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EX-32 - CERTIFICATION - TARA GOLD RESOURCES CORP.tg10sep10qex32.htm
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EX-31.1 - CERTIFICATION - TARA GOLD RESOURCES CORP.tg10sep10qex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 R  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES     EXCHANGEACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010

£  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION FROM __________ TO __________.


COMMISSION FILE NUMBER   000-29595


TARA GOLD RESOURCES CORP.

(Exact Name of Registrant as Specified in its Charter)


Nevada

 

90-0316566

(State or other jurisdiction of

 

 (I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

2162 Acorn Court

 

 

Wheaton, IL

 

60189

(Address of principal executive office)

 

  (Zip code)

 

 

 

Issuer's telephone number: (630) 462-2079

 

 


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 £    No R


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 (§233.405 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 £ No £


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer £

                 Accelerated filer £

Non-accelerated filer £

                  Smaller reporting company R


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  £   No R

As of January 13, 2011, the Company had 102,795,119 outstanding shares common stock.





1




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

21

Item 4.  Controls and Procedures

22

 

 

PART II - OTHER INFORMATION

 

 

 

Item 1.  Legal Proceedings

23

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

24

Item 3.  Defaults Upon Senior Securities

24

Item 4.  [REMOVED AND RESERVED]

24

Item 5.  Other Information

24

Item 6.  Exhibits

24

 

 

SIGNATURES

25

































2




PART I - FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS







TARA GOLD RESOURCES CORP. AND SUBSIDIARIES

(An Exploration Stage Company)



CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR

THE NINE MONTHS ENDED SEPTEMBER 30, 2010

AND

THE PERIOD FROM INCEPTION (DECEMBER 5, 2000) THROUGH SEPTEMBER 30, 2010





3






TARA GOLD RESOURCES CORP. AND SUBSIDIARIES

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. Dollars, except per share amounts)


 

September 30, 2010

December 31, 2009

 

(Unaudited)

(Audited)

Assets

 

 

Current assets:

 

 

     Cash

$

213 

$

1,451 

     Other receivables, net of $443 and $374 of allowance as of September 30, 2010

 

 

          and December 31, 2009, respectively

2,957 

3,262 

     Due from related parties, net

354 

     Marketable securities

650 

450 

     Other current assets

133 

47 

         Total current assets

3,953 

5,564 

 

 

 

Property, equipment, and mine development, net of accumulated depreciation of

 

 

    $280 and $111 as of September 30, 2010 and December 31, 2009, respectively

12,455 

13,141 

Construction in progress

2,163 

Deposits

25 

Deferred tax asset

1,748 

1,748 

Goodwill

12 

12 

         Total assets

$

18,193 

$

22,628 

 

 

 

Liabilities and Stockholders’ Equity

 

 

Current liabilities:

 

 

     Accounts payable and accrued expenses

$

1,809 

$

1,143 

Notes payable, current portion net of debt discount

1,270 

1,106 

     Notes payable related party, current portion net of debt discount

140 

     Due to related parties, net

194 

       Total current liabilities

3,413 

2,249 

 

 

 

Long-term accrued liabilities

430 

989 

Notes payable, long term

2,663 

6,168 

         Total liabilities

6,506 

9,406 

 

 

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

      Common stock; $0.001 par value 150,000,000 shares authorized – 102,795,119 issued and outstanding at September 30, 2010 and December 31, 2009, respectively

103 

103 

     Additional paid-in capital

12,175 

12,175 

     Accumulated deficit during exploration stage

(14,759)

(3,293)

     Other comprehensive loss

(439)

(436)

         Total Tara Gold stockholders’ (deficit) equity

(2,920)

8,549 

Non-controlling interest

14,607 

4,673 

         Total equity

11,687 

13,222 

               Total liabilities and equity

$

18,193 

$

22,628 



See Accompanying Notes to these Condensed Consolidated Financial Statements.








4






TARA GOLD RESOURCES CORP. AND SUBSIDIARIES

 (An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 (In thousands of U.S. Dollars, except per share amounts)

 

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

From inception December 5, 2000 to September 30,

 

2010

2009

2010

2009

2010

Revenues:

 

 

 

 

 

Revenue from website development and software

$               -

$               -

$               -

$                -

$               168

Sales

86

-

124

-

521

Total Revenues

86

-

124

-

689

Cost of revenue

590

-

737

-

838

     Gross loss

(504)

-

(613)

-

(149)

 

 

 

 

 

 

Exploration expenses

-

95

1,749

165

6,067

Operating, general, and administrative expenses

3,748

803

13,785

2,175

30,585

 

 

 

 

 

 

Operating loss

(4,252)

(898)

(16,147)

(2,340)

(36,801)

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest income

82

19

95

33

377

Interest  expense

(240)

(13)

(275)

(18)

(1,035)

Settlement income

-

-

-

-

134

Loss on extinguishment of debt

-

-

-

(1,097)

(766)

Gain on deconsolidation of joint venture

-

-

-

-

8,661

Gain on sale of joint venture interest

-

-

-

-

3,112

Gain on dissolution of joint venture

-

-

-

250

9,163

Loss on disposal of assets

-

-

-

-

(399)

Gain on acquisition of mining concessions

-

-

-

-

100

Realized loss on the sale of marketable securities

-

-

-

(1,681)

(4,604)

Gain on sale of net cash flow interest

-

-

-

-

197

Other income

389

-

652

25

1,118

 

231

6

472

(2,488)

16,058

Non-controlling interest

1,017

149

4,209

337

5,703

 

 

 

 

 

 

Loss before income taxes

(3,004)

(743)

(11,466)

(4,491)

(15,040)

Income tax benefit, net

-

-

-

-

 1,302

Loss income from continuing operations

(3,004)

(743)

(11,466)

(4,491)

(13,738)

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

Income from operations of discontinued oil and gas

     business (including loss on disposal of $7)

-

-

-

-

17

Loss from operations of La Escuadra

-

-

-

-

(1,038)

 

 

 

 

 

 

Net loss

(3,004)

(743)

(11,466)

(4,491)

(14,759)

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

Foreign currency translation gain (loss)

59

(63)

(6)

67

(442)

Unrealized gain (loss), net on marketable securities

(50)

2

3

34

3

Comprehensive loss

$      (2,995)

$        (804)

$    (11,469)

$      (4,390)

$        (15,198)

 

 

 

 

 

 

Net (loss) income per share – basic and diluted

$        (0.03)

$        (0.01)

$        (0.11)

$        (0.04)

 

Weighted Average Number of Common Shares

Outstanding – basic and diluted

102,795,119

101,995,119

102,795,119

101,995,119

 


 

See Accompanying Notes to these Condensed Consolidated Financial Statements.




5






TARA GOLD RESOURCES CORP. AND SUBSIDIARIES

 (An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 (In thousands of U.S. Dollars, except per share amounts)


 

For the Nine Months Ended

 September 30,

From

inception

December 5,

2000 to

September 30,

 

2010

2009

2010

Cash flows from operating activities:

 

 

 

  Net loss

$

(11,466)

$

(4,491)

$

(14,759)

  Adjustments to reconcile net loss to net cash used in

  operating activities:

 

 

 

     Depreciation and amortization

169 

26 

587 

     Allowance for doubtful accounts

701 

146 

1,071 

     Allowance for mining deposits deemed uncollectible

29 

     Common stock issued for services and other expenses

2,599 

     Stock based compensation and stock bonuses

126 

      Gain on deconsolidation of joint venture

(8,661)

      Non-cash expense due to deconsolidation of joint venture

216 

     Gain on sale of joint venture interest

(2,862)

     Gain on dissolution of joint venture

(250)

(8,688)

     Loss on extinguishment of debt, net

1,097 

746 

     Loss on disposed and discontinued operations

1,001 

     Deferred tax asset, net

(1,748)

     Non-controlling interest in net loss

(4,209)

(337)

(5,703)

     Amortization of beneficial conversion

84 

445 

     Loss on the disposal of assets

218 

     Realized loss on marketable securities

1,681 

4,604 

     Common stock of subsidiary issued and options valuations for services

7,155 

354 

8,129 

     Subsidiaries’ stock based compensation and stock bonuses

3,563 

4,857 

     Exploration expenses paid with stock of subsidiaries

1,224 

1,224 

     Lawsuit settlement payable in stock

315 

     Cancellation of common stock for settlement (Tara Minerals)

(750)

     Assets acquired from La Escuadra

(330)

     Gain on acquisition of mining concession

(100)

     Gain on sale of net cash flow interest

(197)

     Changes in operating assets and liabilities:

 

 

 

      Other receivables

(438)

(235)

(1,375)

      Prepaid expenses

      Other current assets

(86)

46 

(145)

      Accounts payable and accrued expenses

648 

(663)

2,201 

      Deferred joint venture income  

(33)

                    Net cash used in operating activities

(2,655)

(2,626)

(16,981)

 

 

 

 



See Accompanying Notes to these Condensed Consolidated Financial Statements.






6






TARA GOLD RESOURCES CORP. AND SUBSIDIARIES

 (An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 (In thousands of U.S. Dollars, except per share amounts)


(CONTINUED)


 

For the Nine Months Ended September 30,

From

inception

December 5,

2000 to

September 30,

 

2010

2009

2010

Cash flows from investing activities:

 

 

 

  Proceeds from sales of oil & gas properties

  Purchase of mining equipment and furniture and fixtures

(327)

(99)

(723)

  Purchase of land and office building

(415)

  Proceeds from the sale of marketable securities

4,949 

6,682 

  Proceeds from the sale of assets

384 

  Purchase of mining concession

(25)

(595)

189 

  Deposits

(25)

(763)

  Payment for construction in progress

(1,015)

(2,163)

  Proceeds from note receivable payments

(7)

  Proceeds from disposal of assets

347 

  Loans to unrelated third parties

(380)

  Cash included in business acquisition

  Business acquisition goodwill

(4)

(4)

  Cash in discontinued operations

(3)

          Net cash (used) provided by in investing activities

(377)

3,238 

3,152 

 

 

 

 

Cash flows from financing activities:

 

 

 

  Proceeds from short term convertible debt

(22)

  Payments toward short term convertible debt

72 

  Payments toward notes payable

(755)

(316)

(10,771)

  Proceeds from notes payable, related party

247 

247 

  Proceeds from notes payable

480 

480 

  Change in due to/from related parties, net

(84)

(326)

313 

  Non-controlling interest in net assets of consolidated  subsidiaries

1,912 

458 

8,501 

  Payments from joint venture partners

9,920 

  Stock offering costs

(13)

  Cash acquired in reverse acquisition

  Common stock issued for cash

5,753 

          Net cash provided (used) by financing activities

1,800 

(184)

14,484 

 

 

 

 

Effect of exchange rate changes on cash

(6)

67 

(442)

 

 

 

 

Cash and cash equivalents:

 

 

 

          Net (decrease) increase for the period

(1,238)

495 

213 

 

 

 

 

          Beginning of the period

1,451 

264 

 

 

 

 

          End of period

$

213 

$

759 

$

213 




See Accompanying Notes to these Condensed Consolidated Financial Statements.



7







TARA GOLD RESOURCES CORP. AND SUBSIDIARIES

 (An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 (In thousands of U.S. Dollars, except per share amounts)


(CONTINUED)


 

For the Nine Months Ended September 30,

From

 Inception

 (December 5,

 2000) to

 September 30,

 

2010

2009

2010

SUPPLEMENT DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

      Interest paid

$

25 

$

45

$

838

      Income taxes paid

$

$

-

$

10

 

 

 

 

NON-CASH TRANSACTIONS

 

 

 

 

 

 

 

      Conversion of debt to common stock

$

$

-

$

782

      Share receivable for debt

$

$

-

$

27

      Issuance of common stock for assets

$

$

-

$

304

      Issuance of common stock under share

 

 

 

         receivable for services

$

$

-

$

35

      Purchase of mining concession paid by debt

 

 

 

         and issuance of stock and warrants

$

(3,324)

$

4,212

$

19,496

      Beneficial conversion feature, convertible debt

$

$

-

$

32

      Beneficial conversion feature, convertible related party debt

$

$

-

$

359

      Recoverable value-added taxes

$

(509)

$

14

$

2,129

      Purchase of La Escuadra with debt

$

$

-

$

1,370

      Receipt of stock for Joint Venture Payments and Fee Income

$

$

-

$

2,301

      Equipment financed through debt

$

301 

$

-

$

468

      Unrealized loss in investments, available for sale

$

$

8,343

$

10,651

      Accrued and capitalized interest

$

46 

$

96

$

327

      Construction in progress reclassified to property, plant and equipment.

$

2,163 

$

-

$

2,163

      Subsidiaries – warrants with debt

$

289 

$

-

$

289

      Notes receivable reclassified to Due from Related Party

$

$

22

$

22



See Accompanying Notes to these Condensed Consolidated Financial Statements.



















8






TARA GOLD RESOURCES CORP. AND SUBSIDIARIES

 (An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1.

          Nature of Business and Significant Accounting Policies


Basis of Presentation and Organization


The accompanying Condensed Consolidated Financial Statements of Tara Gold Resources Corp. (the “Company”) should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. Significant accounting policies disclosed therein have not changed except as noted below.

 

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 September 30, 2010 and December 31, 2009, the condensed consolidated results of its operations for the three and nine months ended September 30, 2010 and 2009 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2010 and 2009. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.


The Company is engaged in the acquisition, exploration and development of mineral resource properties in United States of America and Mexico. The Company owns 100% of the common stock of Corporacion Amermin, S.A. de C.V. In May 2006, the Company established Tara Minerals Corp, which owns 99.9% of American Metal Mining (“AMM”). Tara Minerals organized Adit Resources (“Adit”) in June 2009 and owns 90% Adit’s common stock as of September 30, 2010. Adit in turns owns 99.9% of American Copper Mining, S.A. de C.V. (“ACM”), which was established in December 2006; ACM operates in Mexico and was purchased in June 2009.  Corporacion Amermin and AMM are Mexican corporations. As of September 30, 2010 and December 31, 2009 the Company owned 75% and 80%, respectively, of the outstanding shares of Tara Minerals.


As used in these Notes to the Condensed Consolidated Financial Statements, the terms the “Company”, “we”, “us”, “our” and similar terms refer to Tara Gold Resources, Corp. and, unless the context indicates otherwise its consolidated subsidiaries. The Company’s subsidiaries include Corporacion Amermin, S.A. de C.V., which operates in México (“Amermin”) and Tara Minerals Corp.


Unless otherwise indicated, all references to the Company include the operation of its subsidiaries and all references to Adit include the operations of its subsidiary.


The consolidated financial statements include the accounts of the Company, its subsidiaries and variable interest entities (“VIE”) over which control is achieved through means other than voting rights and we are considered the primary beneficiary.  The primary beneficiary of the VIE consolidates the entity if control is achieved through means other than voting rights such as certain capital structures and contractual relationships.  All significant intercompany transactions and accounts have been eliminated in consolidation.  The consolidated financial statements of the Company have been prepared on the accrual basis of accounting and are in conformity with accounting principles generally accepted in the United States of America and prevailing industry practice. At September 30, 2010 the Company has no joint ventures or VIEs.


The reporting currency of the Company, Tara Minerals and Adit is the U.S. dollar. The functional currency of Amermin, 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 nonmonetary asset and liability accounts, (iii) historical exchange rates for revenues and expenses associated with nonmonetary 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 or loss is recorded as other comprehensive income (loss).




9






The financial statements of the Mexican subsidiaries should not be construed as representations that Mexican pesos have been, could have been or may in the future be converted into U.S. dollars at such rates or any other rates. 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 of the subsidiaries are as follows for the nine months ended September 30, 2010 and 2009 (denoted in Mexican pesos per one U.S. dollar):


 

2010

Current exchange rate at  September 30,

Ps. 12.4801

Weighted average exchange rate for the nine months ended September 30,

Ps. 12.7178


 

2009

Current exchange rate at  September 30,

Ps. 13.5513

Weighted average exchange rate for the nine months ended September 30,

Ps. 13.6581


Allowance for doubtful accounts


Each period the Company analyzes its receivables for collectability.  When a receivable is determined to not be collectible the receivable is allowed for until there is assurance of its collection or that a write off is necessary.  At September 30, 2010 and December 31, 2009 the Company has allowed $442,999 and $374,116, respectively, relating to other receivables, since it was determined that the Mexican government may not allow the complete refund of value added taxes (“VAT”) previously paid by the Company


Mexican Income Tax Rates: Recoverable Value Added Taxes (IVA) and Income Tax (ISR)


Effective January 1, 2010 the Mexican government increased Impuesto al Valor Agregado taxes (IVA) from 15% to 16% and Impuesto Sobre la Renta (ISR) from 28% to 30%. These financial statements reflect these increases.  


Reclassification


Certain reclassifications reported in prior records, which have no effect on net loss, have been adjusted to conform to the current presentation. Specifically, certain items in the Operating Activities section of the Statement of Cash Flows have been reclassified between categories in the inception to date column for clearer presentation.


Fair Value Accounting


As required by the Fair Value Measurements and Disclosures Topic of the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“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).




10






Estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.


Cash Equivalents and Marketable Securities


The Company considers all highly-liquid investment instruments purchased with an original maturity of three months or less to be cash equivalents.  The Company has no cash equivalents at September 30, 2010 and December 31, 2009.


All investments with stated maturities of greater than three months are classified as marketable securities.  The Company had $650,000 and $450,000 in marketable securities at September 30, 2010 and December 31, 2009, respectively.  These marketable securities had a cost basis of $646,875 and $450,000 as of September 30, 2010 and December 31, 2009, respectively. In accordance with the Comprehensive Income topic of the FASB ASC, the Company has accounted for unrealized gain (loss) as a component of other comprehensive income. An unrealized gain of $3,125 and $33,762 was recorded in other comprehensive income for the nine months ended September 30, 2010 and the year ended December 31, 2009, respectively.


Concentrations


The Company maintains cash balances at highly-rated financial institutions in the United States.  Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.  The Company had zero bank accounts and three bank accounts in excess of $250,000, as of September 30, 2010 and December 31, 2009, respectively.  The Company has not experienced any losses in these accounts.


Recent Accounting Pronouncements


Adopted


In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. The guidance became effective for the Company beginning January 1, 2010. The adoption of this guidance does not have a material impact on the Company's consolidated financial statements.


In February 2010, the FASB issued amended guidance on subsequent events to alleviate potential conflicts between FASB guidance and SEC requirements. Under this amended guidance, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. This guidance was effective immediately and the Company adopted these new requirements for the period ended March 31, 2010. The adoption of this guidance did not have a material impact on the Company’s financial statements.


Issued


In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires a roll forward of activities on purchases, sales, issuances, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance will become effective for the Company with the reporting period beginning July 1, 2011. The adoption of this guidance is not expected to have a material impact on the Company’s condensed consolidated financial statements.





11






Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not have, or are not believed by management will have, a material impact on the Company’s present or future consolidated financial statements.


Note 2.

  Property, plant, equipment, mine development and land

 

 

September 30, 2010

December 31, 2009

 

(Unaudited)

(Audited)

 

 

 

Land

$

19,590 

$

19,590 

 

 

 

Mining concessions (a):

 

 

La Currita

1,253,439 

1,253,439 

Las Minitas

2,336,059 

2,292,428 

Pilar

728,313 

728,313 

Don Roman

521,739 

521,739 

Las Nuvias

100,000 

100,000 

Picacho

1,250,000 

4,564,331 

Centenario

1,919,282 

1,905,472 

Las Brisas

3,134 

3,134 

Mezquite and Mariana

168,298 

166,599 

Auriferos

100,000 

100,000 

Pirita

246,455 

245,270 

Picacho Fractions

206,719 

206,719 

Mining concessions

8,833,438 

12,087,444 

 

 

 

Property, plant and equipment (b)

3,883,343 

1,144,834 

 

12,736,371 

13,251,868 

Less – accumulated depreciation

(280,496)

(111,280)

 

$

12,455,875 

$

13,140,588 


a.

Mining Concessions


Mining concessions as of September 30, 2010 are as follows:


i)

In March 2006, the Company acquired the rights to 23 concessions, known as “Las Minitas”.  The effective purchase price of the properties is $2,663,913.


As of September 30, 2010, the resulting debt payment schedule, including applicable value added tax, is as follow:


2010

$

22,500

2012

1,938,657

 

$

1,961,157


In accordance with the Interest Expense topic of FASB ASC, the future payments of the total payment amount of $2,150,000 have been discounted using the incremental borrowing rate of 3.56%. As of September 30, 2010, the present value of future payments on the Las Minitas contract is as follows:


 

Debt

 

IVA

 

Total

Future payments

$

1,750,000 

 

$

302,500 

 

$

2,052,500 

Imputed interest

(91,343)

 

 

(91,343)

Present value of debt

1,658,657 

 

302,500 

 

1,961,157 

Less:  current portion

 

(22,500)

 

(22,500)

 

$

1,658,657 

 

$

280,000 

 

$

1,938,657 




12






In addition to the $2,150,000 above, the Company capitalized $173,913 in payments made toward the original agreement.  Pursuant to the agreement signed in April 2007 this payment could not be applicable to the purchase price.  Accordingly, the effective purchase price of the properties is $2,663,913.


No payments were made after February 2008 and as of January 13, 2011, the Company is actively working with the note holder to renegotiate the agreement.


ii)

In January 2007, the Company acquired the rights to the six concessions, known as “Picacho”. Due to economic circumstances relating to the current recession, the Company failed to make a payment due in November 2008 and the concession was returned to the third party note holder on June 16, 2009.


In July 2009 Tara Minerals agreed to acquire the Picacho claims from a third party, which then included the Dos Amigos and Unification Rey de Oro concessions, for $4,800,000, plus value-added tax of $720,000.  Tara Minerals paid $575,000 of the purchase price in June 2009.  The $575,000 paid in June 2009 was borrowed from the Company by Tara Minerals.  


In July 2009 Tara Minerals transferred the Picacho prospect to Adit.  In connection with the transfer of the prospect, Adit issued Tara Minerals a promissory note in the principal amount of $650,000 to compensate Tara Minerals for its down payment toward the purchase price of the property and to reimburse Tara Minerals for other amounts advanced on behalf of Adit.  The note is unsecured, bears interest at 3.25% per year, and is due and payable on June 30, 2011.  In December 2009 Adit paid an installment of $278,500 (which included applicable value added taxes) toward the purchase.


In March 2010, Adit, on behalf of ACM, and the note holder agreed to reduce the purchase of the Picacho concession to $1,250,000. Under the revised agreement, Adit paid the vendor $500,000 in cash (plus applicable taxes) as final consideration for the mining concession. These changes resulted in the following: 1) decrease debt by $3,324,485; and 2) decrease recoverable value-added taxes by $508,814. At September 30, 2010 the amended purchase price had been paid in full.


In March 2010, Adit purchased technical data pertaining to the Picacho Prospect from the prospect’s former owner in consideration for the issuance to the former owner of 437,500 shares of Tara Minerals’ common stock and 320,000 shares of Adit’s common stock. The technical data includes engineering reports, maps, assessment reports, exploration samples certificates, surveys, environmental studies and other miscellaneous information pertaining to the Picacho Prospect. As of September 30, 2010 the Picacho Prospect did not have any proven reserves.  As such, the information purchased was considered research and development pertaining to a developing mine and in accordance with the ASC Research and Development (R&D) Topic - R&D is expensed when incurred. The parties agreed that the value of the stock for the technical data was $2.25 per share for Adit stock and $4.00 per share for the Tara Minerals’ common stock.  Tara Minerals has accounted for the shares at their fair market value as follows:  320,000 shares of Adit’s common stock were valued at $0.75 per share, and 437,500 shares of Tara Minerals’ common stock were valued at $2.25 per share.  All fair market values were determined based on contemporaneous stock issuances for cash or if the stock was quoted on an exchange, it’s closing stock price. All stock was issued April 2010.


iii)

In November 2008, Tara Minerals acquired eight mining concessions, known as “Centenario”. The acquisition price of the property, as amended, was $1,675,044, plus $266,001 of value added tax.  


The resulting debt payments schedule, including applicable value added tax, is as follow:


2010

$

251,874

2011

551,673

2012

698,474

 

$

1,502,021




13






In accordance with the Interest Expense topic of FASB ASC, the future payments of the total payment amount of $1,675,044 have been discounted using the incremental borrowing rate of 2.97%. As of September 30, 2010, the present value of future payments on the Centenario contract is as follows:


 

Debt

 

IVA

 

Total

Future payments

$

1,364,429 

 

$

218,309 

 

$

1,582,738 

Imputed interest

(80,717)

 

 

(80,717)

Present value of debt

1,283,712 

 

218,309 

 

1,502,021 

Less:  current portion

(446,088)

 

(80,000)

 

(526,088)

 

$

837,624

 

$

138,309 

 

$

975,933 


iv)

In March 2008, Pershimco Resources transferred the Mariana and Mezquite properties to Tara Gold, as well as the remaining debt payments of $190,000, which includes value added taxes of $25,907 owed to a third party.


The remaining debt payment schedule, including applicable value added tax, is as follow:


2010

$

29,676

2011

117,171

 

$

146,847


In accordance with the Interest Expense topic of FASB, the future payments of the total payment amount of $190,000 have been discounted using the incremental borrowing rate of 2.97%. As of September 30, 2010, the present value of future payments on the Mariana and Mezquite contract is as follows:


 

Debt

 

IVA

 

Total

Future payments

$

129,310 

 

$

20,690 

 

$

150,000 

Imputed interest

(3,153)

 

 

(3,153)

Present value of debt

126,157

 

20,690 

 

146,847 

Less:  current portion

(54,447)

 

(9,044)

 

(63,491)

 

$

71,710 

 

$

11,646 

 

$

83,356 


As of January 13, 2011 the Company was in negotiations to amend to its agreements with all vendors relating to Mariana and Mesquite Prospect.


v)

In June 2009, Tara Minerals acquired the rights to three mining concessions, known as “Pirita”. The acquisition price of the property was $250,000 plus value added taxes of $30,000; $50,000 was paid cash and $200,000 plus value added taxes of $30,000 were financed.


The resulting debt payment schedule, including applicable value added tax, is as follow:


2010

$

84,477 

2011

 

85,978 

 

$

170,455


In accordance with the Interest Expense topic of FASB ASC, the future payments of the total payment amount of $200,000 have been discounted using the incremental borrowing rate of 2.76%. As of September 30, 2010, the present value of future payments on the Pirita contract is as follows:


 

Debt

 

IVA

 

Total

Future payments

$

150,000 

 

$

24,000 

 

$

174,000 

Imputed interest

(3,545)

 

 

(3,545)

Present value of debt

146,455 

 

24,000 

 

170,455 

Less:  current portion

(146,455)

 

(24,000)

 

(170,455)

 

$

 

$

 

$



      b) Other Fixed Assets


For the nine months ended September 30, 2010, Tara Minerals and it subsidiaries purchased equipment and other fixed assets in the normal course of business. During the 6 months ended June 30, 2010, Tara Minerals finished the construction of the plant at the Don Roman mine.


Note 3.

Notes Payable


The following table represents the outstanding balance of loans for the Company as of September 30, 2010 and December 31, 2009.


 

September 30, 2010

December 31, 2009

 

(Unaudited)

(Audited)

 

 

 

Mining concessions

$

3,350,524 

$

7,274,400 

Non-related parties loans, net of debt discount of $97,292 and $0 at September 30, 2010 and December 30, 2009, respectively

382,708 

Auto loans

126,320 

Equipment

72,848 

 

3,932,400 

7,274,400 

Less – current portion

(1,269,586)

(1,106,052)

Total long term notes payable

$

2,662,814 

$

6,168,348 


During the nine months ended September 30, 2010 various non-related parties loaned Tara Minerals a total of $480,000. The notes bear interest at 10% per year, and are due and payable six months after the promissory note date. In December 2010, Tara Minerals elected to extend the notes to June 15, 2011. The interest will increase to 12% from and after December 15, 2010. As further consideration for extending credit to Tara Minerals, each note holder received a warrant that entitles them to purchase 380,000 shares of Tara Minerals’ restricted common stock at a price of $1.20 per share. The warrant may be exercised at any time on or prior to June 15, 2013. As of September 30, 2010 the debt discount associated with the notes is $97,292 (see Note 7).


During the nine months ended September 30, 2010, AMM financed the purchase of three Ford F-150's, one Ford F-250, one Ford-350 and one Courier Pick-Ups to be used in operations for $128,750. The loan is for 48 months. As of September 30, 2010 the outstanding balance of the loan was $126,320.


In July 2010, AMM financed the purchase of mining equipment for $98,500 plus IVA of $15,760 to be used in operations. AMM gave a down payment of $20,000 plus IVA of $3,200. The terms of the note are as follows: five monthly payments of $15,700 plus IVA. As of September 30, 2010 the outstanding balance of the note is $72,848 including IVA.


Note 4.

Balances and transactions with related parties


Balances with related parties are as follows:


 

September 30, 2010

December 31, 2009

Due (to) from related parties

$

(194,314)

$

354,247


In accordance to the receivables from related parties Tara Minerals allowed for $632,000, as of September 30, 2010, of receivables that were outstanding for more than a year and deemed uncollectable. The remaining change in due to related parties is primarily due to officers of the Company having reimbursable expenses to the Company that were not remitted to the officers. All transactions with related parties have occurred in the normal course of operations and are measured at the exchange amount.


As of September 30, 2010 the Company had loaned Tara Minerals $1,826,900.  There are no terms to this intercompany payable and it is due on demand. This is an intercompany transaction that eliminates during the consolidation of these financial statements.



15







In March 2010, Adit acquired technical data pertaining to the Picacho Prospect, mentioned in Note 2 (ii) above. Adit paid for the Tara Minerals shares used in the acquisition by means of a note in the principal amount of $1,750,000.  The note bears interest at 6% per year and is due and payable on March 31, 2012. Tara Minerals may convert the outstanding principal, plus accrued interest, into shares of Adit’s common stock.  Tara Minerals will receive one share of Adit’s common stock for each $1.00 of principal and interest converted. This is an intercompany transaction that eliminates during the consolidation of these financial statements.


During the nine months ended September 30, 2010 an officer of Tara Minerals loaned the Company $50,000. The note bears interest at 10% per year, and is due and payable six months after the promissory note date. In December 2010, the Company elected to extend this note to June 25, 2011.  The interest will increase to 12% on December 15, 2010. As further consideration for extending credit to Tara Minerals, the officer received a warrant that entitles him to purchase 50,000 shares of Tara Minerals’ restricted common stock at a price of $1.20 per share. The warrant may be exercised at any time on or prior to June 15, 2013. As of September 30, 2010 the debt discount associated with the note is $10,098 (see Note 7).


On July 28, 2010 Adit borrowed $100,000 from an officer of Adit. The note bears interest at 3.25% per year due and payable on December 31, 2010, the note was extended to December 31, 2011.


Note 5.

Stockholders’ Equity


The authorized common stock of the Company consists of 150,000,000 shares of common shares with par value of $0.001.


For the nine months ended September 30, 2010, the Company did not issue shares of common stock.


Net loss per common share


Net loss per share is calculated in accordance with the Earnings Per Share Topic of FASB ASC.  The weighted average number of common shares outstanding during each period is used to compute basic loss per share. Diluted loss per share is computed using the weighted averaged number of shares and dilutive potential common shares outstanding.  Dilutive potential common shares are additional common shares assumed to be exercised, such as options, warrants and convertible debt.


At September 30, 2010, the Company had a net loss resulting in no dilution of any common stock equivalents.


Note 6.

Non-controlling Interest


During the nine months ended September 30, 2010 Tara Minerals issued the following to third parties resulting in an increase in non-controlling interest of the Company:

·

100,000 shares for officer bonuses valued at $157,000;

·

1,540,000 shares issued for investor relations and other services valued at $3,099,050;

·

1,592,389 shares issued for cash and with warrants attached valued at $980,043 (inclusive of 131,053 shares for $262,106 in association with the March 2010 Private Placement); and,

·

437,500 shares valued at $984,375 for exploration expenses, Technical Data relating to Picacho.


Tara Minerals stock payable at September 30, 2010 was $671,500 for 622,200 shares.


During the nine months ended September 30, 2010 Adit issued the following to third parties resulting in an increase in non-controlling interest of the Company:

·

347,309 shares for cash $260,482; and

·

320,000 shares valued at $240,000 for exploration expenses, Technical Data relating to Picacho.


Adit’s stock payable at September 30, 2010 increased by:

·

Engaged services for $26,145 which increased subscribed stock for 20,805 shares.



16







 

Non-controlling interest

 at September 30, 2010

Non-controlling interest

 at December 31, 2009

Tara Minerals:

 

 

January 2007 private placement

$

2,540,500 

$

2,540,500 

Equipment

600,000 

600,000 

Shares issued with warrants and exercised warrants

2,093,437 

1,375,500 

Shares issued for services and bonuses

3,722,526 

353,976 

March 2009 private placement

458,000 

458,000 

March 2010 private placement

262,106 

Shares acquired by the Company from a third party

(1,073,875)

(1,073,875)

Cumulative statement of operations pickup through

  December 31, 2009

(1,189,195)

(1,189,195)

  Statement of operations pickup 2010

(3,904,887)

  Exploration expenses paid

984,375 

  Warrants and options to third parties (see footnote 7)

7,612,235 

  Share subscriptions

671,500 

Adit:

 

 

July 2009 private placement

1,499,500 

1,239,018 

Finder’s fees

11,879 

11,879 

  Share subscriptions

383,338 

357,272 

  Statement of operations pickup 2010

(304,043)

  Exploration expenses paid with stock

240,000 

ACM:

 

 

  Non-controlling interest

Total non-controlling interest

$

14,607,400 

$

4,673,075 


Note 7.

Options and Warrants


On February 1, 2007, Tara Minerals adopted the following stock option plans:

·

Incentive Stock Option Plan (for up to 1,000,000 shares)

·

Nonqualified Stock Option Plan (for up to 3,000,000 shares, as amended)

·

Stock Bonus Plan (for up to 750,000 shares)


In July 2008, Tara Minerals filed a registration statement on Form S-8 to register the shares issuable upon the exercise of Incentive Stock and Nonqualified Stock Option as well as any shares that may be issued pursuant to the Stock Bonus Plan.


In February 2007, Tara Minerals granted 1,000,000 options under its Nonqualified Stock Option Plan for 1,000,000 shares of common stock with an exercise price of $0.05 to two of Tara Minerals’ officers for compensation which originally expired February 1, 2010.  In January 2010, the expiration date of these options was extended to February 2012.  In the first quarter of 2010, the Company recognized an additional $889,031 in stock compensation associated with the extension of the expiration date.


In January 2010, Tara Minerals granted 750,000 options under it Incentive Stock Option Plan for 750,000 shares of common stock with an exercise price of $1.57 to two of Tara Minerals’ officers for compensation.  These options vest at various times until January 2017 and begin expiring at various times beginning January 2015.  The vested amount of these options was valued at $182,735.


In January 2010, Tara Minerals granted 1,250,000 options under it Nonqualified Stock Option Plan for 1,250,000 shares of common stock with an exercise price of $0.05 to three of Tara Minerals’ officers for compensation.  These options vested immediately and expire January 2015.  These options were valued at $2,334,201.





17






In 2010, Tara Minerals granted 1,000,000 options for 1,000,000 shares of common stock for investor relations services with an exercise price of $2.15 a share, vesting throughout 2010 with a total value of $2,684,028. During the second quarter of 2010, the number of options granted was reduced to 500,000 with no incremental compensation cost.


Warrants issued in relation to investment relation agreements vest at various rates starting in the second quarter of 2010. At September 30, 2010 all warrants were vested.


Warrants issued in relation to debt may be exercised at any time on or prior to June 15, 2013.


The fair value of each option/warrant award discussed above is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatilities are based on volatilities from Tara Minerals’ traded common stock. The expected term of options granted is estimated at half of the contractual term as noted in the individual option/warrant agreements and represents the period of time that management anticipates option/warrants granted are expected 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.


 

2010

Expected volatility

208.37% - 92.53%

Weighted-average volatility

208.67%

Expected dividends

0

Expected term (in years)

0.75 – 3

Risk-free rate

0.25% - 1.57%


A summary of option activity under the Option Plans as of September 30, 2010, 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, 2009

1,000,000

$

0.05

 

 

Granted

3,650,000

0.97

 

 

Exercised

(20,000)

1.00

 

 

Forfeited or expired

(1,000,000)

0.05

 

 

Outstanding at September 30, 2010

3,630,000

$

0.52

4.0

$

3,657,000

Exercisable at September 30, 2010

2,805,000

$

1.01

4.0

$

3,522,000



Nonvested Options

Options

Weighted

-Average

Grant-Date

 Fair Value

Nonvested at December 31, 2009

$

-

Granted

3,650,000 

1.50

Vested

(2,825,000)

1.52

Forfeited

-

Nonvested at September 30, 2010

825,000 

$

1.50







18







A summary of warrant activity as of September 30, 2010, 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, 2009

3,222,500 

$

0.65

*

 

Granted

2,908,253 

1.61

 

 

Exercised

(1,532,336)

1.09

 

 

Forfeited or expired

(500,164) 

2.15

 

 

Outstanding at  September 30, 2010

4,098,253 

$

1.38

1.0

$1,468,748

Exercisable at September 30, 2010

4,098,253 

$

1.26

1.0

$1,468,748



Nonvested Warrants

Warrants

Weighted-

Average

 Grant-Date

Fair Value

Nonvested at December 31, 2009

-

$

-

Granted

2,908,253

1.87

Vested

(2,408,253)

1.54

Forfeited

(500,000)

2.15

Nonvested at September 30, 2010

-

$

-


Note 8.

Fair Value


The Company's financial assets and liabilities, measured at fair value by level within the fair value hierarchy, are shown below. 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 September 30, 2010

 

  

Total

Level 1

Level 2

Level 3

Assets:

  

 

 

 

 

Marketable Securities

 

$

650,000

$

-

$

-

$

650,000

Total

 

$

650,000

$

-

$

-

$

650,000

 

  

 

 

 

 

Liabilities:

  

 

 

 

 

Total due from related parties

  

$

194,314

$

194,314

$

-

$

-

Notes payable, related parties

 

139,902

139,902

-

-

Notes payable,

 

3,932,400

3,932,400

-

-

    Total

  

$

4,266,616

$

4,266,616

$

-

$

-












19







 

  

Fair Value at December 31, 2009

 

  

Total

Level 1

Level 2

Level 3

Assets:

 

 

 

 

 

Marketable Securities

 

$

450,000

$

-

$

-

$

450,000

Total due from related parties

 

354,247

354,247

-

-

     Total

 

$

804,247

$

354,247

$

-

$

450,000

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Notes payable

 

$

7,274,400

$

7,274,400

$

-

$

-

     Total

 

$

7,274,400

$

7,274,400

$

-

$

-


Note 9.

Subsequent Events


a.

Subsequent to September 30, 2010, Tara Minerals had the following stock transactions:


o

issued 2,304,279 shares of common stock for $1,131,500 in cash and

o

issued 149,361 shares of common stock for services rendered, valued at $176,099.





20






ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION


During the nine months ended September 30, 2010, the Company’s operations used approximately $2,655,000 in cash.  During this same period the Company paid approximately the following for investing and financing activities as reported on the statement of cash flows:


·

$327,000 for mining equipment, furniture and fixtures,

·

$25,000 toward the purchase price of mining concessions,

·

$25,000 for mining deposits,

·

$755,000 toward notes payable,

·

$247,000 proceeds from notes payable, related party,

·

$480,000 proceeds from notes payable, and

·

$1,912,000 in the sale of subsidiary stock (for non-controlling interest).


During the nine months ended September 30, 2009, the Company’s operations used approximately $2,626,000 in cash.  During this same period the Company paid approximately the following for investing and financing activities as reported on the statement of cash flows:


·

$99,000 for mining equipment, furniture and fixtures,

·

$4,949,000 from the sale of investments,

·

$595,000 toward the purchase price of mining concessions,

·

$1,015,000 toward construction in progress,

·

$316,000 toward notes payable and

·

$458,000 in the sale of subsidiary stock (for non-controlling interest).


The Company satisfied its cash requirements for the nine months ended September 30, 2010 with cash on hand at the beginning of the periods, loans, and non-controlling interest in the net assets of consolidated subsidiaries.


The Company satisfied its cash requirements for the nine months ended September 30, 2009 with the sale of marketable securities and non-controlling interest in the net assets of consolidated subsidiaries.


The Company anticipates that its capital requirements for the twelve months ending December 31, 2011 will be:

Property payments and taxes – Pirita property

 

170,455

Exploration and Development – Don Roman Groupings

 

1,000,000

Exploration and Development -  Picacho Prospect

 

500,000

Exploration and Development – Centenario

 

300,000

Property payments and taxes – Centenario

 

803,547

Property payments and taxes – Mariana and Mezquite

 

144,989

Property payments and taxes – Las Minitas

 

147,871

Exploration and Development – Godinez Joint Venture

 

200,000

General and administrative expenses

 

500,000

Total

 

$

3,766,862


In the third quarter of 2010, the Company continued extracting lead, zinc, and silver ore from its mine and stockpiling it for future processing at its processing plant. The Company is anticipating the results from the metallurgical testing early in January, which is currently being performed on mined material from El Sapo and other recently discovered structures at Don Roman, with the objective of improving recovery rates at the mill. Management has spent the last couple of months reviewing



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proposals from turn-key contract operators to run Don Roman plant at expanded capacity and improved recovery rates and believes we have found a preferred experienced team. At the same time, the Company has also been entertaining interest from potential joint venture partners, who also have operational expertise. Site visits have taken place and others are being scheduled, along with other due diligence procedures. The Company continues to maintain a very positive outlook for Don Roman and the surrounding properties and management is committed to resolve all operational issues in an expeditious manner. The Company believes that it is making steady progress towards consistent quality production of marketable concentrates and that both cash on hand and revenue from mining activities will satisfy its working capital needs for 2011.


The Company’s future plans will be dependent upon the amount of capital available to it and the amount of cash provided by its operations.


The Company does not anticipate that it will need to hire any additional employees prior to May 31, 2011.


The Company does not have any commitments or arrangements from any person to provide the Company with any additional capital.  If additional financing is not available when needed, the Company may not continue to operate in its present mode, may need to cease operations or may not be able to maintain its required SEC filings.  


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


ITEM 4.   CONTROLS AND PROCEDURES


Francis R. Biscan, Jr., the Company’s President and Chief Executive Officer, and David A. Bizzaro, the Company’s Principal Financial Officer, 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 were ineffective.  


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.



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PART II

OTHER INFORMATION


ITEM 1.      LEGAL PROCEEDINGS


On September 13, 2010, Tara Gold announced that it had entered into a tentative agreement with Tara Minerals which provided Tara Minerals would acquire all of the outstanding shares of Tara Gold by exchanging one share of Tara Mineral’s common stock for two Tara Gold shares.  


On September 20, 2010 Chris Columbo filed a lawsuit in the District Court for Carson City Nevada, against Tara Gold, Tara Gold’s officers and directors and Tara Minerals. 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 Gold and other defendants.


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


Tara Gold believes the lawsuit filed by Ms. Root is premature since, as noted in the September 13, 2010 press release, the transaction is tentative and is 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 signed.  


On May 6, 2010, the Securities and Exchange Commission temporarily suspended trading in Tara Gold’s securities due to the failure of Tara Gold to file its 10-Q and 10-K reports pursuant to Section 13 of the Securities and Exchange Act of 1934.


On the same day the Commission issued an Order Instituting Proceedings whereby the Commission sought to revoke Tara Gold’s registration of its common stock pursuant to Section 12(g) of the Exchange Act.


On September 7, 2010 an administrative law judge issued an Initial Decision revoking Tara Gold’s registration of its common stock.   On September 24, 2010 Tara Gold filed a Petition to Review the decision of the administrative law judge. On September 30, 2010 the Commission granted Tara Gold’s Petition for Review.  On November 1, 2010 Tara Gold filed a brief in support of its petition with the Commission.   As all briefs and replies were filed on December 15, 2010. The Commission will now decide if Tara Gold’s registration pursuant to Section 12(g) of the Exchange Act should be revoked.


Other than the foregoing, Tara Gold is not involved in any legal proceedings and Tara Gold does not know of any legal proceedings which are threatened or contemplated












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


Not applicable.


ITEM 3.      DEFAULTS UPON SENIOR SECURITIES


None.


ITEM 4.     [REMOVED AND RESERVED]


None.


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

Section 1350 Certifications

(1)


(1)

Filed with this report.




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SIGNATURES


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



TARA GOLD RESOURCES CORP.



Dated: January 13, 2011

By: __/s/ Francis Richard Biscan, Jr._____

Francis R. Biscan, Jr., President and

Chief Executive Officer



Dated: January 13, 2011

By: __/s/ David Bizzaro  ___________

 

David Bizzaro

Principal Financial and Accounting Officer

































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