imputing a reasonable rate of interest of 6% per
annum. The Assignor paid cash in the amount of $29,500 to Natural Oil & Gas
"Choice" Development Fund I, LP and Team Resources, Inc. during the year ended
December 31, 2008 for the acquired interests assigned.
The Assignor is an affiliate of an officer and director of the Company. The note
to the Assignor is in the amount of $29,500 and is secured by a security
interest in the acquired interests assigned. Giving effect to the transaction,
the Company is directly or indirectly obligated to the officers and directors in
the total sum of $123,031 and $108,539 as of December 31, 2009 and December 31,
2008, respectively.
5. INCOME TAXES
At December 31, 2009 and 2008, the Company had a federal operating loss
carryforward of approximately $122,952 and $96,025, respectively, which begins
to expire in 2026.
Components of net deferred tax assets, including a valuation allowance, are as
follows at December 31,:
2009 2008
_________ _________
Deferred tax assets:
Net operating loss carryforward $ 43,033 $ 33,609
_________ _________
Total deferred tax assets
43,033 33,609
Less: Valuation Allowance (43,033) (33,609)
_________ _________
Net Deferred Tax Assets $ -- $ --
F-9
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
5. INCOME TAXES (CONTINUED)
The valuation allowance for deferred tax assets as of December 31, 2009 and 2008
was $43,033 and $33,609, respectively. In assessing the recovery of the deferred
tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income in the periods in which those temporary differences become
deductible. Management considers the scheduled reversals of future deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. As a result, management determined it was more likely
than not the deferred tax assets would not be realized as of December 31, 2009
and 2008, and recorded a full valuation allowance.
Reconciliation between the statutory rate and the effective tax rate is as
follows at December 31, 2009:
2009
_______
Federal statutory tax rate (35.0)%
Permanent difference and other 35.0 %
_______
Effective tax rate - %
=======
6. FAIR VALUE MEASUREMENT
On December 31, 2009, the Company evaluated the asset for potential impairment
in accordance with FASB ASC 360-10, "PROPERTY, PLANT AND EQUIPMENT". As of
December 31, 2009, the production wells had encountered several problems and
were currently under assessment as to the best method to solve such problems.
Management expects revenues will not be significant nor will they significantly
increase and will most likely decline precipitously. As such, based on
management revenue expectations, the Company impaired 100% of the asset balance
of $7,221 as of December 31, 2009, resulting in an impairment charge of
($7,221), which was included in earnings for the period. The Company had
previously purchased the asset for $29,500 on April 30, 2008.
7. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through February 25, 2010, the date
which the financial statements were available to be issued. The Company has
determined that there were no such events that warrant disclosure or recognition
in the financial statements.
F-10
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
We have had no changes in or disagreements with our accountants on
accounting and financial disclosures.
ITEM 9A. CONTROLS AND PROCEDURES.
Internal control over financial reporting refers to the process designed
by, or under the supervision of, our Chief Executive Officer and Chief Financial
Officer, and effected by our Board of Directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles, and includes those policies and
procedures that:
o Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our
assets;
o Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorization
of our management and directors; and
o Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisitions, use or disposition of our assets that
could have a material effect on the financial statements.
Internal control over financial reporting cannot provide absolute assurance
of achieving financial reporting objectives because of its inherent limitations.
It is a process that involves human diligence and compliance and is subject to
lapses in judgment and breakdowns resulting from human failures. It also can be
circumvented by collusion or improper management override.
Because of such limitations, there is a risk that material misstatements
may not be prevented or detected on a timely basis by internal control over
financial reporting. However, these inherent limitations are known features of
the financial reporting process. Therefore, it is possible to design into the
process certain safeguards to reduce, though not eliminate, this risk.
Management is responsible for establishing and maintaining adequate internal
control over our financial reporting. To avoid segregation of duty due to
management accounting size, management had engaged an outside CPA to assist in
the financial reporting.
Management has used the framework set forth in the report entitled Internal
Control - Integrated Framework published by the Committee of Sponsoring
Organizations of the Treadway Commission, known as COSO, to evaluate the
effectiveness of our internal control over financial reporting. Based upon this
assessment, management has concluded that our internal control over financial
reporting was effective as of and for the year ended December 31, 2009.
We conclude that our internal control over financial reporting was
effective to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
18.
Changes in Internal Controls
There have been no changes in our internal controls over financial
reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
The Company is not an "accelerated filer" for the 2009 fiscal year because
it is qualified as a "small business issuer". Hence, under current law, the
internal controls certification and attestation requirements of Section 404 of
the Sarbanes-Oxley act will not apply to the Company. This Annual report on Form
10-K does not include an attestation report of our registered public accounting
firm regarding internal control over financial reporting. Management's report
was not subject to attestation by our registered public accounting firm pursuant
to temporary rules of the Securities and Exchange Commission that permit us to
provide only management's report in this Annual Report on Form 10-K.
ITEM 9B. OTHER INFORMATION.
We have no information that we would have been required to disclose in a
report on Form 8-K during a fourth quarter of the year covered by this Form
10-K.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
The members of our Board of Directors serve until the next annual meeting
of the stockholders, or until their successors have been elected. The officers
serve at the pleasure of the Board of Directors. Information as to the directors
and executive officers of the Company is as follows:
Name Ages Position
Sandra J. Andre 56 President, Chief Executive Officer
1150 South Tamarisk Drive and Director
Anaheim Hills, CA 92807
Paul W. Andre 66 Secretary, Treasurer, Chief
6767 Tropicana Blvd., Financial Officer and Director
Suite 207
Las Vegas, Nevada 89103
Suzette M. Encarnacion 43 Director
608 Idaho AVenue, #3
Santa Monica, CA 90403
The principal occupation and business experience during the last five years
for each of the present directors and executive officers of the Company are as
follows:
SANDRA J. ANDRE - Sandra J. Andre has been a major shareholder of the
Company since 1992 and has been President and a director of the Company since
1998. From 1990 to 1995, she was the Vice-President and Chief Financial Officer
of Plitt Amusement Company, Inc. From 1995 to 1996, she was the Chief Financial
Officer of Lottery Enterprises, Inc., a manufacturer of instant lottery tickets
and debit card dispensing technology. From 1996 to 1998, she was the Chief
Financial Officer of Young Minds, Inc., a computer software company. From 1998
to the present, she has been President of Sun-Moon-Stars, Inc., an entertainment
rental business offering equipment and prop rentals for stage usage.
19.
PAUL W. ANDRE - Paul W. Andre has been a major shareholder of the Company
since 1992 and has been Secretary/Treasurer and a director of the Company since
1998. From 1989 to 1996, he was President of Andre and Associates, Inc., a
financial consulting group. From 1996 to the present, he has been President of
Savoy Financial Group, Inc., a corporate consulting organization.
SUZETTE M. ENCARNACION - Suzette M. Encarnacion has been a major
shareholder of the Company since 1992 and has been a director of the Company
since 1998. From 1990 to 1993, she was the controller of Plitt Amusement
Company, Inc. From 1994 to the present, she has been employed by Industrial Bank
as a loan officer and underwriter for business and commercial loans.
Our officers and directors may be deemed parents and promoters of the
Company as those terms are defined by the Securities Act of 1933, as amended.
All directors hold office until the next annual stockholders' meeting or until
their death, resignation, retirement, removal, disqualification, or until their
successors have been elected and qualified. Our officers serve at the will of
the Board of Directors.
There are no agreements or understandings for any officer or director of
the Company to resign at the request of another person and none of the officers
or directors is acting on behalf of or will act at the direction of any other
person.
We have checked the box provided on the cover page of this Form to indicate
that there is no disclosure in this form of reporting person delinquencies in
response to Item 405 of Regulation S-K.
Board Meetings.
Our board held six (6) meetings during the period covered by this annual
report.
Audit Committee.
Our board of directors has not established an audit committee. In addition,
we do not have any other compensation or executive or similar committees. We
will not, in all likelihood, establish an audit committee until such time as the
Company generates a positive cash flow of which there can be no assurance. We
recognize that an audit committee, when established, will play a critical role
in our financial reporting system by overseeing and monitoring management's and
the independent auditors' participation in the financial reporting process. At
such time as we establish an audit committee, its additional disclosures with
our auditors and management may promote investor confidence in the integrity of
the financial reporting process.
Until such time as an audit committee has been established, the full board
of directors will undertake those tasks normally associated with an audit
committee to include, but not by way of limitation, the (i) review and
discussion of the audited financial statements with management, and (ii)
discussions with the independent auditors the matters required to be discussed
by the Statement On Auditing Standards No. 61 and No. 90, as may be modified or
supplemented.
Code of Ethics.
We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer and persons
performing similar functions. The code of ethics will be posted on the investor
relations section of the Company's website in the event that we have a website.
At such time as we have posted the code of ethics on our website, we intend to
satisfy the disclosure requirements under Item 10 of Form 8-K regarding an
amendment to, or waiver from, a provision of the code of ethics by posting such
information on the website.
20.
ITEM 11. EXECUTIVE COMPENSATION.
None of our officers and/or directors receive any compensation for their
respective services rendered to the Company, nor have they received such
compensation in the past. They all have agreed to act without compensation until
authorized by the Board of Directors, which is not expected to occur until we
have generated revenues from operations after consummation of a merger or
acquisition. As of the date of this report, we have no funds available to pay
directors. Further, none of the directors are accruing any compensation pursuant
to any agreement with us.
We have not adopted any retirement, pension, profit sharing, stock option
or insurance programs or other similar programs for the benefit of our
directors, officers and/or employees.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
(a) Security Ownership of Certain Beneficial Owners.
The following table sets forth the security and beneficial ownership for
each class of equity securities of the Company for any person who is known to be
the beneficial owner of more than five percent of the Company.
Name and
Address of Amount and
Beneficial Nature of Percent
Title of Class Owner Ownership (*) of Class
______________________________________________________________________
Common Sandra J. Andre 2,340,000 19.35%
1150 South Tamarisk Drive
Anaheim Hills, CA 92807
Common Paul W. Andre 4,875,000 40.32%
6767 Tropicana Avenue
Suite 207
Las Vegas, Nevada 89103
Common Suzette M. Encarnacion 1,300,000 10.75%
608 Idaho AVenue, #3
Santa Monica, CA 90403
Common All Officers and 8,515,000 70.42%
Directors as a Group
(three [3] individuals)
(*) Record and Beneficial Ownership
The total of the Company's outstanding Common Stock are held by 35 persons.
(b) Security Ownership of Management.
The following table sets forth the ownership for each class of equity
securities of the Company owned beneficially and of record by all directors and
officers of the Company.
21.
Name and
Address of Amount and
Beneficial Nature of Percent
Title of Class Owner Ownership (*) of Class
______________________________________________________________________
Common Sandra J. Andre 2,340,000 19.35%
1150 South Tamarisk Drive
Anaheim Hills, CA 92807
Common Paul W. Andre 4,875,000 40.32%
6767 Tropicana Avenue
Suite 207
Las Vegas, Nevada 89103
Common Suzette M. Encarnacion 1,300,000 10.75%
608 Idaho AVenue, #3
Santa Monica, CA 90403
Common All Officers and 8,515,000 70.42%
Directors as a Group
(three [3] individuals)
(*) Record and Beneficial Ownership
(c) Ownership and Change in Control.
Each of the security ownership by the beneficial owners and by management
is also the owner of record for the like number of shares.
There are currently no arrangements that would result in a change in our
control.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Except as set forth herein, there have been no related party transactions,
or any other transactions or relationships required to be disclosed pursuant to
Item 404 of Regulation S-K.
On April 28, 2008, we entered into an "Assignment and Quit Claim of Oil and
Gas Leases" agreement (the "Agreement") with Sierra Asset Holdings LLC (the
"Assignor") and closed the Agreement whereby the Assignor assigned 100% of
Assignor's right, title and interest in and to the leasehold estate in the oil
and gas leases located in Louisiana and Kansas for a note in the amount of
$29,500 secured by the oil and gas interests assigned. According to the
Agreement, the Assignor conveyed 100% of .04% working interests with a .03% net
revenue interest in one well and conveyed 100% of .035% working interests with a
.03% net revenue interest in three wells. We incurred an obligation for $29,500
for the interests to the Assignor, all due and payable in April 2010. The
Assignor paid cash in the amount of $29,500 to Natural Gas & Oil "Choice"
Development Fund I, LP and Team Resources, Inc. during the year ended December
31, 2009 for the acquired interests assigned.
The Assignor is an affiliate of an officer and director of the Company. The
note to the Assignor is in the amount of $29,500 and is secured by a security
interest in the acquired interests assigned. The note is due and payable in
April 2010. Giving effect to the transaction, we are directly or indirectly
obligated to the officers and directors in the total sum of $123,031. We are
unable to pay either of these obligations.
22.
Our current officers and directors (Paul Andre, Sandra Andre and Suzette
Encarnacion) may be deemed to be promoters, as that term is defined in the
federal securities laws.
Any transactions between the Company and its officers, directors or five
percent shareholders, and their respective affiliates, will be on terms no less
favorable than those terms which could be obtained from unaffiliated third
parties and said transactions will be approved by a majority of the independent
and disinterested directors.
Except as described above, none of the following parties has, since our
date of incorporation, had any material interest, direct or indirect, in any
transaction with us or in any presently proposed transaction that has or will
materially affect us:
(1) any of our directors or officers;
(2) any person proposed as a nominee for election as a Director;
(3) any person who beneficially owns, directly or indirectly, shares
carrying more than 10% of the voting rights attached to our
outstanding shares of common stock; or
(4) any members of the immediate family (including spouse, parents,
children, siblings and in-laws) any of the above persons.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit and Non-Audit Fees
Fiscal Year Ended
December 31,
_______________________________________________
2008 2009
_______________________________________________
Audit Fees $9,750 $9,250
Audit Related Fees None None
Tax Fees 125 None
All Other Fees None None
Pre Approval of Services by the Independent Auditor
The Board of Directors has established policies and procedures for the
approval and pre-approval of audit services and permitted non-audit services.
The Board has the responsibility to engage and terminate the Company's
independent registered public accountants, to pre-approve their performance of
audit services and permitted non-audit services and to review with the Company's
independent registered public accountants their fees and plans for all auditing
services. All services provided by and fees paid to DeJoya Griffith & Company,
LLC in 2009 were pre-approved by the Board of Directors.
23.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
There are no reports on Form 8-K incorporated herein by reference.
We are a reporting company pursuant to the requirements of the 1934 Act and
we file quarterly, annual and other reports with the Securities and Exchange
Commission. The reports and other information filed by us will be available for
inspection and copying at the public reference facilities of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549.
Copies of such material may be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1-800-SEC-0330. In addition, the Commission
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
The following documents are filed as part of this report:
31.1 Certification of Chief Executive Officer.
31.2 Certification of Chief Financial Officer.
32.1 Section 906 Certification.
32.2 Section 906 Certification.*
* Included in Exhibit 32.1
24.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Company has duly caused this Form 10-K to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: March 2, 2010
SIERRA RESOURCE GROUP, INC.
By: /s/ SANDRA J. ANDRE
_____________________________________________
Sandra J. Andre
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 2, 2010
SIERRA RESOURCE GROUP, INC.
By: /s/ SANDRA J. ANDRE
_____________________________________________
Sandra J. Andre
President, Chief Executive Officer
and Director
By: /s/ PAUL W. ANDRE
_____________________________________________
Paul W. Andre
Treasurer, Chief Financial Officer
and Director
By: /s/ SUZETTE M. ENCARNACION
_____________________________________________
Suzette M. Encarnacion
Director
25.
