UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.   20549




Form 10-Q




QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE ACT OF 1934




For the quarterly period ended:June 30, 2011




Commission File Number: 000-25301




SIERRA RESOURCE GROUP, INC.


(Exact name of registrant as specified in its charter)




NEVADA

(State or other jurisdiction of incorporation or organization)

88-0413922

(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 August 10, 2011 the issuer had 145,629,211 issued shares of Common Stock, $0.001 par value.






-1-


TABLE OF CONTENTS




PagePART I - FINANCIAL INFORMATIONItem 1.    Condensed financial statements

3Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

37Item 3.    Quantitative and Qualitative Disclosures About Market Risk

42Item 4T.  Controls and Procedures

42PART II - OTHER INFORMATIONItem 1.    Legal Proceedings

43Item 1A.  Risk Factors

43Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

55Item 3.    Defaults Upon Senior Securities

56Item 4.    Removed and Reserved

56Item 5.    Other Information

Item 6      Exhibits

54SIGNATURES

59




CERTIFICATIONS







31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.32.2
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.32.2
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.




-2-


PART I




FINANCIAL INFORMATION




Item 1.
Condensed financial statements




The accompanying reviewed interim condensed financial statements have been prepared in accordance with the instructions to Form 10-Q.  Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles.  Except as disclosed herein, there has been no material change in the information disclosed in the notes to the condensed financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results that can be expected for the year ending December 31, 2011.




SIERRA RESOURCE GROUP, INC.(An Exploration Stage Company)CONDENSED BALANCE SHEETS(Unaudited)June 30,


December 31,2011


2010ASSETSCURRENT ASSETSCash and cash equivalents

$
12,802


$
23,431Accounts receivable, net






-TOTAL CURRENT ASSETS


12,802



23,431TOTAL ASSETS

$
12,802


$
23,431LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIESAccounts payable and accrued expenses

$
153,530


$
182,173Conversion option liabilities


67,757



20,212Officer advances


90,573



90,573Note payables - related party


391,604



308,821Note payable


360,000



360,000TOTAL CURRENT LIABILITIES


1,063,464



961,779TOTAL LIABILITIES


1,063,464



961,779COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS' DEFICITPreferred stock, $0.001 par value: 10,000,000 shares authorized;none issued and outstanding at March 31, 2011 and December 31, 2010, respectively


-



-Class A Common stock, $0.001 par value: 250,000,000 shares authorized;130,295,877 and 117,552,000  issued and outstandingat June 30, 2011 and December 31, 2010, respectively


130,296



117,552Class B Common stock, $0.001 par value: 200,000,000 shares authorized;Zero shares  issued and outstanding at June 30, 2011 and December 31, 2010


-



-Common stock subscribed:  300,000 shares and 300,000 shares atMarch 31, 2011 and  December 31, 2010 respectively


75,000



75,000Additional Paid-in capital


8,335,693



7,396,538Accumulated deficit


(9,591,651
)


(8,527,438
)TOTAL STOCKHOLDERS' DEFICIT


(1,050,662
)


(938,348
)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$
12,802


$
23,431The accompanying notes are an integral part of these condensed financial statements.






-3-




SIERRA RESOURCE GROUP, INC.(An Exploration Stage Company)CONDENSED STATEMENT OF OPERATIONS(Unaudited) For the Three Months Ended


For the Six Months Ended


December 21, 1992June 30,


June 30,


(Inception) to2011


2010


2011


2010


June 30, 2011REVENUERevenue

$
—


$
—



—



—


$
1,275Total revenue


—



—



—



—



1,275OPERATING EXPENSESAmortization






—







—



11,972Selling, general and administrative expenses


300,963



80,127



794,722



80,142



1,403,866Total operating expenses


300,963



80,127



794,722



80,142



1,415,838Operating loss


(300,963
)


(80,127
)


(794,722
)


(80,142
)


(1,414,563
)Other Income (expense)Interest expense


(197,605
)


(37,500
)


(204,449
)


(37,500
)


(204,449
)Amortization of discount on convertible debt


(61,556
)






(65,042
)






(65,042
)Loss on Impairment of goodwill and equipment


—



—



—



—



(7,907,597
)Total other income (expense)


(259,161
)


(37,500
)


(269,491
)


(37,500
)


(8,177,088
)LOSS BEFORE INCOME TAXES


(560,124
)


(117,627
)


(1,064,213
)


(117,642
)


(9,591,651
)PROVISION FOR INCOME TAXES


—



—



—



—NET LOSS


(560,124
)

$
(117,627
)


(1,064,213
)


(117,642
)


(9,591,651
)BASIC NET LOSS PER COMMON SHARE

$
(0.00
)

$
(0.01
)


(0.01
)


(0.01
)WEIGHTED AVERAGE COMMON SHARES OUTSTANDING


123,365,087



18,073,670



121,049,161



15,098,365The accompanying notes are an integral part of these condensed financial statements.






-4-




SIERRA RESOURCE GROUP, INC.(An Exploration Stage Company)CONDENSED STATEMENTS OF CASH FLOWS(Unaudited)For the Six Months Ended


December 21, 1992June 30,


(Inception) to2011


2010


June 30, 2011Cash flows from operating activities:Net loss

$
(1,064,213
)

$
(117,642
)

$
(9,591,651
)Adjustments to reconcile net loss to net cash used in operating activities:Stock issued for services


709,033



3,000



809,303Accrued Liability from Acquisition






(24,540
)


(24,540
)Interest Expense


204,449



37,500



241,949Loss on Impairment


—



—



7,907,597Amortization of discount on convertible debt and debt issuance costs


47,545



—



67,757Amortization


—



—



11,972Changes in operating assets and liabilities:


—



—Accounts receivable


—



—Other Accrued Liabilities






17,844Accrued Interest - related party


33,700



—



33,700Accounts payable


(28,643
)


47,500



151,449Net cash used in operating activities


(98,129
)


(36,338
)


(392,464
)Cash Flows from Investing ActivitiesConversion of Note Payable


(32,500
)






(32,500
)Investment in oil and gas interests


—



—



(29,500
)Net cash used in investing activities


(32,500
)


—



(62,000
)Cash flows from financing activities:Issuance of common stock










1,860Proceeds from issuance of subscribed stock


—



—



75,000Proceeds from officer advances


—



—



90,573Proceeds from note payable-related party


120,000



34,527



149,500Proceeds from note payable


—



—



150,333Net cash provided by financing activities


120,000



34,527



467,266Net increase in cash and cash equivalents


(10,629
)


(1,811
)


12,802Cash and cash equivalents at beginning of period


23,431



1,811



0Cash and cash equivalents at end of period


12,802


$
0


$
12,802Supplemental disclosures of cash flow information:Non-cash investing and financing activitiesEffect of Assignment and Quit Claim of Oil and Gas Leases


—



(32,330
)Investment in equipment


—



125,000Investments in mining interests


-



767,040The accompanying notes are an integral part of these condensed financial statements.







-5-


SIERRA RESOURCE GROUP, INC.


(An Exploration Stage Company)


NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS


FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011


(UNAUDITED)






NOTE 1. DESCRIPTION OF BUSINESS




Sierra Resource Group, Inc. (the “Company,” “we,” “us,” and “our “) was incorporated in the state of Nevada on December 21, 1992, to engage in the lease, acquisition, exploration and development of interests in natural resource properties such as those involving oil and gas interests. The Company has not commenced significant operations and, in accordance with ASC Topic 915, the Company is considered an exploratory stage company




Our business plan since inception has been to lease, acquire, explore and develop interests in natural resource properties..




NOTE 2.GOING CONCERN ISSUES




The accompanying condensed financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. At June 30, 2011, we had an accumulated deficit of $9,591,651 and a working capital deficit of approximately $1,050,662. During the six months ended June 30, 2011, we incurred a loss of $1,064,213. 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 condensed 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.




-6-


SIERRA RESOURCE GROUP, INC.


(An Exploration Stage Company)


NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS


FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011


(UNAUDITED)




NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Basis of Presentation




The Company prepares its condensed 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 condensed 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 condensed 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 condensed financial statements; accordingly, actual results could differ from these estimates.




These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period.  Management evaluates these estimates and assumptions on a regular basis.  Actual results could differ from those estimates.




Exploration Stage Enterprise




The Company's condensed 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 condensed financial statements and related disclosures in accordance with entities in the development stage. Mining companies subject to Topic 26 are required to label their condensed financial statements as an “Exploratory Stage Company,” pursuant to guidance provided by SEC Guide 7 for Mining Companies.


-7-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)


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 principal product, silver, and associated by-product revenues from the sale of by-product metals consisting primarily of gold and copper. Pursuant to guidance in Topic 605, "Revenue Recognition for Financial Statements", revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable, no obligations remain and collectability is probable. The passing of title to the customer is based on terms of the sales contract. Product pricing is determined at the point revenue is recognized by reference to active and freely traded commodity markets such as the London Bullion Market, an active and freely traded commodity 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 calculate depreciation for principal items of property and equipment are as follow:




Asset Category                                                                             Depreciation/ Amortization Period

Depreciation/

Amortization PeriodFurniture and Fixture                                                                                         3 years

3 YearsOffice equipment                                                                                                3 years

3 YearsLeasehold improvements                                                                                  5 years

5 Years


-8-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)


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 June 30, 2011, 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 theremediation work is performed within current laws and regulations.


-9-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)


It is reasonably possible that due to uncertainties associated with defining the nature and extent of environmental contamination, application of laws and regulations by regulatory authorities, and changes in remediation technology, the ultimate cost of remediation and reclamation could change in the future. The Company continually reviews its accrued liabilities for such remediation and reclamation costs as evidence becomes available indicating that its remediation and reclamation liability has changed.




The Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred, if a reasonable estimate of fair value can be made.  The associated asset retirement costs are capitalized as part of the carrying amount of the associated long-lived assets and depreciated over the lives of the assets on a units-of-production basis.  Reclamation costs are accreted over the life of the related assets and are adjusted for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate on the underlying obligation.




Mineral property rights




All direct costs related to the acquisition of mineral property rights are capitalized. Exploration costs are charged to operations in the period incurred until such time as it has been determined that a property has economically recoverable reserves, at which time subsequent exploration costs and the costs incurred to develop a property are capitalized.




The Company reviews the carrying values of its mineral property rights whenever events or changes in circumstances indicate that their carrying values may exceed their estimated net recoverable amounts. An impairment loss is recognized when the carrying value of those assets is not recoverable and exceeds its fair value. As of December 31, 2010, management 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 during the year ended December 31, 2010.




-10-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)


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 intangibleswith 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.


-11-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)


The Company impaired its goodwill and recorded an impairment of $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% likelyof 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, the Company did not record any liabilities for uncertain tax positions.




We have 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 meetingthe “more likely than not” test, no tax benefit is recorded. The adoption of ASC 740-10-25 had noeffect on our condensed 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.


-12-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)


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 exitprice that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The standard also prioritizes, within the measurement of fair value, the use of market-based measurements.




The three-level hierarchy for fair value measurements is defined as follows:




·
Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;




·
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable of the asset or liability other than quoted prices, either directly or indirectly including inputs in markets that are not considered to be active;




·
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.




Reclassifications




Certain prior year amounts have been reclassified to conform to the current period presentation for comparative purposes.


-13-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)
 Recent Accounting Pronouncements




ASU 2011-05 – Presentation of comprehensive income




ASU 2011-05 was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now requires entities to present all nonowner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements.




All entities that report OCI items will be impacted by the changes in this ASU. The components of OCI have not changed, nor has the guidance on when OCI items are reclassified to net income; however, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.




The amendments to ASC 220, Comprehensive Income, included in ASU 2011-05, Presentation of Comprehensive Income, are effective for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2011 (that is, the fiscal year beginning January 1, 2012 for calendar-year entities) for public entities and for interim and annual periods thereafter. The amended guidance must be applied retrospectively and early adoption is permitted.




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.




-14-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)




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.




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.

June 30, 2011

June 30, 2010Losses available for common shareholders
$
(1,064,213)

$
(117,642
)Weighted average common shares outstanding

121,049,161


15,098,365Basic loss per share
$
(0.01)

$
(0.01
)


-15-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)


NOTE 5. CHLORIDE COPPER PROJECT – BUSINESS COMBINATION




In December 2007, the Financial Accounting Standards Board (FASB) issued FASB ASC 805 Business Combinations [previously SFAS No. 141(R)], which changed accounting and reporting requirements for business acquisitions and which required the acquisition method of accounting to be used for all business combinations and for an acquirer to be identified for each business combination. This accounting standard requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. It also requires the acquirer in a business combination achieved in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with the standard).





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,  included the issuance of 12,750,000 (pre-split) and 76,500,000 (post-split) shares of common stock by the Company to Medina or its assignees, return of 5,348,000 (pre-split) and 32,088,000 (post-split) 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 $.16 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 $7,505,529




Mining Property

$
163,000Equipment


125,000Liabilities


(384,540
)Goodwill


7,602,069Net Assets

$
7,505,529




In addition, pursuant to the Purchase Agreement, Black Diamond Realty Management, LLC returned 32,068,000 (post-split) 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. Impairment was $7,890,069, 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 during the year ended December 31, 2010. All these assets were acquired and recorded as part of the Chloride Copper Project.




NOTE 6. ACCRUED INTEREST – RELATED PARTY




See Note 7. Note Payablefor a discussion regarding our disposition of certain assets as described in the "Assignment, Release and Quit Claim" agreement, pursuant to which we assigned 100% of our right, title and interest in and to the oil and gas leases located in Louisiana and Kansas in exchange for the cancellation of the indebtedness evidenced by a promissory note for $29,500 together with accrued interest and for mutual releases as to any claims, liabilities and demands between the Company, our officers and directors and the Assignor and our members.


-16-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)


NOTE 7 – NOTE PAYABLE










The Company had the following notes payable outstanding as of June 30, 2011 and December 31, 2010:June 30, 2011


December 31, 2010Notes payable and accrued interest due to Brian Hebb and Black Diamond Realty Management, LLC.Acquired as part of Medina Acquisition

$
37,001


$
35,578Notes payable due to Brian Hebb and Black Diamond Realty Management, LLC. Acquired aspart of Medina Acquisition


25,000



25,000Notes payable and accrued interest due to Brian Hebb and Black Diamond Realty Management, LLC.Acquired as part of Medina Acquisition for Fixed assets purchased


134,160



129,000Notes payable with Medina Property Group, LLC Acquired as part of Acquisitionof Chloride Copper Project


360,000



360,000Notes payable with South Concord Corp


32,191



30,658Notes payable and accrued interest to Asher Enterprises-Converted May-June 2011


-0-



56,027Notes payable and accrued interest to Asher Enterprises –December 2010


33,860



32,558Notes payable and accrued interest to Asher Enterprises –January 2011


57,127



-0-Notes payable and accrued interest to Asher Enterprises -May 2011


32,876



-0-Notes Payable and accrued interest to Blackpool Capital-May 2011


6,725



-0-Notes payable and accrued interest to Asher Enterprises –June 2011


32,659



-0-Total Notes Payable – Current Portion


751,604



668,821Total Notes Payable – Long-Term Portion


-0-



-0-Total Notes Payable

$
751,604



668,821




On April 30, 2008, we entered into an "Assignment and Quit Claim of Oil and Gas Leases" agreement with the Assignor whereby the Assignor assigned 100% of Assignor's right, title and interest in and to oil and gas leases located in Louisiana and Kansas to us in exchange for a promissory note with a principal amount outstanding of $29,500, which was secured by the oil and gas interests assigned, all due and payable in April 2010.  On March 8, 2010, we entered into an "Assignment, Quit Claim and


-17-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)


Release" with the Assignor whereby we assigned 100% of our right, title and interest in and to the oil and gas leases located in Louisiana and Kansas in cancellation of the indebtedness evidenced by the promissory note and accrued interest to the Assignor and entered into mutual releases as to any claims, liabilities and demands between us and Paul W. Andre.  On March 8, 2010, we recorded a debit in the amount of $29,500, $2,958 and $128 to Note Payable – Related Party, Accrued Interest – Related Party and Accounts Receivable, respectively, and a corresponding credit in the amount of $32,330 to Additional Paid in Capital.




On August 6, 2010, we entered into a $34,527 promissory note, bearing interest at eight percent (8%), due one year from the date of issuance to an investor that made various payments on behalf of the Company, which investor is the sole managing member of Black Diamond Realty Management, LLC. Total due including interest as of June 30, 2011 and December 31, 2010 is $37,001 and 35,578, respectively.




On August 16, 2010, we entered into a $25,000 promissory note with Black Diamond Realty Management, LLC, bearing interest at zero percent (0%), due one year from the date of issuance. Entire balance of $25,000 was due as of June 30, 2011 and December 31, 2010, respectively.




See Note 5. Chloride Copper Project – Business Combination for a discussion regarding the Purchase Agreement with Medina.  Pursuant to the Purchase Agreement, the purchase price consisted of the issuance of 76,500,00 shares of our common stock by the Company to Medina and its assignees and for the payment of $125,000 to the original seller of certain equipment where the Copper Mine is located, which payment was made by Black Diamond Realty Management, LLC on behalf of the Company and in consideration we issued a $125,000 promissory note bearing interest at eight percent (8%) per annum, due one year from the date of issuance.  In connection with the promissory note and as an incentive. Total due including interest as of June 30, 2011 and December 31, 2010 is $134,160 and $129,000, respectively.




In addition to the loan payable for fixed assets the Company, as part of the acquisition, acquired a $360,000 loan payable due to Medina Property Group, LLC. Entire balance of $360,000 is due as of June 30, 2011 and  December 31, 2010, respectively.




Convertible Note – Related Party




Effective October 13, 2010 the Company entered into a Convertible Promissory Note Agreement (the “Convertible Note – Related Party”), due consisting of a $30,000 convertible promissory note bearing interest at 10% per annum, de September 30, 2011 and of which the holder of shall have the right at any time during the period beginning on the date which is three hundred sixty-five (365) days following the date of the Convertible Note – Related Party and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, to convert all or any part of the outstanding and unpaid principal amount of this Convertible Note into shares of the Company’s Common Stock at a conversion price representing a discount rate of 50% of the then going Market Price which shall be defined as the average of the lowest three (3) Trading Prices for the Company’s Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the holder of this Convertible Note – Related Party to the Company. Total including interest as of June 30, 2011 and December 31, 2010 is $32,191 and $30,658, respectively.




As the effective conversion price of the Convertible Note – Related Party on the date of issuance was below the fair market value of the underlying common stock, the Company will record debt discount based on the intrinsic value of the beneficial conversion feature of the Convertible Note – Related Party. In accordance with ASC 815-40, the debt discount as a result of the beneficial conversion feature of the Convertible Note – Related Party will be amortized as non-cash interest expense over the term of the debt using the effective interest method.




Convertible Notes




Effective September 3, 2010, the Company entered into a Convertible Promissory Note Agreement (the “Convertible Note”), consisting of a $55,000 convertible promissory note bearing interest at 8% per annum, due July 1, 2011 and of which the holder of shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Convertible Promissory Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, to convert all or any part of the outstanding and unpaid principal amount of this Convertible Note into shares of the Company’s Common Stock at a conversion price representing a discount rate of 42% of the then going Market Price which shall be defined as the average of the lowest three (3) Trading Prices for the Company’s Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the holder of this Convertible Note to the Company. Total including interest as of June 30, 2011 and December 31, 2010 is $-0- and $56,027, respectively.




As the effective conversion price of the Convertible Note on the date of issuance was below the fair market value of the underlying common stock, the Company will record debt discount based on the intrinsic value of the beneficial conversion feature of the Convertible Note. In accordance with ASC 815-40, the debt discount as a result of the beneficial conversion feature of the Convertible Note will be amortized as non-cash interest expense over the term of the debt using the effective interest method.


-18-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)




Effective December 23, 2010, the Company entered into a Convertible Promissory Note Agreement (the “Convertible Note”), consisting of a $32,500 convertible promissory note bearing interest at 8% per annum, due September 8, 2011 and of which the holder of shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Convertible Promissory Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, to convert all or any part of the outstanding and unpaid principal amount of this Convertible Note into shares of the Company’s Common Stock at a conversion price representing a discount rate of 42% of the then going Market Price which shall be defined as the average of the lowest three (3) Trading Prices for the Company’s Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the holder of this Convertible Note to the Company. Total including interest as of June 30, 2011 and December 31, 2010 is $33,860 and $32,558, respectively.





As the effective conversion price of the Convertible Note on the date of issuance was below the fair market value of the underlying common stock, the Company will record debt discount based on the intrinsic value of the beneficial conversion feature of the Convertible Note. In accordance with ASC 815-40, the debt discount as a result of the beneficial conversion feature of the Convertible Note will be amortized as non-cash interest expense over the term of the debt using the effective interest method.




Effective January 7, 2011, the Company entered into a Convertible Promissory Note Agreement (“Convertible Note”), consisting of a $55,000 convertible promissory note bearing interest at 8% per annum, due January 7, 2012 and of which the holder of shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Convertible Promissory Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, to convert all or any part of the outstanding and unpaid principal amount of this Convertible Note into shares of the Company’s Common Stock at a conversion price representing a discount rate of 42% of the then going Market Price which shall be defined as the average of the lowest three (3) Trading Prices for the Company’s Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the holder of this Convertible Note to the Company. Total due including interest as of June 30, 2011 and December 31, 2010 was  is $57,127 and none, respectively.




As the effective conversion price of the Convertible Note on the date of issuance was below the fair market value of the underlying common stock, the Company will record debt discount based on the intrinsic value of the beneficial conversion feature of the Convertible Note. In accordance with ASC 815-40, the debt discount as a result of the beneficial conversion feature of the Convertible Note will be amortized as non-cash interest expense over the term of the debt using the effective interest method.




Effective May 17, 2011, the Company entered into a Convertible Promissory Note Agreement (“Convertible Note”), consisting of a $6,700 convertible promissory note bearing interest at 8% per annum, due May 17, 2012 and of which the holder of shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Convertible Promissory Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, to convert all or any part of the outstanding and unpaid principal amount of this Convertible Note into shares of the Company’s Common Stock at a conversion price representing a discount rate of 42% of the then going Market Price which shall be defined as the average of the lowest three (3) Trading Prices for the Company’s Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the holder of this Convertible Note to the Company. Total due including interest as of June 30, 2011 and December 31, 2010 was  is $6,725 and none, respectively.




As the effective conversion price of the Convertible Note on the date of issuance was below the fair market value of the underlying common stock, the Company will record debt discount based on the intrinsic value of the beneficial conversion feature of the Convertible Note. In accordance with ASC 815-40, the debt discount as a result of the beneficial conversion feature of the Convertible Note will be amortized as non-cash interest expense over the term of the debt using the effective interest method




Effective May 9, 2011, the Company entered into a Convertible Promissory Note Agreement (“Convertible Note”), consisting of a $30,000 convertible promissory note bearing interest at 8% per annum, due May 9, 2012 and of which the holder of shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Convertible Promissory Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, to convert all or any part of the outstanding and unpaid principal amount of this Convertible Note into shares of the Company’s Common Stock at a conversion price representing a discount rate of 42% of the then going Market Price which shall be defined as the average of the lowest three (3) Trading Prices for the Company’s Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the holder of this Convertible Note to the Company. Total due including interest as of June 30, 2011 and December 31, 2010 was  is $32,876 and none, respectively.


-19-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)


As the effective conversion price of the Convertible Note on the date of issuance was below the fair market value of the underlying common stock, the Company will record debt discount based on the intrinsic value of the beneficial conversion feature of the Convertible Note. In accordance with ASC 815-40, the debt discount as a result of the beneficial conversion feature of the Convertible Note will be amortized as non-cash interest expense over the term of the debt using the effective interest method.




Effective June 17, 2011, the Company entered into a Convertible Promissory Note Agreement (“Convertible Note”), consisting of a $30,000 convertible promissory note bearing interest at 8% per annum, due June 17, 2012 and of which the holder of shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Convertible Promissory Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, to convert all or any part of the outstanding and unpaid principal amount of this Convertible Note into shares of the Company’s Common Stock at a conversion price representing a discount rate of 42% of the then going Market Price which shall be defined as the average of the lowest three (3) Trading Prices for the Company’s Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the holder of this Convertible Note to the Company. Total due including interest as of June 30, 2011 and December 31, 2010 was  is $32,659 and none, respectively.




As the effective conversion price of the Convertible Note on the date of issuance was below the fair market value of the underlying common stock, the Company will record debt discount based on the intrinsic value of the beneficial conversion feature of the Convertible Note. In accordance with ASC 815-40, the debt discount as a result of the beneficial conversion feature of the Convertible Note will be amortized as non-cash interest expense over the term of the debt using the effective interest method.




NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS




The Company measures fair value in accordance with a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy are described below:




Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;Level 2
Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; andLevel 3
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).




The following table sets forth the Company’s financial assets and liabilities measured at fair value by






level within the fair value hierarchy.  Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.




The table below sets forth a summary of the fair values of the Company’s financial assets and liabilities as of June 30, 2011:




Total


Level 1


Level 2


Level 3LIABILITIES:Conversion option liabilities

$
67,757


$
-


$
-


$
67,757$
67,757


$
-


$
-


$
67,757




The table below sets forth a summary of the fair values of the Company’s financial assets and liabilities as of December 31, 2010:




Total


Level 1


Level 2


Level 3LIABILITIES:Conversion option liabilities

$
20,211


$
-


$
-


$
20,212$
20,212


$
-


$
-


$
20,212




-20-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)




The Company’s conversion option liabilities are valued using pricing models and the Company generally uses similar models to value similar instruments.  Where possible, the Company verifies the values produced by its pricing models to market prices.  Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility and correlations of such inputs.  These financial liabilities do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment.  Such instruments are typically classified within Level 3 of the fair value hierarchy.




NOTE 9. ADVANCE FROM RELATED PARTY




As of June 30, 2011 and December 31, 2010, an advance payable of $90,573 was due to Brian Hebb, a related party.




NOTE 10. INCOME TAXES




The Company adopted ASC Topic 740, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns.  Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.




For income tax reporting purposes, the Company’s aggregate unused net operating losses approximate $9,592,000, which expire in various years through 2030, subject to limitations of Section 382 of the Internal Revenue Code, as amended.  The Company has provided a valuation reserve against the full amount of the net operating loss benefit, because in the opinion of management based upon the earning history of the Company, it is more likely than not that the benefits will not be realized.




Under the Tax Reform Act of 1986, the benefits from net operating losses carried forward may be impaired or limited on certain circumstances.  Events which may cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, cumulative ownership changes of more than 50% over a three-year period.  The impact of any limitations that may be imposed for future issuances of equity securities, including issuances with respect to acquisitions have not been determined.





The provision (benefit) for income taxes from continued operations for the years ended December 31, 2010 and quarter ended June 30, 2011, consist of the following:




Current:

June 30, 2011


December 31, 2010Federal

$
-


$
-State


-



-Deferred:Federal

$
343,741


$
5,206State


53,211



-396,952



5,206Change in valuation allowance


(396,952
)


(5,206
)Provision for income taxes, net

$
-


$
-




-21-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)


The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows:


June 30, 2011


December 31, 2010Statutory federal income tax rate


34.00
%


34.00
%State income taxes and other


5.50
%


5.50
%Valuation allowance


(39.50)



(39.50)
%Effective tax rate


-0-
%


-0-
%




Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following:




JUNE 30, 2011


DECEMBER 31, 2010Net operating loss carryforward


9,592,000



8,527,438Valuation allowance


(9,592,000)



(8,527,438)Deferred income tax asset


-



-




The Company has a net operating loss carry forward of approximately $9,592,000 available to offset future taxable income through 2030.




NOTE 11. EQUITY
  As of June 30, 2011, we were authorized to issue 450,000,000 shares of common stock,  $0.001 par value and 10,000,000 shares of preferred stock, $0.001 par value. The Common stock is divided into two class. The common stock of the Company was divided into two classes of common stock and designated 250,000,000 shares to the Class A common stock and 200,000,000 shares to the Class B common stock.
  Common Stock
  On December 18, 1998, we amended and restated our Articles of Incorporation, to increase our authorized capitalization from two thousand five hundred (2,500) common stock to twenty five million (25,000,000) common stock. The no par value was changed to $0.001 per share.
 
 On December 18, 1998, our shareholders approved a forward split of our common stock at the ratio of one thousand (1,000) shares for every one (1) share of the existing shares. The number of common stock outstanding increased from one thousand eight hundred and sixty (1,860) to one million eight hundred sixty thousand (1,860,000). Prior period information has been restated to reflect the stock split, on a retroactive basis.
  On July 14, 2006, our shareholders declared a five and one half (5.5) share dividend for each one share of the issued and outstanding shares. The record date was July 28, 2006; payable July 31, 2006. The number of common stock outstanding increased from 320,000 to 2,015,000.  Prior period information has been restated to reflect the stock dividend on a retroactive basis. 
 -22-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)
   On April 28, 2010, pursuant to Section 78.315 of the Nevada Revised Statutes (the “NRS”) and subject to stockholder approval, which approval was attained by written consent in lieu of a meeting of stockholders, pursuant to Section 78.320 of the NRS, from the holder of 8,515,000 shares of our Common Stock (the “Majority Stockholder”), which represented approximately 70% of the total votes outstanding, our Board of Directors unanimously approved an amendment (the “Amendment”) to our Certificate of Incorporation which became effective on June 1, 2010, to: (i) declare a dividend of our common stock so that each holder of one (1) share of common stock received an additional five (5) shares; and (ii) increase the number of common stock we are authorized to issue from 25,000,000 to 160,000,000 of which 150,000,000 are designated as Common Stock, par value $.001 per share and 10,000,000 are designated as Preferred Stock, par value $.001 per share.
  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.
  Effective June 1, 2010, we amended our Certificate of Incorporation and declared a six (6) share stock split for each one share of the issued and outstanding shares. Total shares to be issued was six to 1. The record date and that date such shares were issued was June 25, 2010.
  On June 17, 2011, the Company amended its Articles of Incorporation, increasing the number of authorized shares of capital stock, par value $0.001, from 160,000,000 shares to 460,000,000, of which 450,000,000 shares were designated as common stock and 10,000,000 shall be designated preferred stock par value $.001 per share.
  The common stock of the Company was divided into two classes of common stock and designated 250,000,000 shares to the Class A common stock and 200,000,000 shares to the Class B common stock. The holders of common stock shall vote together as a class; however, every holder of the outstanding shares of the Class A common stock shall be entitled to cast one (1) vote for each share of Class A common stock held, while every holder of any outstanding shares of the Class B common stock shall be entitled to cast two (2) votes for each share of Class B common stock held. The amendment does not change the number of shares designated as preferred stock or any other provision governing the preferred stock.
  Common Stock Issued
  See Note 4. Chloride Copper Project – Business Combination for a discussion of an Asset Purchase Agreement (the “Purchase Agreement”) entered into by the Company together with Medina Property
  Group LLC, a Florida limited liability company (“Medina”), pursuant to which the Company agreed to purchase 80% of certain assets of Medina known as the Chloride Copper Project and pursuant to which the purchase price consisted of the issuance of 76,500,000 (post-split) and 12,750,000 (pre-split) shares of our common stock, which shares were issued on or about August 9, 2010, to Medina and certain of its designees.  In connection with and pursuant to the terms of the Purchase Agreement, Black Diamond Realty Management, LLC returned 5,348,000 (pre-split) and 32,088,000 (post-split) shares of the Company’s Common Stock, which shares were returned on June 23, 2010 and, as a result, a change of our shareholder voting control occurred. The net shares issued for this transaction was 44,412,000 shares. The Company recorded this issuance at the market value of the stock at that time which was $.16 per share. The net value for this issuance was $7,402,000
  On June 1, 2010, the Company issued Michael Doherty, our former Director, President (Principal Executive Officer), Chief Financial Officer, and Secretary of the Company, 100,000 shares (pre-split) and 600,000 (post-split) shares of the Company’s Common Stock in consideration for his services to the Company which shares of common stock were valued at $0.16 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 and for which the Company recorded a debit to consulting expense in the amount of $100,000.
  Effective June 1, 2010, we amended our Certificate of Incorporation and declared a six share stock split for each one share of the issued and outstanding shares. Total shares issued was six shares of common shares issued to 1 common share held at the time of the split. The record date, and that date shares were issued, was June 25, 2010. The number of common stock outstanding increased to 117,552,000 as of December 31, 2010.
 -23-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)
  At August 23, 2010, the Company entered into a subscription agreement with an investor in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended.  The Company issued and sold to the investor an aggregate of 300,000 shares of its common stock.  This issuance resulted in aggregate gross proceeds to the Company of $75,000. At June 30, 2011 and December 31, 2010 the 300,000 shares of common stock had not yet been issued and accordingly, the Company recorded to the transaction as  subscribed shares not issued.
  On January 13, 2011 the Company issued Patrick Champney, our 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 Company recorded compensation expense based on the market trading value of the shares on the date of issuance.
  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 Company recorded professional expenses, which was based on the market trading value of the shares on the date of issuance.
  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 Company recorded professional expenses based on the market trading value of the shares on the date of issuance.
  On January 24, 2011 the Company issued Cella Lange and Cella LLP an attorney for the Company, 200,000 shares of the Company’s Common Stock in consideration for their services to the Company.  The Company recorded professional expenses based on the market trading value of the shares on the date of issuance.
  On January 24, 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 Company recorded professional expenses based on the market trading value of the shares on the date of issuance
  On April 18, 2011 the Company issued Eduardo Munoz an 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 based on the market trading value of the shares on the date of issuance.
  On May 12, June 6, and June 28, 2011 the Company issued Asher Enterprises a total of 10,163,877 shares of the Company’s Common stock.  The stock was issued in exchange for the conversion of notes payable issued June 2011. The note had a balance due of $55,000 at the time of conversion. See Note 7 for further information on convertible notes. Terms of the conversion were as follows:
  The holder of shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Convertible Promissory Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, to convert all or any part of the outstanding and unpaid principal amount of this Convertible Note into shares of the Company’s Common Stock at a conversion price representing a discount rate of 42% of the then going Market Price which shall be defined as the average of the lowest three (3) Trading Prices for the Company’s Common Stock during the ten (10) Trading Day period ending one Trading
  Day prior to the date the Conversion Notice is sent by the holder of this Convertible Note to the Company.
  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 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 based on the market trading value of the shares on the date of issuance.
 -24-
 SIERRA RESOURCE GROUP, INC.
 (An Exploration Stage Company)
 NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
 (UNAUDITED)
  The Company current has two classes of common stock. Class A consists of  250,000,000 shares of the common stock authorized and has 130, 295,877 outstanding at June 30, 2011. The other is Class B of which  200,000,000 shares are authorized and zero are outstanding at June 30.
  Preferred Stock
  Prior to the effectiveness of the Amendment to our Articles of Incorporation, we were not authorized to issue preferred stock. We are now authorized to issue 10,000,000 shares of Preferred Stock, with a par value of $0.001 per share, which may be issued from time to time in one or more series by our Board of Directors.  There were no preferred shares outstanding as of the date of this report.  We anticipate that all authorized Preferred Stock will be issued to Harmony Mining S.A. pursuant to the Copper Cathode Sale and Purchase Agreement.
  The above-described transaction has not yet closed and, while the Company remains optimistic that the agreement will be consummated in accordance with its terms, there has been a substantial delay and there is no assurance. The Company is exploring other financing sources while awaiting further developments with Harmony.
  Shares Subscribed, Not 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, 2010 the 300,000 shares of common stock had not yet been issued and accordingly, the Company recorded a credit to subscribed shares.
  Following is a summary of the subscribed share activity:
  Cash


TotalBalance at December 31, 2010

$
300,000


$
300,000Shares subscribed


--



--Issuance of subscribed sharesBalance at June 30, 2011

$
300,000


$
300,000
  We have not granted or issued warrants or options, which would entitle the holder to acquire shares of our common stock.
  Copper Cathode Sale and Purchase Agreement
  The Company entered into that certain Copper Cathode Sale and Purchase Agreement with Harmony Mining SA, a copy is Exhibit 10.1 to the Company’s Definitive Schedule 14A, filed April 11, 2011.
  The above-described transaction has not yet closed and, while the Company remains optimistic that the agreement will be consummated in accordance with its terms, there has been a substantial delay and there is no assurance. The Company is exploring other financing sources while awaiting further developments with Harmony.


-25-




Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations




The following discussion and analysis should be read in conjunction with our condensed financial statements and related notes thereto included elsewhere in this quarterly report. Portions of this document that are not statements of historical or current fact are forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this quarterly report should be read as applying to all related forward-looking statements wherever they appear in this quarterly report.  From time to time, we may publish forward-looking statements relative to such matters as anticipated financial performance, business prospect, and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. All statements other than statements of historical fact included in this section or elsewhere in this report are, or may be deemed to be, 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. Important factors that could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to, the following: changes in the economy; changes in operating expenses; the effect of commodity price increases or decreases; the variability and timing of business opportunities including acquisitions, alliances; our ability to realize the anticipated benefits of acquisitions and other business strategies; the incurrence of debt and contingent liabilities in connection with acquisitions; changes in accounting policies and practices; the effect of organizational changes within the Company, adverse state and federal regulation and legislation; and the occurrence of extraordinary events, including natural events and acts of God, fires, floods and accidents.




Forward-looking statements involve risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results and achievements and cause them to materially differ from those contained in the forward-looking statements include those identified in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the period ended December 31, 2010, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.




In addition, the foregoing factors may affect generally our business, results of operations and financial position. Forward-looking statements speak only as of the date the statement was made. We do not undertake and specifically decline any obligation to update any forward-looking statements.




Overview




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.




As recently announced, the Company has entered into the Copper Cathode Sale and Purchase Agreement that we anticipate will enable the Company to commence operations at the Chloride Copper Mine, in which our Company has an 80% interest, and to begin production and sale of copper cathode as follows:




(a)
The Company will agree to sell the maximum 1-year capacity if the Chloride Copper Mine (approximately 5,040,000 lbs. of copper cathode) at a discount to the current market price of copper, with delivery to begin no later than 3 months from the date that all mining permits and licenses have been granted to the Company.




(b)
The Company will receive assistance in monetizing the agreement through a guaranty by the purchaser of the copper cathode of a bank credit line of a minimum of $6,000,000. The terms of the credit line have not yet been negotiated.




The Agreement includes the issuance of substantial new Company securities, including preferred and a new Class B Common Stock, with resulting significant dilution for our shareholders.  The Company believes the transaction provides a potentially significant opportunity that we anticipate will allow for the development of the Chloride Copper Mine and the platform for future acquisitions.  For a full discussion of the transaction, please see our Definitive Schedule 14A filed with the Securities and Exchange Commission, April 11, 2011, Exhibit 10.1.




While can be no assurance the above transaction will be carried out as planned, we anticipate that the Company may soon be able to move forward with its development of the Chloride Copper Mine and accelerate its strategy to acquire other mining prospects.




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




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.




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 reliability 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 three months ended June 30, 2011 and the three months ended June 30, 2010, we had a net loss of approximately $560,124 and $117,627, respectively. The decrease in loss is mainly the result of expenses related to the costs of operating as a public entity. $27,000 of the costs was stock issued to professionals for services rendered and an additional $197,605 is interest expense related to the issuance and subsequent conversion of convertible notes, $65,000 is for the amortization of derivative liabilities in relation to issuance of convertible notes and $50,000 is for payroll in the quarter.




For the six months ended June 30, 2011 and the six months ended June 30, 2010, we had a net loss of approximately $1,064,213 and $117,642, respectively. The increase in loss is mainly the result of expenses related to the costs of operating as a public entity. $712,034 of the costs was stock issued to professionals for services rendered and an additional $204,449 is interest expense related to the issuance and subsequent conversion of convertible notes.




Liquidity and Capital Resources




We had working capital deficit of approximately $1,050,662 and $938,348 at June 30, 2011 and December 31, 2010, respectively.




The Company believes the financing envisioned by the Copper Cathode Sale and Purchase Agreement may enable it to adequately finance the development of the mine and allow for the furtherance of its growth strategy.  There can be no assurance, however, that this financing or any alternative financing will be obtained.  Absent obtaining financing, there is substantial doubt about our ability to continue as a going concern.




Total Assets were approximately $12,803 at June 30, 2011 compared to $23,431 at December 31, 2010.  The decrease in total assets is exclusively attributed to funds used for working capital during the first quarter related to professional fees of a public company.




Selling, general and administrative expenses for the three months ended June 30, 2011 were $300,963 which are comprised of $39,575 for payroll and labor expenses related to obligation to our current and former CEO and expenses related to our Securities and Exchange Commission filing requirements and $290,000 in professional expenses as a result of stock issuance.




Selling, general and administrative expenses for the six months ended June 30, 2011 were $794,722 which are comprised of $163,000 for payroll and labor expenses related to obligation to our current and former CEO and expenses related to our Securities and Exchange Commission filing requirements and $560,000 in professional expenses as a result of stock issuance.




Interest Expense for the three months ended June 30, 2011 and 2010 was $197,605 and $37,500. Increase to due to $197,605 of interest expense related to the issuance and subsequent conversion of convertible notes




Interest Expense for the six months ended June 30, 2011 and 2010 was $204,449 and $37,500. Increase to due to $204,449 of interest expense related to the issuance and subsequent conversion 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 June 30, 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.




WHERE YOU CAN FIND MORE INFORMATION




You are advised to read this Quarterly Report on Form 10-Q in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q, Annual Report on Form 10-K, and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.




Item 3. Quantitative and Qualitative Disclosures About Market Risk.




We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.




Item 4. 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 condensed 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 June 30, 2011 . There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.




(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 quarter ended June 30, 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.




-26-


PART II




Item 1. Legal Proceedings.




We may be subject to legal proceedings from time to time in the ordinary course of our business.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.




Item 1A. Risk Factors.




You should carefully consider the following risk factors together with the other information contained in this Interim Report on Form 10-Q, 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 minimal 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 ever being profitable is remote, 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:




·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.




The probability of an individual prospect ever having reserves that can be mined at a profit is remote. Accordingly, 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, and in such case any funds spent on exploration activities will probably be lost, which may result in a loss of part of or your entire 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.


-27-


Development of the Chloride Copper Projectwill 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. We have not 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·Any one or a combination of these factors may negatively affect the relative certainty or uncertainty of geological reports or reserve estimates.




Our Business depends upon the continued involvement of our Existing Management.




The loss, individually or cumulatively, of Messrs. Stonehouse or Champney may adversely affect our business, prospects, and our ability to successfully conduct our exploration activities. We rely solely upon Messrs, Stonehouse and Champney’s judgment regarding our exploration activities, including whether to acquire, lease, or stake any potential properties and/or mineral interests. 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 originally 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.


-28-




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. Our ability to sustain or increase our current level of production of metals partly depends on our ability to develop new ore bodies and/or expand existing mining operations. 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.




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.


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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 joint development and operating arrangements may be unsuccessful.




We may enter into joint venture arrangements in order to share the risks and costs of developing and operating properties. In a typical joint venture arrangement, the partners own a proportionate share of the assets, are entitled to indemnification from each other and are only responsible for any future liabilities in proportion to their interest in the joint venture. If a party fails to perform its obligations under a joint venture agreement, we could incur liabilities and losses in excess of our pro-rata share of the joint venture. Accordingly, we may make investments in exploration and development projects that may have to be written off in the event we do not proceed to a commercially viable mining operation.




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 our contracted smelters becomes unavailable, our operations could be adversely affected.


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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.




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.




Our financial condition raises substantial doubt about our ability to continue as a going concern.




We have an accumulated deficit of $9,031,527 as of June 30, 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 with no present financing source identified; 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.


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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 so, 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.


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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.





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 and agreements with our directors and officers 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 or officers 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 OTCBB Instead Of An Exchange Or National Quotation System, Our Investors May Have A Tougher Time Selling Their Stock Or Experience Negative Volatility On The Market Price Of Our Stock.




Our common stock 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.





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.





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, implement and maintain 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.


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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 condensed 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 condensed 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 audit, nominating, or compensation committee, shareholders will have to rely on our board of directors, not all of which are independent, to perform these functions.




We do not have an audit, 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 shareholders or the Company.




Our Board Of Directors has the Ability to Issue Preferred Stock and Determine the Rights, Preferences, Privileges and Restrictions as May Be Set by the Board Without Shareholder Approval Which may Dilute your percentage of ownership of our common stock and Prevent a Change of our Control.




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.


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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.




We did not sell unregistered securities during the period covered by this report, except for the following issuances:




See Note 4 of the unaudited Condensed financial statements, Chloride Copper Project, for a discussion of an Asset Purchase Agreement (the “Purchase Agreement”) entered into by the Company together with Medina Property Group LLC, a Florida limited liability company (“Medina”), pursuant to which the Company agreed to purchase 80% of certain assets of Medina known as the Chloride Copper Project and pursuant to which the purchase price consisted of the issuance of 12,750,000 shares of our common stock by the Company to Medina and its assignees, which shares were issued on August 9, 2010.  In connection with and pursuant to the terms of the Purchase Agreement, Black Diamond Realty Management, LLC returned 5,348,000 shares of the Company’s Common Stock, which shares were returned on June 23, 2010. The 12,750,000 shares issued pursuant to the Purchase Agreement to Medina represented approximately 65% of our common stock shares outstanding upon issuance and, as a result, a change of our shareholder voting control occurred.




On June 1, 2010, the Company issued Michael Doherty, our former Director, President (Principal Executive Officer), Chief Financial Officer, and Secretary of the Company, 100,000 shares of the Company’s Common Stock in consideration for his services to the Company.




On January 13, 2011 the Company issued Patrick Champney, our 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 Company recorded compensation expense, which was based on the market trading value of the shares on the date of issuance.




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 Company recorded professional expenses, which was based on the market trading value of the shares on the date of issuance.




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 Company recorded professional expenses, which was based on the market trading value of the shares on the date of issuance.




On January 24, 2011 the Company issued Cella Lange and Cella LLP an attorney for the Company, 200,000 shares of the Company’s Common Stock in consideration for their services to the Company.  The Company recorded professional expenses, which was based on the market trading value of the shares on the date of issuance.




On January 24, 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 Company recorded professional expenses which was based on the market trading value of the shares on the date of issuance




On April 18, 2011 the Company issued Eduardo Munoz an 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 based on the market trading value of the shares on the date of issuance.




On May 12, June 6, and June 28, 2011 the Company issued Asher Enterprises a total of 10,163,877 shares of the Company’s Common stock.  The stock was issued in exchange for the conversion of notes payable issued June 2011. The note had a balance due of $55,000 at the time of conversion. See Note 7 for further information on convertible notes. Terms of the conversion were as follows:




The holder of shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of the Convertible Promissory Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, to convert all or any part of the outstanding and unpaid principal amount of this Convertible Note into shares of the Company’s Common Stock at a conversion price representing a discount rate of 42% of the then going Market Price which shall be defined as the average of the lowest three (3) Trading Prices for the Company’s Common Stock during the ten (10) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the holder of this Convertible Note to the Company.


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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 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 based on the market trading value of the shares on the date of issuance.




The above offerings and sale was made in reliance upon the exemption from registration under Rule 506 of Regulation D promulgated under the Securities Act of 1933 and/or Section 4(2) of the Securities Act of 1933, based on the following: (a) the investors confirmed to us that they were “accredited investors,” as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933 and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our Company; (d) the investors acknowledged that all securities being purchased were “restricted securities” for purposes of the Securities Act of 1933, and agreed to transfer such securities only in a transaction registered under the Securities Act of 1933 or exempt from registration under the Securities Act; and (e) a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act of 1933or transferred in a transaction exempt from registration under the Securities Act of 1933.




Item 3.  Defaults Upon Senior Securities.




We are not in default in the payment of principal, interest, asking or purchase fund installment or other default with respect to any indebtedness.




Item 4.  Removed and Reserved




Item 5.  Other Information.




Item 6.  Exhibits






Number

Description31.01*

Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act31.02*

Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act32.01*

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 Code32.02*

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*

Filed herewith.




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SIGNATURES






Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.






SIERRA RESOURCE GROUP, INC.Date:  August 18, 2011
By:
/s/ Patrick ChampneyPatrick ChampneyPresident, Chief Executive Officer and

DirectorSIERRA RESOURCE GROUP, INC.Date:  August 18, 2011
By:
/s/ Brad HackerBrad HackerChief Financial Officer







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