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EX-32.2 - SIERRA RESOURCE GROUP INCex322.htm
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EX-32.1 - SIERRA RESOURCE GROUP INCex321.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.   20549
 

Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
 For the fiscal year ended: December 31, 2011
 
Commission File Number: 000-25301
 
SIERRA RESOURCE GROUP, INC.
(Exact name of registrant as specified in its charter)
 
  NEVADA 
 
88-0413922
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
9550 S. Eastern Ave., Suite 253, Las Vegas, NV  89123
(Address of principal executive offices)
 
Registrant's telephone number, including area code: (702) 462-7285
 
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       [X] Yes   [  ]  No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).        [  ]  Yes   [X]  No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.   
 
 
Large accelerated filer
Non-accelerated filer
 [   ]
 [   ]
Accelerated filer
Smaller reporting company
 [   ]
 [X]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).       [  ] Yes   [X]  No
 
APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of April 12, 2012, the issuer had 301,191,344 issued shares of Common Stock, $0.001 par value.
 
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SIERRA RESOURCE GROUP, INC.
 
TABLE OF CONTENTS
 
PART I
   
3
6
15
15
15
     
PART II
   
16
17
17
19
19
19
19
20
     
PART III
   
21
23
23
26
26
     
PART IV
   
27
 
CERTIFICATIONS
   
 
 
 
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Forward-looking Statements:
 
Certain statements contained in this Annual Report on Form 10-K, including without limitation expectations as to future sales and operating results, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.   For this purpose, any statements contained in this report that are not statements of historical fact may be deemed forward-looking statements.  Without limiting the generality of the foregoing, words such as "believe," "may," "will," "expect," "anticipate," "intend," "could" including the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements.  These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Factors that may affect these results include, but are not limited to, the volatility and cyclicality of metals prices, variation in production costs, the highly competitive nature of our industry, reliance on certain key customers, changes in consumer/global demand for metals, exposure to market risks for changes in interest rates and in foreign exchange rates, governmental regulation, environmental issues, other risk factors described in Item 1A of this report, as well as in other documents and reports filed with the Securities and Exchange Commission, and other factors.
 
Although the Company believes the expectations reflected in these forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements.  Moreover, neither we nor anyone else assumes responsibility for the accuracy and completeness of such statements and is under no duty to update any of the forward-looking statements after the date of this report.
 
Item 1.    Business
 
Company History and Overview
 
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, the Company has been in the developmental stage and has had limited 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 their risk and expense, operate, develop and explore the property.
 
On April 30, 2008, we acquired certain working interests in oil and gas leases in Louisiana and Kansas consisting of the following wells:
 
i.  
Snapper #2 Well- .04% of the working interest and .03% of the net revenue interest;
ii.  
Smith A #2 Well- .35% of the working interest and .03% of the net revenue interest;
iii.  
Shoemaker #2, B- .35% of the working interest and .03% of the net revenue interest; and
iv.  
Roger #2 Wells- .35% of the working interest and .03% of the net revenue interest.
 
The Assignor is an affiliate of a former 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 was due and payable in April 2010 and, giving effect to the transaction, we were directly or indirectly obligated to the officers and directors in the total sum of $90,573 as of December 31, 2011.
 
The Company began locating and evaluating copper producing properties for acquisition or joint venture agreements.  On April 23, 2010, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Medina Property Group LLC, a Florida limited liability company (“Medina”). Pursuant to the Purchase Agreement, and upon the terms and subject to the conditions thereof, purchased 80% of certain assets of Medina, known as the Chloride Copper Project, a former copper producer comprised of a mineral deposit and some infrastructure located near Kingston, Arizona (the “Copper Mine”). The Acquisition formally closed on June 21, 2010. 
 
At its annual meeting of the stockholders on April 21, 2011 a majority of stockholders of the Company approved the Copper Cathode Sale and Purchase Agreement by and between the Company and Harmony Mining Ltd. (“Harmony”).  The general terms of the agreement provided Harmony the ability to purchase approximately 5,040,000 lbs of copper cathode at a discount to the current market price and 10,000,000 shares of the Company’s Preferred Stock in exchange for a guaranty by Harmony of a bank credit line of a minimum of $6,000,000.  Effective October 12, 2011 the Copper Cathode Sale and Purchase Agreement was terminated by mutual agreement between the Company and Harmony. All prior terms of the agreement are void and no longer valid. Both parties agreed to mutually release the other without any recourse against the other.
 
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In September 2011 the Company engaged Wilcox Professional Services of Phoenix, AZ to provide exploratory drilling and laboratory services with regard to its Tailings Impoundment project (“Tailings”) and then engaged Geological Group Mining & Environmental Consultants, Inc. to review the analyses of Chloride Mine tailings presented in the Certificate of Analysis by ALS Minerals, dated October 13, 2011.  The conclusions, based on the analyses provided by the Wilcox drilling and ALS Mineral Lab Tests, were that there is a resource of approximately 9.9 million pounds of copper and 9.0 million pounds of zinc in the tailings. It was also recommended that additional test work to confirm the analyses and the recoverable copper and zinc be done. The tailings are the waste product from the previous operation of the Emerald Isle Mine from 1943 to 1973 when copper recovery was much lower than today’s recovery rates. The Company still needs to determine the economic feasibility of converting the tailings into a form sellable on the open market and as such there can be no assurances that the Company will receive material value for the tailings.
 
The primary effort of the Company is to acquire the necessary funding to bring the Chloride Copper Mine into production in order to generate working capital from its operation.  The Company will also continue its strategy to acquire other mining prospects as well as further development of the Chloride Copper Mine.
 
The Chloride Copper Mine property consists of 37 unpatented lode mining claims and 12 mill site claims and it is located 24km northwest of Kingman, in the Wallapai District, Mohave County, Arizona. The Chloride Copper Mine is an open pit mine and the existing SXEW (Solvent extraction/electrowinning) processing plant.
 
The Chloride Copper Mine deposit is hosted by Late Tertiary conglomerates and, to a lesser extent, by Quaternary alluvium and Cretaceous granitic rocks. Copper mineralization at Chloride Copper Mine is in the form of mineralized lenses contained within a paleochannel a few thousands of feet long and up to 750 feet wide. The source of copper at Chloride Copper Mine is interpreted to be the low grade porphyry-type copper mineralization at Alum Wash, about 3.5 miles northeast of the Chloride Copper Mine deposit. The mineralization is characterized by dark blue to black rock similar to the Exotica deposit, a satellite deposit of the huge Chuquicamata copper deposit in Chile.

At its annual meeting of the stockholders held on April 21, 2011, a majority of our stockholders approved an amendment to the Company’s Articles of Incorporation (the “Articles”), to increase the number of shares of the Company’s common stock authorized for issuance there under from 160,000,000 shares to 460,000,000 shares. The amendment also created two classes of common stock of the corporation and designated 250,000,000 shares to the Class A common stock and 200,000,000 shares to the Class B common stock. The amendment to the Articles was filed with the Nevada Secretary of State on June 17, 2011. References to “common stock” in this Report are to the Class A common stock, unless specifically indicated to be the Class B common stock. Further amendments to our Articles are discussed in Item 12 in this Report.

Effective February 20, 2012 the board of directors approved the purchase of half of the minority interest in the Chloride Copper Mine from the Medina Property Group, LLC under the terms of a letter of intent. The execution of this transaction would increase the Company’s interests in the Chloride Copper Mine to 90%.  The letter of intent is attached hereto as Exhibit 1.01 and is incorporated herein by reference.

Our Growth Strategy

Our growth strategy is to first develop the Chloride Copper Mine.  The Company will also continue to seek other properties or companies with mineral deposits for acquisition or joint venture.

Competition

We are a mineral resource exploration and development company.  We compete with other such companies for financing for the acquisition of new mineral properties.  Many of the companies with which we compete have greater financial and technical resources than those available to us.  Accordingly, these competitors may be able to spend greater amounts on acquisitions of mineral properties we might seek, on exploration of their mineral properties and on development of their mineral properties.  In addition, they may be able to afford more geological expertise in the targeting and exploration of mineral properties.  This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and to prospective customers of the mineral products of such properties.  This competition could adversely impact our ability to finance further exploration and to achieve the financing necessary for us to explore and exploit mineral properties we may acquire.
 
Sources and Availability of Raw Materials

The Company presently does not utilize raw materials.  If the Company is able to bring the Chloride Copper Mine into production then issues relating to the sources and availability of raw materials may be an a material disclosure..

 
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Patents, Trademarks and Licenses

We do not have any trademarks, patents, or other intellectual property.

Need for Government Approvals

As a mining company, we are subject to strict governmental regulation.  We are granted the right to mine by the Mining Act of 1872, which allows us to go on the land and explore, develop and extract minerals from the land.  This is done through a permitting process.  On Federal land, we would be required to obtain permits from the Department of the Interior, Bureau of Land Management.  We will have to obtain additional permits to drill and extract any minerals from the land.   On the State side, we are governed with respect to the Chloride Copper Mine by the Arizona State Mining Department, which has its own permitting process for state-owned land.  The permitting processes can be very time-consuming to complete, sometimes taking years.

Effect of Government Regulation on Business

As a company in the mining industry, government regulations, particularly environmental regulations, affect our business and the processes and methodologies we utilize in all facets of our business, beginning with government permitting prior to any activities taking place at the mines, all the way through extraction of any minerals found at the mines.

As such, we will operate strictly in accordance with Mine Safety and Health Administration (MSHA), Occupational Safety and Health Administration (OSHA), Arizona State Mine Inspector and Arizona Department of Environmental Quality (ADEQ) regulations.  Compliance with these regulations is included in the Company’s strategy for development of the Chloride Copper Mine, but there could be significant costs and delays that we have not anticipated.

Effect of Compliance with Environmental Laws

As a company in the mining industry we are subject to numerous environmental and health and safety laws and regulations.  We believe we are in compliance with all such laws and regulations.  These laws and regulations, on federal, state and local levels; however, are evolving and frequently modified and we cannot accurately predict the effect, if any, they will have on our business in the future.  In many instances, the regulations have not been finalized, or are frequently being modified.  Even where regulations have been adopted, they are subject to varying contradicting interpretation and implementation.  In some cases, compliance can only be achieved by capital expenditure and we cannot accurately predict what capital expenditures, if any, may be required.

Environmental laws could become more stringent over time, imposing greater compliance costs and increasing the risks and penalties associated with any violations.  As a handler and generator of hazardous materials, we will be subject to financial risk exposure with regard to intentional or unintentional violations.  Any present or future noncompliance with environmental laws or future discovery of contamination could have a material adverse effect on our results of operations or financial condition.

The process of initiating operations at the Chloride Copper Mine will require compliance with laws and regulations with which the Company has not previously been required to comply.  While the Company believes it is taking the necessary steps to ensure compliance, there are risks and costs associated with such compliance, which we cannot be certain to have anticipated.
 
Amendments to our By-Laws
 
On January 6, 2011, our board of directors and the holders of a majority of the outstanding shares of our Company entitled to vote approved an amendment to Article II Section 3 of our Bylaws, increasing the authorized number of Directors from three (3) directors to seven (7) directors.
 
At its annual meeting of the stockholders held on April 21, 2011 pursuant to a stockholder proposal and not pursuant to any recommendation or solicitation of proxies by the directors of the Company, a majority of the stockholders of the Company voted to approve amendments to the Company’s Bylaws as follows:
 
·  
Article I Section 2 of the Bylaws is hereby amended as follows: “The Company’s management, without further authorization of the Board of Directors, may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.”
 
 
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·  
Article II Section 4 of the Bylaws is hereby amended to read: “Directors shall be elected at each annual meeting of the Shareholders to hold office for a term of three (3) years. Each Director, including a Director elected to fill a vacancy, shall hold office until the expiration of his or her three-year term at the annual meeting and until a successor has been elected and qualified.”
 
·  
Article II Section 9 of the Bylaws is hereby amended to provide that the regular meetings of the Directors shall be held every quarter instead of every month, at a time and place to be designated by the Board of Directors”
 
·  
Article IV Sections 1 and 2 of the Bylaws are hereby amended as follows: “The annual meeting of the stockholders shall be held on April 20 in each year, at the hour of 10:00 a.m., or at such other time on such other day within thirty days of such date as shall be fixed by the board of directors, for the purpose of electing directors and for the transaction of such other business as may lawfully come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein for any annual meeting of the stockholders, or at any adjournment of such, the board of directors shall cause the election to be held at a special meeting of the stockholders as soon thereafter as convenient.”
 
·  
Article IV Section 8 of the Bylaws is hereby amended to read as follows: “The holders of ten (10%) percent of the shares entitled to vote at any meeting of stockholders, present in person or represented by proxy, shall constitute a quorum for the transaction of any business at any such meeting, provided that when a specified item of business is required to be voted on by a class or series (if the corporation shall then have outstanding shares of more than one class or series) voting as a class, the holders of ten (10%) percent of the shares of such class or series shall constitute a quorum (as to such class or series) for the transaction of such item of business. When a quorum is once present to organize a meeting of stockholders, it is not broken by the subsequent withdrawal of any stockholders or their proxies. The holders of a majority of shares present in person or represented by proxy at any meeting of stockholders, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting.”
 
Employees
 
The Company currently employs four (4) employees.  One (1) maintenance person is employed on the Chloride Copper property and is included in this total.  Currently management includes the Chief Executive Officer (full-time), Chief Financial Officer, Senior Vice President of Operations (full-time).

Item 1A.  Risk Factors
You should carefully consider the following risk factors together with the other information contained in this Report on Form 10-K, and in prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933, as amended.  If any of the risks factors actually occur, our business, financial condition or results of operations could be materially adversely affected. In such cases, the trading price of our common stock could decline. We believe there are no changes that constitute material changes from the risk factors previously disclosed in the prior reports pursuant to the Securities Exchange Act of 1934, as amended and the Securities Act of 1933 and include or reiterate the following risk factors:

Risks Related to our Business
 
We engaged in mining developmental activities, which subjects us to risks associated with similarly situated development stage companies in the mining business.
 
We are a development stage company with a limited operating history since inception. We have no revenues and no record of profitability in our current business.  Our likelihood of success must be considered in light of the risks, expenses, difficulties and delays frequently encountered by companies that have a limited operating history.
 
Because the probability of any of our properties or claims being profitable is subject to many variables,, any funds that we spend on exploration may be lost.
 
We own an eighty percent (80%) interest in one property, the Chloride Copper Project, which may not have deposits of copper or other metals that may be mined at a profit. Whether we will be able to mine this property at a profit, depends upon many factors, including:
 
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the size and grade of the deposit;
whether we can obtain sufficient financing on acceptable terms to conduct our exploration activities;
volatile and cyclical price activity of copper and other precious metals; and the cost, personnel, and time burdens of governmental regulation, including taxes,  royalties, land use, importing and exporting of minerals, and environmental protection.
 

 If we are unable to operate the Chloride Copper project at a profit because the deposits may not be of the quality or size that would enable us to make a profit from actual mining activities or because it may not be economically feasible to extract metals from the deposits, any funds spent on exploration activities could be lost, which may result in a loss of part or all of your investment.
 
Development of the Chloride Copper Project may lead to increased costs and burdens on our operations, which may negatively affect our financial condition and results of operations.
 
Development of the Chloride Copper Project will involve substantial efforts by us and/or third parties we retain.  We may encounter various technical and control problems during our development of this property.   Our proposed mining operations may involve longer periods of time or greater expenditures then are presently contemplated.  Such technical or operational problems may negatively impact the economic performance of the mining project and our financial condition.
 
Production of the Copper Chloride Mine is dependent on the availability of a sufficient water supply to support our mining operations.
 
Our mining operations require water for mining, ore processing and related support facilities.  Production at the Chloride Copper Mine is dependent on continuous maintenance of our water rights. Under Arizona law groundwater outside an active management area may be withdrawn and used for reasonable and beneficial use. The character of the water right that is groundwater versus surface water, may at some point become at issue and may be subject to adjudication to the extent certain water is determined to be surface water, which may subject us to additional costs and delays.
 
We may not have access to all of the materials we need to begin exploration, which could cause us to delay or suspend activities.
 
Due to competitive demands for exploration services and obtaining necessary supplies and/or equipment, there may be disruptions in our planned exploration activities, especially if there are unforeseen shortages. While we intend to attempt to arrange alternatives and redundancy, we have not yet attempted to locate or negotiate with any alternative suppliers of products, equipment or materials. We will attempt to locate suitable equipment, materials, manpower and fuel if sufficient funds are available; if we are unable to do so, we will experience delays or suspension of our planned activities, which will adversely affect our exploration activities and financial condition.
 

Our estimates of reserves may be subject to uncertainty.
 
Reserve estimates are subject to uncertainty. Estimates are arrived at by using standard acceptable geological techniques, and are based on interpretive geological data obtained from drill holes, sampling techniques, assaying, surveying, and mapping. Feasibility studies are used to derive estimates of cash operating costs based on anticipated tonnage and grades of copper to be mined and processed, predicted configuration of ore bodies, expected recovery rates of metal from copper, operating costs, and other factors. Actual cash operating costs and economic returns may differ significantly from original estimates due to:

fluctuations in current prices of metal commodities extracted from the deposits;
changes in fuel prices and equipment;
labor rates;
changes in permit requirements; and
variations in actual extraction costs from those projected.
 
 Any one or a combination of these factors may negatively affect the relative certainty or uncertainty of geological reports or reserve estimates.
 
 
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Our Business depends upon the continued involvement of our Existing Management.
 
The loss, individually or cumulatively, of Messrs. Martin, Benjamin or Hacker could adversely affect our business, prospects, and our ability to successfully conduct our exploration activities. We anticipate that our business may become dependent upon other key personnel and/or consultants in the future. We do not presently carry key-man insurance on any of our officers, directors or employees, and cannot predict when or whether we will carry such insurance in the near future. We do not believe that we will be able to operate as planned in the event that we lose their services. Before you decide whether to invest in our common stock, you should carefully consider our reliance upon these personnel and that if we lose the benefit of their expertise, your investment may be negatively impacted.

Should we fail to effectively manage our growth, our operations and financial condition will be negatively affected.
 
We have plans to develop the Chloride Copper project, which will place a significant strain on our management, operational and financial resources.  We expect to add additional key personnel to develop the property.  Additional employees will place significant demands on our management.  In order to manage the expected growth of our operations, we will be required to engage mining personnel, to improve existing structures, including improvement of internal management systems, on a timely basis.  There can be no assurance that our current personnel, systems, procedures and controls will be adequate to support our future operations or that management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to manage and exploit existing and potential opportunities successfully.  If we are unable to manage our operations effectively, our business, results of operations and financial condition will be materially adversely affected.
 
We may never achieve production, which is dependent on a number of assumptions and factors beyond our control.
 
Although we have prepared estimates of future copper production, we may never achieve our production estimates.  Our estimated mining costs and assumptions regarding ore grades and recovery rates may be incorrect.  Additionally, ground conditions, physical conditions of mineralization and our ability to obtain and maintain development and production related permits also may negatively affect whether we successfully enter and maintain a production phase. Our actual production may vary from our estimates if any of these assumptions prove to be incorrect and we may never achieve profitability.
 
Our estimate of ore reserves at the Chloride Copper Mine is based on total copper assays rather than soluble copper assays.
 
A reserve estimate based on total copper is an indirect measurement of copper recovery through leaching. Accordingly, we may have over-estimated the amount of recoverable copper at the Chloride Copper Mine.
 
We may be subject to unanticipated risks related to inadequate infrastructure.
 
Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure, such as reliable roads, bridges, power sources and water supply. Unusual or infrequent weather phenomena, sabotage, government or other interference could adversely affect infrastructure and hence our mining operations.
 
Our development of new ore bodies and other capital costs may cost more and provide less return than we estimate.
 
Capitalized development projects may cost more and provide less return than we estimate. If we are unable to realize a return on these investments, we may incur a related asset write-down that could adversely affect our financial results or condition. Before we can begin a development project, we must first determine whether it is economically feasible to do so.
 
This determination is based on estimates of several factors, including:
  
ore reserves;
expected recovery rates of metals from the ore;
future metals prices;
facility and equipment costs;
availability of affordable sources of power and adequacy of water supply;
exploration and drilling success;
capital and operating costs of a development project;
environmental considerations and permitting;
adequate access to the site, including competing land uses (such as agriculture);
applicable tax rates;
assumptions used in determining the value of our pension plan assets and liabilities;
foreign currency fluctuation and inflation rates; and
availability of financing.

 
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These estimates are based on geological and other interpretive data, which may be imprecise. As a result, actual operating and capital costs and returns from a development project may differ substantially from our estimates as a result of which it may not be economically feasible to continue with a development project.
 
Our ore reserve estimates may be imprecise.
 
Our ore reserve figures and costs are estimates and should not be interpreted in any way that we will actually recover the indicated quantities of these metals. You are strongly cautioned not to place undue reliance on estimates of reserves.  Reserve estimation is interpretive and based upon available data and various assumptions. Our reserve estimates may change based on actual production experience. Further, reserves are valued based on estimates of costs and metals prices, which may be inconsistent with our other operating and non-operating properties.
 
The economic value of ore reserves may be adversely affected by: 
 
declines in the market price of the various metals we mine;
increased production or capital costs;
reduction in the grade or tonnage of the deposit;
increase in the dilution of the ore; and
reduced recovery rates.

Short-term operating factors relating to our ore reserves, such as the need to sequentially develop ore bodies and the processing of new or different ore grades, may adversely affect our cash flow. We may use forward sales contracts and other hedging techniques to partially offset the effects of a drop in the market prices of the metals we mine. However, if the prices of metals that we produce decline substantially below the levels used to calculate reserves for an extended period, we could experience:
 
 ●
delays in new project development;
net losses;
reduced cash flow;
reductions in reserves; and
write-downs of asset values.

Efforts to expand the finite lives of our mines may be unsuccessful, which could hinder our growth and decrease the value of our stock.
 
Mineral exploration, particularly for copper is highly speculative and expensive. It involves significant risks and is often non-productive. Even if we have a valuable mineral deposit, it may be several years before production from that deposit is possible. During that time, it may become no longer feasible to produce those minerals for economic, regulatory, political or other reasons. As a result of high costs and other uncertainties, we may not be able to expand or replace our existing ore reserves as they are depleted, which would adversely affect our business and financial position in the future.
 
Our ability to market our metals production may be affected by disruptions or closures of custom smelters and/or refining facilities.
 
We may sell substantially all of our metallic concentrates to custom smelters, with our ore bars sent to refiners for further processing before being sold to metal traders. If our ability to sell concentrates to such smelters becomes unavailable, our operations could be adversely affected.
 
Mining accidents or other adverse events at an operation could decrease our anticipated production.
 
Production may be reduced below our historical or estimated levels as a result of mining accidents; unfavorable ground conditions; work stoppages or slow-downs; lower than expected ore grades; the metallurgical characteristics of the ore are less economical than anticipated; or our equipment or facilities fail to operate properly or as expected.
 
 
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Our operations may be adversely affected by risks and hazards associated with the mining industry that may not be fully covered by insurance.
 
Our business is subject to a number of risks and hazards including:
environmental hazards;
labor disputes or strikes;
unusual or unexpected geologic formations;
cave-ins;
explosive rock failures; and
unanticipated hydrologic conditions, including flooding and periodic interruptions due to inclement or hazardous weather conditions.
 
Such risks and hazards could result in: 
personal injury or fatalities;
damage to or destruction of mineral properties or producing facilities;
environmental damage;
delays in exploration, development or mining;
monetary losses; and
legal liability.

We presently do not maintain insurance to protect against losses that may result from some of these risks at levels consistent with our historical experience, industry practice and circumstances surrounding each identified risk. Insurance against environmental risks is generally either unavailable or, we believe, too expensive for us, and we therefore do not maintain environmental insurance. Occurrence of events for which we are not insured may have an adverse effect on our business.

Financial Risks
 
Should we fail to successfully compete with our competitors, our name, operations, and financial condition will be negatively affected.
 
We will compete with other companies engaged in the copper mining industry, most of which are well established, have substantially greater financial and other resources than us, and have an established reputation for success in mining.  Therefore, we will face substantial competition in hiring and retaining of highly qualified mining, metallurgical, financial and administrative personnel. Accordingly, there can be no assurance that we will be able to compete successfully with other companies or that we will achieve profitability.

We have not had any significant revenues since our inception and there is no assurance that we will be able to achieve the financing necessary to enable us to precede with our exploration activities.

We have not had any significant revenues since our inception.  We will apply any proceeds from copper sales generated from our activities at the Chloride Copper Project to help cover our exploration expenditures, but we anticipate that revenue may not be generated until FY2013. Our projected expenditures will likely far exceed proceeds from sales over the next twelve months, which will require that we obtain substantial financing in order for us to pursue our current plan of operations.  If we do not achieve the necessary financing, then we will not be able to proceed with other planned activities, including our planned exploration activities, and our financial condition, business prospects and results of operations could be materially adversely affected to the point of having to cease operations, which would likely cause our investors to lose their entire investment.
 
Our financial condition raises substantial doubt about our ability to continue as a going concern.
 
We have an accumulated deficit of $10,303,503 as of December 31, 2011, and our auditor has issued a going concern opinion. This means that there is substantial doubt whether we can continue as an ongoing business. We will need substantial financing to conduct our planned exploration activities; if we fail to obtain sufficient financing, we will be unable to pursue our business plan or our business operations will have to be curtailed or terminated, in which case you will lose part or all of your investment in our common stock.
  
 
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We have limited cash resources and may be dependent on accessing additional financing to meet our expected cash needs.
 
We have cash requirements for ongoing operating expenses, capital expenditures, working capital, and general corporate purposes, which we may be unable to obtain.
 
The global financial crisis may have an impact on our business and financial condition in ways that we currently cannot predict.
 
The continued credit crisis and related turmoil in the global financial system has had and may continue to have an impact on our business and financial position. The financial crisis may limit our ability to raise capital through credit and equity markets.
 
We have accumulated losses that may continue and/or increase in the future.
 
Many of the factors affecting our operating results are beyond our control, including the volatility of metals prices; smelter terms; diesel fuel prices; interest rates; global or regional political or economic policies; inflation; developments and crises; governmental regulations; continuity of ore bodies; and speculation and sales by central banks and other holders and producers of copper in response to these factors. We cannot foresee whether our operations will continue to generate sufficient revenue in order for us to generate net cash from operating activities.
 
We will have to spend additional funds on further drilling and engineering studies before we will know if we have a commercially viable mineral deposit.
 
We may also need capital more rapidly than currently anticipated and we may be unsuccessful in obtaining sufficient capital to accomplish any or all of our objectives Our inability to raise additional funds on a timely basis could prevent us from achieving our business objectives and could have a negative impact on our business, financial condition, results of operations and the value of your investment.
 
A major increase in our input costs, such as those related to acid, electricity, fuel and supplies, may have an adverse effect on our financial condition.
 
Our operations are affected by the cost of commodities and goods such as electrical power, sulfuric acid, fuel and supplies.  A major increase in any of these costs may have an adverse impact on our financial condition. For example, we expect that sulfuric acid and energy, including electricity and diesel fuel, will represent a significant portion of production costs at our operations. Shortages of sulfuric acid, electricity and fuel, may have an adverse effect on our financial condition. Sulfuric acid supply in the southwestern U.S. is produced primarily as a smelter by product at smelters in the southwest U.S. and in Mexico. We may not have an adequate supply of sulfuric acid without interruptions and we may be subject to market fluctuations in the price and supply of sulfuric acid.
 
Other risks pertaining to mining operations may negatively affect our potential profitability or lead to additional accumulated losses or otherwise negatively affect our operations and financial condition.

Our Copper Mining operations inherently imply certain risks, including:
 
Worldwide economic cycles influence prices of base and precious metals.  As economies recede, demand for these commodities may decline, which may negatively impact the supply and demand ratio, causing prices to respond accordingly. The cash flow generated by mining activities is dependent on price levels of the metals produced. Future worldwide economic cycles may cause prices to vary outside assumed parameters in cash flow models, which include certain price assumptions.
Ore grades vary within ore bodies.  Lower grades than predicted might negatively impact cash flow since less metal may be produced from specific ore blocks.
Our economic performance is dependent upon production of the predicted and planned tonnage and grade from the mine.  Ground conditions in underground mines can cause fluctuation of tonnage production from that planned.  Lower tonnage from that planned would imply less metal production, and would negatively impact cash flow.
Economic performance of the mining operation is dependent on sales of the mine production. While both base and precious metals are commodities that are sold worldwide, they still must be sold. Failure to maintain an orderly market for the products would cause an interruption to cash flow until the production is sold.
The regularity of cash flow is dependent upon a regular sales program that we have not finalized.
Smelting costs fluctuate over time.
Transportation of concentrates and final metals produced to the market is subject to weather interruption.
The start date of mining operations may be impacted by delays in the various permits required by government agencies.

 
-11-

 
Legal, Markets and Regulatory Risks
 
If we fail to successfully acquire additional permits and renewals of permits to reactivate the Chloride Copper Mine, we will be unable to engage in operations.
 
We need to obtain additional permits, including an aquifer protection permit, renewal applications or permits that pertain to a substantial change to our operations.  Should we fail to do, we may be: (i) prohibited from mining and/or processing operations; (ii) forced to reduce the scale of or all of our mining operations; or (iii) prohibited or restricted from proceeding with planned exploration or development of mineral properties.
 
We are required to obtain governmental and lessor approvals and permits in order to conduct mining operations.
 
In the ordinary course of business, mining companies are required to seek governmental approvals and permits for our operations. Obtaining the necessary governmental permits is a complex, time-consuming and costly process. The duration and success of our efforts to obtain permits are contingent upon many variables out of our control. Obtaining environmental permits, including the approval of reclamation plans, may increase costs and cause delays depending on the nature of the activity to be permitted and the interpretation of applicable requirements implemented by the permitting authority. There can be no assurance that all necessary approvals and permits will be obtained and, if obtained, that the costs involved will not exceed those that we previously estimated or the costs and delays associated with regulatory compliance could become such that we will be unable to proceed with our development activities or operations. 

We face substantial governmental regulation and environmental risk.
 
Our business is subject to federal, state and local laws and regulations governing development, production, labor standards, occupational health, waste disposal, and use of toxic substances, environmental regulations, mine safety and other matters. We are not presently involved in lawsuits or disputes. In the future we could be accused of causing environmental damage, violating environmental laws, or violating environmental permits, and we may be subject to lawsuits or disputes in the future. New legislation and regulations may be adopted or permit limits reduced at any time that result in additional operating expense, capital expenditures or restrictions and delays in the mining, production or development of our properties.
 
From time to time, the U.S. Congress considers proposed amendments to the General Mining Law of 1872, as amended, which governs mining claims and related activities on federal lands. The extent of any future changes is not known and the potential impact on us as a result of U.S. Congressional action is difficult to predict. Although a majority of our existing U.S. mining operations occur on private or patented property, changes to the General Mining Law, if adopted, could adversely affect our ability to economically develop mineral reserves on federal lands.
 
Risks Pertaining to our Common Stock
 
Our common stock may be diluted which will reduce your percentage of ownership of our common stock.
 
Our common stock may be subject to substantial dilution, including dilution resulting from issuances of securities:
 
in future offerings;
to employees, consultants, joint venture partners and third party financing sources in amounts that are uncertain at this time;
for acquisitions; and
such as preferred stock with super voting rights, conversion rights or preferences over our common stock with respect to the payment of dividends or upon liquidation, dissolution or winding up.

We do not intend to pay dividends in the future.
 
We do not intend to pay dividends in the foreseeable future.  Rather, we will retain earnings, if any, to fund our future growth and there is no assurance we will ever pay dividends in the future.
 
The provisions in our certificate of incorporation, our by-laws and Nevada law could delay or deter tender offers or takeover attempts that may offer a premium for our common stock.
 
 
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The provisions in our certificate of incorporation, our by-laws and Nevada law could make it more difficult for a third party to acquire control of us, even if that transaction would be beneficial to stockholders.
 
Nevada law and our Articles of Incorporation protect our directors from certain types of lawsuits, which could make it difficult for us to recover damages from them in the event of a lawsuit.
 
Nevada law provides that our directors will not be liable to our company or to our stockholders for monetary damages for all but certain types of conduct as directors. Our Articles of Incorporation require us to indemnify our directors and officers against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require our company to use our assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment, or other circumstances.
 
Because we are quoted on the OTC Bulletin Board instead of an Exchange or National Quotation System, our investors may have a tougher time selling their stock or may experience negative volatility on the market price of our stock.
 
Our Class A common stock (referred to as “common stock” in this Report) is traded on the OTCBB. The OTCBB is often highly illiquid.  There is a greater chance of volatility for securities that trade on the OTCBB as compared to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume, and market conditions. Investors in our common stock may experience high fluctuations in the market price and volume of the trading market for our securities. These fluctuations, when they occur, have a negative effect on the market price for our securities. Accordingly, our stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our common stock improves. 

Trading in our common stock has been limited, and our stock price could potentially be subject to substantial fluctuations.

Trading in our common stock has been limited.  Historically, our stock price has been affected substantially by a relatively modest volume of transactions and could be again so affected. If our stock price falls, our stockholders may not be able to sell their stock when desired or at desirable prices. Further, our stockholders may not be able to resell their shares at or above the public offering price.

Our common stock is subject to penny stock regulation
 
Our shares are subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act. The Commission generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be penny stock unless that security is: registered and traded on a national securities exchange meeting specified criteria set by the Commission; authorized for quotation on the NASDAQ Stock Market; issued by a registered investment company; excluded from the definition on the basis of price (at least $5.00 per share) or the registrant's net tangible assets; or exempted from the definition by the Commission. Since our shares are deemed to be "penny stock", trading in the shares will be subject to additional sales practice requirements on broker/dealers who sell penny stock to persons other than established customers and accredited investors.
 
FINRA Sales Practice requirements may also limit a stockholder's ability to buy and sell our stock.
 
In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (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, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

There is currently a “Global Lock” on our Common Stock. Failure to have the “Global Lock” removed on a timely basis could make it difficult to sell shares and may negatively affect the value of our Common Stock in the secondary market.
 
In or about January 2012 management learned, the Depository Trust & Clearing Corporation (“DTC”) suspended post-trade settlement services (known as a “Global Lock” or “Chill”) for our securities. Upon our inquiry, the compliance department at DTC advised us that the Global Lock had been instituted due to their uncertainty about the valid issuance of shares of our company held in street name under their nominee Cede & Co.  As a result, our shares of common stock are not eligible for delivery, transfer or withdrawal through the DTC system and will not be eligible until the Global Lock is removed by DTC.  Therefore, the ability to resell your shares will likely be more difficult and less convenient for purchasers of your shares. Manual trading of our shares between accounts may continue but involves delays associated with manual stock transactions. While our management is communicating with the appropriate departments at DTC and has provided requested documentation necessary to lift the Global Lock, there can be no assurance at this time that the Global Lock will be lifted, and if lifted, how long it will take.

 
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As long as trades of our shares cannot be settled electronically, brokerage firms may be unwilling to trade them.

Since our shares cannot be electronically transferred between brokerage accounts until after the Global Lock is removed, it is likely (based on the realities of today’s marketplace) that certain brokerage accounts will not trade our shares.  
 
Failure to achieve and maintain effective internal controls in accordance with Section 404 of The Sarbanes-Oxley Act could have a material adverse effect on our business and operating results.
 
It may be time consuming, difficult and costly for us to develop and implement the additional internal controls, processes and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal auditing and other finance staff in order to develop and implement appropriate additional internal controls, processes and reporting procedures. If we are unable to comply with these requirements of the Sarbanes-Oxley Act, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires of publicly traded companies.
 
If we fail to comply in a timely manner with the requirements of Section 404 of the Sarbanes-Oxley Act regarding internal control over financial reporting or to remedy any material weaknesses in our internal controls that we may identify, such failure could result in material misstatements in our financial statements, cause investors to lose confidence in our reported financial information and have a negative effect on the trading price of our common stock.
 
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, beginning with our annual report on Form 10-K for our fiscal period ended December 31, 2009, we were required to prepare assessments regarding internal controls over financial reporting and beginning with our annual report on Form 10-K for our fiscal period ended December 31, 2009, furnish a report by our management on our internal control over financial reporting. Failure to achieve and maintain an effective internal control environment could have a material adverse effect on our stock price.
 
In addition, in connection with our on-going assessment of the effectiveness of our internal control over financial reporting, we may discover “material weaknesses” in our internal controls as defined in standards established by the Public Company Accounting Oversight Board, or the PCAOB. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The PCAOB defines “significant deficiency” as a deficiency that results in more than a remote likelihood that a misstatement of the financial statements that is more than inconsequential will not be prevented or detected.
 
In the event that a material weakness is identified, we will employ qualified personnel and adopt and implement policies and procedures to address any material weaknesses that we identify. However, the process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. We cannot assure you that the measures we will take will remediate any material weaknesses that we may identify or that we will implement and maintain adequate controls over our financial process and reporting in the future.
 
Any failure to complete our assessment of our internal control over financial reporting, to remediate any material weaknesses that we may identify or to implement new or improved controls, or difficulties encountered in their implementation, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of the periodic management evaluations of our internal controls and, in the case of a failure to remediate any material weaknesses that we may identify, would adversely affect the annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that are required under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.
 
It is not possible to foresee all risk factors that may affect us.
 
There can be no assurance that we will effectively manage and develop the Chloride Copper Mine.  You are encouraged to carefully analyze the risks factors discussed above.
 
Because we do not have an, nominating, or compensation committee, shareholders will have to rely on our board of directors, all of which are not independent, to perform these functions.
 
We do not have nominating, and compensation committees and our board of directors, as a whole, will perform these functions. There is a potential conflict in that board members who are management will participate in discussions concerning management compensation and audit issues that may affect management decisions, and that such decisions may favor the interest of our management over our minority shareholders or us.

Our Board of Directors has the ability to issue preferred stock and determine the rights, preferences, privileges and restrictions without shareholder approval, which may dilute your percentage of ownership of our common stock and prevent a change of our control.
 
-14-

 
 
We are authorized to issue ten million shares of “blank check” preferred stock.  Our board may issue the shares in response to a hostile take-over attempt, the board could issue such stock to a friendly party or “white knight“ or could establish conversion or other rights in the preferred stock, which would dilute the common stock and make a transaction impossible or less attractive.
 
Compliance with changing regulation of corporate governance and public disclosure will result in additional expenses and pose challenges for our management.
 
Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets. Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.
 
SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.
 
Item 1B. Unresolved Staff Comments

Not applicable.
 
Item 2. Properties

Our executive offices are a mailing address located at 9550 S. Eastern Avenue, Suite 253, Las Vegas, Nevada 89123 supplied by our registered agent. We feel that this arrangement is adequate for our needs at this time and we feel we will be able to locate adequate space in the future if needed.

Sierra's primary asset is 80% ownership of the Chloride Copper Mine, consisting of 37 unpatented lode mining claims and 12 mill site claims, located 24km northwest of Kingman, in the Wallapai District, Mohave County, Arizona and some 160 km (100 mi) southeast of Las Vegas, Nevada, or 275 km (172 mi) northwest of Phoenix, Arizona. The geographic coordinates of the property are 35° 21’ N Latitude and 114° 10’W Longitude (T22 and 23 and R 18).
 
Item 3.  Legal Proceedings
 
The Company is not currently a party to, nor is any of its property currently the subject of, any material legal proceeding. None of the Company’s directors, officers or affiliates is involved in a proceeding adverse to the Company’s business or has a material interest adverse to the Company’s business.
In the ordinary course of business, we may be from time to time involved in various pending or threatened legal actions.  The litigation process is inherently uncertain and it is possible that the resolution of such matters could have a material adverse effect upon our financial condition and/or results of operations.
 
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PART II
 
Item 5.    Market for the Registrant’s Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities
 
 
During all of 2009 and up until June 25, 2010 there was no established trading market in our Common Stock. In August of 2010, a market maker was obtained for our securities to be quoted in the OTC Bulletin Board system. Our symbol is SIRG.
 

The common stock of the Company is traded on the OTC Bulletin Board under the symbol SIRG.  A summary of the high and low sales prices during each year of 2011 and 2010 are presented below.

   
High
   
Low
 
Fiscal Year 2011
           
First Quarter (January-March 2011)
  $ 0.620     $ 0.060  
Second Quarter (April-June 2011)
  $ 0.011     $ 0.085  
Third Quarter (July-September 2011)
  $ 0.015     $ 0.0175  
Fourth Quarter  (October-December 2011)
  $ 0.0015     $ 0.007  
                 
Fiscal Year 2010
               
First Quarter (January-March 2010)
    N/A       N/A  
Second Quarter (April-June 2010)
  $ 1.00     $ 1.00  
Third Quarter (July-September 2010)
  $ 1.00     $ 0.25  
 Fourth Quarter (October-December 2010)
  $ 0.62     $ 0.19  

On or about January 2012, the Depository Trust & Clearing Corporation (“DTC”) suspended post-trade settlement services (known as a “Global Lock” or “Chill”) for our securities. DTC facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement or delivery of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. Upon our inquiry, the compliance department at DTC advised us that the Global Lock had been instituted due to their uncertainty about the valid issuance of shares of our company held in street name under their nominee Cede & Co.  As a result, our shares of common stock are not eligible for delivery, transfer or withdrawal through the DTC system and will not be eligible until the Global Lock is removed by DTC.  Manual trading of our shares between accounts may continue but involves delays associated with manual stock transactions. While our management is communicating with the appropriate departments at DTC and has provided requested documentation necessary to lift the Global Lock, there can be no assurance at this time that the Global Lock will be lifted, and if lifted, how long it will take.

We had approximately 90 record holders of our Common Stock at December 31, 2011.  We believe that there are approximately 300 additional beneficial holders of our Common Stock, based on information obtained from our transfer agent and from broker-dealers that hold shares on behalf of their clients.

The Company has not paid any cash dividends since its incorporation.  The Company does not currently intend to pay any cash dividends.
 
Transfer Agent
 
Our Transfer Agent and Registrar for the common stock is Pacific Stock Transfer Company located in Las Vegas, Nevada.
 
 
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Item 6.   Selected Financial Data

Not applicable.
  
Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our financial statements contained herein as Item 8.

Overview
 
The primary effort of the Company is to acquire the necessary funding to bring the Chloride Copper Mine into production in order to generate working capital from its operation.  The Company will also continue its strategy to acquire other mining prospects in addition to further development of the Chloride Copper Mine.
 
To date the Company has received initial assay results from its Chloride Copper Mine (AKA Emerald Isle Mine) drill program on the tailings impoundment at its Chloride Copper Mine Property near the town of Chloride, in Mohave County Arizona. Copper grade ranged from a minimum of 0.16% Cu to a maximum of 0.43% Cu with the average being 0.36% Cu.  The report also estimated the tailings to contain approximately 1.2 million tons of material.
 
The objectives of this drill program were designed to collect material in order to confirm the grade of copper mineralization that was previously reported by SGV Resources Inc. The copper distribution appears to be consistent over all the samples collected from the tailings impoundment.
 
The tailings are the waste product from the previous operation of the Emerald Isle Mine from 1943 to 1973 when copper recovery was much lower than recovery rates available with today’s technology. This low recovery indicates that a substantial amount of copper-bearing material was sent to the tailings impoundment. The objective of this tailings program is to determine whether the tailings can be economically mined and processed to recover the contained copper in them.  There can be no assurance that the Company will receive material value for the tailings.
 
The Chloride Copper Mine property consists of 37 unpatented lode mining claims and 12 mill site claims and it is located 24km northwest of Kingman, in the Wallapai District, Mohave County, Arizona. The Chloride Copper Mine is comprised of an open pit mine and the existing onsite SXEW (Solvent extraction/electrowinning) processing plant.
 
The Chloride Copper Mine deposit is hosted by Late Tertiary conglomerates and, to a lesser extent, by Quaternary alluvium and Cretaceous granitic rocks. Copper mineralization at Chloride Copper Mine is in the form of mineralized lenses contained within a paleochannel a few thousands of feet long and up to 750 feet wide. The source of copper at Chloride Copper Mine is interpreted to be the low grade porphyry-type copper mineralization at Alum Wash, about 3.5 miles northeast of the Chloride Copper Mine deposit. The mineralization is characterized by dark blue to black rock similar to the Exotica deposit, a satellite deposit of the huge Chuquicamata copper deposit in Chile.
 
Effective February 20, 2012 the board of directors approved the purchase of half of the minority interest in the Chloride Copper Mine from the Medina Property Group, LLC under the terms of a letter of intent. The execution of this transaction would increase the Company’s interests in the Chloride Copper Mine to 90%.  The letter of intent is attached hereto as Exhibit 1.01 and is incorporated herein by reference.
 
While can be no assurance the above transactions will be consummated as planned, however it is anticipated that the Company should soon be able to move forward with its development of the Chloride Copper Mine and accelerate its strategy to acquire other mining prospects.
 
Critical accounting 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 and assumptions.

 
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We have identified the following as critical accounting estimates, which are defined as those that are reflective of significant judgments and uncertainties, are the most pervasive and important to the presentation of our financial condition and results of operations and could potentially result in materially different results under different assumptions and conditions.

Income taxes

Income taxes are accounted for under the asset and liability method.  Under this method, deferred tax assets and liabilities are recognized to reflect the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the differences are expected to be recovered or settled.  For the Company, the differences are attributable to differing methods of reflecting depreciation and stock based compensation for financial statement and income tax purposes.

The likelihood of a material change in the Company's expected realization of these assets is dependent on, among other factors, future taxable income and tax settlements.  While management believes that its judgments and interpretations regarding income taxes are appropriate, significant differences in actual experience may require future adjustments to our tax assets and liabilities, which could be material.
 
We are also required to assess the realizability of our deferred tax assets.  We evaluate positive and negative evidence and use judgments regarding past and future events, including operating results and available tax planning strategies that could be implemented to realize the deferred tax assets.  Based on this assessment, we determine when it is more likely than not that all or some portion of our deferred tax assets may not be realized, in which case we would be required to apply a valuation allowance to offset our deferred tax assets in an amount equal to future tax benefits that may not be realized.  We currently do not apply a valuation allowance to our deferred tax assets.  However, if facts and circumstances change in the future, valuation allowances may be required.

Significant judgment is required in determining income tax provisions and in evaluating tax positions.  We establish additional provisions for income taxes when, despite the belief that tax positions are fully supportable, there remain certain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority.  In the normal course of business, the Company and its subsidiaries are examined by various federal and state tax authorities.  We regularly assess the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of our provision for income taxes.  We adjust the income tax provision, the current tax liability and deferred taxes in any period in which facts that give rise to an adjustment become known.  The ultimate outcomes of the examinations of our income tax returns could result in increases or decreases to our recorded tax liabilities, which could affect our financial results.

Results of Operations
 
Net Loss
 
For the twelve months ended December 31, 2011 and 2010, we had a net loss of approximately $1,776,000 and $8,394,000 respectively. At December 31, 2011 and December 31, 2010, we had an accumulated deficit of approximately $10,303,000 and $8,527,000, respectively.
 
Liquidity and Capital Resources
 
We had working capital deficit of approximately $1,340,000 at December 31, 2011.
 
The Company is aggressively seeking capital necessary to bring the Chloride Copper mine back into production.  As of the date of this filing the Company has been unable to definitively secure the necessary financing.  Absent obtaining financing, there is substantial doubt about our ability to continue as a going concern.
 
Total Assets were $132 at December 31, 2011, compared to $23,431 at December 31, 2010.  The decrease in total assets is attributed to the loss for the year and  offset by related funding from convertible notes payable during 2011.
 
Selling, general and administrative expenses for the twelve months ended December 31, 2011 were approximately $1,021,000, which are comprised of  approximately $574,000 for payroll and contract labor expenses related to obligation to our current and former CEO and approximately $377,000 for legal and consulting, and approximately $70,000 for other experts, related almost exclusively to completing recent Company transactions and meeting our Securities and Exchange Commission filing requirements.
 
-18-

 
Loss on Impairment of Goodwill and Fixed Assets for the twelve months ended December 31, 2010 was approximately $7,890,060 was comprised of $7,602,000 write-off of goodwill, $163,000 write-off of mining interests and $125,000 for the write-down of fixed assets. All these assets were acquired and recorded as part of the Chloride Copper Project.
 
Interest Expense for the twelve months ended December 31, 2011 was $459,000, of which all was interest expense related to the financing of capital as a result of convertible notes
 
Off-Balance Sheet Arrangements
 
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues and results of operations, liquidity, or capital expenditures.
 
At December 31, 2011 and through the date of this report, we did not and do not have any material commitments for capital expenditures, nor do we have any other present commitment that is likely to result in our liquidity increasing or decreasing in any material way.

Item 7A. Quantitative and Qualitative Disclosure about Market Risk

Not applicable.

Item 8.    Financial Statements and Supplementary Data

The audited financial statements of the Company required pursuant to this Item 8 are included in a separate section commencing on page F-1 and are incorporated herein by reference.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.  Controls and Procedures:

Disclosure Controls and Procedures
 
(a)  
Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures were designed to provide reasonable assurance that the controls and procedures would meet their objectives. As required by SEC Rule 13a-15(b), our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Our Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our system of internal control over financial reporting is designed 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 on this assessment, our Chief Executive Officer and Chief Financial Officer have concluded that our internal control over financial reporting was effective as of December 31, 2011. There has been no change in our internal controls over financial reporting during our most recent fiscal year that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
 
 
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(b)  
Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal controls over financial reporting or in other factors that could materially affect, or are reasonably likely to affect, our internal controls over financial reporting during the year ended December 31, 2011. There have not been any significant changes in the Company's critical accounting policies identified since the Company filed its Annual Report on Form 10-K as of December 31, 2010.
 
 
Management’s Annual Report on Internal Control over Financial Reporting
 
Management of Sierra Resource Group, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
Management evaluated the Company’s internal control over financial reporting as of December 31, 2011. In making this assessment, management used the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As a result of this assessment and based on the criteria in the COSO framework, management has concluded that, as of December 31, 2011, the Company’s internal control over financial reporting was effective.

Item 9B.  Other Information

Not applicable.
 
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PART III
 
Item 10.  Executive Officers and Directors of the Registrant
 
On August 23, 2011, Patrick Champney the Chief Executive Officer, Corporate Secretary and member of Sierra Resource Group Inc. Board of Directors unexpectedly passed away.
 
On August 26, 2011, the Board of Directors of Sierra Resource Group Inc. by unanimous written consent appointed J. Rod Martin, as Chief Executive Officer of our Company.
 
On September 9, 2011, the Company accepted the resignation of James Stonehouse and Georges Juilland as members of its Board of Directors.
 
On February 20, 2012 the Board of Directors unanimously appointed J. Rod Martin as Director to serve the seat which term expires at the 2014 shareholders meeting.

Set forth below is information regarding the Company’s current directors and executive officers. There are no family relationships between any of our directors or executive officers. The directors are elected at each annual meeting of our stockholders. The executive officers serve at the pleasure of the Board of Directors.

Name
 
Age
 
Experience and Qualifications
 
Director
Since
 
J. Rod Martin
 
50
 
Chief Executive Officer since August 2011 and director since February 2012.  In 1995 Mr. Martin Founded and acts as Managing Partner of Blackpool Partners, LLC a private equity group. From 2001 through 2002, Mr. Martin acted as an independent consultant and, in 2003, was a founding member of Brampton Crest International, LLC.  From 1999-2001 Mr. Martin was Chairman  of  the  Board  of  Directors  of  GSociety, Inc., a  niche  market media/ entertainment  company.  From 1995 to 1999, Mr. Martin was the principal shareholder and Chief Executive Officer of South Beach Cards, Inc. a world wide wholesaler of fine photography greeting cards, posters and calendars.  From 1990 to 1994, Mr. Martin worked as an independent investment banker and acted as a consultant to public and private companies.  From 1987 to 1990, Mr. Martin was the Regional Sales Manager for Gant and Associates, a national U.S. brokerage firm.  From 1985 to 1987, Mr. Martin was Director of Marketing  and Sales for Martin Machinery  Company,  a family-based  industrial machine tool distributor. Mr. Martin has a B.S. in Marketing and Finance from the University of Arkansas.
 
  
2012
 
Brad Hacker
 
52
 
Chief Financial Officer since January 2011; Partner of Brad Hacker and Company, P.A., a firm of accountants and CPAs which he founded in 2009. Previously, he was a Partner at Kramer Weisman & Associates from 2005 until 2009. During this period of time he also served as chief financial officer of XTX Energy Inc., as interim principal accounting officer of Imperiali, Inc., and as both chief financial officer and a director of Brampton Crest International Inc. From 2002-2004 he served as chief financial officer of Charter Schools USA.  Mr. Hacker received his BA in Business from the University of Texas at Austin (the Red McCombs School of Business) in 1981.
 
 
N/A
Timothy Benjamin
 
46
 
Chairman of the Board of the Company since April 2011.  Manager, Process Improvements at Assurant Solutions Inc., a Fortune 300 company which provides insurance products and services and is a Certified Six Sigma Black Belt. From 2002-03 Mr. Benjamin was the President of CBMJ Enterprises Inc, which performed financial and compliance due diligence for public companies.  From 1999-2002 Chief Financial Officer of GSociety Inc. and  from 1995-1999 Chief Financial Officer of Pelican Properties Int’l Corp., both public companies. From 1989-1995 he also held supervisory positions with the Federal Reserve Bank of Atlanta. He received his MBA in 1995 and his Bachelor’s of Business Administration degree of Finance and Economics in 1989, both from Florida International University.
 
 
2011
 
Michel Rowland
 
 
74
 
Member #225364 of the Australasian Institute of Mining and Metallurgy (Ausimm) and Qualified Person ( Q.P.) for the form 43-101F1; Private consultant in mining geology including photo geology, geotechny, and hydrogeology; Previously, he served as Project Manager in the Dynasty gold field, exploring and drilling for gold, silver and copper. Prior to 2004, he worked for companies such as COGEMA o France, Rumicuri o Ecuador, ECUASAXON and Minera Australiana of Canada and Australia, Vicente Coronel Compania from Cuenca, Ecuador, PetroCanada, Fougerolle from France, Coyne et Bellier from France, and the Department of Commerce of France. He was earned a Geologist Engineer degree in 1973 from Escuela Politécnica Nacional, Quito, Ecuador, a Master degree in Geology from Dijon University, France, in 1961, and a Bachelor degree in Geology from Paris University in 1960.
 
2011
 
Ricardo Cordon
 
56
 
President and COO, ARC, Guatemala, since 1988, providing IT systems and business process optimization, customers include Cometro (Guatemala’s largest sugar distribution company), Walmart Central America, Hoteles Camino Real (Westin), Grupo H, Multimart, Banco Santa Cruz, Grupo Madero, Tema and Central Bank of Guatamala, as well as other private companies and governmental agencies. His academic experience includes Teaching Assistant and then Research Assistant at Princeton University 1982-85; Visiting Professor at: Francisco Marroquin 1986-87, Rafael Landivar 1988, Del Valle 1989-90 and 1996; Mesoamericana 2001; Dean, School of Science and Technology, Universidad Internaciones, Guatemala. Mr. Cordón’s experience and skills in business management, business process optimization and IT systems consulting qualify him to serve as a director.
 
 
2011
 
Luis Munoz
 
32
 
General Manager of a business and legal consulting firm, Neglex, located in Quito, Ecuador, since August 2009.  From 2004 to 2007, Mr. Munoz was a Vice-Chairman of MN&A – Abogados located in Quito Ecuador.  Before that, Mr. Munoz had approximately seven years of additional experience as a business and legal consultant and general manager. In 2009, he received his Masters in Business Administration (MBA) from INCAE Business School located in Alajuela, Costa Rica.  In 2004, he received a Doctor of Law Degree from Universidad International del Ecuador located in Quito, Ecuador.
 
2011
 

 
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At its annual meeting of the stockholders held on April 21, 2011, a majority of the stockholders of the Company voted to approve an amendment to the Company’s Bylaws and to extend the terms of the directors elected at the meeting of this corporation to be fixed at three (3) years and that such terms shall be staggered.  Directors shall be elected at each annual meeting of the Shareholders to hold office for a term of three (3) years. Each Director, including a Director elected to fill a vacancy, shall hold office until the expiration of his or her three-year term at the annual meeting and until a successor has been elected and qualified.  Timothy Benjamin and Ricardo Cordón shall serve an initial term of four (4) years.
 
The following table shows the current directors and the expiration of their term.

Director
Expiration
Timothy Benjamin
2015
Ricardo Cordón
2015
J. Rod Martin
2014
Michel Rowland
2014
Luis Munoz
2014
Vacant
2013
Vacant
2013

On August 26, 2011, the Board of Directors of Sierra Resource Group Inc. by unanimous written consent appointed Timothy Benjamin, its current Chairman of the Board, as Corporate Secretary of the Company.
 
On September 12, 2011, the Company accepted the resignation of James Stonehouse and Georges Juilland as members of its Board of Directors.  Mr. Stonehouse and Mr. Juilland have resigned with no disputes or disagreements with the Company and have made themselves available as consultants as needed.  Upon their resignations, the Company issued Mr. Stonehouse and Mr. Juilland each an option to purchase 419,178 shares of Class A Common Stock at an exercise price of $0.051 per share which represents the accrued board compensation as approved by shareholders on April 21, 2011 and disclosed in the Company’s 8-K filing on April 27, 2011.

On March 9, 2012, former Director James Stonehouse and the Company entered in to a settlement agreement and general release of claims whereby all debt of approximately $106,000 owed by the Company to Mr. Stonehouse were satisfied in exchange for 250,000 options at an exercise price of  $0.05 per share.
 
Board Compensation
 
Each member of the board of directors receives an annual compensation of an option to purchase one million (1,000,000) shares of common stock at eighty five (85%) percent of closing market price on the date of grant.  In addition to the annual compensation above and reimbursement of reasonable expenses, each member of the Board of Directors shall be entitled to meeting attendance fees (payable quarterly in arrears) of $5,000 per Board of Directors Meetings and $1,000 per Board of Directors Telephonic Meetings.

On November 17, 2011 the Board of Directors approved the parameters for a Company Qualified Stock Option Plan (the “Plan”).  As of December 31, 2011 the Board of Directors have not ratified the Plan, but expect to approve the Plan prior to the May 2012 shareholders meeting and intend to include said Stock Option Plan in our proxy solicitation. On November 17, 2011, the Board of Directors through unanimous written consent, voted that upon completion and ratication of the plan the Company will also grant incentive options to Timothy Benjamin, Chairman, Ricardo Cordón, Michel Rowland, and Luis Munoz. Timothy Benjamin will be granted an aggregate amount of 20,000,000 options exercisable at $0.05 per share in the following manner:  5,000,000 options vest six months after the date of the consent, 5,000,000 vest six months after the company’s receipt of long term financing in excess of $1,000,000 and 10,000,000 options vest six months after the Chloride Copper Mine begins operations.  Ricardo Cordón, Michel Rowland, and Luis Munoz will be granted an aggregate amount of 10,000,000 options each exercisable at $0.05 per share in the following manner.  2,000,000 options vest six months after the date of the consent, 4,000,000 vest six months after the company’s receipt of long term financing in excess of $1,000,000 and 4,000,000 options vest six months after the Chloride Copper Mine begins operations.  As of December 31, 2011 the option plan were not ratified and the grants were not effective until the option plan was approved and effective. All options approved on November 17, 2011 are to be included in a pending qualified stock option which is expected to be effective in May 2012. 

On February 20, 2012 the board of directors approved and the Company agreed to a consulting agreement with Timothy Benjamin, Chairman.  The agreement has a three-year term and is effective January 1, 2012.  It provides for an annual compensation of $60,000 until the Company begins production at the Chloride Copper Mine at which time the rate shall increase to $110,000 per year.  Included in the agreement, Mr. Benjamin shall also receive a stock bonus representing up to an additional 20 million option shares exercisable at $0.05 per share earned in the following manner; 25% upon opening the Chloride copper plant, 25% when the company begins production at the Chloride Copper Plant, 25% upon the Company’s generation of a cumulative $5 million in revenue, and 25% upon the Company’s generation of a cumulative $10 million in revenue.  At the time of the execution of this agreement, the bonus stock exercise option price significantly exceeded the current market price.  Mr. Benjamin’s options referenced in the consulting agreement above are to be included in a pending qualified stock option plan addressed in Item 11 Executive Compensation section below.
 
 
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Item 11.  Executive Compensation

J. Rod Martin was appointed as CEO of the Company on August 26, 2011.  Mr. Martin was employed at an annual salary of $150,000 per year as well as 1,500,000 options exercisable at $0.0059 per share, which was the closing price of the Company’s stock on said date.  Mr. Martin was not paid any cash in the fiscal year 2011 as CEO.

On November 17, 2011 the Board of Directors approved the parameters for a Company Qualified Stock Option Plan (the “Plan”).  As of December 31, 2011 the Board of Directors have not ratified the Plan, but expect to approve the Plan prior to the May 2012 shareholders meeting and intend to include said Stock Option Plan in our proxy solicitation which will be the effective date of the plan.  All options set forth  Mr. Benjamin’s consulting agreement referenced above and Mr. Martin and Mr. Snider’s employment agreements referenced below are contingent on final Board of Directors and shareholder approval.  

Effective January 1, 2012 the Company agreed to an Employment agreement with J. Rod Martin the Company’s CEO.  The agreement provides for an annual salary of $150,000 until the Company begins production at the Chloride Copper Mine at which time the rate shall increase to $250,000 per year.  The agreement also includes a bonus to be determined in good faith by the Board of Directors at the end of each fiscal year with a target of $350,000 adjusted in accordance with performance.  Included in the agreement, Mr. Martin shall also receive a stock bonus representing up to an additional 40 million option shares exercisable at $0.05 per share earned in the following manner; 25% upon opening the Chloride copper plant, 25% when the company begins production at the Chloride Copper Plant, 25% upon the Company’s generation of a cumulative $5 million in revenue, and 25% upon the Company’s generation of a cumulative $10 million in revenue.  At the time of the execution of this agreement, the bonus stock option price significantly exceeded the current market price thus they currently hold no value.  The employment agreement also calls for a standard benefits package.

On November 17, 2011, the Board of Directors through unanimous written consent, voted that upon completion and ratification of the plan the Company will also grant stock options to J. Rod Martin, CEO.  Mr. Martin will be granted an aggregate amount of 20,000,000 options exercisable at $0.05 per share in the following manner.  5,000,000 options vest six months after the date of the consent, 5,000,000 vest six months after the company’s receipt of long term financing in excess of $1,000,000 and 10,000,000 options vest six months after the Chloride Copper Mine begins operations. As of December 31, 2011 the option plan were not ratified and the grants were not effective until the option plan was approved and effective. All options approved on November 17, 2011 are to be included in a pending qualified stock option Which is expected to be effective in May 2012.
 
On February 20, 2012 the board of directors approved and the Company agreed to an Employment agreement with Travis Snider, Senior Vice President of Operations.  The employment agreement has a three-year term and is effective January 1, 2012.  It provides for an annual salary of $100,000. The agreement also includes a bonus to be determined in good faith by the Board of Directors at the end of each fiscal year.  Included in the agreement, Mr. Snider shall also receive a stock bonus representing up to an additional 5 million option shares exercisable at $0.05 per share earned in the following manner; 25% upon the execution of the agreement, 25% upon the refurbishment of the Company’s Chloride Copper plant, 25% upon the Company’s first sale of 99.99% pure copper from the Chloride Copper plant, and 25% upon the Company’s generation of a cumulative $5 million in revenue.  At the time of the execution of this agreement, the bonus stock option price significantly exceeded
 
Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
On January 13, 2011 the Company issued Patrick Champney, our former Chief Executive Officer, and a Director of the Company, 1,000,000 shares of the Company’s Common Stock in consideration for his services to the Company and as per his employment agreement.  The shares of common stock were valued at $510,000 based on the value of the associated underlying shares of the Company’s common stock as per the trading price at issuance, which was $.51 per share.
 
On January 19, 2011 the Company issued Brenda Hamilton, an attorney for the Company, 120,000 shares of the Company’s Common Stock in consideration for her services to the Company. The shares of common stock were valued at $62,400 based on the value of the associated underlying shares of the Company’s common stock as per the trading price at issuance, which was $.52 per share.
 
On January 19, 2011 the Company issued, Kathi Rodriguez a contractor for the Company, 10,000 shares of the Company’s Common Stock in consideration for her services to the Company. The shares of common stock were valued at $5,200 based on the value of the associated underlying shares of the Company’s common stock as per the trading price at issuance, which was $.52 per share.
 
On January 24, 2011 the Company issued Cella Lange and Cella, LLP an attorney for the Company, 100,000 shares of the Company’s Common Stock in consideration for their services to the Company. The shares of common stock were valued at $53,000 based on the value of the associated underlying shares of the Company’s common stock as per the trading price at issuance, which was $.53 per share.
 
 
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On February 2, 2011 the Company issued Cella Lange and Cella, LLP an attorney for the Company, 100,000 shares of the Company’s Common Stock in consideration for their services to the Company. The shares of common stock were valued at $19,000 based on the value of the associated underlying shares of the Company’s common stock as per the trading price at issuance, which was $.19 per share.
 
On February 2, 2011 the Company issued Bradley Hacker our Chief Financial Officer for the Company, 100,000 shares of the Company’s Common Stock in consideration for his services to the Company and terms for his appointment as Chief Financial Officer. The shares of common stock were valued at $19,000 based on the value of the associated underlying shares of the Company’s common stock as per the trading price at issuance, which was $.19 per share.
 
On April 18, 2011 the Company issued Eduardo Munoz a consultant for the Company, 100,000 shares of the Company’s Common Stock in consideration for his services and reimbursement of expenses to the Company.  The Company recorded professional expenses and travel costs in the amount of $6,000 based on the market trading value of the shares on the date of issuance
 
From May, 12, 2011 through December 31, 2011 the Company issued Asher Enterprises during seventeen dates a total of 86,672,004 shares of the Company’s Common stock.  The stock was issued in exchange for the conversion of notes payable totaling $538,493 issued during 2010 and 2011.
 
On May 24, 2011 the Company issued First Capital Partners, Inc. a public relations firm for the Company, 750,000 shares of the Company’s Common Stock in consideration for their services to the Company.  The Company recorded professional expenses of $15,000 based on the market trading value of the shares on the date of issuance. 
 
On June 7, 2011 the Company issued Michael Rowland as consultant for the Company, 300,000 shares of the Company’s Common Stock in consideration for his services to the Company.  The Company recorded professional expenses of $6,000 based on the market trading value of the shares on the date of issuance. 
 
During January to March 2012 the Company issued Asher Enterprises a total of 94,387,340 shares of the Company Common stock. The stock was issued in exchange for the conversion of notes payable issued on the remaining balance of June 8, 2011, July, 1, 2011 and a portion of August 30, 2011.
 
On February 16, 2012 the Company issued Grand View Ventures, LLC 8,650,000 shares of the Company’s Common Stock in consideration for a convertible promissory note in the amount of $190,000.  The terms of the convertible promissory note are outlined in Note 7 of the accompanying financial statements.  In conjunction with the $190,000 note, Grand View Ventures also received a common stock purchase warrant to purchase 6,900,000 shares of common stock with an exercise price of $0.015 per share.
 
Shares Subscribed Note Issued
 
During the year ending December 31, 2010, the Company entered into a subscription agreement with an investor in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended.  The Company issued and sold to the investor an aggregate of 300,000 shares of its common stock.  This issuance resulted in aggregate gross proceeds to the Company of $75,000. At December 31, 2011 the 300,000 shares of common stock had not yet been issued.
 
Effective March 10, 2011, the Company entered into a two month independent consulting agreement with J. Rod Martin, its current CEO, in consideration for 200,000 shares of restricted Common Stock. The terms of the agreement were satisfied; however as of this filing the Company has not issued these shares.  Effective May 11, 2011, the Company entered into a four month independent consulting agreement with J. Rod Martin, its current CEO, in consideration for 2,000,000 shares of restricted Common Stock. The terms of the agreement were satisfied; however as of this filing the Company has not issued these shares. The Company recorded a consulting expense on the date agreements were issued.

Effective May 17, 2011, the Company entered into a Convertible Promissory Note Agreement (“Convertible Note”) with Blackpool Partners, LLC, consisting of a $6,700 convertible promissory note bearing interest at 8% per annum,  Blackpool Partners, LLC is controlled by J. Rod Martin, CEO.  On November 28, 2011 J. Rod Martin, being the beneficial owner of the $6,700 loan payable to Blackpool, converted the total amount of principal and interest in the amount of $6,858 per the terms of the loan and was authorized to be issued 2,857,467 shares of common  stock.  As of this filing the Company has not issued these shares.
 
Preferred Shares
 
As of December 31, 2011 and 2010, respectively the company had 10,000,000 shares of Preferred Stock, with a par value of $0.001 per share
 
On December 28, 2011, the Board of Directors designated the company’s Series A Preferred Stock (“Series A”) in the amount of 1,000,000 Preferred Shares.  Series A bears no dividends, does not convert to any class of common stock, and is subject to redemption at the price of $0.10 per share, at the election of the company at any time and automatically upon the obtaining of financing by the Corporation in an amount of $1,000,000 or greater that, in the opinion of the board of directors, allows for the generation of a minimum of $1,000,000 in revenue.  Each share of Series A Preferred Stock entitles the holder to 350 votes on all matters submitted to a vote of the shareholders.  Shareholder approval was not required pursuant to Title 78 of the Nevada Revised Statutes §78.1955.  The Certificate of Designation was filed with the Nevada Secretary of State and became effective on February 9, 2012. Furthermore, the board of directors approved issuance of 500,000 shares of Series A Preferred Stock each to Timothy Benjamin, Chairman, and J. Rod Martin, CEO.   The Board of Directors deemed it necessary and in the best interests of this corporation to create this series of preferred stock in order to compensate the company’s chairman and chief executive officer,
 
Stock Split
 
As a result of the Split, each holder of our common stock received five additional shares of common stock for each one (1) share held.  The record date and that date such shares were issued was June 25, 2010.  The number of common stock outstanding increased from 19,592,000 to 117,552,000.
 
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Common stock
 
On June 1, 2010, the Company amended its Articles of Incorporation, increasing the number of authorized shares of capital stock, par value $0.001, from 25,000,000 shares to 160,000,000, of which 150,000,000 shares were designated as common stock and 10,000,000 shares were designated as “blank check” preferred stock pursuant to the Definitive Schedule 14C filed by the Company on May 11, 2010. On March 21, 2011, the Company filed its Definitive Schedule 14C authorizing the increase of its authorized shares of capital stock, par value $0.001, from 150,000,000 shares to 260,000,000 shares, of which 250,000,000 shares were to be designated as common stock and 10,000,000 shares were still designated as “blank check” preferred stock. However, the Company did not file the amendment with the Nevada Secretary of State, so the number of authorized shares of capital stock remained 160,000,000 shares, par value $0.001.

At its annual meeting of the stockholders held on April 21, 2011, pursuant to a stockholder proposal, a majority of the stockholders of the Company voted to approve an amendment to the Company’s Articles of Incorporation, as amended (the “Articles”), to increase the number of shares of the Company’s common stock authorized for issuance there under to 460,000,000 shares, of which 10,000,000 shares were designated as “blank check” preferred stock. The amendment also created two classes of common stock of the corporation and designated 250,000,000 shares to the Class A common stock and 200,000,000 shares to the Class B common stock. The amendment to the Articles was filed with the Nevada Secretary of State and became effective on June 17, 2011.
 
On December 20, 2011, the Company amended its articles of incorporation as follows: The Company Class A Common stock was changed from 250 million (250,000,000) to 440 million (440,000,000) and the number of Class B Common Stock was changed from 200 million (200,000,000) to 10 million (10,000,000). The Total authorized common shares were 450,000,000 and the total authorized  and Preferred Stock  was 10,000,000 Preferred shares for the year ended December 31, 2011.
 
On January 11, 2012, the company filed an Amendment to its Articles with the Nevada Secretary of State.  The Amendment had been approved by the company's board of Directors on December 28, 2011.  The purpose of the Amendment was to increase the authorized common stock of the company from 460,000,000 to 1,500,000,000 shares, as set forth in the Company’s Definitive Information Statement on SEC Form 14C, filed on February 3, 2012. Subsequent to filing the Amendment, it was determined that shareholder approval for the Amendment had inadvertently not been obtained in compliance with Nevada law, and the company filed a Certificate of Correction on April 13, 2012 with the Nevada Secretary of State to cancel the Amendment.  Therefore, the change in the number of authorized shares described in this paragraph are not effective, and the company continues to operate with 460,000,000 shares of authorized stock under its Articles of Incorporation, as amended prior to the filing of the Amendment and also under the Certificate of Designation filed with the Nevada Secretary of State on February 9, 2012.
 
The following table sets forth certain information regarding beneficial ownership of our common stock as of the Record Date by (i) each person (or group of affiliated persons) who is known by the Company to own more than five percent (5%) of the outstanding shares of Common Stock, (ii) each of the Company’s directors and executive officers, and (iii) all of the Company’s directors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.  Shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or convertible or which become exercisable or convertible within 60 days after the date indicated in the table are deemed beneficially owned by the holders thereof.  Subject to any applicable community property laws, the persons or entities named in the table below have sole voting and investment power with respect to all shares indicated as beneficially owned by them. Again, all reference to “common stock” is to our Class A Common Stock, unless the Class B Common Stock is specifically indicated.
 
Name and Address of Beneficial Owner(1)
 
Number of Shares Beneficially Owned
   
Percent of all
Common Stock Outstanding(2)
 
Security Ownership of Management:
           
J. Rod Martin-CEO and Director (3)
   
10,587,467
     
3.1%
 
Timothy Benjamin – Chairman of the Board  (4)
   
4,576,000
     
1.5%
 
Luis Munoz-Director
   
               --
     
*
 
Michel Rowland-Director
   
     300,000
     
*
 
Ricardo Cordón – Director (5)
   
4,210,000
     
1.4%
 
Brad Hacker-CFO, 5722 S. Flamingo Rd., Suite 151, Ft. Lauderdale, FL 33330
   
100,000
     
*
 
All directors and officers as a group (6 persons)
   
18,572,302
     
6.2%
 
———————
* Less than 1%
 
(1)
Unless otherwise noted, the principal address of each of the directors and officers (and each director nominee) listed above is c/o Sierra Resource Group, Inc., 9550 S. Eastern Avenue, Suite 253, Las Vegas, Nevada 89123.
 
(2)
  Based on 301,191,344 fully diluted shares consisting of 118,982,000 shares of Common Stock and Warrants to purchase Common Stock issued and outstanding as of the Record Date, March 29, 2011 plus an additional 3,619,969 shares convertible debts which consists of 715,334 shares for the subject Note combined with 1,650,132 shares of Common Stock presently reserved for a prior convertible promissory note dated October 29, 2010 plus 1,254,503 shares of Common stock for a prior convertible promissory note in favor of the Investor dated November 29, 2010 .shares of Common Stock issued and outstanding as of the Record Date, April 5, 2012.
 
(3)
Includes 5,057,467 shares which are earned, but have not been issued. These shares are disclosed in this 10-K under Item 12: Shares Subscribed, Not Issued. Had the 5,057,467 share been issued to Mr. Martin then his percent of all common stock outstanding would be 3.5%.
   
(4)
Initial number of shares beneficially owned by Mr. Benjamin at his election to the board was 3,865,300 which was inadvertently reported at 3,840,000 at that time. A Form 3 has not been filed for this disclosure. Mr. Benjamin acquired 710,700 shares on August 3, 2011 at $0.0028 per share as an open market transaction which a Form 4 has not been filed.
   
(5)
Initial number of shares beneficially owned by Mr. Cordón at his election to the board was 1,710,000 which was inadvertently reported at 1,610,000 at that time. A Form 3 has not been filed for this disclosure. Mr. Cordón acquired 3,000,000 shares on December 8, 2011 at $0.0015 per share in a private transaction with an existing shareholder which a Form 4 has not been filed.
 
 
-25-

 
Item 13.  Certain Relationships and Related Transactions
 
There are no family relationships between any of our current directors, director nominees or executive officers. To our knowledge, the new director nominees did not hold any position with the Company previously, other than as disclosed in this Proxy Statement, nor have they been involved in any material proceeding adverse to the Company or any transactions with the Company or any of its directors, executive officers, affiliates or associates that are required to be disclosed pursuant to the rules and regulations of the SEC.
 
Although we have not adopted a Code of Ethics, we rely on our Board of Directors to review related party transactions on an ongoing basis to prevent conflicts of interest. Our Directors review a transaction in light of the affiliations of the director, officer or employee and the affiliations of such person's immediate family. Transactions are presented to our Board of Directors for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If our Board of Directors finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. Our Board of Directors approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company. These policies and procedures are not evidenced in writing.
 
Item 14.  Principal Accounting Fees and Services
 
The Board of Directors has selected Tarvaran, Askelson & Co. LLP as the independent registered public accounting firm to audit our financial statements and the effectiveness of our internal control over financial reporting for 2011. The Company’s By-laws do not require that the stockholders ratify the selection of Tarvaran, Askelson & Co. LLP as the Company’s independent registered public accounting firm.
 
Prior to engaging Tarvaran, Askelson & Co., the Company engaged the services of De Joya Griffith & Company, LLC, as its independent registered public accounting firm.
 
During our two most recent fiscal years and through December 31, 20101 there were no disagreements with our auditors on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of our auditors, would have caused them to make reference in connection with their opinion to the subject matter of the disagreement.  Furthermore during that period, there were no reportable events under then current SEC rules.
 
Accountant Fees
 
During the period covering the fiscal years ended December 31, 2011 and 2010, Tarvaran, Askelson & Co. performed the following professional services:
 
                 
   
2010
   
2011
 
                 
Audit Fees (1)
 
$
18,545
   
$
33,342
 
Audit related fees (2)
 
$
-0-
   
$
-0-
 
All other (3)
 
$
-0-
   
$
-0-
 
 
(1)
 
Audit fees consist of fees for professional services rendered for the audit of our financial statements, the audit of our internal control over financial reporting, review of financial statements included in our yearly reports on Form 10-Q, and review and assistance with other Securities and Exchange Commission filings.
(2)
 
Audit related fees consist of fees for research and consultations concerning financial accounting and reporting matters and related audit procedures for 2010.
(3)
 
All other fees include an out-of-pocket reimbursement for an electronic subscription to an accounting publication.

 
 
-26-

 

PART IV

Item 15.  Exhibits, Financial Statements, Schedules and Reports Filed on Form 8K
 
(a)
Financial Statements – See the Index to Financial Statements on page F-1.
 
(b)
Exhibits:
 
Number
 
Description
     
3.01
 
Articles of Incorporation, as amended(1)
3.02
 
Bylaws(1)
3.03
 
Certificate of Amendment to the Articles of Incorporation*
31.01*
 
Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act
31.02*
 
Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act
32.01*
 
Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code
32.02*
 
Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code
     
(1)
 
Incorporated by reference to an exhibit to the Registration Statement on Form 10-SB of the Registrant, filed with the Commission on January 27, 1999.
     
*
 
Filed herewith.
 
 
 
-27-

 


 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
 
Signature
 
Capacity
 
Date
         
/s/ J. ROD MARTIN
 
President, Chief Executive
 
March 31, 2011
J. ROD MARTIN
 
Officer
   
   
(Principal Executive Officer)
   
         
/s/BRAD HACKER
 
Chief Financial Officer Vice President
 
March 31, 2011
BRAD HACKER
 
(Principal Financial Officer)
   
         
 
 
-28-

 
SIERRA RESOURCE GROUP, INC.

INDEX TO FINANCIAL STATEMENTS
 
 
 Page
Report of independent registered public accounting firm 
F-2
   
Balance sheets
F-3
 
 
Statements of operations 
F-4
   
Statements of Stockholders Deficit
F-5
   
Statements of cash flows
F-6
   
Notes to financial statements  
F-7



 
F-1

 
 
 
 
 
 
 
 
 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 

 
 
To the Board of Directors and Stockholders
 
 
of Sierra Resource Group, Inc.
 
 
Las Vegas, Nevada
 
We have audited the accompanying balance sheets of Sierra Resource Group, Inc. (an exploration stage company) as of December 31, 2011 and 2010, and the related statements of income, stockholders' deficit, and cash flows for the years then ended and from December 21, 1992 (date of inception) to December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements for the period December 21, 1992 (date of inception) through December 31, 2009 were audited by other auditors whose reports expressed unqualified opinions on those statements. The financial statements for the period from December 21, 1992 (date of inception) through December 31, 2009 include total revenues and net loss of $1,275 and $122,952, respectively. Our opinion on the statements of operations, stockholder’s equity (deficit) and cash flow for the period from December 21, 1992 (date of inception) through December 31, 2009, insofar as it relates to amounts for periods through December 31, 2011, is based solely on the reports of other auditors.
 
We conducted our audits in accordance with the 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit 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 audits provide 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. as of December 31, 2011 and 2010 and the results of their operations and their cash flows for the years then ended and from December 21, 1992 (date of inception) to December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed further in Note 2, the Company has incurred significant losses and has an accumulated deficit at December 31, 2011. The Company's viability is dependent upon its ability to obtain future financing and the success of its future operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plan in regard to these matters is also described described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
/s/ Tarvaran Askelson & Company, LLP
 
 
Laguna Niguel, California
 
 
April 10, 2012
 
F-2

 
 
 

 
 

 
SIERRA RESOURCE GROUP, INC.
 
(An Exploration Stage Company)
 
BALANCE SHEETS
 
   
             
   
December 31,
   
December 31,
 
   
2011
   
2010
 
ASSETS
           
CURRENT ASSETS
           
Cash and cash equivalents
  $ 132     $ 23,431  
Accounts receivable, net
            -  
TOTAL CURRENT ASSETS
    132       23,431  
                 
                 
TOTAL ASSETS
  $ 132     $ 23,431  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
CURRENT LIABILITIES
               
Accounts payable and accrued expenses
  $ 369,882     $ 182,173  
Embedded derivative liabilities
    2,262       20,212  
Officer advances
    90,573       90,573  
Subscribed Shares - Not Issued
    75,000       75,000  
Note payables - related party
    388,962       308,821  
Note payable
    413,001       360,000  
                 
TOTAL CURRENT LIABILITIES
    1,339,680       1,036,779  
                 
TOTAL LIABILITIES
    1,339,680       1,036,779  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
STOCKHOLDERS' DEFICIT
               
                 
Class A Common stock, $0.001 par value: 440,000,000 shares authorized;
               
206,804,004 and 117,552,000 issued and outstanding
               
at December 31, 2011 and December 31, 2010, respectively
    206,804       117,552  
                 
Class B Common stock, $0.001 par value: 10,000,000 shares authorized;
               
none issued and outstanding at December 31, 2011 and December 31, 2010, respectively
    -       -  
                 
Preferred stock, $0.001 par value: 10,000,000 shares authorized;
               
none issued and outstanding at December 31, 2011 and 2010, respectively
    -       -  
                 
Common stock subscribed, not issued $.001 par value 2,200,000 and zero shares
               
at December 31, 2011 and 2010, respectively
    262,000       -  
                 
Additional Paid-in capital
    8,495,151       7,396,538  
Accumulated deficit
    (10,303,503 )     (8,527,438 )
TOTAL STOCKHOLDERS' DEFICIT
    (1,339,548 )     (1,013,348 )
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 132     $ 23,431  
                 
The accompanying notes are an integral part of these financial statements.
 
 

 
 

 
F-3

 
 
 

 
SIERRA RESOURCE GROUP, INC.
       
(An Exploration Stage Company)
       
                   
STATEMENT OF OPERATIONS
       
         
                   
                   
                   
   
For the Years Ended
   
December 21, 1992
 
   
December 31,
   
(Inception) to
 
   
2011
   
2010
   
December 31, 2011
 
REVENUE
                 
Revenue
  $     $     $ 1,275  
Total revenue
                1,275  
OPERATING EXPENSES
                       
Amortization
                  11,972  
Selling, general and administrative expenses
    1,021,132       477,181       1,590,082  
Total operating expenses
    1,021,132       477,181       1,602,054  
                         
Operating loss
    (1,021,132 )     (477,181 )     (1,600,779 )
                         
Other Income (expense)
                       
Interest expense
    (459,000 )     (6,794 )     (468,752 )
Amortization of discount on convertible debt
    (293,671 )             (293,671 )
Loss on embedded derivative
    (2,262 )     (20,212 )     (22,474 )
Loss on Impairment of goodwill and equipment
          (7,890,069 )     (7,907,597 )
                         
Total other income (expense)
    (754,933 )     (7,917,075 )     (8,692,494 )
                         
                         
LOSS BEFORE INCOME TAXES
    (1,776,065 )     (8,394,256 )     (10,293,273 )
PROVISION FOR INCOME TAXES
                   
                         
NET LOSS
    (1,776,065 )   $ (8,394,256 )     (10,293,273 )
                         
BASIC NET LOSS PER COMMON SHARE
  $ (0.01 )   $ (0.07 )        
                         
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
at December 31, 2010 and 2009, respectively
    148,406,197       117,552,000          
                         
                         
The accompanying notes are an integral part of these financial statements.
         
 

 
 

 
F-4

 
 
SIERRA RESOURCE GROUP, INC.
 
(An Exploration Stage Company)
 
STATEMENT OF STOCKHOLDER' DEFICIT
 
FOR THE YEAR ENDED DECEMBER 31, 2011
 
AND FOR THE PERIOD FROM DECEMBER 21, 1992 (INCEPTION) THROUGH DECEMBER 31, 2011
 
   
 
             
                         
Common Stock Subscribed Not Issued
             
   
Common Stock
 
Preferred Stock
 
Additional
   
Accumulated
       
   
Shares
   
Amount
 
Shares
Amount
 
Paid -In Capital
   
Shares
   
Amount
   
Deficit
   
Total
 
December 21, 1992, issue common stock
    72,540,000     $ 72,540         $ (60,450 )     -     $ -     $ (10,230 )   $ 1,860  
Net Loss
                                                (1,860 )   $ (1,860 )
Balance December 31, 1992
    72,540,000       72,540           (60,450 )     -       -       (12,090 )     -  
Net Loss, December 31, 1993
                                                -     $ -  
Balance December 31, 1993
    72,540,000       72,540           (60,450 )     -       -       (12,090 )     -  
Net Loss, December 31, 1994
                                                -     $ -  
Balance December 31, 1994
    72,540,000       72,540           (60,450 )     -       -       (12,090 )     -  
Net Loss, December 31, 1995
                                                -     $ -  
Balance December 31, 1995
    72,540,000       72,540           (60,450 )     -       -       (12,090 )     -  
Net Loss, December 31, 1996
                                                -     $ -  
Balance December 31, 1996
    72,540,000       72,540           (60,450 )     -       -       (12,090 )     -  
Net Loss, December 31, 1997
                                                -     $ -  
Balance December 31, 1997
    72,540,000       72,540           (60,450 )     -       -       (12,090 )     -  
Net Loss, December 31, 1998
                                                (450 )   $ (450 )
Balance December 31, 1998
    72,540,000       72,540           (60,450 )     -       -       (12,540 )     (450 )
Net Loss, December 31, 1999
                                                (22,668 )   $ (22,668 )
Balance December 31, 1999
    72,540,000       72,540           (60,450 )     -       -       (35,208 )     (23,118 )
Net Loss, December 31, 2000
                                                (8,394 )     (8,394 )
Balance December 31, 2000
    72,540,000       72,540           (60,450 )     -       -       (43,602 )     (31,512 )
Net Loss, December 31, 2001
                                                (4,888 )     (4,888 )
Balance December 31, 2001
    72,540,000       72,540           (60,450 )     -       -       (48,490 )     (36,400 )
Net Loss, December 31, 2002
                                                (3,156 )     (3,156 )
Balance December 31, 2002
    72,540,000       72,540           (60,450 )     -       -       (51,646 )     (39,556 )
Net Loss, December 31, 2003
                                                (85 )     (85 )
Balance December 31, 2003
    72,540,000       72,540           (60,450 )     -       -       (51,731 )     (39,641 )
Net Loss, December 31, 2004
                                                (2,840 )     (2,840 )
Balance December 31, 2004
    72,540,000       72,540           (60,450 )     -       -       (54,571 )     (42,481 )
Net Loss, December 31, 2005
                                                (8,415 )     (8,415 )
Balance December 31, 2005
    72,540,000       72,540           (60,450 )     -       -       (62,986 )     (50,896 )
Net Loss, December 31, 2006
                                                (4,387 )     (4,387 )
Balance December 31, 2006
    72,540,000       72,540           (60,450 )     -       -       (67,373 )     (55,283 )
Net Loss, December 31, 2007
                                                (5,280 )     (5,280 )
Balance December 31, 2007
    72,540,000       72,540           (60,450 )     -       -       (72,653 )     (60,563 )
Net Loss, December 31, 2008
                                                (33,602 )     (33,602 )
Balance December 31, 2008
    72,540,000       72,540         $ (60,450 )   $ -     $ -     $ (106,255 )     (94,165 )
Net Loss , December 31, 2009
                                                (26,927 )     (26,927 )
Balance December 31, 2009
    72,540,000       72,540           (60,450 )     -       -       (133,182 )     (121,092 )
                                                             
Stock Returned for asset purchase
    (32,088,000 )     (32,088 )         (5,316,495 )     -       -             $ (5,348,583 )
Stock Issued for asset purchase
    76,500,000       76,500           12,673,500       -       -             $ 12,750,000  
Stock issued for service to former CEO
    600,000       600           99,983       -       -             $ 100,583  
Net Loss
                                                (8,394,256 )     (8,394,256 )
                                                             
Balance December 31, 2010
    117,552,000     $ 117,552  
-
$ -
  $ 7,396,538     $ -     $ -     $ (8,527,438 )   $ (1,013,348 )
                                                             
Stock issued for services
    2,580,000       2,580           383,554       2,200,000       262,000               648,134  
Stock issued for conversion of notes payable and interest
    86,672,004       86,672           453,059       -       -               539,731  
Net Loss, December 31, 2011
                                                (1,776,065 )     (1,776,065 )
Balance December 31, 2010
    206,804,004     $ 206,804  
-
$ -
  $ 8,233,151       2,200,000     $ 262,000     $ (10,303,503 )   $ (1,601,548 )
                                                             
The accompanying notes are an integral part of these financial statements.
 
 

 
F-5

 
 
 

 
SIERRA RESOURCE GROUP, INC.
 
(An Exploration Stage Company)
 
                   
STATEMENTS OF CASH FLOWS
 
                   
FOR THE YEAR ENDED DECEMBER 31, 2011
 
AND FOR THE PERIOD FROM DECEMBER 21, 1992 (INCEPTION) THROUGH DECEMBER 31, 2011
 
                   
                   
         
December 21, 1992
 
   
December 31,
   
December 31,
   
(Inception) to
 
   
2011
   
2010
   
December 31, 2010
 
Cash flows from operating activities:
                 
Net loss
  $ (1,776,065 )   $ (8,394,256 )   $ (10,293,273 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Stock issued for services
    648,134       103,000       751,134  
Stock subscribed not issued for services
    262,000               262,000  
Loss on Impairment
    0       7,890,069       7,907,597  
Loss on embedded derivatives
    (17,950 )     20,212       2,262  
Amortization
    0       0       11,972  
Changes in operating assets and liabilities:
                       
Accounts receivable
    0       128          
Accrued Interest - related party
    98,816       (2,958 )     98,816  
Accounts payable
    187,709       180,092       367,801  
                         
Net cash used in operating activities
    (597,356 )     (203,713 )     (891,691 )
                         
Cash Flows from Investing Activities
                       
Investment in oil and gas interests
                    (29,500 )
Net cash used in investing activities
                    (29,500 )
                         
Cash flows from financing activities:
                       
Issuance of common stock
                    1,860  
Interest expense for conversion of stock
    373,357               373,357  
Proceeds from issuance of subscribed stock
    0       75,000       75,000  
Proceeds from officer advances
    0       0       90,573  
Proceeds from note payable-related party
            0       29,500  
Proceeds from note payable
    200,700       150,333       351,033  
                         
Net cash provided by financing activities
    574,057       225,333       921,323  
                         
Net increase (decrease) in cash and cash equivalents
117,552,000 and 12,090,000 issued and outstanding
    (23,299 )     21,620       132  
                         
Cash and cash equivalents at beginning of period
    23,431       1,811          
                         
Cash and cash equivalents at end of period
and at December 31, 2009, respectively
    132       23,431     $ 132  
   
The accompanying notes are an integral part of these financial statements.
 
 
 
F-6

 
 
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010
 
NOTE 1. DESCRIPTION OF BUSINESS
 
Sierra Resource Group, Inc. (the “Company,” “we,” “us,” and “our “) was incorporated in the state of Nevada on December 21, 1992, to engage in the lease, acquisition, exploration and development of interests in natural resource properties such as those involving oil and gas interests. The Company has not commenced significant operations and, in accordance with ASC Topic 915, the Company is considered an exploratory stage company
 
Our business plan has been to lease, acquisition, exploration and development of interests in natural resource properties since our inception.
 
NOTE 2. GOING CONCERN ISSUES
 
The accompanying financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At December 31, 2011, we had an accumulated deficit of $10,303,503 and a working capital deficit of $1,339,548. During the year ended December 31, 2011, we incurred a loss of $1,776,065. We had no significant revenues or earnings from operations.  We will in all likelihood sustain operating expense without corresponding revenues. This may result in us incurring a net operating loss, which will increase continuously unless and until we can achieve meaningful revenues.  
 
These factors raise substantial doubt about the ability of the Company to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.  In this regard, Management is planning to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital.
 
The Company's ability to meet its obligations and continue as a going concern is dependent upon its ability to obtain additional financing, achievement of profitable operations and/or the discovery, exploration, development and sale of mining reserves. The Company cannot reasonably be expected to earn revenue in the exploration stage of operations. Although the Company plans to pursue additional financing, there can be no assurance that the Company will be able to secure financing when needed or to obtain such financing on terms satisfactory to the Company, if at all.
 
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
 
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America.  Significant accounting policies are as follows:
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.

 
F-7

 
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010
 
These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period.  Management evaluates these estimates and assumptions on a regular basis.  Actual results could differ from those estimates.
 
Exploration Stage Enterprise
 
The Company's financial statements are prepared pursuant to the provisions of Topic 26, “Accounting for Development Stage Enterprises,” as it devotes substantially all of its efforts to acquiring and exploring mining interests that will eventually provide sufficient net profits to sustain the Company’s existence. Until such interests are engaged in major commercial production, the Company will continue to prepare its financial statements and related disclosures in accordance with entities in the development stage. Mining companies subject to Topic 26 are required to label their financial statements as an “Exploratory Stage Company,” pursuant to guidance provided by SEC Guide 7 for Mining Companies.
 
Revenue Recognition
 
As the Company is continuing exploration of its mineral properties, no significant revenues have been earned to date. The Company recognizes revenues at the time of delivery of the product to the customers
 
Revenue includes sales value received for our principle product, silver, and associated by-product revenues from the sale of by-product metals consisting primarily of gold and copper. Revenue is recognized when title to silver and gold passes to the buyer and when collectibility is reasonably assured. The passing of title to the customer is based on terms of the sales contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets for example, the London Bullion Market, an active and freely traded commodity market, for both gold and silver, in an identical form to the product sold.
 
Pursuant to guidance in Topic 605, "Revenue Recognition for Financial Statements", revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, no obligations remain and collectibility is probable. The passing of title to the customer is based on the terms of the sales contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets, for example the London Bullion Market for both gold and silver, in an identical form to the product sold.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid investments with an original maturity of year ended or less to be cash equivalents.  Cash equivalents include cash on hand and cash in the bank.
 
Property and Equipment
 
Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon.  Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized.
 
The range of estimated useful lives used to calculated depreciation for principal items of property and equipment are as follow:
 
 
Asset Category
 
Depreciation/
Amortization Period
Furniture and Fixture
 
3 Years
Office equipment
 
3 Years
Leasehold improvements
 
5 Years

 
F-8

 
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010
Mine Exploration and Development Costs
 
All exploration costs are expensed as incurred. Mine development costs are capitalized after proven and probable reserves have been identified.  Amortization is calculated using the units-of-production method over the expected life of the operation based on the estimated recoverable mineral ounces.
 
Mineral Properties
 
Significant payments related to the acquisition of mineral properties, mineral rights, and mineral leases are capitalized.  If a commercially mineable ore body is discovered, such costs are amortized when production begins using the units-of-production method based on proven and probable reserves. If no commercially mineable ore body is discovered, or such rights are otherwise determined to have no value, such costs are expensed in the period in which it is determined the property has no future economic value.
 
Property Evaluations
 
Management of the Company will periodically review the net carrying value of its properties on a property-by-property basis. These reviews will consider the net realizable value of each property to determine whether a permanent impairment in value has occurred and the need for any asset write-down. An impairment loss will be recognized when the estimated future cash flows (undiscounted and without interest) expected to result from the use of an asset are less than the carrying amount of the asset.  Measurement of an impairment loss will be based on the estimated fair value of the asset if the asset is expected to be held and used.
 
Although management will make its best estimate of the factors that affect net realizable value based on current conditions, it is reasonably possible that changes could occur in the near term which could adversely affect management's estimate of net cash flows expected to be generated from its assets, and necessitate asset impairment write-downs.
 
Reclamation and Remediation Costs (Asset Retirement Obligations)
 
The Company had no operating properties at December 31, 2011, respectively, but the Company’s mineral properties will be subject to standards for mine reclamation that are established by various governmental agencies. For these non-operating properties, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Costs of future expenditures for environmental remediation are not discounted to their present value. Such costs are based on management's current estimate of amounts that are expected to be incurred when the remediation work is performed within current laws and regulations.
 
It is reasonably possible that due to uncertainties associated with defining the nature and extent of environmental contamination, application of laws and regulations by regulatory authorities, and changes in remediation technology, the ultimate cost of remediation and reclamation could change in the future. The Company continually reviews its accrued liabilities for such remediation and reclamation costs as evidence becomes available indicating that its remediation and reclamation liability has changed.
 
The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred, if a reasonable estimate of fair value can be made.  The associated asset retirement costs are capitalized as part of the carrying amount of the associated long-lived assets and depreciated over the lives of the assets on a units-of-production basis.  Reclamation costs are accreted over the life of the related assets and are adjusted for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate on the underlying obligation.
 
Mineral property rights
 
All direct costs related to the acquisition of mineral property rights are capitalized. Exploration costs are charged to operations in the period incurred until such time as it has been determined that a property has economically recoverable reserves, at which time subsequent exploration costs and the costs incurred to develop a property are capitalized.

 
F-9

 
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010
 
The Company reviews the carrying values of its mineral property rights whenever events or changes in circumstances indicate that their carrying values may exceed their estimated net recoverable amounts. An impairment loss is recognized when the carrying value of those assets is not recoverable and exceeds its fair value. As of December 31, 2010, management has determined that it would impair the mining claim located in Arizona to zero.
 
At such time as commercial production may commence, depletion of each mining property will be provided on a unit-of-production basis using estimated proven and probable recoverable reserves as the depletion base. In cases where there are no proven or probable reserves, depletion will be provided on the straight-line basis over the expected economic life of the mine.  The company impaired its mining claim and recorded an impairment of $163,000 as of December 31, 2010.
 
Asset retirement obligations
 
The Company plans to recognize liabilities for statutory, contractual or legal obligations, including those associated with the reclamation of mineral and mining properties and any plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. Initially, a liability for an asset retirement obligation will be recognized at its fair value in the period in which it is incurred. Upon initial recognition of the liability, the corresponding asset retirement cost will be added to the carrying amount of the related asset and the cost will be amortized as an expense over the economic life of the asset using either the unit-of-production method or the straight-line method, as appropriate. Following the initial recognition of the asset retirement obligation, the carrying amount of the liability will be increased for the passage of time and adjusted for changes to the amount or timing of the underlying cash flows needed to settle the obligation.
 
Impairment of Long-Lived Assets
 
In accordance with ASC Topic 360, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. The company impaired its mining claim and recorded an impairment of $163,000 and $125,000 in mining interest during the year ended December 31, 2010.
 
Goodwill and Other Intangible Assets
 
The Company adopted Statement of Financial Accounting Standard (“FASB”) Accounting Standards Codification (“ASC”) Topic 350 Goodwill and Other Intangible Assets, effective July 1, 2002. In accordance with (“ASC Topic 350”) "Goodwill and Other Intangible Assets," goodwill, which represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method, acquired in business combinations is assigned to reporting units that are expected to benefit from the synergies of the combination as of the acquisition date. Under this standard, goodwill and intangibles with indefinite useful lives are no longer amortized. The Company assesses goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter, or more frequently if events and circumstances indicate impairment may have occurred in accordance with ASC Topic 350. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, the Company records an impairment loss equal to the difference. ASC Topic 350 also requires that the fair value of indefinite-lived purchased intangible assets be estimated and compared to the carrying value. The Company recognizes an impairment loss when the estimated fair value of the indefinite-lived purchased intangible assets is less than the carrying value.
 
The company impaired its goodwill and recorded an impairment of approximately $7,602,000 during the year ended December 31, 2010.
 
Income Taxes
 
Deferred income taxes are provided based on the provisions of ASC Topic 740, "Accounting for Income Taxes", to reflect the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
 
The Company adopted the provisions of ASC Topic 740; "Accounting For Uncertainty In Income Taxes-An Interpretation Of ASC Topic 740 ("Topic 740").  Topic 740 contains a two-step approach to recognizing and measuring uncertain tax positions.  The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely of being realized upon ultimate settlement.  The Company considers many factors when evaluating and estimating the Company's tax positions and tax benefits, which may require periodic adjustments. At December 31, 2010 and 2011, respectively, the Company did not record any liabilities for uncertain tax positions.

 
F-10

 
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010
 
The Company has adopted “Accounting for Uncertainty in Income Taxes”. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption of ASC 740-10-25 had no effect on our financial statements.
 
Concentration of Credit Risk
 
The Company maintains its operating cash balances in banks in Tampa, Florida.  The Federal Depository Insurance Corporation (FDIC) insures accounts at each institution up to $250,000.
 
Share-Based Compensation
 
The Company applies Topic 718 “Share-Based Payments” (“Topic 718”) to share-based compensation, which requires the measurement of the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award.  Compensation cost is recognized when the event occurs.  The Black-Scholes option-pricing model is used to estimate the fair value of options granted.
 
Basic and Diluted Net Loss Per Share
 
Net loss per share was computed by dividing the net loss by the weighted average number of common shares outstanding during the period.  The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding.  Diluted net loss per share for the Company is the same as basic net loss per share, as the inclusion of common stock equivalents would be antidilutive.  
 
Fair Value of Financial Instruments
 
The company financial instruments consist primarily of cash, affiliate receivable, settlement receivable, accounts payable and accrued expenses and debt.  The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.  The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows. 
 
The Company adopted ASC Topic 820, Fair Value Measurements (“ASC Topic 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosure about fair value measurements.  The standard provides a consistent definition of fair value which focuses on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The standard also prioritizes, within the measurement of fair value, the use of market-based measurements.
 
The three-level hierarchy for fair value measurements is defined as follows:
 
·
Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;
 
·
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable of the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active;
 
·
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
Reclassifications
 

 
F-11

 
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010
 
 
 
Certain prior year amounts have been reclassified to conform to the current period presentation for comparative purposes.
 
Recent Accounting Pronouncements
 
ASU 2011-04 – Amendments to achieve common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs

The amendments in ASU 2011-04 do not modify the requirements for when fair value measurements apply; rather, they generally represent clarifications on how to measure and disclose fair value under ASC 820, Fair Value Measurement, including the following revisions:

• The concepts of highest and best use and valuation premise are relevant only for measuring the fair value of nonfinancial assets and do not apply to financial assets and liabilities.

• An entity should measure the fair value of an equity-classified financial instrument from the perspective of the market participant that holds the instrument as an asset.

• An entity that holds a group of financial assets and financial liabilities whose market risk (that is, interest rate risk, currency risk, or other price risk) and credit risk are managed on the basis of the entity’s net risk exposure may apply an exception to the fair value requirements in ASC 820 if certain criteria are met. The exception allows such financial instruments to be measured on the basis of the reporting entity’s net, rather than gross, exposure to those risks.

• Premiums or discounts related to the unit of account are appropriate when measuring fair value of an asset or liability if market participants would incorporate them into the measurement (for example, a control premium). However, premiums or discounts related to size as a characteristic of the reporting entity’s holding (that is, a “blockage factor”) should not be considered in a fair value measurement.

The amendments to ASC 820, Fair Value Measurement, included in ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, are effective prospectively for public entities for interim and annual periods beginning after December 15, 2011 (that is, the quarter ending March 31, 2012 for calendar-year entities). Early adoption is not permitted for public entities

ASU 2011-03 – Reconsideration of effective control for repurchase agreements

The amendments to ASC 860-10 included in ASU 2011-03, simplified the accounting for financial assets transferred under repurchase agreements (repos) and similar arrangements, by eliminating the transferor’s
 
ability criteria from the assessment of effective control over those assets as well as the related implementation guidance.

Currently under ASC 860-10-40-24 a transferor must meet four criteria to maintain effective control of securities transferred in a repo and to therefore account for the transfer as a secured borrowing rather than a sale. One of these criteria states that the transferor must be able to either repurchase or redeem the transferred securities on substantially the agreed terms, even if the transferee is in default. This criterion is satisfied only if the transferor has cash or collateral sufficient to fund substantially the entire cost of purchasing replacement securities.

The amendments in ASU 2011-03 remove this criterion and related implementation guidance from the Codification, thereby reducing the criteria that transferors must satisfy to qualify for secured borrowing accounting and, as a result, likely reducing the number of transfers accounted for as sales.

 
F-12

 
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010

The amendments to ASC 860-10, Transfers and Servicing, included in ASU 2011-03, Reconsideration of Effective Control for Repurchase Agreements, are effective for both public and nonpublic entities prospectively for new transfers and existing transactions modified as of the first interim or annual period beginning on or after December 15, 2011 (that is, the fiscal year beginning January 1, 2012 for calendar-year entities). Early adoption is not permitted.
 
ASU 2011-02 - FASB amends creditor troubled debt restructuring guidance
 
This bulletin discusses ASU 2011-02, which was issued by the FASB to provide creditors with additional guidance in evaluating whether a restructuring of debt is a troubled debt restructuring. The new guidance does not amend the guidance for debtors. It is generally effective for public entities in the quarter ended September 30, 2011.
 
ASU 2011-01 - Troubled debt restructuring disclosures for public-entity creditors deferred
 
The FASB issued Accounting Standards Update (ASU) 2011-01, Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20, which temporarily defers the date when public-entity creditors are required to provide the new disclosures for troubled debt restructurings in ASU 2010-20, Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The deferred effective date will coincide with the effective date for the clarified guidance about what constitutes a troubled debt restructuring, which the Board is currently deliberating. The clarified guidance is expected to apply for interim and annual periods ending after June 15, 2011.
 
 
When providing the new disclosures under ASU 2010-20, public entities would be required to retrospectively apply the clarified guidance on what constitutes a troubled debt restructuring to restructurings occurring on or after the beginning of the year in which the proposed clarified guidance is adopted.
 
The Company has implemented all new accounting pronouncements that are in effect and that may impact its condensed financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
 
NOTE 4 - NET LOSS PER SHARE
 
The net loss per common share is calculated by dividing the loss by the weighted average number of shares outstanding during the periods.\
 
The following table represents the computation of basic and diluted losses per share at December 31, 2011 and 2010, respectively:
 
 
 
December 31,
   
December 31,
 
 
 
2011
   
2010
 
Losses available for common shareholders
   
(1,776,065
 )
   
(8,394,256
 )
 
               
Weighted average common shares outstanding
   
(148,406,197
)
   
(117,552,000
)
Basic loss per share
   
(.01
 )
   
(.07
 )
Net loss per share is based upon the weighted average shares of common stock outstanding
 

 
F-13

 
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010
 
5. CHLORIDE COPPER PROJECT
 
On April 23, 2010, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Medina Property Group LLC, a Florida limited liability company (“Medina”). Pursuant to the Purchase Agreement, and upon the terms and subject to the conditions thereof, the Company agreed to purchase 80% of certain mining interests of Medina known as the Chloride Copper Project, a former copper producer comprised of a mineral deposit and some infrastructure located near Kingston, Arizona (the “Copper Mine”).
 
The Company's acquisition of the Chloride Copper Project was accounted for in accordance with ASC 805 Business Combinations and the Company has allocated the purchase price based upon the fair value of the net assets acquired and liabilities assumed at the acquisition date.
 
The purchase price was $7,505,529 which, pursuant to the Purchase Agreement, The purchase price included the issuance of 12,750,000 shares of common stock by the Company to Medina or its assignees, return of 5,358,000 by Black Diamond and the payment of $125,000 to the original seller of certain equipment where the Chloride Copper Mine is located, as designated by Medina in the Purchase Agreement. The purchase price was determined based on the Company's analysis of a recently completed comparable acquisition and based on the value of the associated underlying shares of the Company’s common stock which value of $1.00 per share represented the offering price of the Company’s Common Stock in its most recently completed equity transaction prior to the date of the Purchase Agreement.  The Company recognized goodwill of $7,602,069 and assumed $384,540 in liabilities, which consisted of a $360,000 promissory note and $3,040 in accrued interest and $21,500 in accounts payable.
 
The following table summarizes the acquisition with a total purchase price of $507,500:
 
Mining Property
  $ 163,000  
Equipment
  $ 125,000  
Liabilities
  $ (384,540 )
Goodwill
  $ 7,602,069  
Net Assets
  $ 7,505,529  
 
In addition, pursuant to the Purchase Agreement, Black Diamond Realty Management, LLC returned 5,348,000 shares of the Company’s Common Stock, and as a result, a change of our shareholder voting control occurred. The Acquisition formally closed on June 21, 2010. The shares of Common Stock constituting the equity portion of the purchase price were issued on August 9, 2010 to certain assignees of Medina, and although this issuance of shares approximately doubled our outstanding shares of Common Stock, no single person or cohesive group took a controlling interest in our Company as a result of this transaction.
 
The Company had impairment on the entire purchase price for the Medina Property acquisition and impairment on the Chloride Cooper Project related to fixed assets and mining interests. During the year ended December 31, 2010 impairment was  $7,890,069 was comprised of $7,602,069 write-off of goodwill, $163,000 write-off of mining interests and $125,000 for the write-down of fixed assets. All these assets were acquired and recorded as part of the Chloride Copper Project.
 
F-14

 
SIERRA RESOURCE GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010
NOTE 6 – NOTE PAYABLE
 
The Company had the following notes payable outstanding as of December 31, 2011 and December 31, 2010:
   
   
December 31, 2011
   
December 31, 2010
 
Promissory note payable dated August 16, 2010 due to Brian Hebb including accrued interest.
  $ 42,055     $ 35,578  
                 
Promissory note payable dated August 6, 2010 due to Black Diamond Realty Mgmt including accrued interest.
    26,126       25,000  
                 
Promissory note payable dated May 5, 2010 due to Brian Hebb including accrued interest.
    155,146       129,000  
                 
Notes payable acquisition as a part of the Chloride Copper Project dated March 22, 2010 including accrued interest
    413,001       360,000  
                 
Promissory note payable dated September 30, 2011 due to South Concord Corp including accrued interest