FIRMA HOLDINGS CORP., 10-Q filed on 5/16/2011
Quarterly Report
Document And Entity Information
3 Months Ended
Mar. 31, 2011
May 16, 2011
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
FALSE 
 
Document Period End Date
2011-03-31 
 
Entity Registrant Name
Tara Minerals Corp. 
 
Entity Central Index Key
0001387054 
 
Current Fiscal Year End Date
12/31 
 
Document Fiscal Year Focus
2011 
 
Document Fiscal Period Focus
Q1 
 
Entity Filer Category
Smaller Reporting Company 
 
Entity Common Stock, Shares Outstanding
 
60,106,087 
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
Mar. 31, 2011
Dec. 31, 2010
Current assets
 
 
Cash
$ 123,310 
$ 157,579 
Recoverable value added taxes, net of allowance for bad debt of $1,252,689 and $1,366,533 at March 31, 2011 and December 31, 2010, respectively
139,595 
170,494 
Other receivables, net of allowance for bad debt of $3,170 and $4,692 at March 31, 2011 and December 31, 2010, respectively
122,405 
104,828 
Total current assets
385,310 
432,901 
Property, plant, equipment mine development and land, net of accumulated depreciation of $353,462 and $295,925 at March 31, 2011 and December 31, 2010, respectively
6,654,788 
8,101,786 
Mining deposits
59,462 
53,368 
Deferred tax, non-current portion
2,930,982 
2,930,982 
Goodwill
12,028 
12,028 
Other assets
74,029 
157,870 
Total assets
10,116,599 
11,688,935 
Current liabilities
 
 
Accounts payable and accrued expenses
755,364 
680,221 
Note payable, current portion
231,161 
824,001 
Notes payable related party
100,000 
100,000 
Due to related parties, net of due from of $76,215 and $69,143 at March 31, 2011 and December 31, 2010, respectively
3,237,827 
3,465,232 
Total current liaibilities
4,324,352 
5,069,454 
Notes payable, non-current portion
60,405 
1,068,350 
Total liabilities
4,384,757 
6,137,804 
Commitments and contingencies
 
 
Stockholders' equity
 
 
Common stock: $0.001 par value; authorized 200,000,000 shares; issued and outstanding 58,479,987 and 57,236,288 shares at March 31, 2011 and December 31, 2010, respectively
58,480 
57,236 
Additional paid-in capital
26,126,261 
24,515,978 
Common stock payable, net of stock receivable of $0 and $212,744 at March 31, 2011 and December 31, 2010, respectively
844,685 
1,129,696 
Other comprehensive loss
(281,640)
(246,253)
Accumulated deficit during exploration stage
(23,566,405)
(21,962,357)
Total Tara Minerals stockholders' equity
3,181,381 
3,494,300 
Non-controlling interest
2,550,461 
2,056,831 
Total equity
5,731,842 
5,551,131 
Total liabilities and stockholders' equity
$ 10,116,599 
$ 11,688,935 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Mar. 31, 2011
Dec. 31, 2010
CONDENSED CONSOLIDATED BALANCE SHEETS [Abstract]
 
 
Recoverable value added taxes, allowance for bad debt
$ 1,252,689 
$ 1,366,533 
Other receivables, allowance for bad debt
3,170 
4,692 
Property, plant, equipment mine development and land, accumulated depreciation
353,462 
295,925 
Due from related parties
76,215 
69,143 
Common stock, par value per share
0.001 
0.001 
Common stock, shares authorized
200,000,000 
200,000,000 
Common stock, shares issued
58,479,987 
57,236,288 
Common stock, shares outstanding
58,479,987 
57,236,288 
Common stock, stock receivable
$ 0 
$ 212,744 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $)
3 Months Ended
Mar. 31,
2011
2010
Mar. 31, 2011
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS [Abstract]
 
 
 
Mining revenues
 
 
160,421 
Cost of revenue
 
 
658,007 
Gross margin
 
 
(497,586)
Exploration expenses
923,004 
1,595,971 
3,396,713 
Operating, general, and administrative expenses
695,487 
7,115,049 
21,067,827 
Net operating loss
(1,618,491)
(8,711,020)
(24,962,126)
Non-operating (income) expense:
 
 
 
Interest (income)
(6,551)
(6,694)
(142,191)
Loss on conversion of note payable
 
 
783,090 
Interest expense
5,309 
221 
2,094,109 
Gain on debt extinguishment
 
 
(6,178)
Loss on disposal or sale of assets
4,260 
 
4,260 
Other (income)
(11,091)
(1,029)
(791,086)
Total non-operating (income) expense
(8,073)
(7,502)
1,942,004 
Loss before income taxes
(1,610,418)
(8,703,518)
(26,904,130)
Income tax benefit
 
 
(2,930,982)
Net loss including non-controlling interest
(1,610,418)
(8,703,518)
(23,973,148)
Non-controlling interest in net loss of consolidated subsidiaries
6,370 
 
406,743 
Net loss attributable to Tara Minerals' shareholders
(1,604,048)
(8,703,518)
(23,566,405)
Other comprehensive loss:
 
 
 
Foreign currency translation
(35,387)
(4,877)
(281,640)
Comprehensive loss
$ (1,639,435)
$ (8,708,395)
$ (23,848,045)
Net loss per share, basic and diluted
(0.03)
(0.17)
 
Weighted average number of shares, basic and diluted
57,547,213 
51,904,807 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
Mar. 31, 2011
Cash flows from operating activities:
 
Net loss attributable to Tara Minerals' shareholders
$ (23,566,405)
Adjustments to reconcile net loss to net cash used in operating activities:
 
Allowance for doubtful accounts
1,255,859 
Depreciation
366,004 
Stock based compensation and stock bonuses
8,154,292 
Common stock issued for services
5,371,684 
Cancellation of shares for settlement
(750,000)
Non-controlling interest in net loss of consolidated subsidiaries
406,743 
Non-controlling interest - stock issued to third parties of subsidiaries
348,549 
Expense of mining deposit upon note modification
6,000 
Accretion of beneficial conversion feature and debt discount
1,983,575 
Exploration expenses paid with parent and subsidiary common stock
1,969,060 
Gain on debt extinguishment
(6,138)
Loss on conversion of debt to common stock
783,090 
Accrued interest converted to common stock
84,438 
Deferred tax asset, net
(2,930,982)
Loss on disposal or sale of assets
4,260 
Rent expense reclassified from capital lease
12,207 
Changes in current operating assets and liabilities:
 
Recoverable value added taxes
(1,127,368)
Other receivables
(118,343)
Other assets
(74,030)
Accounts payable and accrued expenses
777,439 
Net cash used in operating activities
(7,863,552)
Cash flows from investing activities:
 
Acquisition of land
(19,590)
Purchase of mining concession
(830,171)
Deposits toward mining concessions
(37,094)
Acquisition of property, plant and equipment
(2,588,049)
Cash included in business acquisition
2,037 
Business acquisition goodwill
(3,758)
Proceeds from disposal/sale of assets
29,394 
Net cash provided (used in) investing activities
(3,447,231)
Cash flows from financing activities:
 
Cash from the sale of common stock
6,748,288 
Proceeds from notes payable, related party
150,000 
Proceeds from notes payable
480,000 
Payment toward notes payable
(1,251,866)
Payment towards equipment financing
(201,438)
Change in due to/from related parties, net
3,422,104 
Non-controlling interest - cash from sale of sale of common stock of subsidiaries
2,368,645 
Net cash provided by financing activities
11,715,733 
Effect of exchange rate changes on cash
(281,640)
Net (decrease) increase
123,310 
Cash, beginning of period
 
Cash, end of period
123,310 
Supplemental Information:
 
Cash paid for interest
182,451 
Cash paid for income tax
 
Non-cash Investing and Financing Transactions:
 
Purchase of mining concession paid by debt to related party plus capitalized interest (negative movement due to note modification)
1,281,655 
Purchase of or (reduction) in purchase of concession paid with notes payable plus capitalized interest
986,771 
Recoverable value-added taxes incurred through additional debt and due to related party, net of mining concession modification
1,795,245 
Beneficial conversion value for convertible debt
1,695,000 
Conversion of debt to common stock, plus accrued interest
2,309,438 
Purchase of mining equipment with common stock
600,000 
Acquisition of property and equipment through debt
430,921 
Receivable reclassified to mining deposit
28,368 
Construction in progress reclassified to property plant and equipment
$ 2,163,485 
Nature of Business and Significant Accounting Policies
Nature of Business and Significant Accounting Policies

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, a publicly traded company which trades under the TRGD symbol.


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, they include all normal recurring adjustments necessary for a fair presentation of the condensed consolidated balance sheets of the Company at March 31, 2011 and December 31, 2010, and the condensed consolidated statements of operations for the three months ended March 31, 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 three months ended March 31, 2011.  Mexican pesos per one U.S. dollar.  


 

March 31, 2011

Current exchange rate

Ps.     

11.9219

Weighted average exchange rate for the nine months ended  

Ps.     

12.0782


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 we allow for the receivable until we are either assured of collection or assured that a write off is necessary.  We have recorded an allowance of $1,252,689 and $1,366,533 as of March 31, 2011 and December 31, 2010, respectively, in association with our receivable from IVA from our Mexico subsidiaries as we have determined that the Mexican government may not allow 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 our 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.


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.


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.


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

Property, plant, equipment, mine development and land
Property, plant, equipment, mine development and land

Note 2.

Property, plant, equipment, mine development and land


 

March 31, 2011

December 31, 2010

 

Unaudited

Audited

 

 

 

Land

$

19,590 

$

19,590 

 

 

 

Mining concessions:

 

 

  Pilar a

710,172 

710,172 

  Don Roman

521,739 

521,739 

  Las Nuvias

100,000 

100,000 

  Centenario b

635,571 

1,946,545 

  Pirita

246,455 

246,455 

  Picacho

1,250,000 

1,250,000 

  La Palma c

79,974 

Mining concessions

3,543,911 

4,774,911 

 

 

 

Construction in Progress

Property, plant and equipment

3,444,749 

3,603,210 

 

7,008,250 

8,397,711 

Less - accumulated depreciation

353,462

295,925

 

$

6,654,788 

$

8,101,786 


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


a.

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, AMM and the note holder agreed to reduce the purchase 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 were 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.


b.

On March 2011, AMM 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. AMM 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 is due thirty days after the execution date of the agreement.  


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 were 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.


Other Fixed Assets


For the three months ended March 31, 2011, Tara Minerals and its subsidiaries disposed of and sold equipment and other fixed assets, for a $4,260 loss on disposal and sale of assets.

Other assets
Other assets

Note 3.

Other assets


In September 2010, Tara Minerals signed an agreement to purchase three real estate properties for a price of $1,000,000. In order to hold these properties Tara Minerals made a cash deposit of $60,000. Tara Minerals is obligated to pay all the expenses, fees and general expenditures relating to the sale, which expenses, up to a maximum of $500,000, which are deductible from the sales price.  In March 2011, Tara Minerals received notification from Pacemaker Silver Mining S.A. de C.V. a wholly-owned Mexican subsidiary of El Tigre, indicating that they also had surface rights related to being able to work claims they held mining rights too. Although this is does not effect our specific right to the tailing piles, there could be an issue as to who would have specific areas and specific times.   Until the difference can be determined, the deposit was expensed as of March 31, 2011.

Related Party Transactions
Related Party Transactions

Note 4.

Related Party Transactions


Due to related parties, net of due from was $3,237,827 and $3,465,232 as of March 31, 2011 and December 31, 2010, respectively.

 

As of March 31, 2011, Tara Gold loaned the Company $1,588,257 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 Tara Minerals which provided that Tara Minerals will acquire all of the outstanding shares of Tara Gold by exchanging one Tara Mineral share for two Tara Gold shares.  In 2011 this acquisition was cancelled.  Tara Gold Resources Corp. will begin to distribute all of its shares in Tara Minerals to its shareholders at a rate of one Tara Minerals common share for every 20 outstanding shares of Tara Gold Resources Corp.  The ex-dividend date is May 18, 2011, the record date is May 20, 2011 and the payment date is May 27, 2011.  Additional distributions will be announced over the next 24 months until all Tara Minerals shares, held by Tara Gold, are distributed to Tara Gold shareholders.

Notes Payable
Notes payable

Note 5.

Notes Payable


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


 

March 31, 2011

December 31, 2010

 

Unaudited

Audited

 

 

 

Mining concession

$

205,229 

$

1,699,737 

Auto loans

86,337 

119,766 

Equipment

72,848 

 

291,566 

1,892,351 

Less - current portion

231,161

824,001

Total - non-current portion

$

60,405 

$

1,068,350 


During the three months ended March 31, 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.  


During the three months ended March 31, 2011, AMM defaulted on an equipment capital lease entered into on July 21, 2010, the equipment was returned and removed from the books and treated as an operating lease.

Stockholders' Equity
Stockholders' Equity

Note 6.

Stockholders' Equity


The authorized common stock of the Company consists of 200,000,000 shares with par value of $0.001.


March 2011, the Company issued 1,012,977 shares of common stock valued at $1,215,572 or $1.20 a share to convert loans from unrelated parties.


March 2011, the Company issued 105,722 shares of common stock valued at $126,866 or $1.20 a share to convert a loan from a related party.


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


Common Stock Subscribed


At March 31, 2011, common stock payable consists of:

·

100,000 shares payable to an Officer of the Company, valued at $100,000, for payment of services on behalf of Tara Gold.

·

416,100 shares payable, valued at $353,685 for the purchase of Centenario's technical data. See Note 2 above.

·

460,000 shares payable, valued at $391,000 for the purchase of La Palma's technical data. See Note 2 above.

Stock Compensation
Stock Compensation

Note 7.

Stock Compensation


In January 2010, the Company granted two of its officer's options under its Incentive Stock Option Plan for the purchase of 750,000 shares of common stock. The options are exercisable at a price of $1.57 per share and vest at various dates until January 2017. The options expire at various dates beginning January 2015.  As of March 31, 2011 options that vested in 2011 were valued at $182,735.


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 March 31, 2011 options that vested in 2011 were valued at $36,353.


No options or warrants were issued in the first quarter 2011.


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.


 

2010

date of grant

Expected volatility

208.37% - 319.79%

Weighted-average volatility

159.17%

Expected dividends

0

Expected term in years

0.75 - 4.50

Risk-free rate

0.30% - 2.37%



A summary of option activity under the Plan as of March 31, 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

$

0.05

 

 

Granted

-

-

 

 

Exercised

-

-

 

 

Forfeited or expired

-

-

 

 

Outstanding at March 31, 2011

4,630,000

$

0.05

3.5

$2,025,000

Exercisable at March 31, 2011

3,330,000

$

0.46

3.5

$

2,025,000

 


 

Nonvested Options

Options

Weighted

-Average

Grant-Date

 Fair Value

Nonvested at December 31, 2010

1,475,000 

$

1.37

Granted

-

Vested

175,000

1.22

Forfeited

-

Nonvested at March 31, 2011

1,300,000 

$

0.86



A summary of warrant activity under the Plan as of March 31, 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

$

0.65

 

 

Granted

-

 

 

Exercised

125,000

0.40

 

 

Forfeited, cancelled or expired

-

 

 

Outstanding at  March 31, 2011

4,146,999 

$

0.85

1.5

$  580,590

Exercisable at March 31, 2011

4,146,999 

$

0.85

1.5

$

580,590


All warrants at March 31, 2011 were vested.

Non-controlling Interest
Non-controlling Interest [Text Block]

Note 8.

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 expected to be completed May 15, 2011.  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 March 31, 2011

Non-controlling interest at December 31, 2010

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

6,370

AMM Non-controlling interest

Total non-controlling interest

$

2,550,461 

$

2,056,831 


Fair Value
Fair Value

Note 9.

Fair Value


In accordance with authoritative guidance, the table below sets forth the Company's financial assets and liabilities measured at fair value by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


 

Fair Value at March 31, 2011

 

Total

Level 1

Level 2

Level 3

Assets:

 

 

 

 

None

$

-

$

-

$

-

$

-

 

 

 

 

 

Liabilities:

 

 

 

 

Total notes payable

$

291,566

$

291,566

$

-

$

-

Due to related parties, net of due from

3,237,827

3,237,827

-

-

Total

$

3,529,393

$

3,529,393

$

-

$

-


 

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

$

-

$

-


Subsequent Events
Subsequent Events

Note 10.

Subsequent Events


Management evaluated all activity of the Company through May 14, 2011 the issue date of the Financial Statements and concluded the following disclosures are pertinent:


a.

In April 2011, the Company and AMM signed a letter of intent with Springbok Development-Claridge-Hanlon Resource Engineering, "SD-CHRE" and/or Nominee or any of its subsidiaries to grant them an option to acquire up to an undivided forty-nine percent 49% interest in and to all of the mining concessions known as the Don Roman grouping located in the State of Sinaloa, Mexico. The Don Roman grouping now totals approximately 10,000 hectares in close proximity to the existing mill, which includes the Don Roman, Centenario, and the newly acquired La Verdes concessions. The grouping lies 15 km SW of the historically prolific La Reforma silver/zinc/lead district. Key personnel from SD-CHRE have worked on Mining, Commercial, Government and Infrastructure projects for over 20-years.


The Letter of Intent is non-binding and requires SD-CHRE, as the mine and mill operator, to make a $250,000 cash payment to The Company within 45 days of the signing. To earn its 49% interest, SD-CHRE will incur a minimum of $2 million to start-up the existing mill and achieve a production rate of 120 tonnes per day within 120 days; incur another $2 million to achieve a production rate of 360 tonnes per day within 6 months; and incur an additional minimum $4 million to achieve and maintain a minimum production rate, as the parties may agree upon within the Definitive Agreement, not to be less than 480 tonnes per day, within twelve months.


The net revenue generated from the project will be shared on a 50% SD-CHRE and 50% the Company basis. The LOI envisions an assessment and design period of 45-60 days and a Definitive Agreement within 90 days.


b.

In April 2011, the Company entered into an agreement to acquire 100% of the La Verdes gold, silver, zinc and lead project grouping. The 2,200 hectares property consists of eight concessions 13-18 km from the Don Roman mine and mill. The concessions were being mined as late as 2010, with the extracted material grading 0.5-1.5 g/t gold, 300-600 g/t silver, 14-15% zinc, 6-8% lead, and 2.1-2.6% copper. Recent channel samples across the workings assayed similar grades. A road from the groupings, to the Don Roman mill, has also been completed. The Company now controls over 10,000 hectares in close proximity to the mill.


The Company is acquiring the grouping for $1.8 million plus applicable taxes. $1.66 million of the acquisition cost will be paid by the issuance of The Company restricted shares valued at $2 per share, with the remainder being paid in cash.


The La Verdes grouping comprises of an extensive area of hydrothermal alteration that hosts numerous precious and base metal occurrences along the western part of the Northern Sierra Madre Gold Belt. The property lies 30 km SW of the historically prolific La Reforma Pb-Zn-Ag District that is now the focus of concerted exploration by Peñoles. The grouping has 50 m of tunnels and 14 known showings of old workings. Numerous gold/silver/zinc/lead vein structures have been identified with three being well defined. These veins are approximately 1.5-8 meters wide and are comprised of 80% sulfides. The strike length of some of these structures have already been traced to a combined total of over 5 kilometers.


c.

In May 2011, the Company reached an agreement for the right to mine the 3,233 hectare Tania Iron Ore property located in Manzanillo, State of Colima, Mexico. The Company has the right to remove 6 million tonnes of salable concentrate from the property, with perpetual renewal rights, extending through the life of the property. The Company will pay the vendor $6 per salable tonne for the first 500,000 tonnes removed from the property and $7 per tonne thereafter. A total of $100,000 will be advanced to the vendor against future royalty payments.


The Company is also pleased to announce that it has raised $750,000 through a royalty rights offering to advance the project. A portion of the funds will be used to secure appropriate environmental permits, export permits, and recovery process engineering.


The Tania property is located 33 km from the port of Manzanillo. The Iron is contained within decomposed granite with little overburden. On the surface, the mineralized zone is estimated to be 2 km wide and approximately 1 km in length. The zone is continuous and sampled 30-40% Iron. The property has not been subjected to modern exploration methods or concentrating processes.


d.

In May 2011, the Company increased its authorized shares to 200,000,000.  


e.

In May 2011, the Company sold 1,643,333 Units at a price of $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 during the one year period following the sale of the Units.  All warrants expire May 2012.