10-Q 1 f51112210q.htm FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012 f51112210q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
 (Mark One)
 
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012
 
OR
 
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE TRANSITION PERIOD FROM __________ TO __________.

COMMISSION FILE NUMBER   333-143512
 

TARA MINERALS CORP.
(Exact Name of Registrant as Specified in its Charter)

 Nevada
  
20-5000381 
(State or other jurisdiction of
  
 (I.R.S. Employer
incorporation or organization)
  
Identification No.)
     
375 N. Stephanie St. Bldg. 2 Ste. #211
    
Henderson, NV
  
89014
(Address of principal executive offices)
  
  (Zip code)
     
(888) 901-4550
    
(Registrant's telephone number, including area code)
    


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ    No o

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  þ    No o

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 Large accelerated filer o
Accelerated filer o
Non-accelerated filer o
Smaller reporting company þ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o   No þ
 
As of May14, 2012, the Company had 67,492,435 outstanding shares common stock.
 
 
1
 
 
 
 
 
 
 
 
 
 
PART I - FINANCIAL INFORMATION



 
TARA MINERALS CORP. AND SUBSIDIARIES
(A Subsidiary of Tara Gold Resources Corp.)
(An Exploration Stage Company)

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
AND
THE PERIOD FROM INCEPTION (MAY 12, 2006) THROUGH MARCH 31, 2012
 
 
 
 
 
 
TARA MINERALS CORP. AND SUBSIDIARIES
(A Subsidiary of Tara Gold Resources Corp.)
(An Exploration Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS

   
March 31,
 2012
    
December 31,
 2011
  
   
(Unaudited)
        
Assets
            
Current assets:
            
Cash
  
$
68,453
    
$
365,587
  
Other receivables, net
    
346,067
      
341,950
  
Deferred tax asset, current portion
    
4,041,000
      
4,041,000
  
Prepaid Assets
    
105,000
      
116,500
  
Assets available for sale, net
    
1,464,250
      
-
  
Total current assets
    
6,024,770
      
4,865,037
  
Property, plant, equipment, mine development and land, net
    
5,449,967
      
6,948,187
  
Mining deposits
    
27,336
      
28,880
  
Deferred tax asset, non-current portion
    
2,475,000
      
2,475,000
  
Goodwill
    
-
      
12,028
  
Other assets
    
260,265
      
207,752
  
Total assets
  
$
14,237,338
    
$
14,536,884
  
                 
Liabilities and Stockholders’ Equity
                
Current liabilities:
                
Accounts payable and accrued expenses
  
$
1,547,931
    
$
1,282,856
  
Notes payable, current portion
    
442,082
      
419,977
  
Notes payable related party
    
100,000
      
100,000
  
Due to related parties, net of due from
    
2,368,491
      
2,380,403
  
Total current liabilities
    
4,458,504
      
4,183,236
  
Notes payable, non-current portion
    
65,641
      
68,974
  
Total liabilities
    
4,524,145
      
4,252,210
  
                 
Iron Ore Properties financial instrument, net
    
570,000
      
570,000
  
                 
Stockholders’ equity:
                
Common stock: $0.001 par value; authorized 200,000,000 shares; issued and
outstanding 66,713,435 and 66,713,435 shares
    
66,713
      
66,713
  
Additional paid-in capital
    
      30,930,613
      
30,930,613
  
Technical data paid with common stock
    
1,432,805
      
1,432,805
  
Common stock payable
    
347,000
      
-
  
Accumulated deficit during exploration stage
    
(26,151,266
)
    
(25,333,453
) 
Accumulated other comprehensive loss
    
(296,120
)
    
(209,217
) 
Total Tara Minerals stockholders’ equity
    
6,329,745
      
6,887,461
  
Non-controlling interest
    
2,813,448
      
2,827,213
  
Total stockholders’ equity
    
9,143,193
      
9,714,674
  
Total liabilities and stockholders’ equity
  
$
14,237,338
    
$
14,536,884
  
 
See Accompanying Notes to these Condensed Consolidated Financial Statements.
 
 
TARA MINERALS CORP. AND SUBSIDIARIES
(A Subsidiary of Tara Gold Resources Corp.)
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND
COMPREHENSIVE LOSS
(UNAUDITED)
   
For the Three
Months Ended
March 31, 2012
    
For the Three
Months Ended
March 31, 2011
    
From Inception
(May 12, 2006)
Through
March 31, 2012
  
         
(Restated)
        
Mining revenues
   $ -     $ -     $ 160,421  
Cost of revenue
     -       -       658,007  
       Gross margin
     -       -       (497,586 )
Exploration expenses
     144,661       1,930,319       5,517,396  
Operating, general, and administrative expenses
     633,276       695,487       25,229,138  
Net operating loss
     (777,937 )     (2,625,806 )     (31,244,120 )
                         
Non-operating (income)  expense:
                        
       Interest income
     (6,517 )     (6,551 )     (168,606 )
       Interest expense
     4,836       5,309       2,121,825  
       Loss on debt due to extinguishment and conversion
     -       -       776,952  
       Loss on disposal or sale of assets
     -       4,260       4,260  
       Gain on dissolution of joint venture
     -       -       (100,000 )
       Other income
     -       (11,091 )     (800,373 )
       Total non-operating (income) loss
     (1,681 )     (8,073 )      1,834,058  
Loss before income taxes
     (776,256 )     (2,617,733 )     (33,078,178 )
        Income tax benefit
     -       -       (6,516,000 )
Loss from continuing operations
     (776,256 )     (2,617,733 )     (26,562,178 )
Discontinued operations:
                        
Loss from operations of American Copper Mining
     (55,322 )     -       (55,322 )
Net loss
     (831,578 )     (2,617,733 )     (26,617,500 )
        Add: Net loss attributable to non-controlling interest
     13,765       6,370       466,234  
Net loss attributable to Tara Minerals’ shareholders
     (817,813 )     (2,611,363 )     (26,151,266 )
                         
Other comprehensive loss:
                        
     Foreign currency translation
     (86,903 )     (35,387 )     (296,120 )
Total comprehensive loss
   $ (904,716 )   $ (2,646,750 )   $ (26,447,386 )
                         
Net loss per share, basic and diluted
   $ (0.01 )   $ (0.05 )        
                         
Weighted average number of shares, basic and diluted
     66,713,435       57,547,213          

See Accompanying Notes to these Condensed Consolidated Financial Statements.
 
 
TARA MINERALS CORP. AND SUBSIDIARIES
(A Subsidiary of Tara Gold Resources Corp.)
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
   
For the Three
Months Ended
March 31, 2012
    
For the Three
Months Ended
March 31, 2011
    
From Inception
(May 12, 2006)
Through
March 31, 2012
  
         
(Restated)
        
Cash flows from operating activities:
                  
   Net loss attributable to Tara Minerals’ shareholders
   $ (817,813 )   $ (2,611,363 )   $ (26,151,266 )
   Adjustments to reconcile net loss to net cash:
                        
      Depreciation and amortization
     70,425       70,079       645,240  
      Allowance for doubtful accounts
     122,129       (115,366 )      1,954,324  
      Stock based compensation and stock bonuses
     -       219,088       8,464,942  
      Common stock issued for services and other expenses
     -       -       5,789,134  
      Cancellation of shares for settlement
     -       -       (750,000 )
      Non-controlling interest in net loss of consolidated subsidiaries
     (13,765 )     (6,370 )     (466,224 )
      Non-controlling interest - stock issued to third parties of subsidiaries
     -       -       671,028  
      Accretion of beneficial conversion feature and debt discount
     -       -       1,983,575  
      Exploration expenses paid with parent and subsidiary common stock
     -       1,752,000       3,716,365  
      Loss on debt due to extinguishment and conversion
     -       -       776,952  
      Accrued interest converted to common stock
     -       -       84,438  
      Deferred tax asset, net
     -       -       (6,516,000 )
      Loss from operations of American Copper Mining
     55,322       -       55,322  
      Gain on dissolution of joint venture
     -       -       (100,000 )
      Other
     10,646       16,467       93,113  
   Changes in operating assets and liabilities:
                        
      Recoverable value-added taxes
     (150,768 )     (73,760 )     (1,236,260 )
      Other receivables
     (16,429 )     (8,823 )     (170,273 )
      Prepaid expenses
     11,500       -       (105,000 )
      Other assets
     (63,993 )     83,841       (156,746 )
      Accounts payable and accrued expenses
     284,099       78,089       1,593,748  
   Net cash used in operating activities
     (508,647 )     (596,118 )     (9,823,588 )
Cash flows from investing activities:
                        
   Acquisition of property, plant and equipment
     (790 )     (6,094 )     (2,645,973 )
   Purchase of mining concession
     -       -       (860,231 )
   Payments made for mining deposits
     1,544       -       (211,512 )
   Proceeds from the sale or disposal of assets
     -       29,394       30,672  
   Assets available for sale, net
     (222,258 )     -       (222,258 )
   Other
     -       -       (1,721 )
Net cash (used in) provided by investing activities
     (221,504 )     23,300       (3,911,023 )
Cash flows from financing activities:
                        
   Cash from the sale of common stock
     -       50,000       9,706,332  
   Proceeds from notes payable, related party
     -       -       150,000  
   Proceeds from notes payable
     -       -       480,000  
   Payments towards notes payable
     -       (61,403 )     (1,315,502 )
   Payment towards equipment financing
     -       -       (201,438 )
   Change in due to/from related parties, net
     172,920       (127,405 )      1,926,891  
   Common stock payable
     347,000       212,744       134,256  
   Payments from joint venture partners
     -       -       100,000  
   Non-controlling interest – cash from the sale of common stock of
subsidiaries
     -       500,000       2,368,645  
   Iron Ore Properties financial instrument
     -       -       750,000  
Net cash provided by financing activities
     519,920       573,936       14,099,184  
                         
Effect of exchange rate changes on cash
    
(86,903
) 
    
(35,387
)
    
(296,120
)
Net (decrease) increase
    
(297,134
) 
    
(34,269
)
    
68,453
  
Cash, beginning of period
    
365,587
      
157,579
      
-
  
Cash, end of period
  
$
68,453
    
$
123,310
    
$
68,453
  

 
Supplemental Information:
                        
   Interest paid
  
$
3,211
    
$
34
    
$
286,665
  
   Income taxes paid
  
$
-
    
$
10,565
    
$
10,565
  
                         
Non-cash Investing and Financing Transactions:
                        
                         
Purchase of mining concession paid by debt to related party plus
capitalized interest
  
$
-
    
$
-
    
$
1,445,448
  
Purchase of or (reduction) in purchase of concession paid with
notes payable plus capitalized interest
  
$
-
    
$
(1,310,974
)
  
$
1,422,144
  
Recoverable value-added taxes incurred through additional debt
and due to related party, net of mining concession modification
  
$
-
    
$
(218,502
)
  
$
1,753,293
  
Beneficial conversion value for convertible debt
  
$
-
    
$
-
    
$
1,695,000
  
Beneficial conversion feature on financial instrument
  
$
-
    
$
-
    
$
180,000
  
Conversion of debt to common stock, plus accrued interest
  
$
-
    
$
-
    
$
2,309,438
  
Purchase of property and equipment through debt and common stock
  
$
-
    
$
-
    
$
1,298,051
  
Issuance of common stock for Tara Gold Payable
  
$
-
    
$
-
    
$
100,000
  
Security deposits reclassified to other receivables
  
$
1,768
    
$
-
    
$
1,768
  
American Copper Mining assets, net of liabilities reclassified to assets
available for sale
  
$
1,297,314
    
$
-
    
$
1,297,314
  
 
See Accompanying Notes to these Condensed Consolidated Financial Statements.
 
 
 
 
 
 
 
TARA MINERALS CORP. AND SUBSIDIARIES
(A Subsidiary of Tara Gold Resources Corp.)
(An Exploration Stage Company)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 1.   Nature of Business and Significant Accounting Policies
 
Nature of business and principles of consolidation:

The accompanying Condensed Consolidated Financial Statements of Tara Minerals Corp. (the “Company”) should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. Significant accounting policies disclosed therein have not changed, except as noted below.

Tara Minerals owns 99.9% of the common stock of American Metal Mining S.A. de C.V. (“AMM”), a Mexican corporation.  Tara Minerals also owns 85% of the common stock of Adit Resources Corp. (“Adit”). Tara Minerals’ operations in Mexico are conducted through AMM since Mexican law provides that only Mexican corporations are allowed to own mining properties.  American Metal Mining’s primary focus is on industrial minerals, e.g. copper, zinc.

On April 4, 2012 Adit sold its subsidiary American Copper Mining S.A. de C.V. (“ACM”) to Yamana Mexico Holdings B.V. (“Yamana”). ACM’s primary asset is the Picacho groupings.

The Company currently has limited operations and, in accordance with the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Development Stage Entities Topic, is considered an Exploration Stage Company.

In this filing references to "Company," "we," "our," and/or "us," refers to Tara Minerals and, unless the context indicates otherwise, its consolidated subsidiaries.

Tara Minerals is a subsidiary of Tara Gold Resources Corp. (“Tara Gold” or “the Company’s Parent”).

The accompanying Condensed Consolidated Financial Statements and the related footnote information are unaudited.  In the opinion of management, they include all normal recurring adjustments necessary for a fair presentation of the condensed consolidated balance sheets of the Company as of March 31, 2012 and December 31, 2011, the condensed consolidated results of its operations for the three months ended March 31, 2012 and 2011 and the condensed consolidated statements of cash flows for the three months ended March 31, 2012 and 2011. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. All intercompany balances and transactions have been eliminated in consolidation.

The reporting currency of the Company and Adit is the U.S. dollar.  The functional currency of AMM and ACM is the Mexican Peso. As a result, the financial statements of the subsidiaries have been re-measured from Mexican pesos into U.S. dollars using (i) current exchange rates for monetary asset and liability accounts, (ii) historical exchange rates for non-monetary asset and liability accounts, (iii) historical exchange rates for revenues and expenses associated with non-monetary assets and liabilities and (iv) the weighted average exchange rate of the reporting period for all other revenues and expenses. In addition, foreign currency transaction gains and losses resulting from U.S. dollar denominated transactions are eliminated. The resulting re-measurement loss is recorded to accumulated other comprehensive income (loss).

Current and historical exchange rates are not indicative of what future exchange rates will be and should not be construed as such.

Relevant exchange rates used in the preparation of the financial statements for the AMM and ACM are as follows for the three months ended March 31, 2012 and 2011.  Mexican pesos per one U.S. dollar.

 
March 31, 2012
Current exchange rate
Ps.     
 12.8489
Weighted average exchange rate for the three months ended
Ps.     
 13.0087
 
 
March 31, 2011
Current exchange rate
Ps.     
 11.9219
Weighted average exchange rate for the three months ended
Ps.     
 12.0782


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.

Reclassifications

Certain reclassifications, which have no effect on net loss, have been made in the prior period financial statements to conform to the current presentation.

Recoverable Value-Added Taxes (IVA) and Allowance for Doubtful Accounts

Impuesto al Valor Agregado taxes (IVA) are recoverable value-added taxes charged by the Mexican government on goods sold and services rendered at a rate of 16%.  Under certain circumstances, these taxes are recoverable by filing a tax return and as determined by the Mexican taxing authority.

Each period, receivables are reviewed for collectability.  When a receivable is determined to not be collectable we allow for the receivable until we are either assured of collection or assured that a write-off is necessary.  Our allowance in association with our receivable from IVA from our Mexico subsidiaries is based on our determination that the Mexican government may not allow the complete refund of these taxes.

   
March 31, 2012
(Unaudited)
    
December 31, 2011
  
             
Allowance – recoverable value-added taxes
   $ 1,155,034     $ 1,211,109  
Allowance - other receivables
     410       377  
Total
   $ 1,155,444     $ 1,211,486  

Recently Adopted and Recently Issued Accounting Guidance

Adopted

In May 2011, the FASB issued an accounting standard update that amends the accounting standard on fair value measurements. The accounting standard update provides for a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. generally accepted accounting principles and International Financial Reporting Standards. The accounting standard update changes certain fair value measurement principles, clarifies the application of existing fair value measurement, and expands the fair value measurement disclosure requirements, particularly for Level 3 fair value measurements. The amendments in this accounting standard update are to be applied prospectively and are effective for interim and annual periods beginning after December 15, 2011.  The adoption of this accounting standard update became effective for the reporting period beginning January 1, 2012.  The adoption of this guidance will not have a material impact on the Company’s financial position, results of operations or cash flows

In June 2011, the FASB issued an accounting standard update which requires the presentation of components of other comprehensive income with the components of net income in either (1) a continuous statement of comprehensive income that contains two sections, net income and other comprehensive income, or (2) two separate but consecutive statements. This accounting standard update eliminates the option to present components of other comprehensive income as part of the statement of shareholders’ equity, and is effective for interim and annual periods beginning after December 15, 2011.   The adoption of this accounting standard update became effective for the reporting period beginning January 1, 2012.  The adoption of this guidance will not have a material impact on the Company’s financial position, results of operations or cash flows.

 
In September 2011, the FASB issued an accounting standard update that amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  The amendments in this accounting standard update are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  The adoption of this accounting standard update became effective for the reporting period beginning January 1, 2012.  The adoption of this guidance will not have a material impact on the Company’s financial position, result of operations or cash flows.

Issued

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.
 
Note 2.   Property, plant, equipment, mine development and land

   
March 31, 2012
    
December 31, 2011
  
   
(Unaudited)
        
             
Land
   $ 19,590     $ 19,590  
                 
Mining concessions:
                
  Pilar
     710,172       710,172  
  Don Roman
     521,739       521,739  
  Las Nuvias
     100,000       100,000  
  Centenario
     635,571       635,571  
  La Palma
     80,000       80,000  
  La Verde
     60,000       60,000  
  Pirita
     250,000       250,000  
  Picacho (a)
     -       1,250,000  
  Picacho Fractions (a)
     -       163,793  
  Las Viboras Dos
     188,094       188,094  
Mining concessions
     2,545,576       3,959,369  
                 
Property, plant and equipment
     3,514,509       3,531,501  
      6,079,675       7,510,460  
Less – accumulated depreciation
     (629,708 )     (562,273 )
    $ 5,449,967     $ 6,948,187  

Pilar, Don Ramon, Las Nuvias, Centenario, La Palma and La Verde properties are geographically located in Mexico and are known as the Don Roman Groupings.

The Picacho and Picacho Fractions are geographically located in Mexico and are known as the Picacho Groupings.

 
a.
Picacho Groupings is owned by ACM and were reclassified to assets available for sale, net at March 31, 2012 (See Note 4).

Other Mining Commitments

Mina El Champinon Iron Ore Project

In September 2011, the Company leased the Mina El Champinon Iron Ore Project (“Champinon”) for royalty payments based on production which gives the Company the right to mine the project for a period of 10 years with an automatic renewal clause.
 
 
Tara Minerals will semi-annually pay the concession owner a royalty of $5, plus any value-added tax, for each tonne of material sold with a minimum of $300,000 in royalty payments every 6 months. The concession owner has been paid $235,345 and $175,000, plus value-added taxes at March 31, 2012 and December 31, 2011, respectively (see Note 3), and will be advanced funds, against the minimum royalty, on a monthly basis. The concession owner granted the Company additional time to pay the remaining $64,655 towards the $300,000 minimum semi-annual royalty advance.

Mina Godinez

In July 2010, Tara Minerals entered into a joint venture agreement whereby third parties would contribute 100% of the mining rights to the concession “Mina Godinez” and Tara Minerals would have the exclusive rights to manage, operate, explore and exploit the concession. This joint venture was terminated January 18, 2012.

Note 3.   Other Assets
 
 
As of March 31, 2012 and December 31, 2011, respectively, the Company had advances of $235,345 and $175,000 toward Champinon (see Note 2) and security deposits of $24,920 and $32,752. During the three months ending March 31, 2012, the Company made an additional advance toward Champinon in the amount of $60,345 and reclassified security deposits for vacated rental properties in Manzanillo, Colima to other receivables until a reimbursement is received.

Note 4.   Assets Available for Sale, Net

On April 4, 2012 Adit sold ACM to Yamana.  ACM’s primary asset is the Picacho groupings (See Note 11). The following assets and liabilities have been presented as assets available for sale, net of liabilities as of March 31, 2012 (Unaudited).

Other Receivables, net
   $ 24,338  
Other current assets
     10,565  
Goodwill
     12,028  
Fixed assets, net of accumulated depreciation
     3,983  
Mining concessions
     1,413,793  
Accounts payable and accrued expenses
     (457 )
     Total assets available for sale as of March 31, 2012
   $ 1,464,250  

Note 5.   Notes Payable

The following table represents the outstanding balance of notes payable.
 
   
March 31, 2012
    
December 31, 2011
  
   
(Unaudited)
        
             
Mining concession
   $ 411,374     $ 392,189  
Auto loans
     96,349       96,762  
Related party
     100,000       100,000  
      607,723       588,951  
Less – current portion
     (542,082 ) )     (519,977 )
Total – non-current portion
   $ 65,641     $ 68,974  

The five year maturity schedule for notes payable is presented below:

   
2013
    
2014
    
2015
    
2016
    
2017
    
Total
  
                                     
Mining Concessions
  
$
411,374
    
$
-
    
$
-
    
$
-
    
$
-
    
$
411,374
  
Auto Loans
    
30,708
      
35,883
      
26,229
      
3,529
      
-
      
96,349
  
Related party
    
100,000
      
-
      
-
      
-
      
-
      
100,000
  
Total
  
$
542,082
    
$
35,883
    
$
26,229
    
$
3,529
    
$
-
    
$
607,723
  

 
Note 6.   Related Party Transactions

 
March 31, 2012
  
December 31, 2011
  
 
(Unaudited)
      
         
Due from related parties, net
   $ 150,869     $ 144,962  
Due to related parties
     (2,519,360 )     (2,525,365 )
    $ (2,368,491 )   $ (2,380,403 )

All transactions with related parties have occurred in the normal course of operations and Mexico based related party transactions are measured at the foreign exchange amount.

 In January 2007, Amermin, a subsidiary of Tara Gold, made the arrangements to purchase the Pilar, Don Roman and Las Nuvias properties listed in Note 2 (part of the Don Roman Groupings) and sold the concessions to AMM. At December 31, 2011, Amermin has paid the original note holder in full. AMM owes Amermin $535,659 for the Pilar mining concession and $211,826 for the Don Roman mining concession.

As of March 31, 2012, Amermin loaned AMM $1,002,404 at 0% interest, due on demand

As of March 31, 2012, the Company owes Tara Gold $568,645. There are no terms to this intercompany payable and it is due on demand by Tara Gold.

On May 2011, ACM acquired three mining concessions knows as “Picacho Fractions I, II and III” from Amermin. The acquisition price of the properties was $163,793 plus value added taxes of $26,207, financed at LIBOR plus 3.25%. As of March 31, 2012 ACM has paid Amermin the full acquisition price.

On July 28, 2010, Adit borrowed $100,000 from an officer of Adit. The note bears interest at 3.25% per year, with interest payable quarterly and due on June 30, 2012 (as amended).

Note 7.   Stockholders’ Equity

During the three months ended March 31, 2012 the Company did not issue any shares of common stock.

Common Stock Payable

At March 31, 2012, common stock payable consists of:
 
·
719,000 shares of common stock, valued at $347,000 for cash. These shares were issued during April 2012.

Note 8.   Options and Warrants

The Company has the following stock option plans which are registered under a Form S-8:
·      Incentive Stock Option Plan
·      Nonqualified Stock Option Plan
·      Stock Bonus Plan

In March 2012, the Company sold 594,000 units in a private offering for $297,000 in cash, or $0.50 per unit. Each unit consisted of one share of the Company’s common stock, which have not been issued and are recorded as common stock payable, and one warrant. Each warrant entitles the holder to purchase one share of the Company’s common stock at a price of $1.00 per share at or any time before December 31, 2012. The shares and warrants were issued in April 2012.

On October 28, 2009, Adit, the Company’s subsidiary, adopted the following stock option plans which have not been registered:
·      Incentive Stock Option Plan
·      Nonqualified Stock Option Plan
·      Stock Bonus Plan

There was no issuance of instruments under the Adit plans in 2012.

 
The fair value of each award discussed above is estimated on the date of grant using the Black-Scholes valuation model that uses the assumptions noted in the following table. Expected volatilities are based on volatilities from the Company’s traded common stock. The expected term of the award granted is usually estimated at half of the contractual term as noted in the individual agreements, unless the life is one year or less based upon management’s assessment of known factors, and represents the period of time that management anticipates awards granted to be outstanding.  The risk-free rate for the periods within the contractual life of the option is based on the U.S. Treasury bond rate in effect at the time of grant for bonds with maturity dates at the estimated term of the options.

   
March 31, 2012
  
December 31, 2011
  
Expected volatility
  
121.09%
  
98.06% - 163.11%
  
Weighted-average volatility
  
121.09%
  
143.46%
  
Expected dividends
  
0
  
0
  
Expected term (in years)
  
1.50
  
1.50
  
Risk-free rate
  
0.21%
  
0.58%
  

A summary of option activity under the Plans as of March 31, 2012 (unaudited) and changes during the period then ended is presented below:

Options
  
Shares
    
Weighted-
Average
Exercise
Price
    
Weighted-
Average
Remaining
Contractual
 Term
    
Aggregate
Intrinsic
 Value
  
Outstanding at December 31, 2011
    
3,350,000
    
$
0.69
              
Granted
    
-
      
-
              
Exercised
    
-
      
-
              
Forfeited, expired or cancelled
    
-
      
-
              
Outstanding at March 31, 2012
    
3,350,000
    
$
0.69
      
3.0
    
$
1,107,500
  
Exercisable at March 31, 2012
    
2,340,000
    
$
1.03
      
3.5
    
$
1,037,800
  
 
Non-vested Options
  
Options
    
Weighted
-Average
Grant-Date
 Fair Value
  
Non-vested at December 31, 2011
    
1,010,000
    
$
1.08
  
Granted
    
-
      
-
  
Vested
    
-
      
-
  
Forfeited, expired or cancelled
    
-
      
-
  
Non-vested at March 31, 2012
    
1,010,000
    
$
1.08
  
 
A summary of warrant activity as of March 31, 2012 (unaudited) and changes during the period then ended is presented below:

Warrants
  
Shares
    
Weighted-
Average
Exercise
Price
    
Weighted-
Average
Remaining
Contractual
Term
    
Aggregate
Intrinsic
Value
  
Outstanding at December 31, 2011
    
7,393,081
    
$
0.89
              
Granted
    
594,000
      
0.87
              
Exercised
    
-
      
-
              
Forfeited, cancelled or expired
    
(250,000
)
    
0.01
              
Outstanding at  March 31, 2012
    
7,737,081
    
$
1.04
      
1.5
    
$
686,536
  
Exercisable at March 31, 2012
    
7,143,081
    
$
1.04
      
1.5
    
$
686,536
  
 
            All warrants vest upon issuance.

 
Note 9.        Non-controlling Interest

   
March 31, 2012
(Unaudited)
    
December 31, 2011
  
Combined Adit / ACM:
            
Common stock for cash
   $ 1,999,501     $ 1,999,501  
Common stock for services
     95,215       95,215  
Technical data for Picacho
     240,000       240,000  
Officer stock based compensation
     944,956       944,956  
Net loss attributable to non-controlling interest through December 31, 2011
     (452,464 )     (452,464 )
Net loss attributable to non-controlling interest  in 2012
     (13,765 )     -  
Other
     5       5  
Total non-controlling interest
   $ 2,813,448     $ 2,827,213  

Note 10.        Fair Value

In accordance with authoritative guidance, the table below 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.

   
Fair Value at March 31, 2012 (Unaudited)
  
   
Total
    
Level 1
    
Level 2
    
Level 3
  
Assets:
                        
None
  
$
-
    
$
-
    
$
-
    
$
-
  
                                 
Liabilities:
                                
Total notes payable, including related party
  
$
607,723
    
$
607,723
    
$
-
    
$
-
  
Due to related parties, net of due from
    
2,368,491
      
2,368,491
      
-
      
-
  
Iron Ore Properties financial instrument
    
570,000
      
-
      
-
      
570,000
  
Total
  
$
3,546,214
    
$
2,976,214
    
$
-
    
$
570,000
  


 
Fair Value at December 31, 2011
  
   
Total
    
Level 1
    
Level 2
    
Level 3
  
Assets:
                        
None
  
$
-
    
$
-
    
$
-
    
$
-
  
                                 
Liabilities:
                                
Total notes payable, including related party
  
$
588,951
    
$
588,951
    
$
-
    
$
-
  
Due to related parties, net of due from
    
2,380,403
      
2,380,403
      
-
      
-
  
Iron Ore Properties financial instrument
    
570,000
      
-
      
-
      
570,000
  
Total
  
$
3,422,829
    
$
2,969,354
    
$
-
    
$
570,000
  
 
 
Note 11.         Subsequent Events

 
a)
On April 4, 2012, Adit agreed to sell its wholly owned subsidiary, ACM, to Yamana. American Copper’s primary asset is the Picacho group of concessions. The Picacho concessions do not have any proven reserves.

As consideration for the sale of ACM, Yamana agreed to pay Adit, in U.S. dollars:

 
·
$7.5 million, minus approximately $780,000 (the amount required to pay the Mexican government to release its tax lien on the property), which amount was deposited into an escrow account and will be released to Adit when the Mexican government releases its tax lien on the property (the “Escrow Release Date”);
 
·
$10 million one year after the Escrow Release Date;
 
·
During the period ending five years after the Escrow Release Date, $1.0 million for every 100,000 ounces of gold, (whether proved, measured or inferred) discovered on the property. If no gold is discovered on the property three years after the Escrow Release Date, Yamana will nevertheless pay Adit $3 million. Regardless of the number of ounces of gold discovered on the property, Yamana, pursuant the agreement, will pay a maximum of $14 million and a minimum of $3 million.
 
·
$4.3 million six years after the Escrow Release Date.

As part of the agreement, Yamana will also surrender the shares and warrants which it purchased from Adit.

Yamana has the option to terminate the agreement within ten business days prior to the one year anniversary of Escrow Release Date for any reason.  If the agreement is terminated, Yamana will be required to return the capital stock of American Copper.
 
 
 
 

 
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Tara Minerals was incorporated on May 12, 2006.  During the period from its incorporation through March 31, 2012 Tara Minerals generated revenue of $160,421 and incurred expenses of $658,007 in cost of sales; $5,517,396 in exploration expenses and $25,229,138 in operating and general administration expenses.  Included in operating and general and administrative expenses is a non-cash charge of $8,464,942 pertaining to the issuance of stock options and bonus plans.

 Material changes of certain items in Tara Minerals’ Statement of Operation for the three months ended March 31, 2012, as compared to the same period last year, are discussed below.

Three Months Ended
  
March 31, 2012
    
March 31, 2011
  
       
Revenue
  
$
-
    
$
-
  
Cost of revenue
    
-
      
-
  
Exploration expenses
    
144,661
      
1,930,319
  
Operating, general and administrative expenses
    
633,276
      
695,487
  
Net operating loss
  
$
(777,937
)
  
$
(2,625,806
)
 
For the three months ending March 31, 2012, exploration expenses consisted of geological consulting, assaying, field supplies and other mine expenses.  As of March 31, 2011, exploration expenses consisted of $1,852,000 for the purchase of technical data for the Centenario and La Palma, $78,319 for geological consulting, assaying, field supplies and other mine expenses.

Material changes of certain items in Tara Minerals’ operating, general and administrative expenses for the three months ended March 31, 2012, as compared to the same period last year, are discussed below.

Three Months Ended
  
March 31, 2012
  
March 31, 2011
  
       
Bad debt expense (recovery)
  
$
19,051
    
$
(150,723)
  
Investment banking and investor relations expense
    
39,700
      
52,283
  
Compensation, officer employment contracts and bonuses
    
169,236
      
360,657
  
Professional fees
    
225,248
      
144,161
  
Repairs and maintenance
    
27,996
      
8,205
  
Rent and rental of equipment
    
6,365
      
40,529
  
 

Bad debt expense for the three months ending March 31, 2012 of $19,051 was due to the corresponding IVA receivable experienced in the normal course of business in the Mexican subsidiaries. During the three months ending March 31, 2011 the Company recognized bad debt recovery due to the renegotiation of an agreement which included IVA and caused an adjustment of IVA Receivables, allowance and bad debt expense.

The decrease in investment banking and investor relations expense is due to fewer consultants needed in 2012. As of March 31, 2012 investor relations consisted of $329,700 in cash. As of March 31, 2011 investor relations expenses consisted of options to purchase Tara Minerals shares, valued at $36,353 and the remainder in cash.

During the three months ended March 31, 2012 compensation, officer employment contracts and bonuses consisted of officer compensation of $169,236. During the three months ended March 31, 2011 compensation, officer employment contracts and bonuses consisted of options valued at $182,735 and officer compensation of $177,922.

Professional fees increased in 2012 due to increased legal expenses due to negotiations of the sale of American Copper Mining, which was finalized in April 2012.

Repairs and maintenance increased during the three months ended March 31, 2012 due to fixed assets being fully utilized and therefore expensed. During the three months ended March 31, 2011 repair and maintenance expenses consisted of ordinary repairs and maintenance of machinery, and other plant and mining equipment.

Rent and rental equipment decreased during the three months ended March 31, 2012 because the Company vacated the rental offices and apartments in Manzanillo, Colima where the Tania Iron Ore Properties are located. During the three months ended March 31, 2011 the Company was renting the offices and apartments mentioned on the preceding sentence.
 
 
The following is an explanation of Tara Minerals’ material sources and (uses) of cash during the three months ended March 31, 2012 and 2011:
   
March 31, 2012
    
March 31, 2011
  
             
Net cash used in operating activities
   $ (508,647 )   $ (596,118 )
Acquisition of property, plant and equipment
     (790 )     (6,094 )
Payments made for mining deposits
     1,544       -  
Proceeds from disposal/sale of assets
     -       29,394  
Assets available for sale, net of liabilities
     (222,258 )     -  
Cash for the sale of common stock
     -       50,000  
Payments towards notes payable
     -       (61,403 )
Change in due to/from related parties, net
     172,920       (127,405 ) 
Common stock payable
     347,000       212,744  
Non-controlling interest – cash from the sale of common stock of subsidiaries
     -       500,000  
Cash, beginning of period
     365,587       157,579  
 
In March 2012, the Company sold 594,000 units in a private offering for $297,000 in cash, or $0.50 per unit. Each unit consisted of one share of the Company’s common stock, which have not been issued and are recorded as common stock payable, and one warrant. Each warrant entitles the holder to purchase one share of the Company’s common stock at a price of $1.00 per share at or any time before December 31, 2012.

Tara Minerals anticipates that its capital requirements during the twelve months ending March 31, 2013 will be:

Exploration and Development – Don Roman Groupings
  
$
1,500,000
  
Exploration and Development – Iron Ore Properties
    
1,000,000
  
Property taxes
    
95,000
  
General and administrative expenses
    
700,000
  
Total
  
$
3,295,000
  

The capital requirements shown above include capital required by Tara Minerals and subsidiaries.

Tara Minerals will need to obtain additional capital if it is unable to generate sufficient cash from its operations or find joint venture partners to fund all or part of its exploration and development costs.

Tara Minerals continues to evaluate the economics of the Mina El Champinon Iron Ore Project (“Champinon”).

As of the date of this filing, the Company is reviewing the Pirita, Tania and Las Viboras Dos properties for continued inclusion as part of the Company’s mining property portfolio.  No payments toward Pirita were made in 2012 or 2011.  The Company may decide to terminate the purchase/lease agreements and return the properties. Tara Minerals is critically reviewing all properties for joint venture, option or sale opportunities.

Tara Minerals does not know of any trends, events or uncertainties that have had, or are reasonably expected to have, a material impact on its sales, revenues or income from continuing operations, or liquidity and capital resources.

Tara Minerals’ future plans will be dependent upon the amount of capital available to Tara Minerals, the amount of cash provided by its operations, and the extent to which Tara Minerals is able to have joint venture partners pay the costs of exploring and developing its mining properties.

Tara Minerals does not have any commitments or arrangements from any person to provide Tara Minerals with any additional capital.  If additional financing is not available when needed, Tara Minerals may continue to operate in its present mode. Tara Minerals does not have any plans, arrangements or agreements to sell its assets or to merge with another entity.

See Note 1 to the financial statements included as part of this report for a description of Tara Minerals’ accounting policies and recent accounting pronouncements.

 

Francis Richard Biscan, Jr., the Company’s Principal Executive Officer and Lynda R. Keeton-Cardno, the Company’s Principal Financial and Accounting Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report, and in their opinion the Company’s disclosure controls and procedures are effective.

There were no changes in the Company’s internal controls over financial reporting that occurred during the period that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
 
 
 
 
 
PART II
 
OTHER INFORMATION
 

On September 13, 2010, Tara Gold announced that it had entered into a tentative agreement with Tara Minerals which provided that Tara Minerals would acquire all of the common shares of Tara Gold by exchanging one share of Tara Minerals' common stock for two Tara Gold shares.  In an effort to avoid any conflicts due to common directors, the transaction would require the approval of non-affiliate shareholders owning a majority of the outstanding shares of Tara Minerals and Tara Gold.

On September 20, 2010 Chris Columbo filed a lawsuit in the District Court for Carson City Nevada, against Tara Minerals, Tara Gold, and Tara Minerals' officers and directors. The essence of the lawsuit was to obtain the fairest price for Tara Gold, whether from Tara Minerals or a third party.  On October 25, 2010 Mr. Columbo voluntarily dismissed his lawsuit against Tara Minerals and other defendants.

On October 22, 2010 Patricia J. Root filed a lawsuit in the Circuit Court for Dupage County, Illinois, against Tara Minerals, Tara Gold, and Tara Gold’s directors.  The essence of the lawsuit was to prevent the Company’s proposed acquisition of Tara Gold.

Tara Minerals believes the lawsuit filed by Ms. Root was premature since, as noted in the September 13, 2010 press release, the transaction was tentative and was subject to the approval of the shareholders of Tara Gold who are not officers or directors of Tara Gold.  No binding agreement between Tara Gold and Tara Minerals has been was ever signed.

On April 6, 2011 Ms. Root voluntarily dismissed her lawsuit against Tara Minerals, Tara Gold, and all other defendants.

Tara Minerals subsequently decided that it would not acquire Tara Gold.

In August 2011 Tara Minerals entered into an agreement with Carnegie Mining and Exploration, Inc. which provided Carnegie with the option to earn up to a 50% interest in Tara Minerals’ Don Roman and iron ore projects.

In order to earn an interest in the Don Roman project, Carnegie was required to spend certain amounts on the Don Roman property such that the Don Roman plant reached minimum production levels. Carnegie could earn a 50% interest in Tara Minerals’ iron ore projects by spending $1,000,000 toward the projects by November 6, 2011.

Carnegie did not spend the required amounts on either project and Tara Minerals terminated the option.

On November 10, 2011, Tara Minerals filed a complaint against Carnegie seeking a declaration that Carnegie failed to properly exercise its option to acquire an interest in the iron ore properties. Carnegie was required to respond to the complaint on or before March 21, 2012.

On December 9, 2011, Carnegie and a purported affiliate, Carnegie Operations, LLC filed a complaint in Texas state court against former employees of Carnegie. Although Tara Minerals was not initially named as a defendant, the substance of the state court complaint made it clear that the core issues were substantially similar to those raised in the Nevada litigation. The individual defendants removed the case to federal court in Dallas, Texas on December 22, 2011. Carnegie responded with a First Amended Complaint on January 31, 2012, which formally named Tara Minerals as a defendant. In its amended complaint, Carnegie seeks an injunction against Tara Minerals in connection with its option on the iron ore properties, as well as damages for alleged fraud, trade secret theft, civil conspiracy, and tortuous interference with Carnegie’s employment contracts with the individual defendants.

On February 14, 2012, Tara Minerals moved the Texas court for a transfer of venue to Nevada so that the cases could be consolidated. The motion is premised upon the facts that: 1) the option agreement includes an express consent to jurisdiction and venue in Nevada; 2) Tara Minerals filed its lawsuit first in Nevada; 3) the cases involve common issues of fact and law; and 4) transfer is cost-efficient and more convenient for the key witnesses in both matters. As of May 14, 2012, Tara Minerals is waiting for the court’s ruling on the motion.
 
 

In March 2012, the Company sold 594,000 units in a private offering for $297,000 in cash, or $0.50 per unit. Each unit consisted of one share of the Company’s common stock and one warrant. Each warrant entitles the holder to purchase one share of the Company’s common stock at a price of $1.00 per share at any time on or before December 31, 2012.


The Company relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 with respect to the issuance of these securities.  The persons who acquired these securities were sophisticated investors and were provided full information regarding the Company’s business and operations.  There was no general solicitation in connection with the offer or sale of these securities.  The persons who acquired these securities acquired them for their own accounts.  The certificates representing these securities bear a restricted legend providing that they cannot be sold except pursuant to an effective registration statement or an exemption from registration.  No commission or other form of remuneration was given to any person in connection with the sale of these securities.


None.


None.


None.

 
Exhibit No.
Description of Exhibit
  
14
Code of Ethics
(1)
31.1
Rule 13a-14(a) Certifications – CEO
(1)
31.2
Rule 13a-14(a) Certifications - CFO
(1)
32
Section 1350 Certifications
(1)
101.INS
XBRL Instance Document
(1)
101.SCH
XBRL Taxonomy Extension Schema Document
(1)
101.CAL
XBRL Taxonomy Calculation Linkbase Document
(1)
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
(1)
101.LAB
XBRL Taxonomy Label Linkbase Document
(1)
101.PRE
XBRL Taxonomy Presentation Linkbase Document
(1)

(1)
Filed with this report.

 


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.

 
 
TARA MINERALS CORP.
  
       
       
Dated: May 14, 2012
By:
/s/ Francis Richard Biscan, Jr.
  
   
Francis R. Biscan, Jr.,  Director and
  
   
[Principal Executive Officer
  
       
       
Dated: May 14, 2012
By: 
/s/ Lynda R. Keeton-Cardno, CPA
  
   
Lynda R. Keeton-Cardno, CPA
  
   
Principal Financial and Accounting Officer
  

 
 
 
 
21