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, 2010. Significant accounting policies disclosed therein have not changed, except as noted below.

The Company was organized May 12, 2006 under the laws of the State of Nevada. The Company currently is engaged in the acquisition, exploration and development of mineral resource properties in the United States of America and Mexico.  The Company owns 99.9% of the common stock of American Metal Mining, S.A. de C.V. ("AMM"), which was established in December 2006 and operates in México. The Company also owns 87% of the common stock of Adit Resources Corp., which in turns owns 99.9% of American Copper Mining, S.A. de C.V. ("ACM"), which was established in December 2006 and operates in México.  Adit Resources Corp. ("Adit") was organized in June 2009 and ACM was purchased in June 2009.  The Company currently has limited operations and, in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") Development Stage Entities Topic, is considered an Exploration Stage Company.

Tara Minerals Corp. is a subsidiary of Tara Gold Resources Corp. ("Tara Gold" or the "Company's Parent").

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

The accompanying Condensed Consolidated Financial Statements and the related footnote information are unaudited.  In the opinion of management, these financials statements include all normal recurring adjustments necessary for a fair presentation of the condensed consolidated balance sheets of the Company at September 30, 2011 and December 31, 2010, and the condensed consolidated statements of operations for the three and nine months ended September 30, 2011 and 2010. Results of operations reported for interim periods are not necessarily indicative of results for the entire year. The consolidated financial statements include the financial statements of the Company, AMM, Adit and ACM. All amounts are in U.S. dollars unless otherwise indicated. All significant intercompany balances and transactions have been eliminated in consolidation.

The reporting currency of the Company and Adit is the U.S. dollar. The functional currency of AMM and ACM is the Mexican peso. As a result, the financial statements of the subsidiaries have been re-measured from Mexican pesos into U.S. dollars using (i) current exchange rates for monetary asset and liability accounts, (ii) historical exchange rates for 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 loss.

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.

Relevant exchange rates used in the preparation of the financial statements for the subsidiary are as follows for the nine months ended September 30, 2011.  Mexican pesos per one U.S. dollar.

	September 30, 2011
Current exchange rate	Ps.	13.4567
Weighted average exchange rate for the six months ended	Ps.	12.0300

The Company's significant accounting policies are:

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.

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

Each period receivables are reviewed for collectability.  When a receivable is determined to not be collectable, the Company allows for the receivable until the Company is either assured of collection or assured that a write off is necessary.  The Company has recorded an allowance of $1,235,132 and $1,366,533 as of September 30, 2011 and December 31, 2010, respectively, for its receivables for IVA taxes paid by the Company's Mexican subsidiaries based upon the determination that the Mexican government may not pay the complete refund of these taxes.

Reclassifications

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

Purchase of Technical Data

Technical data, including engineering reports, maps, assessment reports, exploration samples certificates, surveys, environmental studies and other miscellaneous information, may be purchased for the Company's mining concessions. When purchased for concessions without proven reserves the cost is considered research and development pertaining to a developing mine and in accordance with the Research and Development (R&D) Topic of the FASB ASC and is expensed when incurred.

Financial Instruments

The Company periodically enters into financial instruments. Upon entry, each instrument is 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 a triggering event of any such instruments happens that remove the temporary element the Company appropriately reclassifies the instrument to debt or equity.

Recently Adopted and Recently Issued Accounting Guidance

Adopted

In October 2009, the FASB issued changes to revenue recognition for multiple-deliverable arrangements. These changes require separation of consideration received in such arrangements by establishing a selling price hierarchy (not the same as fair value) for determining the selling price of a deliverable, which will be based on available information in the following order: vendor-specific objective evidence, third-party evidence, or estimated selling price; eliminate the residual method of allocation and require that the consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the arrangement to each deliverable on the basis of each deliverable's selling price; require that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis; and expand the disclosures related to multiple-deliverable revenue arrangements. These changes become effective on January 1, 2011. The Company has determined that the adoption of these changes will not have an impact on its consolidated financial statements, as the Company does not currently have any such arrangements with its customers.

Issued

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

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

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

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

Note 2.       Property, plant, equipment, mine development and land

		September 30, 2011				December 31, 2010
		(Unaudited)
Land		$	19,590			$	19,590
Mining concessions:
Pilar			710,172				710,172
Don Roman (a)			521,739				521,739
Las Nuvias			100,000				100,000
Centenario (b)			635,571				1,946,545
La Palma (c)			80,000				-
La Verde (d)			60,000				-
Pirita			249,909				246,455
Picacho			1,250,000				1,250,000
Picacho Fractions (e)			163,793				-
Las Viboras Dos (f)			195,390				-
Mining concessions			3,966,574				4,774,911
Property, plant and equipment			3,499,480				3,603,210
			7,485,644				8,397,711
Less - accumulated depreciation			(491,600	)			(295,925	)
		$	6,994,044			$	8,101,786

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

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

a.

In August, 2011 the Company entered into an agreement with Carnegie Mining and Exploration, Inc. which provides Carnegie with the option to earn up to a 50% interest in the Company's Don Roman and all of the Company's Iron Ore Properties located in Mexico, including the Company's Tania Iron Ore property. (See Note 8)

b.

In November 2008, the Company acquired eight mining concessions known as "Centenario" from an independent third party. The properties approximate 5,400 hectares and were purchased for $1,894,050, including $247,050 in value added taxes.

In June 2009, the Company and the note holder modified the agreement to 1) revalue the entire Centenario concession to $2,000,000, 2) apply $127,000 toward the purchase price which had already been paid and recorded as a mining deposit, and 3) apply $197,956 toward the new price of the concession which was originally paid by another subsidiary of the Company's Parent.  These changes resulted in the following 1) additional debt of $28,044 plus related value added tax for these concessions, 2) the reduction of the amount of the mining deposit of $127,000, 3) the expense of $6,000 that AMM also paid but which was not included in the revaluation of the concession, and 4) the increase in Due to Related Party of $197,956 plus related value added tax. The effective amount financed in relation to this concession is $1,675,044 plus $251,257 of value added tax.

In March 2011, the Company and the note holder agreed to reduce the purchase price of the Centenario concession to $635,571. These changes resulted in the following: 1) decrease debt by $1,310,974; and 2) decrease recoverable value added taxes by $218,309. At March 31, 2011 the amended purchase price was paid in full.

In March 2011, the Company purchased technical data pertaining to Centenario from the former owner in consideration for 416,100 shares of the Company's common stock and $100,000 cash. The parties agreed that the value of the stock for the technical data was $2.00 per share for the Company's common stock.  The Company has accounted for the shares at their fair market value as follows:  416,100 shares of the Company's common stock valued at $0.85.  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 2011.

c.

On March 2011, the Company executed an agreement to acquire six mining concessions known as "La Palma" from an independent third party. The properties approximate 2,104 hectares, and were purchased for a total of $92,800, including $12,800 in value added taxes. The Company paid $50,000 as a deposit for the concession mining deposit which was applied to the effective price of the property.  The remaining balance of $42,800 was paid during the second quarter of 2011.

 

In March 2011, the Company purchased technical data pertaining to the La Palma from the former owner for 460,000 shares of the Company's common stock. The parties agreed that the value of the stock for the technical data was $2.00 per share for the Company's common stock.  The Company has accounted for the shares at their fair market value as follows:  460,000 shares of the Company's common stock valued at $0.85.  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 2011.

La Palma is part of the "Don Roman Groupings".

d.

On April 2011,  the Company executed an agreement to acquire two mining concessions known as "La Verde" from an independent third party. The properties approximate 127 hectares, and were purchased for a total of $69,600, including $9,600 in value added taxes. The Company paid $30,000 as a deposit for the concession mining deposit which was applied to the effective price of the property and the remaining balance was paid during the second quarter of 2011.

In April 2011, the Company purchased technical data pertaining to the La Verde from the former owner for 370,000 shares of the Company's common stock. The parties agreed that the value of the stock for the technical data was $2.00 per share for the Company's common stock.  The Company has accounted for the shares at their fair market value as follows:  370,000 shares of the Company's common stock valued at $0.85.  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 2011.

La Verde is part of the "Don Roman Groupings".

e.

On May 2011, the Company executed an agreement to acquire three mining concessions knows as "Picacho Fractions I, II and III" from Tara Gold. The properties approximate 3,823 hectares, and the acquisition price of the properties was $190,000 including $26,207 in value added taxes. The full amount was financed with an interest rate of LIBOR plus 3.25%.

Picacho and the Picacho Fractions are known as the "Picacho Groupings".

f.

On July 2011, the Company executed an agreement to acquire a mining concession known as "Las Viboras Dos" from an independent third party. The properties approximate 148 hectares, and the acquisition price of the properties was $195,390 plus value added taxes. The purchase price was financed and as of September 30, 2011 the balance due toward the purchase price was $209,487.

If the Company fails to fulfill its obligations, there is a $74,312 penalty, at September 30, 2011. The Company is reviewing the property for continued inclusion as part of the Company's mining property portfolio. Therefore the penalty was recorded as an accrued expense at September 30, 2011.

Note 3.

Mining Deposits

 

On September 2011, the Company executed an agreement for the right to mine an Iron Ore Property known as "Champinon". The property approximates 150 hectares and is located in Sinaloa, Mexico. The agreement gives the Company the right to mine Champinon for a period of 10 years.

 

The Company will pay the concession holder a royalty of $5, plus any Value Added Tax, for each tone of material sold. The Company has committed to extract and sell a minimum of 60,000 tonnes every 6 months and the Company anticipates that it can initially reach production rates of a minimum of 30,000 tonnes per month, scaling up to over 50,000 tonnes per month. . As of September 30, 2011, the concession holder has been paid $175,000, plus Value Added Taxes, recorded as a mining deposit, and will be advanced funds, against the minimum royalty, on a monthly basis. Additionally, as of September 30, 2011 production has not commenced.

Note 4.

Other assets, current and non-current

In September 2010, the Company signed an agreement to purchase three properties for a price of $1,000,000. In order to hold these properties, the Company made a cash deposit of $60,000. The Company is obligated to pay all the expenses, fees and general expenditures relating to the sale, up to a maximum of $500,000, which are deductible from the sales price.  In March 2011, the Company received notification from Pacemaker Silver Mining S.A. de C.V. a wholly-owned Mexican subsidiary of El Tigre, indicating that they had rights to the three properties. Although this does not affect the Company's specific right to the property, until the difference can be determined, the deposit was expensed in 2011.

 

In May 2011, the Company paid $66,667 towards a $100,000 advance payable to the Iron Ore Properties vendor, against future royalty payments (See Note 8).

Note 5.

Income taxes

As of September 30, 2011, the 2010 tax returns for Tara Minerals and Adit were filed. As a result of the finalized tax returns, the deferred tax asset was analyzed, resulting in an updated value of $2,820,013. As of December 31, 2010 the Company's estimated deferred tax asset was $2,930,982. The difference of $110,969 was recognized as an income tax provision as of September 30, 2011.

Note 6.

Notes Payable

The following table represents the outstanding balance of loans and capital leases for the Company as of September 30, 2011 and December 31, 2010.

		September 30, 2011				December 31, 2010
		(Unaudited)
Mining concession		$	383,396			$	1,699,737
Auto loans			108,920				119,766
Equipment			-				72,848
			492,316				1,892,351
Less - current portion			(411,696	)			(824,001	)
Total - non-current portion		$	80,620			$	1,068,350

During the nine months ended September 30, 2011, one of the vehicles purchased in 2010 was stolen, the insurance claim was processed and the note payable and the fixed asset removed from the AMM's books. AMM defaulted on an equipment capital lease entered into on July 21, 2010. The equipment was capitalized as an asset and the asset and related debt were removed and payments were reclassified to treat the payments similar to an operating lease.

AMM financed the purchase of one truck to be used in operations for $48,491; the note payable has a 13.5% interest rate and a maturity date of June 1, 2015.

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

Due on or before		September 30, 2012				September 30, 2013				September 30, 2014				September 30, 2015				September 30, 2016				Total
Mining Concessions		$	383,396			$	-			$	-			$	-			$	-			$	383,396
Auto Loans			28,300				32,314				39,245				9,061				-				108,920
Total		$	411,696			$	32,314			$	39,245			$	9,061			$	-			$	492,316

Note 7.

Related Party Transactions

Due to related parties, net of due from related parties was $2,552,645 and $3,465,232 as of September 30, 2011 and December 31, 2010, respectively.

 

The Company is a subsidiary of Tara Gold Resources Corp. In January 2007, another subsidiary of Tara Gold Resources Corp., Corporacion Amermin, S.A. de C.V. ("Amermin"), made the arrangements to purchase the Pilar, Don Roman and Las Nuvias properties listed in Note 2 (part of the Don Roman Grouping). These properties were assigned to the Company's subsidiary AMM as of January 2007. AMM makes payments to Amermin and Amermin made payments related to the original purchase agreements. At June 30, 2010, Amermin has paid the original note holder in full but AMM has not paid Amermin. At September 30, 2011, due from related parties is $79,077 and due to related parties, includes:

- Pilar mining concession: $535,237 (inclusive of valued added tax)

- Don Roman concession: $211,826

- Due to Amermin: $810,794

- Other related party: $101,209

As of September 30, 2011, Tara Gold had loaned the Company $754,599 which amount is included in Due to Related Parties. There are no terms to this related party payable and it is due on demand.

In September 2010, Tara Gold entered into a tentative agreement with the Company which provided that the Company would acquire all of the outstanding shares of Tara Gold by exchanging one Tara Mineral share for two Tara Gold shares.  In 2011 this agreement was cancelled and Tara Gold announced it would begin to distribute all of its shares of the Company's common stock to its shareholders. In May 2011, the first distribution, at a rate of one share of the Company's common stock for every 20 outstanding shares of Tara Gold, was made. Additional distributions will be announced over the next 24 months until all of the Company's common stock, held by Tara Gold, are distributed to Tara Gold shareholders. As of September 30, 2011 Tara Gold owns 55.13% of the common stock of the Company.

On May 2011, ACM acquired three mining concessions knows as "Picacho Fractions I, II and III" from Amermin. The acquisition price of the properties was $190,000 including $26,207 in value added taxes, financed at LIBOR plus 3.25%.

Note 8.

Iron Ore Properties and Related Financial Instrument

 

Note 9.

Stockholders' Equity

March 2011, the Company issued 1,012,977 shares of common stock valued at $1,215,572 or $1.20 a share to unrelated parties as a result of the conversion of loans in the principal amount of $480,000 and related interest of $26,489 at December 2010.

March 2011, the Company issued 105,722 shares of common stock valued at $126,866 or $1.20 a share to a related party as a result of the conversion of loans in the principal amount of $50,000 and related interest of $2,861 at December 2010.

March 2011, the Company issued 125,000 shares of common stock for warrants exercised, for $50,000 in cash or $0.40 a share.

April 2011, the Company issued 100,000 shares of common stock to an Officer of the Company, valued at $100,000 or $1.00 a share for payment on behalf of Tara Gold for services rendered. See Note 7 above.

April 2011, the Company issued 416,100 shares of common stock valued at $353,685 or $0.85 a share for the purchase of Centenario's technical data. See Note 2 above.

April 2011, the Company issued 460,000 shares of common stock valued at $391,000 or $0.85 a share for the purchase of La Palma's technical data. See Note 2 above.

April 2011, the Company issued 370,000 shares of common stock valued at $314,500 or $0.85 a share for the purchase of La Verde's technical data. See Note 2 above.

April 2011, the Company issued 280,000 shares of common stock for warrants exercised, for $112,000 in cash or $0.40 a share.

May 2011, the Company issued 792,500 shares of common stock for warrants exercised, for $317,000 in cash or $0.40 a share.

In May 2011, the Company sold 1,643,334 units in a private offering for $493,000 in cash, or $0.30 per unit. Each unit consisted of one share of the Company's common stock and one warrant.  Each warrant entitles the holder to purchase one share of the Company's common stock at a price of $1.00 per share at any time on or before May 1st, 2012.

May 2011, the Company issued 1,100,000 shares of common stock for $55,000 in cash or $0.050 a share to Officers of the Company who exercised stock options.

In May 2011, the Company increased its authorized capitalization to 200,000,000 shares of common stock.

In September 2011, the Company sold 1,017,667 units in a private offering for $1,017,667 in cash, or $1.00 per unit. Each unit consisted of one share of the Company's common stock and one warrant. Each warrant entitles the holder to purchase one share of the Company's common stock at a price of $1.25 per share during the first year or $1.50 per share during the second year after units were sold and shares issued.

September 2011, the Company issued 100,000 shares of common stock, valued at $66,000 or $0.66 a share for services rendered.

September 2011, the Company issued 90,000 shares of common stock, valued at $148,500 or $1.65 a share for services rendered.

September 2011, the Company issued 10,000 shares of common stock for warrants exercised, for $15,000 in cash or $1.50 a share.

 

Common Stock Payable

At September 30, 2011, common stock payable consists of:

·

212,000 shares payable, valued at $218,000 for cash.

Note 10.

Options and Warrants

In January 2010, under its Incentive Stock Option Plan the Company granted two of its officers options for the purchase of 750,000 shares of common stock. In May 2011, the options were cancelled and the Company concurrently granted new Incentive Stock Options to the officers; under this new grant the officers have the option to purchase 750,000 shares of common stock, exercisable at a price of $0.58 per share and vest at various dates until May 2013. The options expire at various dates beginning May 2013.  In accordance with the Stock Compensation Topic, FASB ASC 718-20-35, the Company has analyzed the cancellation of the award accompanied by the concurrent grant of a replacement award and determined that there was no further incremental compensation cost. As of September 30, 2011 options that vested in 2011 associated with this transaction were valued at $493,384.

In September 2010, the Company granted options for 200,000 shares of common stock to an unrelated third party for investor relations services. The options have an exercise price of $1.00 per share, vest between September 2010 and March 2011 and expire two years from the date of vesting. As of September 30, 2011 options that vested in 2011 were valued at $36,353.

In May 2011, the Company sold 1,643,334 units in a private offering for $493,000 in cash, or $0.30 per unit. Each unit consisted of one share of the Company's common stock and one warrant.  Each warrant entitles the holder to purchase one share of the Company's common stock at a price of $1.00 per share at any time on or before May 1, 2012.

In September 2011, the Company sold 1,017,667 units in a private offering for $1,017,667 in cash, or $1.00 per unit. Each unit consisted of one share of the Company's common stock and one warrant. Each warrant entitles the holder to purchase one share of the Company's common stock at a price of $1.25 per share during the first year or $1.50 per share during the second year after units were sold and shares issued.

 

The fair value of each option 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 the Company's traded common stock. The expected term of options granted is estimated at half of the contractual term as noted in the individual option agreements and represents the period of time that management anticipates option 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.

		September 30, 2011				December 31, 2010
Expected volatility			163.11%				208.37% - 319.79%
Weighted-average volatility			146.85%				159.17%
Expected dividends			0				0
Expected term (in years)			2.00				0.75 - 4.50
Risk-free rate			0.58%				0.30% - 2.37%

A summary of option activity under the Plan as of September 30, 2011 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, 2010			4,630,000			$	0.49
Granted			750,000				0.58
Exercised			(1,100,000	)			0.05
Forfeited, expired or cancelled			(830,000	)			(0.79	)
Outstanding at September 30, 2011			3,450,000			$	0.43				3.0			$	2,634,000
Exercisable at September 30, 2011			2,240,000			$	0.36				3.5			$	2,322,400

Non-vested Options		Options				Weighted -Average Grant-Date  Fair Value
Non-vested at December 31, 2010			1,475,000			$	1.37
Granted			750,000				0.58
Vested			(390,000	)			0.78
Forfeited, expired or cancelled			(625,000	)			(1.57	)
Non-vested at September 30, 2011			1,210,000			$	0.29

 

A summary of warrant activity under the Plan as of September 30, 2011, 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, 2010			4,271,999			$	0.73
Granted			2,671,001				1.13
Exercised			(1,207,500	)			0.95
Forfeited, cancelled or expired			(5,000	)			0.40
Outstanding at  September 30, 2011			5,730,500			$	0.99				1.5			$	1,646,949
Exercisable at September 30, 2011			5,730,500			$	0.99				1.5			$	1,646,949

 

 

Non-vested Warrants		Warrants				Weighted -Average Grant-Date  Fair Value
Non-vested at December 31, 2010		$	-			$	-
Granted			2,671,001				1.13
Vested			(2,671,001	)			(1.13	)
Forfeited			-				-
Non-vested at September 30, 2011			-			$	-

Note 11.

Non-controlling Interest

On January 28, 2011, Adit, sold 500,000 units at a price of $1.00 per unit to Yamana Gold Inc.  Each unit consisted of one share of Adit's common stock and one half warrant. Each full warrant entitles Yamana to purchase one share of Adit's common stock at a price of $1.50 per share at any time on or before January 28, 2014.

In connection with the sale of the units, Adit also signed a letter of intent that grants Yamana an option to acquire up to a 70% interest in Adit's Picacho gold/silver project.  A definitive agreement is not yet completed. Upon completion of the definitive agreement, Adit will sell an additional 2,500,000 units to Yamana at a price of $1.00 per unit. The units will be identical to the units sold on January 28, 2011.  From the $3,000,000 received from Yamana, Adit will be required to spend $2,000,000 in exploration work on the Picacho project within 12 months of signing the definitive agreement.

Yamana can earn a 51% interest in the project by spending an additional $5,000,000 on the project within 30 months of the date of the definitive agreement and paying Adit an additional $1,000,000.  Yamana can increase its interest to 70% by spending an additional $9,000,000 on the project and paying Adit an additional $2,000,000.

 

		Non-controlling interest at September 30, 2011				Non-controlling interest at December 31, 2010
		(Unaudited)
Combined Adit / ACM:
Private placement		$	1,499,501			$	1,499,501
Common stock for cash			500,000				-
Finder's fees			95,215				95,215
Technical data for Picacho			240,000				240,000
Officer compensation			487,500				487,500
Officer options			134,978				134,978
Cumulative statement of operations pickup through December 31, 2010			(400,368	)			(400,368	)
Statement of operations pickup 2011			(6,540	)			-
AMM non-controlling interest			5				5
Total non-controlling interest		$	2,550,291			$	2,056,831

Note 12.

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 September 30, 2011 (Unaudited)
		Total				Level 1				Level 2				Level 3
Assets:
None		$	-			$	-			$	-			$	-
Liabilities:
Total notes payable, related and unrelated		$	592,316			$	592,316			$	-			$	-
Due to related parties, net of due from			2,552,645				2,552,645				-				-
Iron Ore Properties financial instrument			570,000				-				-				570,000
Total		$	3,714,961			$	3,144,961			$	-			$	570,000

		Fair Value at December 31, 2010
		Total				Level 1				Level 2				Level 3
Assets:
None		$	-			$	-			$	-			$	-
Liabilities:
Total notes payable, including related   party		$	1,992,351			$	1,992,351			$	-			$	-
Due to related parties, net of due from			3,465,232				3,465,232				-				-
Total		$	5,457,583			$	5,457,583			$	-			$	-