Firma 10Q 2014 Q1 Quarterly report

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, 2014

o TRANSITION 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 May 19, 2014, the Company had 81,082,278 outstanding shares of common stock.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	Page

Item 1. Condensed Consolidated Financial Statements	3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3. Quantitative and Qualitative Disclosures about Marketing Risk	19
Item 4. Controls and Procedures	19

PART II - OTHER INFORMATION

Item 1. Legal Proceedings	20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3. Defaults Upon Senior Securities	20
Item 4. Mine Safety Disclosures	20
Item 5. Other Information	20
Item 6. Exhibits	20

SIGNATURES	21

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TARA MINERALS CORP. AND SUBSIDIARIES

(A Subsidiary of Tara Gold Resources Corp.)

(An Exploration Stage Company)

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2014 AND FOR

THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

AND

THE PERIOD FROM INCEPTION (MAY 12, 2006) THROUGH MARCH 31, 2014

Table of Contents

TARA MINERALS CORP. AND SUBSIDIARIES

(A Subsidiary of Tara Gold Resources Corp.)

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2014			December 31, 2013
	(Unaudited)
Assets
Current assets:
Cash	$	82,055		$	76,758
Other receivables, net		120,766			73,106
Prepaid assets		100,146			114,425
Assets held for disposal, net		29,262			29,262
Other current assets		21,653			21,684
Total current assets		353,882			315,235

Property, plant, equipment, mine development and land, net		7,068,015			7,344,419
Total assets	$	7,421,897		$	7,659,654

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	1,689,095		$	1,410,281
Notes payable, current portion		118,784			38,614
Convertible notes payable, net		205,108			75,652
Due to related parties, net of due from		1,467,583			1,517,615
Total current liabilities		3,480,570			3,042,162
Notes payable, non-current portion		23,739			28,005
Total liabilities		3,504,309			3,070,167

Stockholders’ equity:
Common stock: $0.001 par value; authorized 200,000,000 shares; issued and outstanding 81,082,278 shares		81,082			81,082
Additional paid-in capital		37,286,709			37,191,859
Common stock payable		47,466			47,466
Accumulated deficit during exploration stage		(36,515,483	)		(35,757,123	)
Accumulated other comprehensive loss		(171,310	)		(167,584	)
Total Tara Minerals stockholders’ equity		728,464			1,395,700
Non-controlling interest		3,189,124			3,193,787
Total stockholders’ equity		3,917,588			4,589,487
Total liabilities and stockholders’ equity	$	7,421,897		$	7,659,654

See accompanying notes to these Condensed Consolidated Financial Statements.

Table of Contents

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,						From Inception May 12, 2006 to March 31,
	2014			2013			2014

Mining revenues	$	105,316		$	-		$	265,737
Cost of revenue		-			-			658,007
Gross margin		105,316			-			(392,270	)
Exploration expenses		163,393			241,563			8,711,664
Operating, general and administrative expenses		553,259			790,591			32,223,707
Net operating loss		(611,336	)		(1,032,154	)		(41,327,641	)

Non-operating income (loss):
Interest income		12,454			12,652			257,872
Interest expense		(126,344	)		(202,015	)		(2,464,715	)
Gain (loss) on debt due to extinguishment and conversion		5,000			-			(778,952	)
Loss on disposal or sale of assets		(54,558	)		-			(86,088	)
Gain on dissolution of joint venture		-			-			100,000
Settlement loss, net		-			(861,996	)		(1,814,996	)
Gain on bargain acquisition of ACM		-			-			3,489,971
Impairment of long lived assets		-			-			(28,001	)
Other income		11,761			144			1,539,188
Total non-operating income (loss)		(151,687	)		(1,051,215	)		214,279
Loss before income taxes		(763,023	)		(2,083,369	)		(41,113,362	)
Income tax benefit		-			-			959,000
Loss from continuing operations		(763,023	)		(2,083,369	)		(40,154,362	)
Discontinued operations:
Gain from discontinued operations, net of tax		-			-			3,618,402
Net loss		(763,023	)		(2,083,369	)		(36,535,960	)
Net loss attributable to non-controlling interest		4,663			870			20,477
Net loss attributable to Tara Minerals’ shareholders		(758,360	)		(2,082,499	)		(36,515,483	)

Other comprehensive loss:
Foreign currency translation loss		(3,726	)		(51,311	)		(171,310	)
Total comprehensive loss	$	(762,086	)	$	(2,133,810	)	$	(36,686,793	)

Net loss per share, basic and diluted	$	(0.01	)	$	(0.03	)

Weighted average number of shares, basic and diluted		81,082,278			69,090,834

See accompanying notes to these Condensed Consolidated Financial Statements.

Table of Contents

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,						From Inception May 12, 2006 to March 31,
	2014			2013			2014
Cash flows from operating activities:
Net loss attributable to Tara Minerals’ shareholders	$	(758,360	)	$	(2,082,499	)	$	(36,515,483	)
Adjustments to reconcile net loss to net cash:
Depreciation and amortization		73,557			72,912			1,246,607
Allowance for doubtful accounts		2,517			118,235			2,747,237
Stock based compensation and stock bonuses		-			-			9,199,375
Common stock issued for services and other expenses		-			18,000			6,173,500
Settlement loss, net		-			861,996			314,996
Non-controlling interest in net (loss) income of consolidated subsidiaries		(4,663	)		(870	)		(20,487	)
Non-controlling interest - stock issued to third parties of subsidiaries		-			-			671,028
Accretion of beneficial conversion feature and debt discount		114,306			200,000			2,343,533
Exploration expenses paid with parent and subsidiary common stock		-			-			4,146,365
Loss on debt due to extinguishment and conversion		(5,000	)		-			778,952
Accrued interest converted to common stock		-			-			84,438
Deferred tax asset, net		-			-			(959,000	)
Gain from discontinued operations, net of tax		-			-			(3,618,402	)
Gain on dissolution of joint venture		-			-			(100,000	)
Gain on bargain purchase of ACM		-			-			(3,489,971	)
Other		54,558			-			175,431
Changes in current operating assets and liabilities:
Other receivables, net		1,948			(110,573	)		(1,700,687	)
Prepaid expenses		14,279			354			(152,266	)
Other assets		31			(1,255	)		(90,613	)
Accounts payable and accrued expenses		459,977			133,460			1,939,557
Net cash used in operating activities		(46,850	)		(790,240	)		(16,825,890	)
Cash flows from investing activities:
Acquisition of property, plant, equipment, land and construction in progress		-			(221,386	)		(3,424,246	)
Purchase of mining concession including mining deposits		-			-			(1,719,907	)
Proceeds from the sale or disposal of assets		-			-			29,128
Proceeds from the sale of ACM		-			-			7,500,000
Investment in ACM		-			-			(224,521	)
Other		-			-			(1,721	)
Net cash (used in) provided by investing activities		-			(221,386	)		2,158,733
Cash flows from financing activities:
Cash from the sale of common stock		-			700,000			12,124,588
Proceeds from notes payable, related party		-			-			150,000
Proceeds from notes payable		110,000			-			1,540,000
Payments towards notes payable		(4,095	)		(11,013	)		(2,087,256	)
Payments towards notes payable, related party		-			-			(100,000	)
Payment towards equipment financing		-			-			(201,438	)
Change in due to/from related parties, net		(50,032	)		(82,486	)		1,025,983
Payments from joint venture partners		-			-			100,000
Non-controlling interest – cash from the sale of common stock of subsidiaries		-			-			2,368,645
Net cash provided by financing activities		55,873			606,501			14,920,522

See accompanying notes to these Condensed Consolidated Financial Statements.

Table of Contents

TARA MINERALS CORP. AND SUBSIDIARIES

(A Subsidiary of Tara Gold Resources Corp.)

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(CONTINUED)

	For the Three Months Ended March 31,						From Inception May 12, 2006 to March 31, 2014
	2014			2013			2014

Effect of exchange rate changes on cash		(3,726	)		(51,311	)		(171,310	)

Net (decrease) increase in cash		5,297			(456,436	)		82,055
Beginning of period cash balance		76,758			906,663			-
End of period cash balance	$	82,055		$	450,227		$	82,055

Supplemental Information:
Interest paid	$	663		$	2,011		$	308,104
Income taxes paid	$	-		$	-		$	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 concession paid with notes payable or mining deposit plus capitalized interest	$	-		$	-		$	3,400,837
Recoverable value-added taxes incurred through additional debt and due to related party, net of mining concession modification	$	-		$	-		$	2,101,293
Beneficial conversion value for convertible debt and financial instruments	$	94,850		$	-		$	2,109,850
Conversion of debt and Iron Ore Financial instrument to common stock, plus accrued interest	$	-		$	800,000		$	3,109,438
Purchase of property and equipment through debt and common stock	$	-		$	-		$	1,327,089
Issuance of common stock payable for services	$	-		$	50,400		$	50,400
Other	$	-		$	-		$	319,480

See accompanying notes to these Condensed Consolidated Financial Statements.

Table of Contents

TARA MINERALS CORP. AND SUBSIDIARIES

(A Subsidiary of Tara Gold Resources Corp.)

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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, 2013. 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, and owns 87% of the common stock of Adit Resources Corp. (“Adit”). Adit in turns owns 99.99% of American Copper Mining, S.A. de C.V. (“ACM”). All of Tara Minerals’ operations in Mexico are conducted through AMM and ACM since Mexican law provides that only Mexican corporations are allowed to own mining properties. AMM’s primary focus is on industrial minerals, e.g. copper, zinc. Adit, through ACM, focuses on gold mining concessions.

The Company is a mining company in the exploration stage and presents inception to date information, in accordance with the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Development Stage Entities Topic.

In these financial statements, references to "Company," "we," "our," and/or "us," refer to Tara Minerals Corp. 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, 2014 and December 31, 2013, the condensed consolidated results of its operations for the three months ended March 31, 2014 and 2013 and the condensed consolidated statements of cash flows for the three months ended March 31, 2014 and 2013. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.

The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All amounts are in U.S. dollars unless otherwise indicated. All significant inter-company 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 these 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 gain (loss) is recorded to other comprehensive gain (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 AMM and ACM are as follows for the three months ended March 31, 2014 and 2013. Mexican pesos per one U.S. dollar:

	March 31, 2014
Current exchange rate	Ps.	13.0841
Weighted average exchange rate for the three months ended	Ps.	13.2339

	March 31, 2013
Current exchange rate	Ps.	12.3546
Weighted average exchange rate for the three months ended	Ps.	12.6468

Table of Contents

The Company’s significant accounting policies are:

Reclassifications

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

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. Management routinely makes judgments on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

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. Our allowance in association with our receivable from IVA from our Mexico subsidiary is based on our determination that the Mexican government may not allow the complete refund of these taxes.

	March 31, 2014		December 31, 2013
	(Unaudited)
Allowance – recoverable value-added taxes	$	1,599,620	$	1,597,407
Allowance – other receivables		348,737		348,433
Total	$	1,948,357	$	1,945,840

Bad debt expense was $2,517 and $118,235 at March 31, 2014 and 2013, respectively.

AMM received refunds of $40,489 for IVA taxes during January and February 2014.

Reclamation and remediation costs (asset retirement obligations)

Reclamation costs are allocated to expense over the life of the related assets and are periodically adjusted to reflect changes in the estimated present value resulting from the passage of time and revisions to the estimates of either the timing or amount of the reclamation and abandonment costs.

Future remediation costs for reprocessing plant and buildings are accrued based on management’s best estimate, at the end of each period, of the undiscounted costs expected to be incurred at a site. Such cost estimates include, where applicable, ongoing remediation, maintenance and monitoring costs. Changes in estimates are reflected in earnings in the period an estimate is revised. There were no reclamation and remediation costs incurred or accrued as of March 31, 2014 and 2013.

Income taxes

Income taxes are provided for using the asset and liability method of accounting in accordance with the Income Taxes Topic of the FASB ASC. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized by management. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The computation of limitations relating to the amount of such tax assets, and the determination of appropriate valuation allowances relating to the realization of such assets, are inherently complex and require the exercise of judgment. As additional information becomes available, management continually assesses the carrying value of our net deferred tax assets.

Table of Contents

Fair Value Accounting

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

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;

Level 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).

Recently Adopted and Recently Issued Accounting Guidance

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, net

	March 31, 2014			December 31, 2013
	(Unaudited)
Land	$	19,590		$	19,590

Mining concessions:
Pilar (a)		710,172			710,172
Don Roman (See Note 4)		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
Dixie Mining District		650,000			650,000
Picacho Groupings		1,571,093			1,571,093
Mining concessions		4,328,575			4,328,575

Property, plant and equipment		3,897,097			4,142,245
		8,245,262			8,490,410
Less – accumulated depreciation		(1,177,247	)		(1,145,991	)
	$	7,068,015		$	7,344,419

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

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

In January 2007, the Company acquired the Pilar de Mocoribo Prospect (“Pilar”) from Tara Gold for $739,130 plus $115,737 of value-added tax (as amended). The Company owes $535,659 for this mining concession (including the applicable value-added tax).

Table of Contents

In accordance with the Interest Topic of FASB ASC, the future payments of the total payment amount of $739,130 have been discounted using the incremental borrowing rate of 5.01%. As of March 31, 2014, the present value of future payments is as follows:

	Debt			IVA		Total
Total remaining debt	$	486,739		$	77,878	$	564,617
Imputed interest		(28,958	)		-		(28,958	)
Present value of debt	$	457,781		$	77,878	$	535,659

Note 3.

Notes Payable and Convertible Notes Payable, net

The following table represents the outstanding balance of notes payable.

	March 31, 2014			December 31, 2013
	(Unaudited)
Auto loans	$	62,523		$	66,619
Notes payable		80,000			-
Convertible notes payable, net		205,108			75,652
		347,631			142,271
Less – current portion		(118,784	)		(38,614	)
Less – current portion convertible notes payable, net		(205,108	)		(75,652	)
Total – non-current portion	$	23,739		$	28,005

During the three months ended March 31, 2014 the Company converted balances with two vendors to notes payable in the amount of $80,000 and recognized a gain on debt extinguishment in the amount of $5,000, notes are due to in May 2014.

During the year ended December 31, 2013 the Company raised $150,000 through the sale of a convertible note. The note payable was due in February 2014 and extended until July 2014; bears interest of 16% per year and can be converted to the Company’s stock at $0.10 per share. The beneficial conversion feature of the note payable was determined to be $120,000 of which $120,000 was amortized as of March 31, 2014. Interest expense related to the convertible note was $8,000 as of March 31, 2014.

During the three months ended March 31, 2014 the Company raised $60,000 through the sale of a convertible note. The note payable due in May 2014 and extended until July 2014; can be converted to the Company’s stock at $0.10 per share. The beneficial conversion feature of the note payable was determined to be $60,000 of which $39,101 was amortized as of March 31, 2014. Interest expense related to the convertible note was $2,000 as of March 31, 2014.

During the three months ended March 31, 2014 the Company raised $50,000 through the sale of a convertible note. The note payable is due in July 2014 and can be converted to the Company’s stock at $0.10 per share. The beneficial conversion feature of the note payable was determined to be $34,850 of which $857 was amortized as of March 31, 2014.

The five year maturity schedule for notes payable and convertible notes payable, net is presented below:

	2014		2015		2016		2017		2018		Total

Auto loans	$	38,784	$	9,501	$	5,948	$	6,178	$	2,112	$	62,523
Note payables		80,000		-		-		-		-		80,000
Convertible note payable, net		205,108		-		-		-		-		205,108
Total	$	323,892	$	9,501	$	5,948	$	6,178	$	2,112	$	347,631

Note 4.

Related Party Transactions

	March 31, 2014			December 31, 2013
	(Unaudited)
Due from related parties	$	119,920		$	221,592
Due to related parties		(1,587,503	)		(1,739,207	)
	$	(1,467,583	)	$	(1,517,615	)

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

Table of Contents

In January 2007, Corporacion Amermin S.A. de C.V. (“Amermin”), a subsidiary of Tara Gold, made the arrangements to purchase Pilar, Don Roman and Las Nuvias properties listed in Note 2 (part of the Don Roman Groupings) and sold the concessions to AMM. At March 31, 2014, Amermin has paid the original note holder in full and AMM owes Amermin $535,659 for the Pilar mining concession and $211,826 for the Don Roman mining concession.

As of March 31, 2014, Amermin had loaned AMM $1,017,439 at 0% interest, due on demand.

As of March 31, 2014, Tara Gold owed the Company a total of $177,419 at 0% interest, due on demand.

The following are intercompany transactions that eliminate during the consolidation of these financial statements:

During 2012, Tara Minerals issued Adit six promissory notes for $4,286,663. During 2013, Tara Minerals issued Adit one promissory note for $610,000. These notes are unsecured, bear interest at U.S. prime rate plus 3.25% per year and are due and payable between May 2014 and January 2015. As of March 31, 2014, Tara Minerals owed Adit $5,413,414 in interest and principal.

Note 5.

Stockholders’ Equity

The Company had no issuances of common stock during the three months ended March 31, 2014.

Note 6.

Options

Tara Minerals has the following incentive plans which are registered under a Form S-8:

· Incentive Stock Option Plan

· Nonqualified Stock Option Plan

· Stock Bonus Plan

There have been no issuances under the Company’s plans in 2014.

On October 28, 2009, Adit adopted the following incentive plans which have not been registered:

· Incentive Stock Option Plan

· Nonqualified Stock Option Plan

· Stock Bonus Plan

There have been no issuances under the Adit plans in 2014.

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 the grant for bonds with maturity dates at the estimated term of the options. Historically the Company has had no forfeitures of options or warrants, therefore, the Company uses a zero forfeiture rate.

	March 31, 2014		December 31, 2013
Expected volatility		0.00%		218.84%
Weighted-average volatility		0.00%		218.84%
Expected dividends		0		0
Expected term (in years)		0		2.00
Risk-free rate		0.00%		0.22%

Table of Contents

A summary of option activity under the plans as of March 31, 2014 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, 2013		2,750,000	$	0.24
Granted		-		-
Exercised		-		-
Forfeited, expired or cancelled		-		-
Outstanding at March 31, 2014		2,750,000	$	0.24		1.5	$	167,440
Exercisable at March 31, 2014		2,340,000	$	0.24		1.5	$	167,440

Non-vested Options	Options		Weighted-Average Grant-Date Fair Value
Non-vested at December 31, 2013		410,000	$	0.48
Granted		-		-
Vested		-		-
Forfeited, expired or cancelled		-		-
Non-vested at March 31, 2014		410,000	$	0.48

Note 7.

Non-controlling Interest

All non-controlling interest of the Company is a result of the Company’s subsidiaries stock movement and results of operations. Cumulative results of these activities results in:

	March 31, 2014			December 31, 2013
	(Unaudited)
Common stock for cash	$	1,999,501		$	1,999,501
Common stock for services		95,215			95,215
Exploration expenses paid for in subsidiary common stock		240,000			240,000
Stock based compensation		1,374,880			1,374,880
Cumulative net loss attributable to non-controlling interest		(20,478	)		(15,815	)
Treasury stock		(500,000	)		(500,000	)
Other		6			6
Total non-controlling interest	$	3,189,124		$	3,193,787

A summary of activity as of March 31, 2014 and changes during the period then ended is presented below:

Non-controlling interest at December 31, 2013	$	3,193,787
Net income attributable to non-controlling interest		(4,663	)
Non-controlling interest at March 31, 2014	$	3,189,124

Note 8.

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, 2014 (Unaudited)
	Total		Level 1		Level 2		Level 3
Assets:
None	$	-	$	-	$	-	$	-

Liabilities:
Beneficial conversion feature of note payable (See Note 3)	$	54,892	$	54,892	$	-	$	-

Table of Contents

	Fair Value at December 31, 2013
	Total		Level 1		Level 2		Level 3
Assets:
Fair market value of ACM’s net identifiable assets acquired	$	1,589,000	$	-	$	-	$	1,589,000

Liabilities:
Beneficial conversion feature of note payable (See Note 3)	$	74,348	$	74,348	$	-	$	-

Note 9.

Subsequent Events

In May 2014, the Company sold 5,000,000 units in a private offering for $750,000 in cash, or $0.15 per unit. Each unit consisted of one share of the Company’s common stock and one warrant. Two warrants entitle the holder to purchase one share of common stock at a price of $0.35 per share at any time on or before May 1, 2016.

Table of Contents

ITEM 2.

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

Tara Minerals was incorporated on May 12, 2006. During the period from its incorporation through March 31, 2014, Tara Minerals generated revenue of $265,737 and incurred expenses of $658,007 in cost of sales, $8,711,664 in exploration expenses and $32,223,707 in operating and general administration expenses. Included in operating and general and administrative expenses is a non-cash charge of $9,199,375, pertaining to the issuance of stock based compensation and stock bonuses.

RESULTS OF OPERATIONS

Material changes of certain items in Tara Minerals’ Statement of Operations for the three months ended March 31, 2014, as compared to the three months ended March 31, 2013, are discussed below.

Three Months Ended	March 31, 2014			March 31, 2013
(In thousands of U.S. Dollars)
Revenue	$	105		$	-
Cost of revenue		-			-
Exploration expenses		163			242
Operating, general and administrative expenses		553			791
Net operating loss	$	(611	)	$	(1,032	)

For the three months ended March 31, 2014, ore from the exploration process at the Dixie Mining District was sold; compared to the three months ended March 31, 2013, when the Company had no revenues from mining activity at any of its properties.

For the three months ended March 31, 2014, exploration expenses decreased primarily due to Dixie Mining District being dormant due to weather; Mexico properties were dormant pending funding. Expenses incurred for the three months ended March 31, were for routine maintenance; compared to the three months ended March 31, 2013, when the Company focused primarily on preliminary work being performed at the Dixie Mining District and Don Roman. In 2013 exploration expenses included expenses for preproduction activities, geology 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, 2014, as compared to the three months ended March 31, 2013, and are discussed below.

Three Months Ended	March 31, 2014		March 31, 2013
(In thousands of U.S. Dollars)
Investment banking and investor relations expense	$	22	$	109
Professional fees		121		238

The decrease in investment banking and investor relations expense for the three months ended March 31, 2014 was primarily due to limited efforts put into investor relations during this period; compared to the three months ended March 31, 2013 when the Company’s efforts were to obtain financing through equity.

Professional fees for the three months ended March 31, 2014, decreased primarily due to lower accounting and security fees at the Mexico office; compared to the three months ended March 31, 2013, which consisted of legal services related to the acquisition of additional acres to be added to the Dixie Mining District in addition to accounting and auditing services performed in the normal course of business.

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

The following is an explanation of Tara Minerals’ material sources and (uses) of cash during the three months ended March 31, 2014 and 2013:

	March 31, 2014			March 31, 2013
(In thousands of U.S. Dollars)
Net cash used in operating activities	$	(47	)	$	(790	)
Acquisition of property, plant, equipment, land and construction in progress		-			(221	)
Cash from the sale of common stock		-			700
Proceeds from notes payable		110			-
Payments towards notes payable		(4	)		(11	)
Change in due to/from related parties, net		(50	)		(82	)
Cash, beginning of period		77			907

Tara Minerals anticipates that its capital requirements during the twelve months ending March 31, 2015 will be:

Exploration and Development – Don Roman Groupings	$	200,000
Exploration and Development – Picacho Groupings		160,000
Exploration and Development - Dixie Mining District Groupings		60,000
Property taxes		125,000
General and administrative expenses		1,000,000
Total	$	1,545,000

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

During the year ended December 31, 2013, Tara Minerals expanded its holdings into the U.S. by purchasing the Black Diamond and Ontario prospects in the Dixie Mining District. To date, the land package consists of 6,741 acres of both patented and unpatented mining claims. The optioned claims include previously mined veins with a historic sampling of the exposed outcrops averaging 14 grams/tonne of gold.

In 2014, the Company’s primary focus is achieving commercial production. Now that the Don Roman District, which houses the Don Roman Groupings, is unencumbered, in any way, by the Carnegie litigation, and because of underground development that will be needed in the Dixie district to further that project, it has been determined that the best path is advancing the Don Roman district to production. There has been extensive preproduction planning for the Don Roman District, and the business plan has been developed and mapped out for execution. The preproduction surface level work has resulted in the identification of additional potential start-up mill feed material for processing.

In support of this plan, on January 9, 2014, Tara Minerals’ entered into an Investment Agreement with Panormus Trust and Investments Ltd. and Mediterranea Trust Ltd., collectively referred to as “MTI”. The Agreement grants MTI the right to invest in Tara Minerals through the purchase of up to $2,025,000 in the restricted common stock of the Company at $0.30 per share and a targeted loan of $4,725,000 for the development of the Don Roman Groupings (the "Don Roman Project Loan").

The targeted Don Roman Project Loan will be used to advance the Don Roman Groupings to commercial production and is payable from 49% of the net income realized from the minerals recovered from the concession area of the Don Roman Groupings. Initially, MTI’s 49% net income interest will be designated as loan repayment. Once the loan has been repaid, MTI will continue to receive 49% of the net income realized from the Don Roman Groupings.

The Company and MTI formed a Management Committee which oversees operations based on a committee approved Business Plan. The loan proceeds will be released from a segregated account based on approved expenditures.

Panormus Trust and Investments Ltd. and MTI have acknowledged that they have experienced some administrative and managerial challenges that have resulted in a delay in the release of funds. They have also acknowledged that the challenges have been resolved; the Company has agreed to give them until May 30, 2014 to fund.

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.

Table of Contents

As May 14, 2014, Tara Minerals is still reviewing the Pirita, Tania and Las Viboras Dos properties for continued inclusion as part of the Company’s mining property portfolio. No payments toward these properties were made in 2014. The Company may decide to terminate the purchase/lease agreements and return the properties. The Company 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 other 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.

Off-Balance Sheet Arrangements

At March 31, 2014, Tara Minerals had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on its consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a number of significant accounting policies affecting our consolidated financial statements, we believe the following critical accounting policies involve the most complex, difficult and subjective estimates and judgments.

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

Each period, receivables are reviewed for collectability. When a receivable has doubtful collectability we allow for the receivable until we are either assured of collection (and reverse the allowance) 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.

Property, Plant, Equipment, Mine Development and Land

Mining concessions and acquisitions, exploration and development costs relating to mineral properties with proven reserves are deferred until the properties are brought into production, at which time they will be amortized on the unit of production method based on estimated recoverable reserves. If it is determined that the deferred costs related to a property are not recoverable over its productive life, those costs will be written down to fair value as a charge to operations in the period in which the determination is made. The amounts at which mineral properties and the related deferred costs are recorded do not necessarily reflect present or future values.

The recoverability of the book value of each property is assessed at least annually for indicators of impairment such as adverse changes to any of the following:

• estimated recoverable ounces of copper, lead, zinc, gold, silver or other precious minerals

• estimated future commodity prices

• estimated expected future operating costs, capital expenditures and reclamation expenditures

A write-down to fair value is recorded when the expected future cash flow is less than the net book value of the property or when events or changes in the property indicate that carrying amounts are not recoverable. The carrying amounts of the Company’s mining properties are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication of impairment exists, the asset’s recoverable amount will be reduced to its estimated fair value. As of March 31, 2014 and 2013, respectively, no indications of impairment existed. As of the May 14, 2014, no events have occurred that would require the write-down of any assets.

Table of Contents

Certain mining plant and equipment included in mine development and infrastructure is depreciated on a straight-line basis over their estimated useful lives from 3 – 10 years. Other non-mining assets are recorded at cost and depreciated on a straight-line basis over their estimated useful lives from 3 – 10 years.

Financial and Derivative Instruments

The Company periodically enters into financial instruments. Upon entry, each instrument are reviewed for debt or equity treatment. In the event that the debt or equity treatment is not readily apparent, FASB ASC 480-10-S99 is consulted for temporary treatment. Once an event takes place that removes the temporary element the Company appropriately reclassifies the instrument to debt or equity.

The Company periodically assesses its financial and equity instruments to determine if they require derivative accounting. Instruments which may potentially require derivative accounting are conversion features of debt, equity, and common stock equivalents in excess of available authorized common shares, and contracts with variable share settlements. In the event of derivative treatment, the instrument is to marketed to market.

Exploration Expenses and Technical Data

Exploration costs not directly associated with proven reserves on our mining concessions are charged to operations as incurred.

Technical data, including engineering reports, maps, assessment reports, exploration samples certificates, surveys, environmental studies and other miscellaneous information, may be purchased for our mining concessions. When purchased for concessions without proven reserves, the cost is considered research and development pertaining to a developing mine and is expensed when incurred.

Reclamation and Remediation Costs (asset retirement obligations)

Stock Based Compensation

Stock based compensation is accounted for using the Equity-Based Payments to Non-Employee’s Topic of the FASB ASC, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. We determine the value of stock issued at the date of grant. We also determine at the date of grant the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.

Shares issued to employees are expensed upon issuance.

Stock based compensation for employees is accounted for using the Stock Based Compensation Topic of the FASB ASC. We use the fair value method for equity instruments granted to employees and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

Income Taxes

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

ITEM 4. CONTROLS AND PROCEDURES

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.

Table of Contents

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Tara Minerals is not involved in any legal proceedings and is not aware of any legal proceedings which are threatened or contemplated.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act has been included in Exhibit 95 to this Quarterly Report on Form 10-Q.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No.	Description of Exhibit
31.1	Rule 13a-14(a) Certifications – CEO	(1)
31.2	Rule 13a-14(a) Certifications - CFO	(1)
32.1	Section 1350 Certifications	(1)
95.1	Mine Safety Disclosures	(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.

Table of Contents

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.

Dated: May 19, 2014	By:	/s/ Francis Richard Biscan, Jr.
		Francis R. Biscan, Jr., President,
		Chief Executive Officer

Dated: May 19, 2014	By:	/s/ Lynda R. Keeton-Cardno
		Lynda R. Keeton-Cardno, CPA
		Principal Financial and Accounting Officer

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Avg

Firma (FRMA) 10-Q2014 Q1 Quarterly report

Content analysis