0001111741false--12-31Non-accelerated
FilerQ22021Yes0.0001173499200000.0001100000040000000177228251772282551648051648010.20.199560000.12543374804333053000P4Y4M2D043902617349922.50The
Series C Preferred Shares may receive a 4% per annum dividend,
payable if available, and in arrears. A description of the
transaction which included the issuance of the Series C Preferred
Shares is included below. The Dividend is calculated at 4.0% of
$4,337,480 payable annually on June 30. At June 30, 2021 dividends
for the years 2017 to 2021 totaling $866,940 were in
arrears.10001000400000000.011000173499230000000.000116000001332212.502.41230630000001000516980405548000000388240048000000110.182500000.03750000.008750000.0000011117412021-01-012021-06-300001111741us-gaap:SubsequentEventMember2021-08-090001111741us-gaap:SubsequentEventMember2021-07-010001111741us-gaap:SubsequentEventMember2021-08-040001111741us-gaap:SubsequentEventMember2021-08-0100011117412021-05-012021-05-1200011117412021-03-012021-03-3000011117412021-02-012021-02-0400011117412021-06-1800011117412021-03-3000011117412021-05-0100011117412018-07-012018-07-3100011117412017-06-012017-06-3000011117412018-02-012018-02-2800011117412018-06-012018-06-3000011117412019-02-012019-02-2800011117412019-10-012019-10-310001111741dynr:ThreeandFourCustomerMember2020-01-012020-06-300001111741dynr:ThreeandFourCustomerMember2021-01-012021-06-300001111741dynr:ThreeandTwoCustomersMember2021-01-012021-06-300001111741dynr:ThreeandTwoCustomersMember2020-01-012020-06-300001111741us-gaap:FairValueInputsLevel3Member2020-12-310001111741us-gaap:FairValueInputsLevel2Member2020-12-310001111741us-gaap:FairValueInputsLevel1Member2020-12-310001111741us-gaap:FairValueInputsLevel3Member2021-06-300001111741us-gaap:FairValueInputsLevel2Member2021-06-300001111741us-gaap:FairValueInputsLevel1Member2021-06-300001111741dynr:PreferredSeriesDMember2019-12-310001111741dynr:PreferredSeriesCMember2019-12-310001111741dynr:PreferredSeriesDMember2020-12-310001111741dynr:PreferredSeriesDMember2021-06-300001111741dynr:PreferredSeriesCMember2020-12-310001111741dynr:PreferredSeriesCMember2021-06-300001111741dynr:PreferredSeriesDMember2020-01-012020-12-310001111741dynr:PreferredSeriesCMember2020-01-012020-12-310001111741dynr:GoldgroupResourcesMember2017-08-240001111741dynr:DynaMexicoMember2015-10-050001111741dynr:GoldgroupResourcesMember2015-10-012015-10-050001111741dynr:LandLeaseAgreementMember2014-01-012014-01-0600011117412014-12-090001111741dynr:GoldgroupResourcesMember2015-10-050001111741dynr:DynausaandDynamexicoMember2021-05-200001111741dynr:DynausaandDynamexicoMember2021-04-160001111741dynr:DynausaandDynamexicoMember2020-07-1700011117412021-05-1200011117412021-02-0400011117412020-12-0500011117412019-12-012019-12-0600011117412015-10-012015-10-050001111741dynr:OfficeLeaseMember2021-01-012021-06-300001111741dynr:GroundLeaseMember2021-01-012021-06-300001111741dynr:GoldenPostRailLlcTexasLimitedCompanyMemberdynr:AdditionalFinancingAgreementMemberdynr:DynaResourceIncMember2020-05-012020-05-130001111741dynr:SecuritiesPurchaseAgreementMember2020-07-012020-07-140001111741dynr:SecuritiesPurchaseAgreementMember2015-05-012015-05-060001111741dynr:GoldenPostRailLlcTexasLimitedCompanyMemberdynr:AdditionalFinancingAgreementMemberdynr:DynaResourceIncMember2021-01-012021-06-300001111741dynr:GoldenPostRailLlcTexasLimitedCompanyMemberdynr:FinancingAgreementMember2015-05-012015-05-060001111741dynr:GoldenPostRailLlcTexasLimitedCompanyMemberdynr:FinancingAgreementMember2015-06-012015-06-300001111741dynr:GoldenPostRailLlcTexasLimitedCompanyMemberdynr:FinancingAgreementMember2015-05-060001111741dynr:GoldenPostRailLlcTexasLimitedCompanyMemberdynr:AdditionalFinancingAgreementMemberdynr:DynaResourceIncMember2021-06-300001111741dynr:GoldenPostRailLlcTexasLimitedCompanyMemberdynr:AdditionalFinancingAgreementMemberdynr:DynaResourceIncMember2020-01-012020-12-310001111741dynr:GoldenPostRailLlcTexasLimitedCompanyMemberdynr:AdditionalFinancingAgreementMemberdynr:DynaResourceIncMember2020-05-140001111741dynr:GoldenPostRailLlcTexasLimitedCompanyMemberdynr:AdditionalFinancingAgreementMemberdynr:DynaResourceIncMember2020-05-012020-05-140001111741dynr:GoldenPostRailLlcTexasLimitedCompanyMemberdynr:FinancingAgreementMember2021-06-300001111741dynr:GoldenPostRailLlcTexasLimitedCompanyMemberdynr:FinancingAgreementMember2021-01-012021-06-300001111741dynr:PreferredStockUndesignatedMember2020-12-310001111741dynr:PreferredStockUndesignatedMember2021-06-300001111741dynr:CommonStocksMember2020-12-310001111741dynr:CommonStocksMember2021-06-300001111741dynr:CeoMemberus-gaap:SeriesAPreferredStockMember2020-12-310001111741dynr:CeoMemberus-gaap:SeriesAPreferredStockMember2021-06-300001111741us-gaap:SeriesCPreferredStockMember2015-05-012015-05-060001111741us-gaap:SeriesCPreferredStockMember2015-05-060001111741us-gaap:SeriesCPreferredStockMember2015-06-012015-06-300001111741us-gaap:SeriesCPreferredStockMember2015-06-300001111741dynr:TwentyTwentyActivityMember2020-12-310001111741dynr:TwentyTwentyActivityMember2020-05-140001111741dynr:TwentyTwentyActivityMember2020-01-012020-06-300001111741dynr:TwentyTwentyActivityMember2020-05-012020-05-140001111741dynr:TwentyTwentyActivityMember2020-05-012020-05-130001111741dynr:TwentyTwentyActivityMember2021-01-012021-06-3000011117412020-01-012020-12-310001111741us-gaap:SeriesCPreferredStockMember2020-01-012020-12-310001111741us-gaap:SeriesCPreferredStockMember2019-12-310001111741dynr:ForeignRangeMember2021-06-300001111741dynr:UnitedStatesRangeMember2021-06-300001111741dynr:UnitedStatesIndefiniteLimitedtoEightyPercentofNOLMember2021-06-300001111741dynr:AprilandMayTwentyThirteeneMemberus-gaap:NotesPayableOtherPayablesMember2021-06-300001111741dynr:AprilandMayTwentyThirteeneMemberus-gaap:NotesPayableOtherPayablesMember2020-12-310001111741dynr:AprilandMayTwentyThirteeneMemberus-gaap:NotesPayableOtherPayablesMember2020-03-012020-03-310001111741dynr:AprilandMayTwentyThirteeneMemberus-gaap:NotesPayableOtherPayablesMember2019-01-012019-12-300001111741dynr:AprilandMayTwentyThirteeneMemberus-gaap:NotesPayableOtherPayablesMember2020-03-310001111741dynr:AprilandMayTwentyThirteeneMemberus-gaap:NotesPayableOtherPayablesMember2020-01-012020-12-310001111741dynr:AprilandMayTwentyThirteeneMemberus-gaap:NotesPayableOtherPayablesMember2021-01-012021-06-300001111741dynr:TwentyThirteenandTwentyForteenMemberus-gaap:NotesPayableOtherPayablesMemberdynr:AdditionalNoteAgreementsMember2020-03-310001111741dynr:TwentyThirteenandTwentyForteenMemberus-gaap:NotesPayableOtherPayablesMemberdynr:AdditionalNoteAgreementsMember2020-12-310001111741dynr:TwentyThirteenandTwentyForteenMemberus-gaap:NotesPayableOtherPayablesMemberdynr:AdditionalNoteAgreementsMember2021-06-300001111741dynr:TwentyThirteenandTwentyForteenMemberus-gaap:NotesPayableOtherPayablesMemberdynr:AdditionalNoteAgreementsMember2019-01-012019-12-300001111741dynr:TwentyThirteenandTwentyForteenMemberus-gaap:NotesPayableOtherPayablesMemberdynr:AdditionalNoteAgreementsMember2020-03-012020-03-310001111741dynr:TwentyThirteenandTwentyForteenMemberus-gaap:NotesPayableOtherPayablesMemberdynr:AdditionalNoteAgreementsMember2019-12-310001111741dynr:TwentyThirteenandTwentyForteenMemberus-gaap:NotesPayableOtherPayablesMemberdynr:AdditionalNoteAgreementsMember2020-01-012020-06-300001111741dynr:TwentyThirteenandTwentyForteenMemberus-gaap:NotesPayableOtherPayablesMemberdynr:AdditionalNoteAgreementsMember2020-01-012020-12-310001111741dynr:TwentyThirteenandTwentyForteenMemberus-gaap:NotesPayableOtherPayablesMemberdynr:AdditionalNoteAgreementsMember2021-01-012021-06-300001111741us-gaap:OtherOwnershipInterestMember2010-12-012010-12-310001111741us-gaap:OtherOwnershipInterestMember2010-12-310001111741us-gaap:OtherOwnershipInterestMember2020-12-310001111741us-gaap:OtherOwnershipInterestMember2021-06-300001111741srt:MinimumMember2021-06-300001111741srt:MaximumMember2021-06-300001111741dynr:WarrantsMember2021-01-012021-06-300001111741dynr:WarrantsMember2021-06-300001111741dynr:GoldgroupResourcesMember2021-06-300001111741dynr:PreferredSeriesDMember2021-01-012021-06-300001111741dynr:PreferredSeriesCMember2021-01-012021-06-300001111741us-gaap:SeriesCPreferredStockMember2021-01-012021-06-300001111741us-gaap:RetainedEarningsMember2021-04-012021-06-3000011117412021-03-310001111741us-gaap:NoncontrollingInterestMember2021-03-310001111741us-gaap:RetainedEarningsMember2021-03-310001111741us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001111741us-gaap:AdditionalPaidInCapitalMember2021-03-310001111741us-gaap:TreasuryStockMember2021-03-310001111741us-gaap:PreferredStockMember2021-03-310001111741us-gaap:CommonStockMember2021-03-310001111741dynr:SeriesAPreferredStocksMember2021-03-310001111741us-gaap:NoncontrollingInterestMember2021-06-300001111741us-gaap:RetainedEarningsMember2021-06-300001111741us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001111741us-gaap:AdditionalPaidInCapitalMember2021-06-300001111741us-gaap:TreasuryStockMember2021-06-300001111741us-gaap:PreferredStockMember2021-06-300001111741us-gaap:CommonStockMember2021-06-300001111741dynr:SeriesAPreferredStocksMember2021-06-300001111741us-gaap:RetainedEarningsMember2021-01-012021-06-300001111741us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-06-300001111741us-gaap:NoncontrollingInterestMember2020-12-310001111741us-gaap:RetainedEarningsMember2020-12-310001111741us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001111741us-gaap:AdditionalPaidInCapitalMember2020-12-310001111741us-gaap:TreasuryStockMember2020-12-310001111741us-gaap:PreferredStockMember2020-12-310001111741us-gaap:CommonStockMember2020-12-310001111741dynr:SeriesAPreferredStocksMember2020-12-310001111741us-gaap:RetainedEarningsMember2020-04-012020-06-300001111741us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300001111741us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001111741us-gaap:TreasuryStockMember2020-04-012020-06-3000011117412020-03-310001111741us-gaap:NoncontrollingInterestMember2020-03-310001111741us-gaap:RetainedEarningsMember2020-03-310001111741us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310001111741us-gaap:AdditionalPaidInCapitalMember2020-03-310001111741us-gaap:TreasuryStockMember2020-03-310001111741us-gaap:PreferredStockMember2020-03-310001111741us-gaap:CommonStockMember2020-03-310001111741dynr:SeriesAPreferredStocksMember2020-03-3100011117412020-06-300001111741us-gaap:NoncontrollingInterestMember2020-06-300001111741us-gaap:RetainedEarningsMember2020-06-300001111741us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001111741us-gaap:AdditionalPaidInCapitalMember2020-06-300001111741us-gaap:TreasuryStockMember2020-06-300001111741us-gaap:PreferredStockMember2020-06-300001111741us-gaap:CommonStockMember2020-06-300001111741dynr:SeriesAPreferredStocksMember2020-06-300001111741us-gaap:RetainedEarningsMember2020-01-012020-06-300001111741us-gaap:NoncontrollingInterestMember2020-01-012020-06-300001111741us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-06-300001111741us-gaap:AdditionalPaidInCapitalMember2020-01-012020-06-300001111741us-gaap:TreasuryStockMember2020-01-012020-06-3000011117412019-12-310001111741us-gaap:NoncontrollingInterestMember2019-12-310001111741us-gaap:RetainedEarningsMember2019-12-310001111741us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001111741us-gaap:AdditionalPaidInCapitalMember2019-12-310001111741us-gaap:TreasuryStockMember2019-12-310001111741us-gaap:PreferredStockMember2019-12-310001111741us-gaap:CommonStockMember2019-12-310001111741dynr:SeriesAPreferredStocksMember2019-12-3100011117412020-01-012020-06-3000011117412020-04-012020-06-3000011117412021-04-012021-06-300001111741us-gaap:SeriesAPreferredStockMember2020-12-310001111741us-gaap:SeriesAPreferredStockMember2021-06-300001111741us-gaap:SeriesCPreferredStockMember2020-12-310001111741us-gaap:SeriesCPreferredStockMember2021-06-3000011117412020-12-3100011117412021-06-3000011117412021-07-31iso4217:USDxbrli:sharesiso4217:USDxbrli:sharesxbrli:pureutr:acre
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended June 30, 2021.
OR
☐ TRANSITION REPORT UNDER SECTION
13 OF 15(d) OF THE EXCHANGE ACT OF 1934
From the transition period ___________ to ____________.
Commission File Number 000-30371
DYNARESOURCE, INC.
|
(Exact name of small
business issuer as specified in its charter)
|
Delaware
|
|
94-1589426
|
(State or other
jurisdiction of
incorporation or
organization)
|
|
(IRS Employer
Identification No.)
|
222 W Las Colinas
Blvd., Suite 1910 North Tower, Irving, Texas
75039
(Address of principal executive offices)
(972)
868-9066
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 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 ☐
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
|
☒ |
Indicate by a check mark whether the company is a shell company (as
defined by Rule 12b-2 of the Exchange Act):
Yes ☐ No ☒
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13 (a) of the Exchange Act.
Yes ☐ No ☒
As of July 31, 2021, there were 17,722,825 shares of Common Stock
of the issuer outstanding.
TABLE OF
CONTENTS
DYNARESOURCE,
INC.
|
CONSOLIDATED
BALANCE SHEETS
|
JUNE 30, 2021
AND DECEMBER 31, 2020
|
|
|
2021
|
|
|
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and Cash
Equivalents
|
|
$ |
9,364,960 |
|
|
$ |
1,504,016 |
|
Accounts
Receivable
|
|
|
3,828,995 |
|
|
|
840,743 |
|
Inventories
|
|
|
1,364,836 |
|
|
|
603,967 |
|
Foreign Tax
Receivable
|
|
|
3,204,226 |
|
|
|
2,179,914 |
|
Appeal Bond
|
|
|
- |
|
|
|
1,111,111 |
|
Other Current
Assets
|
|
|
714,766 |
|
|
|
578,661 |
|
Total Current
Assets
|
|
|
18,477,783 |
|
|
|
6,818,412 |
|
|
|
|
|
|
|
|
|
|
Mining Equipment and
Fixtures (Net of Accumulated
|
|
|
|
|
|
|
|
|
Depreciation of $114,801
and $113,176)
|
|
|
4,353 |
|
|
|
5,978 |
|
Operating
Lease
|
|
|
692,889 |
|
|
|
735,220 |
|
Mining
Concessions
|
|
|
4,132,678 |
|
|
|
4,132,678 |
|
Investment in
Affiliate
|
|
|
70,000 |
|
|
|
70,000 |
|
Other
Assets
|
|
|
95,267 |
|
|
|
95,380 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$ |
23,472,970 |
|
|
$ |
11,857,668 |
|
|
|
|
|
|
|
|
|
|
LIBILITIES AND STOCKHOLDERS’ EQUITY
(DEFICIT)
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$ |
1,363,617 |
|
|
$ |
2,274,011 |
|
Accrued
Expenses
|
|
|
4,404,998 |
|
|
|
3,385,093 |
|
Customer
Advances
|
|
|
9,250,000 |
|
|
|
2,500,000 |
|
Derivative
Liabilities
|
|
|
2,556,676 |
|
|
|
2,371,560 |
|
Current Portion of
Convertible Notes Payable – Series D
|
|
|
3,539,409 |
|
|
|
- |
|
Current Portion of
Convertible Notes Payable – Series I & II
|
|
|
543,279 |
|
|
|
- |
|
Current Portion of
Long-Term Debt
|
|
|
2,009,461 |
|
|
|
1,984,007 |
|
Current Portion of
Operating Lease Payable
|
|
|
92,386 |
|
|
|
82,733 |
|
Total Current
Liabilities
|
|
|
23,759,826 |
|
|
|
12,597,404 |
|
|
|
|
|
|
|
|
|
|
Convertible Notes
Payable – Series D, (Net of Unamortized Discount of $480,591 and
$755,214), Less Current Portion
|
|
|
- |
|
|
|
3,264,786 |
|
Convertible Notes
Payable – Series I & II, Less Current Portion
|
|
|
- |
|
|
|
543,279 |
|
Long Term Debt, Less
Current Portion
|
|
|
33,119 |
|
|
|
97,428 |
|
Operating Lease Payable,
Less Current Portion
|
|
|
630,158 |
|
|
|
685,951 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
24,423,103 |
|
|
|
17,188,848 |
|
|
|
|
|
|
|
|
|
|
Preferred Stock, Series
C, $0.0001 par value, 1,734,992 shares Authorized, issued and
outstanding
|
|
|
4,337,480 |
|
|
|
4,337,480 |
|
COMMITMENTS AND
CONTINGENCIES
|
|
|
- |
|
|
|
- |
|
STOCKHOLDERS' EQUITY
(DEFICIT)
|
|
|
|
|
|
|
|
|
Preferred Stock, Series
A, $0.0001 par value, 1,000 shares authorized,
issued and outstanding
|
|
|
1 |
|
|
|
1 |
|
Common Stock, $0.01 par
value, 40,000,000 shares authorized 17,722,825 and
17,722,825 issued and outstanding
|
|
|
177,228 |
|
|
|
177,228 |
|
Preferred
Rights
|
|
|
40,000 |
|
|
|
40,000 |
|
Additional Paid In
Capital
|
|
|
50,407,333 |
|
|
|
50,407,333 |
|
Treasury Stock, 516,480
and 516,480 shares
|
|
|
(1,474,486 |
) |
|
|
(1,474,486 |
) |
Accumulated Other
Comprehensive income
|
|
|
66,685 |
|
|
|
438,092 |
|
Accumulated
Deficit
|
|
|
(54,504,374 |
) |
|
|
(59,256,828 |
) |
TOTAL STOCKHOLDERS’
DEFICIT
|
|
|
(5,287,613 |
) |
|
|
(9,668,660 |
) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
|
$ |
23,472,970 |
|
|
$ |
11,857,668 |
|
The accompanying notes are an integral part of these
consolidated financial statements.
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE
INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND
2020
(Unaudited)
|
|
Three
Months
June 30,
2021
|
|
|
Three
Months
June 30,
2020
|
|
|
Six
Months
June 30,
2021
|
|
|
Six
Months
June 30,
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$ |
10,526,313 |
|
|
$ |
(3,409 |
) |
|
$ |
15,439,025 |
|
|
$ |
414,635 |
|
COSTS AND EXPENSES OF MINING
OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Costs
Applicable to Sales
|
|
|
778,885 |
|
|
|
- |
|
|
|
1,160,151 |
|
|
|
211,575 |
|
Mine Production
Costs
|
|
|
1,442,932 |
|
|
|
- |
|
|
|
2,249,402 |
|
|
|
533,901 |
|
Mine Exploration
Costs
|
|
|
1,273,241 |
|
|
|
- |
|
|
|
2,285,989 |
|
|
|
40,825 |
|
Mine Expansion
Costs
|
|
|
- |
|
|
|
639,656 |
|
|
- _
|
|
|
|
909,190 |
|
Camp, Warehouse and
Facilities
|
|
|
723,527 |
|
|
|
421,282 |
|
|
|
1,258,722 |
|
|
|
873,324 |
|
Transportation
|
|
|
355,134 |
|
|
|
(446 |
) |
|
|
593,698 |
|
|
|
75,734 |
|
Property Holding
Costs
|
|
|
36,903 |
|
|
|
31,306 |
|
|
|
79,650 |
|
|
|
68,129 |
|
General and
Administrative
|
|
|
651,992 |
|
|
|
1,097,315 |
|
|
|
1,166,969 |
|
|
|
1,517,571 |
|
Depreciation and
Amortization
|
|
|
813 |
|
|
|
812 |
|
|
|
1,625 |
|
|
|
1,625 |
|
Total Operating
Expenses
|
|
|
5,263,427 |
|
|
|
2,189,925 |
|
|
|
8,796,206 |
|
|
|
4,231,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET OPERATING INCOME
(LOSS)
|
|
|
5,262,886 |
|
|
|
(2,193,334 |
) |
|
|
6,642,819 |
|
|
|
(3,817,239 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Gains
(Losses)
|
|
|
470,016 |
|
|
|
(230,310 |
) |
|
|
136,281 |
|
|
|
(339,685 |
) |
Interest
Expense
|
|
|
(369,197 |
) |
|
|
(269,865 |
) |
|
|
(730,419 |
) |
|
|
(404,445 |
) |
Derivatives Adj.
Mark-to-Market Gain (Loss)
|
|
|
210,151 |
|
|
|
(750,524 |
) |
|
|
(185,116 |
) |
|
|
(689,275 |
) |
Arbitration Award
Expense
|
|
|
(1,111,111 |
) |
|
|
- |
|
|
|
(1,111,111 |
) |
|
|
- |
|
Other Income
(Expense)
|
|
|
- |
|
|
|
(4,427 |
) |
|
-_
|
|
|
|
(4,427 |
) |
Total Other Income
(Expense)
|
|
|
(800,141 |
) |
|
|
(1,255,126 |
) |
|
|
(1,890,365 |
) |
|
|
(1,437,832 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) BEFORE
TAXES
|
|
|
4,462,745 |
|
|
|
(3,448,460 |
) |
|
|
4,752,454 |
|
|
|
(5,255,071 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAXES
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$ |
4,462,745 |
|
|
$ |
(3,448,460 |
) |
|
$ |
4,752,454 |
|
|
$ |
(5,255,071 |
) |
DEEMED DIVIDEND FOR SERIES C
PREFERRED
|
|
$ |
(43,375 |
) |
|
|
(43,330 |
) |
|
|
(86,750 |
) |
|
|
(86,660 |
) |
LOSS ATTRIBUTABLE TO NON-CONTROLLING
INTERESTS
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
61,589 |
|
NET INCOME (LOSS)ATTRIBUTABLE TO
COMMON SHAREHOLDERS
|
|
$ |
4,419,370 |
|
|
$ |
(3,491,790 |
) |
|
$ |
4,665,704 |
|
|
$ |
(5,280,142 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) PER SHARE
DATA ATTRIBUTABLE TO THE EQUITY HOLDERS OF
DYNARESOURCE, INC:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Loss per Common
Share
|
|
$ |
0.25 |
|
|
$ |
(0.20 |
) |
|
$ |
0.26 |
|
|
$ |
(0.30 |
) |
Diluted Loss per Common
Share
|
|
$ |
0.24 |
|
|
$ |
(0.19 |
) |
|
$ |
0.25 |
|
|
$ |
(0.30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Outstanding, Basic
|
|
|
17,722,825 |
|
|
|
17,722,825 |
|
|
|
17,722,825 |
|
|
|
17,722,825 |
|
Weighted Average Shares
Outstanding, Diluted
|
|
|
18,945,827 |
|
|
|
17,722,825 |
|
|
|
18,945,827 |
|
|
|
17,722,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency
Exchange Gains (Losses)
|
|
|
(663,778 |
) |
|
|
10,683 |
|
|
|
(371,407 |
) |
|
|
1,144,987 |
|
TOTAL OTHER COMPREHENSIVE INCOME
(LOSS)
|
|
|
(663,778 |
) |
|
|
10,683 |
|
|
|
(371,407 |
) |
|
|
1,144,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL COMPREHENSIVE INCOME
(LOSS)
|
|
$ |
3,798,967 |
|
|
$ |
(3,437,777 |
) |
|
$ |
4,381,047 |
|
|
$ |
(4,110,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATTRIBUTABLE TO:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY HOLDERS OF
DYNARESOURCE, INC.
|
|
$ |
3,798,967 |
|
|
$ |
(3,437,777 |
) |
|
$ |
4,381,047 |
|
|
$ |
(4,036,826 |
) |
NON-CONTROLLING
INTERESTS
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(73,258 |
) |
TOTAL COMPREHENSIVE INCOME
(LOSS)
|
|
$ |
3,798,967 |
|
|
$ |
(3,437,777 |
) |
|
$ |
4,381,047 |
|
|
$ |
(4,110,084 |
) |
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
DYNARESOURCE,
INC.
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIT)
|
FOR THREE AND
SIX MONTHS ENDED JUNE 30, 2021, AND 2020
|
|
|
Preferred
A
|
|
|
Common
|
|
|
Preferred
|
|
|
Preferred
|
|
|
Paid
In
|
|
|
Treasury
|
|
|
Treasury
|
|
|
Other
Comp
|
|
|
Accumulated
|
|
|
Non
Controlling
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Rights
|
|
|
Amount
|
|
|
Capital
|
|
|
Shares
|
|
|
Amount
|
|
|
Income
|
|
|
Deficit
|
|
|
Interests
|
|
|
Totals
|
|
Balance, March 31, 2020
|
|
|
1,000 |
|
|
$ |
1 |
|
|
|
17,722,825
|
|
|
$ |
177,228 |
|
|
|
1 |
|
|
$ |
40,000 |
|
|
$ |
51,056,738 |
|
|
|
778,980 |
|
|
$ |
(2,223,891 |
) |
|
$ |
1,471,814 |
|
|
$ |
(55,697,616 |
) |
|
$ |
0 |
|
|
$ |
(5,175,726 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock Issued
for Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(363,917 |
) |
|
|
(162,500 |
) |
|
|
463,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive
Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,683 |
|
|
|
|
|
|
|
|
|
|
|
10,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,448,460 |
) |
|
|
|
|
|
|
(3,448,460 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020
|
|
|
1,000 |
|
|
$ |
1 |
|
|
|
17,722,825 |
|
|
$ |
177,228 |
|
|
|
1 |
|
|
$ |
40,000 |
|
|
$ |
50,692,821 |
|
|
|
616,480 |
|
|
$ |
(1,759,974 |
) |
|
$ |
1,482,497 |
|
|
$ |
(59,146,076 |
) |
|
$ |
0 |
|
|
$ |
(8,513,503 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021
|
|
|
1,000 |
|
|
$ |
1 |
|
|
|
17,722,825 |
|
|
$ |
177,228 |
|
|
|
1 |
|
|
$ |
40,000 |
|
|
$ |
50,407,333 |
|
|
|
516,480 |
|
|
$ |
(1,474,486 |
) |
|
$ |
730,463 |
|
|
$ |
(58,967,119 |
) |
|
$ |
0 |
|
|
$ |
(9,086,580 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive
Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(663,778 |
) |
|
|
|
|
|
|
|
|
|
|
(663,778 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,462,745 |
|
|
|
|
|
|
|
4,462,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021
|
|
|
1,000 |
|
|
$ |
1 |
|
|
|
17,722,825 |
|
|
$ |
177,228 |
|
|
|
1 |
|
|
$ |
40,000 |
|
|
$ |
50,407,333 |
|
|
|
516,480 |
|
|
$ |
(1,474,486 |
) |
|
$ |
66,685 |
|
|
$ |
(54,504,374 |
) |
|
$ |
0 |
|
|
$ |
(5,287,613 |
) |
Balance, December 31,
2019
|
|
|
1,000 |
|
|
$ |
1 |
|
|
|
17,722,825 |
|
|
$ |
177,228 |
|
|
|
1 |
|
|
$ |
40,000 |
|
|
$ |
56,622,159 |
|
|
|
778,980 |
|
|
$ |
(2,223,891 |
) |
|
$ |
325,841 |
|
|
$ |
(53,952,594 |
) |
|
$ |
(5,723,663 |
) |
|
$ |
(4,734,919 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock Issued
for Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(363,917 |
) |
|
|
(162,500 |
) |
|
|
463,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive
Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,156,656 |
|
|
|
|
|
|
|
(11,669 |
) |
|
|
1,144,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,193,482 |
) |
|
|
(61,589 |
) |
|
|
(5,255,071 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination of Non-Controlling Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,565,421 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,796,921 |
|
|
|
231,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020
|
|
|
1,000 |
|
|
$ |
1 |
|
|
|
17,722,825 |
|
|
$ |
177,228 |
|
|
|
1 |
|
|
$ |
40,000 |
|
|
$ |
50,692,821 |
|
|
|
616,480 |
|
|
$ |
(1,759,974 |
) |
|
$ |
1,471,814 |
|
|
$ |
(59,146,076 |
) |
|
$ |
0 |
|
|
$ |
(8,513,503 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2020
|
|
|
1,000 |
|
|
$ |
1 |
|
|
|
17,722,825 |
|
|
$ |
177,228 |
|
|
|
1 |
|
|
$ |
40,000 |
|
|
$ |
50,407,333 |
|
|
|
516,480 |
|
|
$ |
(1,474,486 |
) |
|
$ |
438,092 |
|
|
$ |
(59,256,828 |
) |
|
$ |
0 |
|
|
$ |
(9,668,660 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive
Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(371,407 |
) |
|
|
|
|
|
|
|
|
|
|
(371,407 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,752,454 |
|
|
|
|
|
|
|
4,752,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021
|
|
|
1,000 |
|
|
$ |
1 |
|
|
|
17,722,825 |
|
|
$ |
177,228 |
|
|
|
1 |
|
|
$ |
40,000 |
|
|
$ |
50,407,333 |
|
|
|
516,480 |
|
|
$ |
(1,474,486 |
) |
|
$ |
66,685 |
|
|
$ |
(54,504,374 |
) |
|
$ |
0 |
|
|
$ |
(5,287,613 |
) |
The accompanying notes are an integral part of these
consolidated financial statements.
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND
2020
(UNAUDITED)
|
|
2021
|
|
|
2020
|
|
CASH FLOWS FROM OPERATING
ACTIVITES:
|
|
|
|
|
|
|
Net income (Loss)
|
|
$ |
4,752,454 |
|
|
$ |
(5,255,071 |
) |
Adjustments to reconcile net loss to
cash used in operating activities
|
|
|
|
|
|
|
|
|
Change in
Derivatives
|
|
|
185,116 |
|
|
|
689,275 |
|
Depreciation
|
|
|
1,625 |
|
|
|
1,625 |
|
Amortization of Loan
Discount
|
|
|
274,623 |
|
|
|
68,656 |
|
Stock issued for
Services
|
|
|
- |
|
|
|
100,000 |
|
Non-Dilution Stock
Issuance
|
|
|
- |
|
|
|
4,427 |
|
Change in Operating Assets and
Liabilities
|
|
|
|
|
|
|
|
|
Accounts
Receivable
|
|
|
(2,988,252 |
) |
|
|
718,487 |
|
Inventories
|
|
|
(760,869 |
) |
|
|
523,089 |
|
Foreign Tax
Receivable
|
|
|
(1,024,312 |
) |
|
|
139,260 |
|
Appeal Bond
|
|
|
1,111,111 |
|
|
|
- |
|
Operating Lease
Assets
|
|
|
42,331 |
|
|
|
37,887 |
|
Other
Assets
|
|
|
(135,992 |
) |
|
|
(41,059 |
) |
Accounts
Payable
|
|
|
(910,394 |
) |
|
|
(598,917 |
) |
Accrued
Expenses
|
|
|
1,019,905 |
|
|
|
220,056 |
|
Customer
Advances
|
|
|
6,750,000 |
|
|
|
- |
|
Lease
Liabilities
|
|
|
(46,140 |
) |
|
|
(37,659 |
) |
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES
|
|
|
8,271,206 |
|
|
|
(3,429,944 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Advances from
Stockholders
|
|
|
|
|
|
|
45,000 |
|
Proceeds from
Borrowing
|
|
|
- |
|
|
|
3,275,000 |
|
Payments of Convertible
Notes
|
|
|
- |
|
|
|
(112,500 |
) |
Payments of Long-Term
Debt
|
|
|
(36,460 |
) |
|
|
(29,315 |
) |
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES
|
|
|
(36,460 |
) |
|
|
3,178,185 |
|
|
|
|
|
|
|
|
|
|
Effects of Foreign
Exchange
|
|
|
(373,802 |
) |
|
|
728,966 |
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVILANTS
|
|
|
7,860,944 |
|
|
|
477,207 |
|
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD
|
|
|
1,504,016 |
|
|
|
354,572 |
|
CASH AND CASH EQUIVALENTS AT END OF
PERIOD
|
|
$ |
9,364,960 |
|
|
$ |
831,779 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES
|
|
|
|
|
|
|
|
|
Cash Paid for
Interest
|
|
$ |
243,979 |
|
|
$ |
47,875 |
|
Cash Paid for Income
Taxes
|
|
$ |
- |
|
|
$ |
- |
|
NON-CASH TRANSACTION
Accrued Interest Rolled into Notes Payable
|
|
$ |
- |
|
|
$ |
23,934 |
|
The accompanying notes are an integral part of these
consolidated financial statements.
DYNARESOURCE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 AND 2020
NOTE 1 – NATURE OF
ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities, History and Organization
DynaResource, Inc. (The “Company”, “DynaResource”, or “DynaUSA”)
was organized September 28, 1937, as a California corporation under
the name of West Coast Mines, Inc. In 1998, the Company
re-domiciled to Delaware and changed its name to DynaResource, Inc.
The Company is in the business of acquiring, investing in, and
developing precious metal properties, and the production of
precious metals.
In 2000, the Company formed a wholly owned subsidiary, DynaResource
de México S.A. de C.V., chartered in México (“DynaMéxico”). This
Company was formed to acquire, invest in and develop resource
properties in México. DynaMéxico owns a portfolio of mining
concessions that currently includes its interests in the San José
de Gracía Project (“SJG”) in northern Sinaloa State, México. The
SJG District covers 9,920 hectares (24,513 acres) on the west side
of the Sierra Madre mountain range. The Company currently owns 100%
of the outstanding capital of DynaMéxico. A 20% minority interest
in Dyna México was held by Goldgroup Resources Inc., a wholly owned
subsidiary of Goldgroup Mining Inc. Vancouver BC (“Goldgroup”)
until February 24, 2020.
In 2005, the Company formed DynaResource Operaciones de San Jose De
Gracía S.A. de C.V. (“DynaOperaciones”), and acquired control of
Mineras de DynaResource, S.A. de C.V. (formerly Minera Finesterre
S.A. de C.V., “DynaMineras”). The Company owns 100% of Dyna
Mineras.
The Company elected to become a voluntary reporting issuer in
Canada in order to avail itself of Canadian regulations regarding
reporting for mining properties and, more specifically, National
Instrument 43-101 (“NI 43-101”). This regulation sets forth
standards for reporting resources in a mineral property and is a
standard recognized in the mining industry.
Reclassifications and Adjustments
Certain financial statement reclassifications have been made to
prior period balances to reflect the current period’s presentation
format; such reclassifications had no impact on the Company’s
consolidated statements of income or consolidated statements of
cash flows and had no material impact on the Company’s consolidated
balance sheets.
Significant Accounting Policies
The Company’s management selects accounting principles generally
accepted in the United States of America and adopts methods for
their application. The application of accounting principles
requires the estimating, matching and timing of revenues and
expenses. The accounting policies used conform to generally
accepted accounting principles which have been consistently applied
in the preparation of these financial statements.
The financial statements and notes are representations of the
Company’s management which is responsible for their integrity and
objectivity. Management further acknowledges that it is solely
responsible for adopting sound accounting practices, establishing
and maintaining a system of internal accounting control and
preventing and detecting fraud. The Company's system of internal
accounting control is designed to assure, among other items that:
1) recorded transactions are valid; 2) valid transactions are
recorded; and 3) transactions are recorded in the proper period in
a timely manner to produce financial statements which present
fairly the financial condition, results of operations and cash
flows of the Company for the respective periods presented.
Basis of Presentation
The Company prepares its financial statements on the accrual basis
of accounting in conformity with accounting principles generally
accepted in the United States.
Principles of Consolidation
The financial statements include the accounts of DynaResource,
Inc., as well as DynaResource de México, S.A. de C.V. (100%
ownership), DynaResource Operaciones S.A. de C.V. (100% ownership)
and Mineras de DynaResource S.A. de C.V. (100% ownership). All
significant inter-company transactions have been eliminated. All
amounts are presented in U.S. Dollars unless otherwise stated.
Non-Controlling Interest
The Company’s subsidiary, DynaResource de México S.A. de C.V, was
20% owned by Goldgroup Resources, Inc. until February 24, 2020 when
the Company recovered the shares as partial satisfaction of a legal
judgement. See Note 10 for further details.
The Company accounted for this outside interest as “non-controlling
interest” through February 2020. A 20% share of operating income
(loss) and comprehensive income (loss) was allocated to the
non-controlling interest through the date of the recovery of the
shares.
Investments in Affiliates
The Company owns a 19.95% interest in DynaResource Nevada, Inc., a
Nevada Corporation (“DynaNevada”), with one operating subsidiary in
México, DynaNevada de México, S.A. de C.V. (“DynaNevada de
México”), together “DynaNevada”. The Company accounts for this
investment using the cost basis. The Company has significant
influence over DynaNevada, but not control, due to the lack of a
majority voting interest in the entity. DynaNevada has been dormant
for several years. DynaUSA has no plan or intention of future
funding with DynaNevada nor are any other transactions with
DynaNevada contemplated at this time. The Company therefore
accounts for this investment using the cost basis. The investment
was $70,000 and $70,000 at June 30, 2021 and December 31, 2020,
respectively.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an
original maturity of three months or less to be cash equivalents.
At times, cash balances may be in excess of the Federal Deposit
Insurance Corporation (“FDIC”) insurance limits. As of June 30,
2021, the Company had $9,507,800 of deposits in U.S. Banks in
excess of the FDIC limit.
Accounts Receivable and Allowances for Doubtful
Accounts
The allowance for accounts receivable is recorded when receivables
are considered to be doubtful of collection. As of June 30, 2021
and December 31, 2020, respectively, no allowance has been
made.
Foreign Tax Receivable
Foreign Tax Receivable is comprised of recoverable value-added
taxes (“IVA”) charged by the Mexican government on goods and
services rendered. Under certain circumstances, these taxes are
recoverable by filing a tax return. Amounts paid for IVA are
tracked and held as receivables until the funds are remitted. The
total amounts of the IVA receivable as of June 30, 2021 and
December 31, 2020 are $3,204,226 and $2,179,914, respectively.
Inventory
Inventories are carried at the lower of cost or net realizable
value and consist of mined tonnage, and gravity and flotation
concentrates, and gravity tailings or flotation feed material. The
inventories are $1,364,836 and $603,967 as of June 30, 2021 and
December 31, 2020, respectively.
Proven and Probable Reserves (No Known
Reserves)
The definition of proven and probable reserves is set forth in SEC
Industry Guide 7 (“Industry Guide 7”). Proven reserves for which
(1) quantity is computed from dimensions revealed in outcrops,
trenches, workings or drill holes, grade and/or quality are
computed from the results of detailed sampling and (2) the sites
for inspection, sampling and measurement are spaced so closely and
the geological character is so well defined that size, shape, depth
and mineral content of the reserves are well-established. Probable
reserves are reserves for which quantity and grade and/or quality
are computed from information similar to that used for proven
(measured) reserves, but the sites for inspection, sampling, and
measurement are farther apart or are otherwise less adequately
spaced. The degree of assurance, although lower than that for
proven (measured) reserves, is high enough to assume continuity
between points of observations.
As June 30, 2021 of the Company's properties contain resources that
satisfy the definition of proven and probable reserves. The Company
classifies the development of its properties, including the San
Jose de Gracía Property, as exploration stage projects since no
proven or probable reserves have been established under Industry
Guide 7.
Property
Substantially all mine development costs, including design,
engineering, mine construction, and installation of equipment are
expensed as incurred as the Company has not established proven and
probable reserves on any of its properties. Only certain types of
mining equipment which has alternative uses or significant salvage
value, may be capitalized without proven and probable reserves.
Depreciation is computed using the straight-line method. Office
furniture and equipment are being depreciated on a straight-line
method over estimated economic lives ranging from 3 to 5 years.
Leasehold improvements, which relate to the Company's corporate
office, are being amortized over the term of the lease of 10
years.
Design, Construction, and Development Costs: Mine
development costs include engineering and metallurgical studies,
drilling and other related costs to delineate an ore body, the
removal of overburden to initially expose an ore body at open pit
surface mines and the building of access ways, shafts, lateral
access, drifts, ramps and other infrastructure at underground
mines.
When proven and probable reserves as defined by Industry Guide 7
exist, development costs are capitalized, and the property is a
commercially minable property. Mine development costs incurred
either to develop new ore deposits, expand the capacity of
operating mines, or to develop mine areas substantially in advance
of current production would be capitalized. Costs of start-up
activities and costs incurred to maintain current production or to
maintain assets on a standby basis are charged to operations as
incurred. Costs of abandoned projects are charged to operations
upon abandonment. All capitalized costs would be amortized using
the units of production method over the estimated life of the ore
body based on recoverable ounces to be mined from proven and
probable reserves.
Certain costs to design and construct mining and processing
facilities may be incurred prior to establishing proven and
probable reserves. As no proven and probable reserves have been
established on any of the Company's properties, design,
construction and development costs are not capitalized at any of
the Company's properties, and accordingly, substantially all costs
are expensed as incurred, resulting in the Company reporting larger
losses than if such expenditures had been capitalized.
Additionally, the Company does not have a corresponding
depreciation or amortization of these costs going forward since
these expenditures were expensed as incurred as opposed to being
capitalized. As a result of these and other differences, the
Company's financial statements may not be comparable to the
financial statements of mining companies that have established
reserves.
Mineral Properties Interests
Mineral property interests include acquired interests in
development and exploration stage properties, which are considered
tangible assets. The amount capitalized relating to a mineral
property interest represents its fair value at the time of
acquisition. When a property does not contain mineralized material
that satisfies the definition of proven and probable reserves, such
as with the San Jose de Gracía Property, capitalized costs and
mineral property interests are amortized using the straight-line
method once production begins. As of June 30, 2021, the mining
interests have been in the pilot production stage and therefore, no
amortization has been expensed. Mining properties consist of 33
mining concessions covering approximately 9,920 hectares at the San
Jose de Gracía property (“SJG”), the basis of which are amortized
on the unit of production method based on estimated recoverable
resources. If it is determined that the deferred costs related to a
property are not recoverable over its productive life, those costs
will be written down to fair value as a charge to operations in the
period in which the determination is made. The amounts at which
mineral properties and the related costs are recorded do not
necessarily reflect present or future values.
Impairment of Assets: The Company reviews and evaluates
its long-lived assets for impairment when events or changes in
circumstances indicate that the related carrying amounts may not be
recoverable. Mineral properties are monitored for impairment based
on factors such as mineral prices, government regulation and
taxation, the Company's continued right to explore the area,
exploration reports, assays, technical reports, drill results and
its continued plans to fund exploration programs on the
property.
For operating mines, recoverability is measured by comparing the
undiscounted future net cash flows to the net book value. When the
net book value exceeds future net undiscounted cash flows, an
impairment loss is measured and recorded based on the excess of the
net book value over fair value. Fair value for operating mines is
determined using a combined approach, which uses a discounted cash
flow model for the existing operations and a market approach for
the fair value assessment of exploration land claims. Future cash
flows are estimated based on quantities of recoverable mineralized
material, expected gold and silver prices (considering current and
historical prices, trends and related factors), production levels,
operating costs, capital requirements and reclamation costs, all
based on life-of-mine plans. The term "recoverable mineralized
material" refers to the estimated amount of gold or other
commodities that will be obtained after considering losses during
processing and treatment of mineralized material. In estimating
future cash flows, assets are grouped at the lowest level for which
there are identifiable cash flows that are largely independent of
future cash flows from other asset groups. The Company's estimates
of future cash flows are based on numerous assumptions and it is
possible that actual future cash flows will be significantly
different than the estimates, as actual future quantities of
recoverable minerals, gold, silver and other commodity prices,
production levels and costs and capital are each subject to
significant risks and uncertainties.
The recoverability of the book value of each property will be
assessed annually for indicators of impairment such as adverse
changes to any of the following:
●
|
estimated recoverable ounces of gold, silver or other precious
minerals;
|
●
|
estimated future commodity prices;
|
●
|
estimated expected future operating costs, capital expenditures and
reclamation expenditures.
|
A write-down to fair value will be recorded when the expected
future cash flow is less than the net book value of the property or
when events or changes in the property indicate that carrying
amounts are not recoverable. This analysis will be completed as
needed, and at least annually. As of the date of this filing, no
events have occurred that would require write-down of any assets.
As of June 30, 2021 and December 31, 2020, no indications of
impairment existed.
Asset Retirement Obligation
As the Company is not obligated to remediate the mining properties,
no Asset Retirement Obligation (“ARO”) has been established.
Changes in regulations or laws, any instances of non-compliance
with laws or regulations that result in fines, or any unforeseen
environmental contamination could result in a material impact to
the amounts charged to operations for reclamation and remediation.
Significant judgments and estimates are made when estimating the
fair value of AROs. Expected cash flows relating to AROs could
occur over long periods of time and the assessment of the extent of
environmental remediation work is highly subjective. Considering
all of these factors that go into the determination of an ARO, the
fair value of the AROs can materially change over time.
Property Holding Costs
Holding costs to maintain a property on a care and maintenance
basis are expensed in the period they are incurred. These costs
include security and maintenance expenses, lease and claim fees and
payments, and environmental monitoring and reporting costs.
Exploration Costs
Exploration costs are charged to operations and expenses as
incurred. Exploration, development, direct field costs and
administrative costs are expensed in the period incurred.
Transactions in and Translations of Foreign
Currency
The functional currency for the subsidiaries of the Company is the
Mexican Peso. As a result, the financial statements of the
subsidiaries have been translated from Mexican Pesos into U.S.
dollars using (i) yearend exchange rates for balance sheet
accounts, and (ii) the weighted average exchange rate of the
reporting period for all income statement accounts. Foreign
currency translation gains and losses are reported as a separate
component of stockholders’ equity and comprehensive income
(loss).
The financial statements of the 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 subsidiaries are as follows for the periods
ended June 30, 2021 and December 31, 2020 (Mexican Pesos per one
U.S. dollar):
|
|
June 30,
2021
|
|
|
Dec 31,
2020
|
|
Exchange Rate at Period End
Pesos
|
|
|
19.94 |
|
|
|
19.91 |
|
Relevant exchange rates used in the preparation of the income
statement portion of financial statements for the subsidiaries are
as follows for the periods ended June 30, 2021 and June 30, 2020
(Mexican Pesos per one U.S. dollar):
|
|
June 30,
2021
|
|
|
June 30,
2020
|
|
Weighted Average Exchange Rate for the Six Months
Ended Pesos
|
|
|
20.19 |
|
|
|
21.65 |
|
The Company recorded currency transaction gains (losses) of
$136,281 and $(339,685) for the six months ended June 30, 2021 and
2020, respectively.
Income Taxes
The Company accounts for income taxes under ASC 740 “Income
Taxes” using the liability method, recognizing certain
temporary differences between the financial reporting basis of
liabilities and assets and the related income tax basis for such
liabilities and assets. This method generates either a net deferred
income tax liability or asset for the Company, as measured by the
statutory tax rates in effect. The Company derives the deferred
income tax charge or benefit by recording the change in either the
net deferred income tax liability or asset balance for the year.
The Company records a valuation allowance against any portion of
those deferred income tax assets when it believes, based on the
weight of available evidence, it is more likely than not that some
portion or all of the deferred income tax asset will not be
realized.
Income from the Company’s subsidiaries in México are taxed at
applicable Mexican tax law.
Use of Estimates
In order to prepare financial statements in conformity with
accounting principles generally accepted in the United States,
management must make estimates, judgments and assumptions that
affect the amounts reported in the financial statements and
determines whether contingent assets and liabilities, if any, are
disclosed in the financial statements. The ultimate resolution of
issues requiring these estimates and assumptions could differ
significantly from resolution currently anticipated by management
and on which the financial statements are based.
Comprehensive Income (Loss)
ASC 220 “Comprehensive Income” establishes standards for
reporting and display of comprehensive income and its components in
a full set of general-purpose financial statements. The Company’s
comprehensive income consists of net income and other comprehensive
income (loss), consisting of unrealized net gains and losses on the
translation of the assets and liabilities of its foreign
operations.
Revenue Recognition
The Company follows ASC 606 “Revenue from contracts with
customers”. The Company generates revenue by selling gold and
silver produce from its mining operations. The Company recognizes
revenue for gold and silver concentrate production, net of
treatment and refining costs, when it satisfies the performance
obligation of transferring control of the concentrate to the
customer. This is generally when the material is delivered to the
customer facility for treatment and processing as the customer has
the ability to direct the use of and obtain substantially all the
remaining benefits from the material and the customer has the risk
of loss.
The amount of revenue recognized is initially recorded on a
provisional basis based on the contract price and the estimated
metal quantities based on assay data. The revenue is adjusted upon
final settlement of the sale. The chief risk associated with the
recognition of sales on a provisional basis is the fluctuations
between the estimated quantities of precious metals base on the
initial assay and the actual recovery from treatment and
processing.
As of June 30, 2021 there are $9,250,000 in customer deposit
liabilities for payments received in advance expected to be settled
in 2021.
During the periods ended June 30, 2021 and 2020 there was $0 and $0
of revenue recognized during the period from customer deposit
liabilities (deferred contract revenue) from prior periods, and $0
of customer deposits refunded to the customer on order
cancellation.
As of and for the periods ended June 30, 2021 and December 31,
2020, there are no contract costs or commissions deferred.
We have elected to account for shipping and handling costs as
fulfillment costs after the customer obtains control of the
goods.
Stock-Based Compensation
The Company accounts for stock options at fair value as prescribed
in ASC 718. The Company estimates the fair value of each stock
option at the grant date by using the Black-Scholes option-pricing
model and provides for expense recognition over the service period,
if any, of the stock option.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, receivables,
payables and long-term debt. The carrying amount of cash,
receivable and payables approximates fair value because of the
short-term nature of these items. The carrying amount of long-term
debt approximates fair value due to the relationship between the
interest rate on long-term debt and the Company’s incremental risk
adjusted borrowing rate.
Per Share Amounts
Earnings per share are calculated in accordance with ASC 260
“Earnings per Share”. The weighted average number of
common shares outstanding during each period is used to compute
basic earnings (loss) per share. Diluted earnings per share are
computed using the weighted average number of shares and
potentially dilutive common shares outstanding. Potentially
dilutive common shares are additional common shares assumed to be
exercised. Potentially dilutive common shares consist of stock
warrants, convertible preferred shares and convertible notes and
are excluded from the diluted earnings per share computation in
periods where the Company has incurred a net loss or where the
average stock price was below the exercise price of the respective
potentially dilutive common share, as their effect would be
considered anti-dilutive.
The Company had 3,391,835 warrants outstanding at June 30, 2021
which upon exercise, would result in the issuance of 3,391,835
shares of common stock. Of these warrants 2,166,527 were
exercisable at $2.05 per share and1,225,308 were exercisable at
$.01 per share. The Company also had convertible debt instruments
as of June 31, 2021 which, upon conversion at valuations from $2.00
to $2.50 per share, would result in the issuance of 2,227,312
shares of stock.
The Company had 3,391,835 warrants outstanding at December 31, 2020
which upon exercise, would result in the issuance of 3,391,835
shares of common stock. Of these warrants 2,166,527 were
exercisable at $2.05 per share and 1,225,308 were exercisable at
$.01 per share. The Company also had convertible debt instruments
as of December 31, 2020 which, upon conversion at valuations from
$2.00 to $2.50 per share, would result in the issuance of 2,227,312
shares of stock.
|
|
Three Month
Ended
June 30,
2021
|
|
|
Three Month
Ended
June 30,
2020
|
|
|
Six Month
Ended
June 30,
2021
|
|
|
Six Month
Ended
June 30,
2020
|
|
Net loss attributable to common shareholders
|
|
$ |
4,419,370 |
|
|
$ |
(3,491,790 |
) |
|
$ |
4,665,704 |
|
|
$ |
(5,280,142 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding,
Basic
|
|
|
17,722,825 |
|
|
|
17,722,825 |
|
|
|
17,722,825 |
|
|
|
17,722,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares
outstanding,
|
|
|
18,945,827 |
|
|
|
17,722,825 |
|
|
|
18,945,827 |
|
|
|
17,722,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$ |
0.25 |
|
|
$ |
(0.20 |
) |
|
$ |
0.26 |
|
|
$ |
(0.30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$ |
0.24 |
|
|
$ |
(0.19 |
) |
|
$ |
0.25 |
|
|
$ |
(0.30 |
) |
At June 30, 2021 2,166,527 shares of potentially dilutive common
stock related to outstanding stock warrants and 2,227,312 shares of
potentially dilutive common stock related to convertible debt were
excluded from the diluted earnings per share calculation because
the exercise and conversion prices exceeded the average stock price
and therefore their effect would be anti-dilutive.
At June 30, 2020 potentially dilutive common shares related to
stock warrants and convertible debt were excluded from the diluted
earning per share computation because the Company incurred a net
loss and therefore their effect would be anti-dilutive.
Related Party Transactions
FASB ASC 850, "Related Party Disclosures" requires companies to
include in their financial statements, disclosures of material
related party transactions. The Company discloses all material
related party transactions. A party is considered to be related to
the Company if the party directly or indirectly or through one or
more intermediaries, controls, is controlled by, or is under common
control with the Company. Related parties also include principal
owners of the Company, its management, members of the immediate
families of principal owners of the Company and its management and
other parties with which the Company may deal if one party controls
or can significantly influence the management or operating policies
of the other to an extent that one of the transacting parties might
be prevented from fully pursuing its own separate interests. A
party which can significantly influence the management or operating
policies of the transacting parties or if it has an ownership
interest in one of the transacting parties and can significantly
influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own
separate interests is also a related party.
NOTE 2 –
INVENTORIES
Inventories are carried at the lower of cost or fair value and
consist of mined tonnage, gravity-flotation concentrates, and
gravity tailings (or, flotation feed material). Inventory balances
of June 30, 2021 and December 31, 2020, respectively, were as
follows:
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Mined Tonnage
|
|
$ |
1,218,021 |
|
|
$ |
555,608 |
|
Gold-Silver Concentrates
|
|
|
146,815 |
|
|
|
48,359 |
|
Total Inventories
|
|
$ |
1,364,836 |
|
|
$ |
603,967 |
|
NOTE 3 –
PROPERTY
Property consists of the following at June 30, 2021 and December
31, 2020:
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
$ |
9,340 |
|
|
$ |
9,340 |
|
Office equipment
|
|
|
31,012 |
|
|
|
31,012 |
|
Office furniture and fixtures
|
|
|
78,802 |
|
|
|
78,802 |
|
Sub-total
|
|
|
119,154 |
|
|
|
119,154 |
|
Less: Accumulated depreciation
|
|
|
(114,801 |
) |
|
|
(113,176 |
) |
Total Property
|
|
$ |
4,353 |
|
|
$ |
5,978 |
|
Depreciation has been provided over each asset’s estimated useful
life. Depreciation expense was $1,625 and $1,625 for the periods
ended June 30, 2021 and 2020 respectively.
NOTE 4 – MINING
CONCESSIONS
Mining properties consist of the San Jose de Gracía (“SJG”)
concessions. Mining Concessions were $4,132,678 and $4,132,678 at
June 30, 2021 and December 31, 2020, respectively.
Depletion expense was $0 and $0 for the periods ended June 20, 2021
and 2020, respectively.
NOTE 5 – INVESTMENT
IN AFFILIATE/RECEIVABLES FROM AFFILIATE/OTHER
ASSETS
The Company owns 19.95% DynaResource Nevada, Inc. (“DynaNevada”), a
Nevada Corporation, which owns 100% of one operating subsidiary in
México, DynaNevada de México, S.A. de C.V. (“DynaNevada de
México”). DynaNevada is a related entity (affiliate), and through
its subsidiary, DynaNevada de México has entered into an Option
agreement with Grupo México (IMMSA) in México, for the exploration
and development of approximately 3,000 hectares in the State of San
Luis Potosi (“The Santa Gertrudis Property”). DynaNevada de México
exercised the Option with IMMSA in March 2010, so that DynaNevada
de México now owns 100% of the Santa Gertrudis Property. In June
2010, DynaNevada de México acquired an additional 6,000 hectares in
the State of Sinaloa (the “San Juan Property”).
On December 31, 2010, the Company received 3,223,040 shares, which
represents approximately 19.95% of the outstanding shares of
DynaNevada. At the time of the exchange, DynaNevada’s net book
value was approximately $695,000, consisting of $30,000 of cash and
the remainder being unproven mining properties. Subsequent to the
exchange management determined the investment to be impaired due to
a lack of development of the properties and incurred a charge to
the income statement. Management estimated the value of the
Company’s DynaNevada shares as of June 30, 2021 and December 31,
2020 to be $70,000 and $70,000, respectively.
At June 30, 2021 and December 31, 2020, the Company had a
receivable from DynaNevada de México of $71,379 and $71,465,
respectively for working capital advances. These amounts are
included in Other Assets in the accompanying consolidated balance
sheets.
NOTE 6 –
CONVERTIBLE PROMISSORY NOTES
Notes Payable – Series I
In April and May 2013, the Company entered into note agreements
with shareholders in the principal amount of $1,495,000, of which
$340,000 was then converted to preferred shares within the same
year, netting to proceeds of $1,155,000 (the “Series I Notes”). The
Series I Notes bear simple interest at twelve and a half percent
(12.5%), accrued for twelve months, and with the accrued interest
to be added to the principal, and then interest will be paid by the
Company, quarterly in arrears. The holders of the Series I Notes
(in aggregate) are also entitled to receive ten percent (10%) of
the net profits received by the Company, on the first fifty
thousand tons processed through the mill facilities at San Jose de
Gracía. Such net profits (if any) are to be calculated after
deducting “all expenses related to the production”, and after a
prior deduction of thirty-three percent (33%) from the net profits,
to be deposited into a sinking fund cash reserve. To date, the
Company has not produced any net profits as calculated in
accordance with the Series I Notes.
The Notes originally matured on December 31, 2015. As of December
31, 2018, seven of the Series I Notes totaling $646,875 had
subsequently been extended to December 30, 2019. On December 31,
2019, the Company entered into agreements to extend seven
outstanding notes totaling $646,875 plus accrued interest totaling
$34,277 for new total notes of $681,152 until December 31,
2020.
On March 31, 2020 the Company entered into agreements to extend the
seven outstanding notes totaling $691,152 plus accrued interest
totaling $21,286 for a new total of $702,438 until June 30, 2022.
At December 31, 2020 one note for $246,533 was paid off leaving six
Series I Notes remaining outstanding with a total balance of
$455,905.
At June 30, 2021 six Series I Notes remained outstanding with a
total balance of $455,905. The Company has the right to prepay the
Series I Notes with a ten percent (10%) penalty.
The Series I Note holder retains the option, at any time prior to
maturity or prepayment, to convert any unpaid principal and accrued
interest into Common Stock at $2.50 per share. If the Series I Note
is converted into Common Stock, at the time of conversion, the
holder would also receive warrants, in the same number as the
number of common shares received upon conversion, to purchase
additional common shares of the Company for $7.50 per share, with
such warrants expiring one year from their conversion date.
Notes Payable – Series II
In 2013 and 2014, the Company entered into additional note
agreements of $199,808 and $250,000, respectively (the “Series II
Notes”) with similar terms as the Series I Notes. The Series II
Notes bear simple interest at twelve and a half percent (12.5%),
accrued for twelve months, and with the accrued interest to be
added to the principal, and then interest will be paid by the
Company, quarterly in arrears. The holders of the Series II Notes
(in aggregate) are also entitled to receive ten percent (10%) of
the net profits received by the Company, on the second fifty
thousand tons processed through the mill facilities at San Jose de
Gracía. Such net profits (if any) are to be calculated after
deducting “all expenses related to the production” and after a
prior deduction of thirty-three percent (33%) from the net profits,
to be deposited into a sinking fund cash reserve. To date, the
Company has not produced any net profits as calculated in
accordance with the Series II Notes.
The Notes originally matured on December 31, 2015. On December 31,
2019 the Company entered into agreements to extend the two notes
totaling $78,750 plus accrued interest of $5,977 for total new
notes of $84,757 to December 31, 2020. One note for $112,500 was
not extended and was past due as of December 31, 2019. At December
31, 2019 three Series II notes remained outstanding for
$197,226.
On March 31, 2020 the Company entered into agreements to extend the
two notes totaling $84,726 plus accrued interest of $2,648 for
total new notes of $87,374 to June 30, 2022. One note for $112,500
was not extended and was paid off in May 2020. At December 31, 2020
two Series II notes remained outstanding for $87,374.
At June 30, 2021, two Series II notes remained outstanding for
$87,374. The Company has the right to prepay the Series II Notes
with a ten percent (10%) penalty.
The Note holder may, at any time prior to maturity or prepayment,
convert any unpaid principal and accrued interest into common stock
of the Company at $2.50 per share. At the time of conversion, the
holder would receive a warrant to purchase additional common shares
of the Company for $7.50 per share, such warrant expiring one year
from their conversion date.
NOTE 7 – INCOME
TAXES
The Company has adopted ASC 740-10, “Income Taxes”, which
requires the use of the liability method in the computation of
income tax expense and the current and deferred income taxes
payable (deferred tax liability) or benefit (deferred tax asset).
Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
The cumulative tax effect at the expected statutory tax rate of 21%
of significant items comprising the Company’s net deferred tax
amounts as of June 30, 2021 and December 31, 2020 are as
follows:
Deferred Tax Asset Related to:
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Prior Year
|
|
$ |
13,473,000 |
|
|
$ |
13,780,490 |
|
Tax (Expense) Benefit for Current Year
|
|
|
(1,421,781 |
) |
|
|
953,120 |
|
Expiration of NOL Carryforward Period
|
|
|
- |
|
|
|
(1,260,610 |
) |
Total Deferred Tax Asset
|
|
|
12,051,219 |
|
|
|
13,473,000 |
|
Less Valuation Allowance
|
|
|
(12,051,219 |
) |
|
|
(13,473,000 |
) |
Net Deferred Tax Asset
|
|
$ |
- |
|
|
$ |
- |
|
For Financial Reporting Purposes Income (Loss) Before Taxes for the
Six Months ended June 30, 2021 and 2020 includes the Following
Components:
|
|
2021
|
|
|
2020
|
|
United States
|
|
$ |
(4,841,452 |
) |
|
$ |
(1,862,612 |
) |
Foreign
|
|
|
9,593,906 |
|
|
|
(3,392,459 |
) |
|
|
$ |
4,752,454 |
|
|
$ |
(5,255,071 |
) |
The Expense (Benefit) for Taxes for the Six Months Ended June 30,
2021 and 2020 Consist of the Following:
Current
|
|
|
|
|
|
|
Federal
|
|
$ |
- |
|
|
$ |
- |
|
State
|
|
|
- |
|
|
|
- |
|
Foreign
|
|
|
- |
|
|
|
- |
|
|
|
$ |
- |
|
|
$ |
- |
|
Deferred and Other
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
(920,960 |
) |
|
$ |
(285,487 |
) |
State
|
|
|
- |
|
|
|
- |
|
Foreign
|
|
|
2,342,741 |
|
|
|
(848,115 |
) |
|
|
|
1,421,781 |
|
|
|
(1,133,602 |
) |
|
|
|
|
|
|
|
|
|
Total Tax Expense (Benefit)
|
|
|
1,421,781 |
|
|
|
(1,133,602 |
) |
Change in Valuation Allowance
|
|
|
(1,421,781 |
) |
|
|
1,133,602 |
|
Net Tax Expense (Benefit)
|
|
$ |
- |
|
|
$ |
- |
|
The Company's Income Tax Expense (Benefit)for the six months ending
June 30, 2021 and 2020 differs from the Statutory Rate of 21% due
to the following:
|
|
2021
|
|
|
2020
|
|
Tax Expense (Benefit) at Statutory Rate
|
|
$ |
998,015 |
|
|
$ |
(1,103,565 |
) |
Foreign Tax Rate Differential
|
|
|
863,450 |
|
|
|
(210,203 |
) |
Permanent Differences
|
|
|
|
|
|
|
|
|
Stock Issued for Services
|
|
|
- |
|
|
|
21,000 |
|
Change in Derivative Liability
|
|
|
38,874 |
|
|
|
144,748 |
|
Amortization of Loan Discount
|
|
|
57,671 |
|
|
|
14,418 |
|
Timing Differences
|
|
|
|
|
|
|
|
|
Depreciation & Capitalized Assets
|
|
|
(15,283 |
) |
|
|
|
|
Sales & Accounts Receivable
|
|
|
(321,479 |
) |
|
|
|
|
Inventory and COGS
|
|
|
(198,667 |
) |
|
|
|
|
Other
|
|
|
(800 |
) |
|
|
|
|
Change in Valuation Allowance
|
|
|
(1,421,781 |
) |
|
|
1,133,602 |
|
Provision for Income Tax Expense (Benefit)
|
|
$ |
- |
|
|
$ |
- |
|
The net deferred tax asset and benefit for the current year is
generated primarily from the cumulative net operating loss
carry-forward which is approximately $49,800,000 at June 30, 2021
and will expire as follows:
United States Expiring 2029 through
|
|
$ |
18,500,000 |
|
United States indefinite limited to 80% of NOL
|
|
|
11,300,000 |
|
Foreign expiring from 2021 to 2030
|
|
|
20,000,000 |
|
Total
|
|
$ |
49,800,000 |
|
NOTE 8 –
STOCKHOLDERS’ EQUITY
Authorized Capital. The total number of
shares of all classes of capital stock which the corporation shall
have the authority to issue is 60,001,000 shares, consisting of (i)
twenty million and one thousand (20,001,000) shares of Preferred
Stock, par value $0.0001 per share (“Preferred Stock”), of which
one thousand (1,000) shares shall be designated as Series A
Preferred Stock, 1,734,992 are designated as Series C Preferred
Stock, and 3,000,000 shares are designated as Series D Preferred
Stock and (ii) forty million (40,000,000) shares of Common Stock,
par value $0.01 per share (“Common Stock”). As of June 30, 2021,
15,265,008 of Preferred stock remain undesignated.
Series A Preferred Stock
The Company has designated 1,000 shares of its Preferred Stock as
Series A, having a par value of $0.0001 per share. Holders of the
Series A Preferred Stock have the right to elect a majority of the
Board of Directors of the Company. The Company issued 1,000 shares
of Series A Preferred Stock to its CEO. At June 30, 2021 and
December 31, 2020, there were 1,000 shares of Series A Preferred
Stock outstanding.
Series C Senior Convertible Preferred Shares
On June 30, 2015, the Company issued 1,600,000 Series C Senior
Convertible Preferred Shares (the “Series C Preferred Shares”) at
$2.50 per share for gross proceeds of $4,000,000, as well as
issuing 133,221 additional Series C Preferred Shares due to
anti-dilution provisions (with no cash remuneration). Legal fees of
$45,000 were deducted from the proceeds of this transaction at
closing. These Series C Preferred Shares were convertible to common
shares at $2.50 per share, through June 30, 2020. The Series C
Preferred Shares may receive a 4% per annum dividend, payable if
available, and in arrears. A description of the transaction which
included the issuance of the Series C Preferred Shares is included
below. The Dividend is calculated at 4.0% of $4,337,480 payable
annually on June 30. At June 30, 2021 dividends for the years 2017
to 2021 totaling $866,940 were in arrears.
Financing Agreement with Golden Post Rail, LLC, a Texas
Limited Liability Company
|
1.
|
On
May 6, 2015, the Company, Golden Post Rail, LLC, a Texas limited
liability company (“Golden Post”), and Mr. Koy W. (“K.D.”)
Diepholz, Chairman-CEO of the Company entered into a Securities
Purchase Agreement (the “SPA”). Pursuant to the SPA, Golden Post
acquired the following securities:
|
|
a)
|
1,600,000 shares of Series C Senior Convertible Preferred Stock
(the “Series C Preferred”) at a purchase price of $2.50 per share
($4M USD), plus an additional 133,221 shares of Series C Preferred
pursuant to anti-dilution provisions. The Series C Preferred is
entitled to receive dividends at the per share rate of four percent
(4%) per annum, ranks senior (in priority) to the Common Stock, the
Series A Preferred Stock, and each other class or series of equity
security of the Company. The Series C Preferred is convertible into
Common Stock of the Company at the price of $2.41 per share and is
entitled to anti-dilution protection for (i) subsequent equity
issuances by the Company and (ii) changes in the Company’s
ownership of DynaResource de México SA de CV (“DynaMéxico”). The
Series C Preferred is also entitled to preemptive rights, and the
holder has the right to designate one person to the Company’s Board
of Directors as a Class III director.
|
|
|
|
|
b)
|
A
Common Stock Purchase Warrant (the “Golden Post Warrant”) for the
purchase of 2,166,527 shares of the Company’s Common Stock, at an
exercise price of $2.50 per share, and expiring June 30, 2020. The
anti-dilution protections contained in the terms of the Series C
Preferred are essentially replicated in the Golden Post Warrant.
The expiration of the Golden Post Warrant was extended on May 14,
2020, pursuant to an additional financing agreement with Golden
Post.
|
|
2.
|
Pursuant to the SPA, the Company executed a Registration Rights
Agreement pursuant to which Golden Post may require the Company to
register the shares of Common Stock which may be issued upon the
conversion of the Series C Preferred and the shares of Common Stock
issuable upon the exercise of the Warrant, including any additional
shares of Common Stock issuable pursuant to anti-dilution
provisions.
|
Additional Financing Agreement with Golden Post Rail, LLC,
a Texas Limited Liability Company, and with Shareholders of
DynaResource, Inc.
On May 14, 2020, the Company closed an additional financing
agreement with Golden Post, and with certain individual
shareholders of DynaUSA (“DynaUSA Shareholders”), and related
agreements. A summary of the transactions and related agreements
are set forth below:
|
1.
|
Pursuant to the May 14, 2020 Note Purchase Agreement (the “NPA”)
among the Company, Golden Post Rail, LLC (the “Lead Purchaser”),
and the other parties listed on Exhibit A thereto (the “Remaining
Purchasers”):
|
|
·
|
Golden Post acquired the following
securities: |
|
(a)
|
A
convertible promissory note (the “Golden Post Note”) payable to
Golden Post in the principal amount of $2,500,000, bearing interest
at 10%, and maturing two years from the date of execution. One half
of the principal amount of the Golden Post Note, or $1,250,000, has
been fully funded in accordance with an agreed-upon draw summary
and budget. The balance of the principal amount will also be funded
in accordance with agreed-upon draw summaries and the budget. The
Golden Post Note is convertible, at the option of Golden Post, into
shares of Series D Senior Convertible Preferred Stock (the “Series
D Preferred”) at a conversion price of $2.00 per share; and
|
|
(b)
|
A
common stock purchase warrant (the “2020 Warrant”) for the purchase
of 783,976 shares of the Company’s common stock, at an exercise
price of $0.01 per share, and maturing on the 10-year anniversary
of the date of issuance. The 2020 Warrant contains anti-dilution
provisions; and
|
|
·
|
The Remaining Purchasers acquired the
following securities: |
|
(a)
|
Convertible promissory notes (the “Remaining Notes”) in the
aggregate principal amount of $1,400,000, bearing interest at 10%,
and maturing two years from the date of issuance. The Remaining
Notes have been fully funded. The Remaining Notes are convertible,
at the option of each individual Remaining Purchaser, into shares
of Series D Preferred at a conversion price of $2.00 per share;
and
|
|
(b)
|
Common stock purchase warrants (the “Remaining Purchasers
Warrants”) for the purchase of an aggregate of 439,026 shares of
the Company’s common stock, at an exercise price of $0.01 per
share, and maturing on the 10-year anniversary of the date of
issuance. The Remaining Purchasers Warrants contain anti-dilution
provisions.
|
|
2.
|
Also pursuant to the NPA, the Company and the Lead Purchaser have
agreed to amend the common stock purchase warrant dated June 30,
2015 (the “2015 Warrant”), issued to the Lead Purchaser in
connection with that certain Securities Purchase Agreement dated as
of May 6, 2015. The 2015 Warrant contemplates the purchase, upon
exercise, of 2,166,527 shares (subject to adjustment) of the
Company’s common stock and matured June 30, 2020 (the “Termination
Date”). The amendment to the 2015 Warrant provides that, following
the expiration of the 2015 Warrant pursuant to its terms, the
Company will issue to the Lead Purchaser a new warrant (the “New
Warrant”), substantially in the same form of the 2015 Warrant, for
the number of shares of the Company’s common stock that went
unexercised on the Termination Date, if any. The New Warrant has a
maturity date of June 30, 2022.
|
|
3.
|
As
part of the transaction contemplated by the NPA, the Company
executed an Amended and Restated Registration Rights Agreement
pursuant to which Golden Post may require the Company to register
the shares of common stock which may be issued upon (i) the
conversion of the Series C Senior Convertible Preferred Stock
(“Series C Preferred”), (ii) the conversion of the Series D
Preferred, and (iii) the shares of common stock issuable upon the
exercise of the 2015 Warrant, the 2020 Warrant, and a compensatory
warrant issued to the Lead Purchaser on May 13, 2020 (described
below under the heading “Compensatory Issuances”), including any
additional shares of common stock issuable pursuant to
anti-dilution provisions of such securities.
|
|
4.
|
Pursuant to the transaction contemplated by the NPA, the Company
agreed to call a special meeting of Company stockholders, to be
held not later than July 14, 2020, to solicit stockholder approval
of (a) an amendment of the Company’s certificate of incorporation
to increase the number of authorized shares of common stock from
25,000,000 shares to 40,000,000 shares, and (b) an amendment of the
Certificate of Designations of the Series C Preferred, in order to
(a) extend the maturity date of the Series C Preferred by an
additional two (2) years, (ii) add an equity cap in respect of the
conversion of Series C Preferred into common stock of the Company,
and (iii) add certain restrictions on the ability of the Company to
issue Series C Preferred. The special meeting was properly called
and held on July 13, 2020, whereby Company stockholders confirmed
approval for each item referenced in item 4 above.
|
|
|
|
|
4.
|
Compensatory
Issuances. On May 13, 2020, one business day prior to the
NPA, the Company issued to the Lead Purchaser the following: (i) a
common stock purchase warrant for 2,306 shares, at an exercise
price of $0.01 per share, and maturing on the 7-year anniversary of
the date of issuance (the “Compensatory Warrant”); and (ii) 1,771
shares of Series C Preferred Shares. These issuances were
occasioned by the Company’s obligations under the Securities
Purchase Agreement dated as of May 6, 2015.
|
|
|
|
|
6.
|
In
order to accommodate the issuance of the additional 1,771 shares of
Series C Preferred, on May 13, 2020 the Company filed with the
Secretary of State of Delaware a Certificate of Increase of Series
C Senior Convertible Preferred Stock, to increase the number of
shares of preferred stock designated as Series C Preferred from
1,733,221 shares to 1,734,992 shares (“Certificate of
Increase”).
|
(1)
|
Also, on May 13, 2020, the Company filed with the Secretary of
State of Delaware a Certificate of Designations of the Powers,
Preferences and Relative, Participating, Optional and Other Special
Rights of Preferred Stock and Qualifications, Limitations and
Restrictions thereof of Series D Senior Convertible Preferred
Stock, contemplating the authorization of 3,000,000 shares of
Series D Preferred (“Certificate of Designation”).
|
The sale of the Golden Post Note, the Remaining Notes, the 2020
Warrant, the Remaining Purchasers Warrants, the Compensatory
Warrant, and the Series C Preferred was made pursuant to a
privately negotiated transaction that did not involve a public
offering of securities and, accordingly, the Company believes that
the transaction was exempt from the registration requirements of
the Securities Act pursuant to Section 4(a)(2) thereof. Each
investor represented that it (A) is an “accredited investor” and
(B) has such knowledge and experience in financial and business
matters that the investor is capable of evaluating the merits and
risks of acquiring the securities acquired by such investor. All of
the foregoing securities are deemed restricted securities for
purposes of the Securities Act.
Due to underlying anti-dilutive provisions contained in the Series
C Preferred Shares and the Golden Post Warrant, the Company
incurred derivative liabilities. On May 14, 2020 in connection with
the Series D Convertible Note financing, the expiration date for
the Series C Preferred Shares and the Golden Post warrants were
extended to June 30, 2022. In addition, a new derivative liability
was incurred due to the issuance of warrants for kicker shares. At
June 30, 2021 the total derivative liability was $2,556,676 which
included $626,579 for the Series C Preferred Shares, and $830,432
in connection with the Golden Post Warrants and $1,099,665 in
connection with the Series D Convertible Note Kicker Warrants. At
December 31, 2020 the total derivative liability was $2,371,560
which included $601,313 for the Series C Preferred Shares, and
$817,613 in connection with the Golden Post Warrants and $952,634
in connection with the Series D Convertible Note Kicker Warrants.
The deemed dividend for the periods ending June 30, 2021 and June
30, 2020 were $86,750 and $86,660. respectively. As the Company has
not declared these dividends, it is required only as an item
“below” the net income (loss) amount on the accompanying
consolidated statements of income (loss).
Due to the nature of this transaction as mandatorily redeemable,
the Series C preferred shares are classified as “temporary equity”
on the balance sheet.
|
|
Preferred
Series C
|
|
|
|
|
|
Carrying Value, December 31, 2019
|
|
$ |
4,333,053 |
|
Issuances at Fair Value, Net of Issuance Costs
|
|
|
- |
|
Bifurcation of Derivative Liability
|
|
|
- |
|
Relative Fair Value of Warrants – Preferred Stock
Discount
|
|
|
4,427 |
|
Accretion of Preferred Stock to Redemption
Value
|
|
|
- |
|
Carrying Value, December 31, 2020
|
|
|
4,337,480 |
|
|
|
|
|
|
Issuances at Fair Value, Net of Issuance Costs
|
|
|
- |
|
Bifurcation of Derivative Liability
|
|
|
- |
|
Relative Fair Value of Warrants – Preferred Stock
Discount
|
|
|
- |
|
Accretion of Preferred Stock to Redemption
Value
|
|
|
- |
|
Carrying Value, June 30, 2021
|
|
$ |
4,337,480 |
|
Preferred Stock (Undesignated)
In addition to the 1,000 shares designated as Series A Preferred
Stock and the 1,734,992 shares designated as Series C Preferred
Shares and the 3,000,000 shares designated as Series D Preferred
Stock, the Company is authorized to issue an additional 15,265,008
shares of Preferred Stock, having a par value of $0.0001 per share.
The Board of Directors of the Company has authority to issue the
Preferred Stock from time to time in one or more series, and with
respect to each series of the Preferred Stock, to fix and state by
the resolution the terms attached to the Preferred Stock. At June
30, 2021 and December 31, 2020, there were no other shares of
Preferred Stock outstanding.
Separate Series; Increase or Decrease in Authorized
Shares. The shares of each series of Preferred Stock may vary
from the shares of any other series thereof in any or all of the
foregoing respects and in any other manner. The Board of Directors
may increase the number of shares of Preferred Stock designated for
any existing series by a resolution adding to such series
authorized and unissued shares of Preferred Stock not designated
for any other series. Unless otherwise provided in the Preferred
Stock Designation, the Board of Directors may decrease the number
of shares of Preferred Stock designated for any existing series by
a resolution subtracting from such series authorized and unissued
shares of Preferred Stock designated for such existing series, and
the shares so subtracted shall become authorized, unissued and
undesignated shares of Preferred Stock.
Common Stock
The Company is authorized to issue 40,000,000 common shares at a
par value of $0.01 per share. These shares have full voting rights.
At June 30, 2021 and December 31, 2020, there were 17,722,825 and
17,722,825 shares outstanding, respectively. No dividends were paid
for the periods ended June 30, 2021 and 2020, respectively.
Preferred Rights
The Company issued “Preferred Rights” for the rights to percentages
of revenues generated from the San Jose de Gracía Pilot Production
Plant and received $784,500 for these rights. This has been
reflected as “Preferred Rights” in stockholders’ equity. As of June
30, 2021, $744,500 had been repaid, leaving a current balance of
$40,000 and $40,000 as of June 30, 2021 and December 31, 2020,
respectively
Stock Issuances
There were no issuances of common stock during the periods ending
June 30, 2021 and December 31, 2020.
Treasury Stock
During the year ending December 31, 2020, 262,500 treasury shares
were transferred for services provided to the Company.
No treasury stock was issued during the period ended June 30,
2021
Outstanding treasury shares total 516,980 at both June 30, 2021 and
December 31, 2020.
Warrants
2021 activity
The Company had 3,391,835 warrants outstanding at June 30, 2021.
There were no warrants issued or exercised in 2021 and no warrants
expired in 2021.
2020 Activity
On May 13, 2020, the Company issued 2,306 warrants to purchase
shares of common stock with an exercise price of $.01per share
related to anti-dilution provisions of the Series C preferred
stock. These warrants expire on May 13, 2027.
On May 14, 2020, the Company issued 1,223,002 warrants to purchase
shares of common stock with an exercise price of $.01 per share as
kicker shares as part of the Series D note agreements. These
warrants expire on May 14, 2030.
On June 30, 2020, as part of the Series D note agreement the
Company issued 2,166,527 warrants to purchase shares of common
stock with an exercise price of $2.05 per share to replace the
2,166,527 warrants previously outstanding which expired on that
date. These warrants expire on June 30, 2022.
At December 2020, the Company had a total of 3,391,835 warrants
outstanding.
The Company recorded no expense related to the issuance of these
warrants since these warrants were issued in common stock for cash
sales and note conversions.
|
|
Number
of Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining Contractual
Life (Years)
|
|
|
Intrinsic
Value
|
|
Balance at December 31, 2019
|
|
|
2,166,527 |
|
|
$ |
2.45 |
|
|
|
0.51 |
|
|
$ |
- |
|
Granted
|
|
|
3,391,815 |
|
|
$ |
1.31 |
|
|
|
4.89 |
|
|
$ |
- |
|
Exercised
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
$ |
- |
|
Forfeited
|
|
|
2,166,527 |
|
|
$ |
- |
|
|
|
|
|
|
$ |
- |
|
Balance at December 31, 2020
|
|
|
3,391,815 |
|
|
$ |
1.31 |
|
|
|
4.34 |
|
|
$ |
- |
|
Granted
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
$ |
- |
|
Exercised
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
$ |
- |
|
Forfeited
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
$ |
- |
|
Balance at June 30, 2021
|
|
|
3,391,815 |
|
|
$ |
1.31 |
|
|
|
3.84 |
|
|
$ |
- |
|
Exercisable at June 30, 2021
|
|
|
3,391,815 |
|
|
$ |
1.31 |
|
|
|
3.84 |
|
|
$ |
- |
|
NOTE 9 – RELATED
PARTY TRANSACTIONS
Dynacap Group Ltd.
The Company paid $87,500 and $37,500 to Dynacap Group, Ltd.
(“Dynacap”, an entity controlled by the CEO of the Company) for
consulting and other fees during the periods ended June 30, 2021
and 2020, respectively.
NOTE 10 –
COMMITMENTS AND CONTINGENCIES
Concession Taxes
The Company is required to pay taxes in México in order to maintain
mining concessions owned by DynaMéxico. Additionally, the Company
is required to incur a minimum amount of expenditures each year for
all concessions held. The minimum expenditures are calculated based
upon the land area, as well as the age of the concessions. Amounts
spent in excess of the minimum may be carried forward indefinitely
over the life of the concessions and are adjusted annually for
inflation. Based on Management’s recent business activities and
current and forward plans and considering expenditures on mining
concessions since 2002-2017 and continuing expenditures in current
and forward activities, the Company does not anticipate that
DynaMéxico will have any difficulties meeting the minimum annual
expenditures for the concessions ($388 – $2,400 Mexican Pesos per
hectare). DynaMéxico retains sufficient carry-forward amounts to
cover over 10 years of the minimum expenditure (as calculated at
the 2017 minimum, adjusted for annual inflation of 4%).
Leases
In addition to the surface rights held by DynaMéxico pursuant to
the Mining Act of México and its Regulations (Ley
Minera y su Reglamento), DynaMineras maintains access and
surface rights to the SJG Project pursuant to the 20-year Land
Lease Agreement. The 20 Year Land Lease Agreement with the Santa
Maria Ejido Community surrounding San Jose de Gracía was dated
January 6, 2014 and continues through 2033. It covers an area of
4,399 hectares surrounding the main mineral resource areas of SJG
and provides for annual lease payments on January 1st
each year by DynaMineras of $1,359,443 Pesos (approx. $72,000 USD),
commencing in 2014. The Land Lease Agreement provides DynaMineras
with surface access to the core resource areas of SJG (4,399
hectares), and allows for all permitted mining and exploration
activities from the owners of the surface rights (Santa Maria Ejido
community).
The Company leases office space for its corporate headquarters in
Irving, Texas. In September 2017, the Company entered into a
sixty-six-month extension of the lease through 2023. As part of the
agreement the Company received six months free rent as a finish out
allowance. The Company capitalized the leasehold improvement costs
and amortized them over the rent abatement period as rent expense.
The Company makes tiered lease payments on the 1st of
each month.
Effective January 1, 2019, the Company adopted ASC 842, which
requires recognition of a right-of-use asset and lease liability
for all leases at the commencement date based on the present value
of lease payments over the lease term. Additional qualitative and
quantitative disclosures regarding the Company's leasing
arrangements are also required. The Company adopted ASC 842
prospectively and elected the package of transition practical
expedients that does not require reassessment of (1) whether any
existing or expired contracts are or contain leases, (2) lease
classification and (3) initial direct costs. In addition, the
Company has elected other available practical expedients to not
separate lease and non-lease components, which consist principally
of common area maintenance charges, for all classes of underlying
assets and to exclude leases with an initial term of 12 months or
less.
The Company determines if a contract is or contains a lease at
inception. As of June 30, 2021, the Company has two operating
leases - a six and one-half year lease for office space with a
remaining term of eighteen months and a twenty-year ground lease in
association with its México mining operations with a remaining term
of thirteen years. Variable lease costs consist primarily of
variable common area maintenance, storage parking and utilities.
The Company’s leases do not have any residual value guarantees or
restrictive covenants.
As the implicit rate is not readily determinable for most of the
Company’s lease agreements, the Company uses an estimated
incremental borrowing rate to determine the initial present value
of lease payments. These discount rates for leases are calculated
using the Company's interest rate of promissory notes.
The Company’s components of lease cost are as follows:
|
|
Period
Ended
June 30,
2021
|
|
Operating Lease – Office Lease
|
|
$ |
42,742 |
|
Operating Lease – Ground Lease
|
|
|
44,337 |
|
Short Term Lease Costs
|
|
|
6,279 |
|
Variable Lease Costs
|
|
|
- |
|
TOTAL
|
|
$ |
93,358 |
|
Weighted average remaining lease term and weighted average discount
rate are as follows:
Weighted Average Remaining Lease Term (Years) – Operating
Leases
|
|
|
11.00 |
|
Weighted Average Discount Rate – Operating Leases
|
|
|
12.50 |
% |
Estimated future minimum lease obligations are as follow for the
years ending June 30:
YEAR
|
|
|
|
2022
|
|
$ |
179,474 |
|
2023
|
|
|
145,896 |
|
2024
|
|
|
96,896 |
|
2025
|
|
|
99,803 |
|
2026
|
|
|
102,797 |
|
Thereafter
|
|
|
684,885 |
|
Total
|
|
$ |
1,308,751 |
|
Less Imputed Interest
|
|
|
(586,207 |
) |
OPERATING LEASE PAYABLE
|
|
$ |
722,544 |
|
Other Contingencies
The Company's mining and exploration activities are subject to
various laws and regulations governing the protection of the
environment. These laws and regulations are continually changing
and generally becoming more restrictive. The Company conducts its
operations so as to protect public health and the environment, and
believes its operations are materially in compliance with all
applicable laws and regulations. The Company has made, and expects
to make in the future, expenditures to comply with such laws and
regulations.
Arbitration filed by Goldgroup / DynaMéxico Complaint
against Goldgroup
On March 14, 2014, Goldgroup filed for arbitration in the United
States with the American Arbitration Association ("AAA"), citing
the Earn In Agreement dated September 1, 2006 as the basis for the
arbitration filing. The Company filed an answer on April 10, 2014,
disputing that any issues exist which provide for arbitration.
DynaResource de Mexico filed Civil Claims again Goldgroup
Mining Inc., and Goldgroup Resources Inc. requesting Damages of
$50M USD
On December 9, 2014, DynaMéxico filed an Ordinary commercial
lawsuit (Civil Claims) against Goldgroup Mining Inc., its parent
company Goldgroup Resources Inc., and the AAA, in the Thirty Sixth
Civil Court in the Federal District of México, under file 1120
number / 2014 ("the DynaMéxico Trial"). The DynaMéxico Trial sought
to terminate the U.S.-based arbitration proceedings, as DynaMéxico
believes there is no legal basis for arbitration, and to nullify
the arbitration proceedings since Goldgroup previously sought
recourse in Mexican courts. In the DynaMéxico Trial, DynaMéxico
also requests that substantial damages (in the amount of US $50
million) be awarded to DynaMéxico against Goldgroup for:
|
a)
|
Wrongfully using and disseminating confidential information and
data belonging to DynaMéxico;
|
|
b)
|
Asserting that Goldgroup owns any interest in the San Jose de
Gracía Project in northern Sinaloa, México, rather than accurately
disclosing that Goldgroup owns a common shares equity interest
(shareholder’s interest) in DynaMéxico;
|
|
c)
|
Improperly disclosing the percentage of common shares equity
interest (shareholder’s interest) owned by Goldgroup in
DynaMéxico;
|
|
d)
|
Improperly disclosing or implying that Goldgroup is the operator of
the San Jose de Gracía Project;
|
|
e)
|
Attempting to delay, stop, or otherwise impair the financing of,
and further development of, the SJG Project;
|
|
f)
|
Making numerous threats against DynaMéxico management and
officers;
|
|
g)
|
Failing to properly disclose that broad powers of attorney for
acting on behalf of DynaMéxico are held by an individual not
affiliated with Goldgroup.
|
On October 5, 2015, the Thirty Sixth Civil Court of the Superior
Court of Justice of the Federal District of México (Tribunal
Superior de Justicia del Distrito Federal), file number 1120/2014
declared, among other resolutions, that:
|
a)
|
The AAA must “cease and desist” from the arbitration
proceeding;
|
|
b)
|
The AAA does not have jurisdiction to hear any conflict and/or
interpretation arising from the Earn In/Option Agreement, dated
September 1, 2006; and
|
|
c)
|
The AAA does not have jurisdiction to hear disputes arising between
shareholders of DynaMexico, which disputes do not arise directly
and immediately from the Earn In/Option Agreement, dated September
1, 2006.
|
$48M Damages Awarded to DynaMéxico
Also on October 5, 2015, DynaMéxico was awarded in excess of US $48
million in damages from Goldgroup Resources, Inc. by virtue of a
Sentencia Definitiva (the “Definitive Sentence”) issued by the
Thirty Sixth Civil Court of the Superior Court of Justice of the
Federal District of México (Tribunal Superior de Justicia del
Distrito Federal), File number 1120/2014. The Definitive Sentence
included the considerations and resolutions by the Court, and
additional Resolutions were also ordered in favor of DynaMéxico
(together the damages award and the additional Resolutions are
referred to as, the “Oct. 5, 2015 Resolution”).
A concise translation to English of the Oct. 5, 2015 Resolution
(the resolution portion of the Definitive Sentence) is set forth
below:
FIRST:
|
The action and litigation based on commercial law filed by
DynaMéxico is valid and enforceable, and where Goldgroup and the
American Arbitration Association were found to be in default, was
proper.
|
SECOND:
|
Goldgroup is declared in breach of its corporate duties, for
failure to refrain from claiming direct ownership of 50% of the San
José de Gracía Mining Project.
|
THIRD:
|
Goldgroup is condemned and ordered to pay to DynaMéxico the amount
of USD $20,000,000 (Twenty Million Dollars) in damages caused by
Goldgroup to DynaMéxico, deriving from its breach of obligations in
refraining from claiming direct ownership of 50% of the San Jose de
Gracía Mining Project; which amount should be paid within five days
upon execution of this order and resolution.
|
FOURTH:
|
Goldgroup is condemned and ordered to pay to DynaMéxico the amount
of USD $28,280,808.34 (Twenty Eight Million Two Hundred and Eighty
Thousand Eight Hundred and Eight and 34/100 Dollars), for breach of
its corporate duty and covenants with regards to the San Jose de
Gracía mining project, as a result of depriving profits from
DynaMéxico which DynaMéxico could have earned for the sale of gold
produced and extracted during the years 2013 and 2014; amounts that
should be paid within five days upon execution of this order and
resolution.
|
FIFTH:
|
Goldgroup is condemned and ordered to pay losses and damages to
DynaMéxico, which Goldgroup continues to cause, until full payment
of the above-mentioned amounts has been made, which damages, and
losses shall be calculated by an expert opinion in a corresponding
legal procedure related to this litigation.
|
SIXTH:
|
Pursuant to Article 1424 of the Commercial Code of México, the
arbitration provision established under clause 8.16 of the Earn
In/Option Agreement, dated as of September 1, 2006, is ineffective
and impossible to execute.
|
SEVENTH:
|
This court declares that any controversy arising from the Ear
In/Option Agreement must be brought and resolved under Mexican Law
and by competent Mexican Courts with proper jurisdiction, in
recognition of the waiver and exclusion of the arbitration clause
(contained in the Earn In/Option Agreement) by both parties.
|
EIGHTH:
|
This Court declares that the American Arbitration Association must
abstain from hearing arbitration procedure number 50 501 T 00226
14, or any other ongoing and/or future arbitration proceeding
already filed or that may be filed by the co-defendant Goldgroup
against DynaResource.
|
NINTH:
|
This Court declares that the American Arbitration Association does
not have jurisdiction to hear any conflict and/or interpretation
arising from the Earn In/Option Agreement, dated September 1,
2006.
|
TENTH:
|
This Court declares that the American Arbitration Association does
not have jurisdiction to hear disputes arising between shareholders
of DynaMéxico, which disputes do not arise directly and immediately
from the Earn In/Option Agreement, dated September 1, 2006.
|
ELEVENTH:
|
This Court declares that the American Arbitration Association does
not have jurisdiction to hear any matters where Koy Wilber
Diepholz, who is the President of the Board of Directors of
DynaMéxico and has been personally sued in relation to the
arbitration clause established under clause 8.16 of the Earn
In/Option Agreement, dated September 1, 2006, since he signed the
mentioned instrument in representation of the Company and not in
his personal capacity.
|
TWELFTH:
|
The expenses and costs associated with these proceedings are
hereby waived.
|
THIRTEENTH:
|
LET IT SO BE PUBLISHED. A Copy of this order and Sentence shall be
found in the corresponding records.
|
ORDERED, adjudged and decreed by the Thirty Sixth
Civil Judge of the Superior Court of the Federal District, Mr.
JULIO GABRIEL IGLESIAS GOMEZ.
The October 5, 2015 Resolution constitutes a public record which
may be viewed through the Courts in México City.
México City Court Approves Lien on Shares of DynaMéxico
owned by Minority Interest Holder
On October 5, 2016, the Thirty-Sixth Civil Court of the Superior
Court of Justice of the Federal District of México (Tribunal
Superior de Justicia del Distrito Federal) approved a Lien
(referred to by the court as an “Embargo”), in favor of DynaMéxico,
upon Stock Certificates in the name of Goldgroup Resources Inc.
(“Goldgroup”). The Stock Certificates subject to the Lien
(“Embargo”) constitute Shares of DynaMéxico (“the Goldgroup
DynaMéxico Shares”).
The Goldgroup DynaMéxico Shares were seized as a partial recovery
of assets by DynaMéxico after DynaMéxico was awarded more than $48M
USD (Forty-Eight Million Dollars) in damages against Goldgroup (the
“Damages against Goldgroup”) on October 05, 2015, as described in a
Sentencia Definitiva (the “Definitive Sentence”) issued by the same
court, the Thirty Sixth Civil Court of the Superior Court of
Justice of the Federal District of México, File number 1120/2014.
Excerpts from the Definitive Sentence appear below. In addition to
the Damages against Goldgroup, the Definitive Sentence also
included additional Resolutions ordered in favor of DynaMéxico (the
Damages against Goldgroup and the additional Resolutions are
together referred to as the “Oct. 5, 2015 Resolution”).
Denial of Amparo Appeal
On August 24, 2017 a Federal Amparo Judge (“Juzgado de Distrito”)
in the State of Vera Cruz, México, dismissed Goldgroup Resources
Inc’s Amparo Trial Challenge to the $48 M USD damages award
previously granted in favor of DynaMéxico. Pursuant to the
dismissal ruling, the $48M USD damages award, previously granted to
DynaMéxico by the Thirty-Sixth Civil Court of the Superior Court of
Justice of the Federal District of México on October 5, 2015, was
effectively confirmed.
México Circuit Court of Appeals – Notice of Intent for
Final Ruling in Favor of DynaResource de México
On May 27, 2019, The Eleventh Collegiate Court in Civil
Matters of the First Circuit (“México Circuit Court”, and the Court
of Final Appeal for Goldgroup Resources Inc.) issued a written
notice confirming it was ruling against the Amparo Appeal filed by
Goldgroup Resources Inc. and in Favor of DynaResource de México,
S.A. de C.V. In an effort to stay the issuance of the
Ruling by the México Circuit Court, Goldgroup Resources Inc. filed
a request to The Supreme Court of México to review the Amparo
Appeal decision.
Rejection of Goldgroup Resources Inc. request to the
Supreme Court of México
On July 3, 2019 an Official Ruling from The Supreme Court
of México was issued to Reject the Request of Goldgroup Resources
Inc. (the “México Supreme Court Rejection to Goldgroup”).
The Justices of the First Chamber of the Supreme Court of Justice
of México issued a Rejection Notice to Goldgroup Resources Inc.,
“due to the lack of legitimacy presented by Goldgroup”; and in
issuing the Rejection Notice to Goldgroup, the Supreme court
thereby reverted the Amparo Appeal back to the México Circuit Court
where the Official and Final Ruling from the México Circuit Court
is expected to be issued.
Final Legal Ruling in México (DynaMéxico Final Legal
Ruling)
On December 6, 2019 the 11th Federal Circuit Collegiate
Court in México issued its Final Ruling (“the DynaMéxico Final
Legal Ruling”).
The DynaMéxico Final Legal Ruling is Favorable to DynaMéxico, and
denies the Amparo challenge of Goldgroup Resources Inc., the
subsidiary of Goldgroup Mining Inc. (“GGA.TO”). The DynaMéxico
Final Legal Ruling constitutes the Final Appeal of Goldgroup
Resources Inc.; and is Not subject to further appeal or
protest.
The DynaMéxico Final Legal Ruling is the result and culmination of
7 years of legal action performed by DynaMéxico and is the Final
Ruling of the 11th Federal Circuit Collegiate Court.
With this DynaMéxico Final Legal Ruling issued, all matters before
the Court in México with respect to DynaMéxico and Goldgroup
Resources Inc. are fully resolved and are no longer subject to
appeal or reconsideration.
Legal Summary - Consequence of the México Final Legal
Ruling:
|
1.
|
The $48,280,808.34 USD damages award (dated October 05,
2015) in favor of DynaMéxico and against Goldgroup Resources Inc.
is now Final. Goldgroup Resources’ challenge(s) to that award have
been fully denied and the damages award is Final.
|
|
2.
|
The Lien against the Shares of DynaMéxico owned by
Goldgroup Resources Inc. (established October 5, 2016, the “Lien
against Goldgroup Shares”) is now fully confirmed, Final, and
enforceable.
|
|
3.
|
Ownership of the shares of DynaMéxico currently held by
Goldgroup Resources (currently representing 20% of the outstanding
shares of DynaMéxico) are subject to the Lien against Goldgroup
Shares.
|
DynaMéxico Recovery of 100% of Goldgroup
Shares
On February 20, 2020, a México City court issued
its Final Judgment, effectively foreclosing on all shares of
DynaMéxico formerly held by Goldgroup Resources Inc. and awarding
those shares to DynaMéxico (the “DynaMéxico Foreclosure
Judgment”).
The DynaMéxico Foreclosure Judgment awarded to DynaMéxico 100% of
the Shares of DynaMéxico previously owned by Goldgroup Resources
Inc. (a Subsidiary Company in México owned 100% by Goldgroup Mining
Inc., Vancouver, BC., “GGA.TO”). Prior to the DynaMéxico
Foreclosure Judgment, Goldgroup Resources Inc. owned shares of
DynaMéxico constituting 20% of the total outstanding shares of
DynaMéxico (the “Goldgroup Shares of DynaMéxico”). The Goldgroup
Shares of DynaMéxico were held under Lien by DynaMéxico since
October 2016. DynaUSA previously owned 80% of the outstanding
shares of DynaMéxico.
DynaUSA and DynaMéxico filed an Original Petition for
Recognition of the $48M USD Foreign Judgment in US. District Court,
134th Judicial District in Dallas County,
Texas
|
·
|
On December 5, 2020, DynaUSA and
DynaMéxico filed an Original Petition for Recognition of the $48M
USD Foreign Judgment in US. District Court in Dallas County
Texas. |
|
·
|
On February 4, 2021, DynaUSA and
DynaMéxico filed a First Amended Petition for Recognition of the
$48M USD Foreign Judgment in US. District Court, 134th
Judicial District, Dallas County, Texas. |
|
·
|
On May 12, 2021, The US District
Court for Dallas County issued a ruling stating the Court was not
obligated to recognize the $48M Judgment in the US.; but found the
$48M Judgment to be final, conclusive and enforceable under Mexican
Law. |
DynaUSA and DynaMéxico Appeal of the US. District Court
Ruling
On May 14, 2021, DynaUSA and DynaMéxico filed a Notice of Appeal of
the US District Court Ruling.
Arbitration Ruling
In direct contradiction to the October 5, 2015, Definitive Sentence
issued by court in México, on August 25, 2016, the American
Arbitration Association - International Centre for Dispute
Resolution, Denver office (the “AAA”) issued an Arbitration Ruling
(the “Arbitration Ruling”) in favor of Goldgroup Resources Inc.
against DynaMéxico and DynaResource, Inc. The Arbitration Ruling
was the result of a proceeding in which neither DynaMéxico nor
DynaResource participated, since the Definitive Sentence issued by
the court in México effectively prohibited their participation in
the Arbitration proceeding and should have prohibited Goldgroup
Resources Inc. participation.
The Arbitration Ruling provides the following: (i) the Earn
In/Option Agreement is still in force, and consequently Goldgroup
may appoint two directors to the DynaMéxico board, and may
participate in the appointment of a fifth director; (ii) the
DynaMéxico Management Committee is reinstated, and must approve all
budgets and expenditures; (iii) amounts expended by DynaMéxico that
were not approved by the Management Committee are subject to
repayment by DynaResource; (iv) the issuance of additional shares
by DynaMéxico (and consequent dilution of Goldgroup’s equity
interest) was in violation of the Earn In/Option Agreement; and (v)
DynaResource and DynaMéxico are responsible for Goldgroup’s costs
and professional fees associated with the Arbitration Ruling.
Unlike most arbitration proceedings in the U.S., the Arbitration
Ruling is not final. Since the Arbitration Ruling is subject to
international rules, the ruling may be vacated by U.S. courts, or
simply not recognized by U.S. courts, on several grounds.
Accordingly, both DynaMéxico and DynaResource have timely requested
relief from the United States Federal District Court in Colorado,
via the filing of a Petition for Nonrecognition of Foreign Arbitral
Award and/or Motion to Vacate Arbitration Award (the “Petition for
Nonrecognition”), and a supporting brief. The Petition for
Nonrecognition relies heavily upon the Mexican court’s Definitive
Sentence, key excerpts of which appear immediately below.
The Mexican court has already ruled that “any controversy arising
from the Earn In/Option Agreement must be brought and resolved
under Mexican Law and by competent Mexican Courts with proper
jurisdiction.” Consequently, the monetary awards against
DynaResource – which are based upon a finding that the Earn
In/Option Agreement is still in force – will not be enforceable if
the Mexican court rules that the Earn In/Option Agreement is
terminated. The Company believes that the potential for the
assessment of a material monetary judgment against DynaResource is
remote.
|
(a)
|
The Arbitration Ruling contains an acknowledgement by the AAA that
the AAA was named as a defendant in the legal demand filed by
DynaMéxico in the Thirty Sixth Civil Court of the Superior Court of
Justice of the Federal District of México (the “DynaMéxico Legal
Demand”). The Arbitration Ruling also contains a statement that the
AAA was not properly served notice of the DynaMéxico Legal
Demand;
|
|
(b)
|
DynaMéxico obeyed the October 5, 2015 Court Order and did not
attend the Arbitration hearing;
|
|
(c)
|
DynaMéxico will pursue all legal remedies in order to obtain a full
dismissal of the Arbitration Ruling;
|
|
(d)
|
The Arbitration Ruling contains an acknowledgement by the AAA that
the AAA was named as a defendant in the legal demand filed by
DynaMéxico in the Thirty Sixth Civil Court of the Superior Court of
Justice of the Federal District of México (the “DynaMéxico Legal
Demand”). The Arbitration Ruling also contains a statement that the
AAA was not properly served notice of the DynaMéxico Legal
Demand;
|
DynaUSA and DynaMéxico filed Motion to Vacate Arbitration
Ruling
On November 17, 2016, DynaUSA and DynaMéxico filed a Motion to
Vacate the Arbitration Ruling in United States District Court,
District of Colorado.
Recommendation to Vacate Arbitration Ruling issued by
United States Magistrate Judge
On February 13, 2018 a Recommendation to Vacate the Arbitration
Ruling was issued by a United States Magistrate Judge of the United
States District Court, District of Colorado.
Arbitration Award against DynaResource, Inc. and
DynaResource de México, S.A. de C.V.
On May 9, 2019, the United States District Court for the District
of Colorado confirmed the August 2016 Arbitration award against
DynaResource, Inc. and DynaResource de México, S.A. de C.V. The
district court’s decision overruled the recommendation previously
issued by the magistrate judge to sustain the DynaResource
entities’ motion to vacate the arbitration award. Each of
DynaResource, Inc. and DynaResource de México, S.A. de C.V. intends
to exercise all its rights, as appropriate, including an
appeal.
DynaResource Entities Filings in US District Court in
Response to Arbitration Ruling
|
·
|
DynaUSA and DynaMéxico
filed Motion to Alter Judgment |
|
|
|
|
|
On June 6, 2019, DynaUSA and
DynaMéxico file a Motion to Alter Judgment. |
|
|
|
|
·
|
DynaUSA and DynaMéxico
filed Motion for Stay of Judgment Pending Appeal and to Waive
Bond |
|
|
|
|
|
On June 7, 2019, DynaUSA and
DynaMéxico filed A Motion for Stay of Judgment Pending Appeal and
to Waive Bond. |
|
|
|
|
·
|
DynaUSA and DynaMéxico
filed Motion for Leave to Supplement the Record |
|
|
|
|
|
On July 13, 2019, DynaUSA and
DynaMéxico filed A Motion for Leave to Supplement the Record with
the following information: |
|
|
|
|
·
|
“Rejection
of Goldgroup Resources Inc. request to the Supreme Court of
México” |
|
|
|
|
|
On July 3, 2019, an Official Ruling
from The Supreme Court of México was issued to Reject the Request
of Goldgroup Resources Inc. (the “México Supreme Court Rejection to
Goldgroup”). The Justices of the First Chamber of the Supreme Court
of Justice of México issued a Rejection Notice to Goldgroup
Resources Inc., “due to the lack of legitimacy presented by
Goldgroup”; and in issuing the Rejection Notice to Goldgroup, the
Supreme court thereby reverted the Amparo Appeal back to the México
Circuit Court where the Official and Final Ruling from the México
Circuit Court is expected to be issued. |
|
|
|
|
·
|
DynaUSA and DynaMéxico
filed Reply in Support of Motion to Alter Judgment. |
|
|
|
|
|
On July 23, 2019, DynaUSA and
DynaMéxico filed a Reply in Support of Motion to Alter Judgment.
Goldgroup Resources was confirmed to be misleading the US District
Court with inaccurate reports of the ruling of the México Supreme
Court Rejection. |
|
|
|
|
·
|
Final Legal Ruling in
México (DynaMéxico Final México Legal Ruling) |
|
|
|
|
|
On December 6, 2019, the
11th Federal Circuit Collegiate Court in México issued
its Final Ruling (“the DynaMéxico Final México Legal Ruling”). |
|
|
|
|
|
The DynaMéxico Final México Legal
Ruling is Favorable to DynaMéxico, and denies the Amparo challenge
of Goldgroup Resources Inc., the subsidiary of Goldgroup Mining
Inc. (“GGA.TO”). The DynaMéxico Final México Legal Ruling
constitutes the Final Appeal of Goldgroup Resources Inc.; and is
Not subject to further appeal or protest. |
|
|
|
|
|
The DynaMéxico Final Legal Ruling
is the result and culmination of 7 years of legal action performed
by DynaMéxico and is the Final Ruling of the 11th
Federal Circuit Collegiate Court. With this DynaMéxico Final Legal
Ruling issued, all matters before the Court in México with respect
to DynaMéxico and Goldgroup Resources Inc. in México are fully
resolved and are no longer subject to appeal or
reconsideration. |
|
|
|
|
·
|
Legal Summary - Consequence
of the México Final Legal Ruling: |
|
o
|
The $48,280,808.34 USD damages award (dated October 05,
2015) in favor of DynaMéxico and against Goldgroup Resources Inc.
is now Final. Goldgroup Resources’ challenge(s) to that award have
been fully denied and the damages award is Final.
|
|
o
|
The Lien against the Shares of DynaMéxico owned by
Goldgroup Resources Inc. (established October 5, 2016, the “Lien
against Goldgroup Shares”) is now fully confirmed, Final, and
enforceable.
|
|
o
|
Ownership of the shares of DynaMéxico currently held by
Goldgroup Resources (currently representing 20% of the outstanding
shares of DynaMéxico) are subject to the Lien against Goldgroup
Shares.”
|
|
·
|
DynaMéxico Recovery of 100%
of Goldgroup Shares |
|
|
|
|
|
On February 20,
2020, a México City court issued its Final Judgment,
effectively foreclosing on all shares of DynaMéxico formerly held
by Goldgroup Resources Inc. and awarding those shares to DynaMéxico
(the “DynaMéxico Foreclosure Judgment”). |
|
|
|
|
|
The DynaMéxico Foreclosure Judgment
awarded to DynaMéxico 100% of the Shares of DynaMéxico previously
owned by Goldgroup Resources Inc. (a Subsidiary Company in México
owned 100% by Goldgroup Mining Inc., Vancouver, BC., “GGA.TO”).
Prior to the DynaMéxico Foreclosure Judgment, Goldgroup Resources
Inc. owned shares of DynaMéxico constituting 20% of the total
outstanding shares of DynaMéxico (the “Goldgroup Shares of
DynaMéxico”). The Goldgroup Shares of DynaMéxico were held under
Lien by DynaMéxico since October 2016. DynaUSA previously owned 80%
of the outstanding shares of DynaMéxico. |
|
|
|
Confirmation of Arbitration Award in U.S. District Court –
District of Colorado
|
|
|
|
On
March 25, 2020 The U.S. District Court, District of Colorado
affirmed the August 24, 2016 Arbitration Award in favor of
Goldgroup Resources Inc.
|
|
|
|
DynaUSA and DynaMéxico filed Appeal of Arbitration
Affirmation to U.S. District Court - 10th Circuit Court
of Appeals
|
|
|
|
|
·
|
On July 17, 2020, DynaUSA and
DynaMéxico filed an Appeal of the Affirmation of the Arbitration
Award to the U.S. District Court – 10th Circuit Court of
Appeals. |
|
|
|
|
·
|
On July 17, 2020, DynaUSA and
DynaMéxico posted supersedeas bond with the U.S. District Court,
District of Colorado, in the amount of $1.111M USD.; and DynaUSA
and DynaMéxico filed a motion for Stay of Judgment pending
Appeal. |
|
|
|
U.S. Court of Appeals - 10th Circuit Court of
Appeals Denial of DynaUSA and DynaMéxico Appeal
|
|
|
|
On
April 16, 2021, the U.S. Court of Appeals for the 10th
Circuit Court issued a Ruling which denied the DynaUSA and
DynaMéxico Appeal of the August 24, 2016 Arbitration Award in favor
of Goldgroup Resources, Inc. In denying the Appeal of DynaUSA and
DynaMéxico, the Arbitration Award in favor of Goldgroup was
affirmed.
|
|
|
|
|
·
|
On July 17, 2020, DynaUSA and
DynaMéxico posted supersedeas bond with the U.S. District Court,
District of Colorado, in the Amount of $1.111M USD, in order to
fully bond the Monetary portion of the Arbitration Award. |
|
·
|
On August 24, 2020, DynaMéxico
conducted an Extraordinary Shareholder’s Meeting of DynaMéxico,
wherein all Non-Monetary portions of the Arbitration Award were
fully performed and executed. |
|
|
|
Full Performance of Arbitration Award by DynaUSA and
DynaMéxico / Closure of the Arbitration Case by US. District
Court
|
|
|
|
|
·
|
On August 24, 2020, DynaMéxico
conducted an Extraordinary Shareholder’s Meeting of DynaMéxico,
wherein all Non-Monetary portions of the Arbitration Award were
fully performed and executed. |
|
·
|
On May 20, 2021, DynaUSA and
DynaMéxico agreed to release the $1.111 M USD supersedeas bond and
paid an addition amount of $4,054.59 in interest calculated to June
2, 2021; in full performance and satisfaction of the monetary
portion of the Arbitration Award. |
Goldgroup Resources Inc. Filed Motion for Contempt of Court
Sanctions against DynaUSA and DynaMéxico
On June 11, 2021, Goldgroup Resources Inc. filed a Motion for Civil
Contempt Sanctions against DynaUSA and DynaMéxico. The Motion for
Contempt Sanctions is pending.
DynaUSA and DynaMéxico file Motion for Relief of Judgment
Pursuant to Federal Rule of Civil Procedure 60(b)
On July 1, 2021, DynaUSA and DynaMéxico filed a Motion for Relief
of Judgment Pursuant to Federal Rule of Civil Procedure 60(b). The
Motion for Relief of Judgment is pending.
Complaint filed by Goldgroup against the May 17, 2013,
Shareholders’ Meeting of DynaMéxico
On February 2nd, 2014, Goldgroup Resources Inc. filed a petition
with the Judge of the Tenth District Mazatlán, according to record
08/2014, in the ordinary commercial action, against DynaResource
Inc., and DynaResource de México, S.A. de CV. (“DynaMéxico”). In
the Petition, Goldgroup complains against the results of the
shareholders meeting of DynaMéxico of May 17, 2013, and petitions
for the nullification of the meeting itself and for the
nullification of the additional shares of the outstanding capital
of DynaMéxico issued to DynaResource, Inc. in satisfaction of debts
owed to DynaResource.
DynaResource and DynaMéxico filed a response on January 9, 2016.
DynaMéxico will vigorously defend against all such complaints by
Goldgroup, as there exists no legal basis for the complaint by
Goldgroup against the May 17, 2013 shareholders meeting of
DynaMéxico.
On October 31, 2018, the Judge of the Tenth District declared the
Expiration of the Trial, due to inactivity of Goldgroup in the
process, and the Judge decreed the Trial as a concluded and filed
trial. As a result, the shareholders' meeting of May 17, 2013
remains valid.
On November 16, 2018, Goldgroup appealed the declaration of
Expiration of the Trial.
On February 12, 2019, the Court of Appeals (Segundo Tribunal
Unitario de Circuito in Mazatlán) confirmed the resolution issued
October 31, 2018 by the Judge of Tenth District and declared and
confirmed the Expiration of the Trial, due to the inactivity of
Goldgroup to the process, and therefore the Court of Appeals
decreed the matter as a concluded and filed trial. As a result, the
shareholders' meeting of May 17, 2013 remains valid.
Goldgroup has filed a writ of amparo against the resolution of the
Court of Appeals that confirmed the declaration of expiration of
the trial. This Amparo Trial is pending resolution.
Litigation(s) in México – Company as Plaintiff
The Company, and DynaMéxico have filed several legal actions in
México against Goldgroup Mining Inc. and Goldgroup Resources Inc.,
and certain individuals retained as agents of Goldgroup Mining
Inc., or Goldgroup Resources. The Company and DynaMéxico are
plaintiffs in the actions filed in México and the outcomes are
pending.
The Company believes that no material adverse change will occur as
a result of the actions taken, and the Company further believes
that there is little to no potential for the assessment of a
material monetary judgment against the Company for legal actions it
has filed in México. For purposes of confidentiality, the Company
does not provide more specific disclosure in this Form 10-Q.
Litigation
The Company believes that no material adverse change will occur as
a result of the legal actions taken, and the Company further
believes that there is little to no potential for the assessment of
an adverse material monetary judgment against the Company for legal
actions it has filed in México. Further, the Company believes there
is no legal basis for which to conduct arbitration proceedings.
Coronavirus Pandemic
In March 2020, the World Health Organization declared the outbreak
of a novel coronavirus (COVID-19) as a pandemic, which continues to
spread throughout the United States of America. Efforts implemented
by local and national governments, as well as businesses, including
temporary closures, are expected to have adverse impacts on local,
national and the global economies. Although the disruption is
currently expected to be temporary, there is uncertainty around the
duration and the related economic impact. Therefore, while we
expect this matter to have an impact our business, the impact to
our results of operations and financial position cannot be
reasonably estimated at this time.
NOTE 11 –
DERIVATIVE LIABILITIES
Preferred Series C Stock
As discussed in Note 8, the Company analyzed the embedded
conversion features of the Series C Preferred Stock and determined
that the stock qualified as a derivative liability and is required
to be bifurcated and accounted for as such since the host and the
embedded instrument are not clearly and closely related. The
Company performed a valuation of the conversion feature. In
performing the valuation, the Company applied the guidance in ASC
820, “Fair Value Measurements”, to nonfinancial assets and
liabilities that are recognized or disclosed at fair value on a
nonrecurring basis. ASC 820 defines fair value as the price that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the
measurement date (exit price). To measure fair value, the Company
incorporates assumptions that market participants would use in
pricing the asset or liability and utilizes market data to the
maximum extent possible.
In instances where the determination of the fair value measurement
is based on inputs from different levels of the fair value
hierarchy, the level in the fair value hierarchy within which the
entire fair value measurement falls is based on the lowest level
input that is significant to the fair value measurement in its
entirety. The Company’s assessment of the significance of a
particular input to the fair value measurement in its entirety
requires judgment and considers factors specific to the asset or
liability.
The Company considered the inputs in this valuation to be level 3
in the fair value hierarchy under ASC 820 and used an equity
simulation model to determine the value of conversion feature of
the Series C Preferred Stock based on the assumptions below:
|
|
2021
|
|
|
2020
|
|
Annual volatility rate
|
|
|
167 |
% |
|
|
156 |
% |
Risk free rate
|
|
|
0.25 |
% |
|
|
0.13 |
% |
Remaining Term
|
|
1.00 years
|
|
|
1.50 years
|
|
Fair Value of common stock
|
|
$ |
0.90 |
|
|
$ |
0.78 |
|
For the periods ended June 30, 2021 and December 31, 2020, an
active market for the Company’s common stock did not exist.
Accordingly, the fair value of the Company’s common stock was
estimated using a valuation model with level 3 inputs.
The below table represents the change in the fair value of the
derivative liability during the periods ended June 30, 2021 and
December 31, 2020.
Period Ended
|
|
2021
|
|
|
2020
|
|
Fair value of derivative (stock), beginning of period
|
|
$ |
601,313 |
|
|
$ |
37,038 |
|
Change in fair value of derivative
|
|
|
25,266 |
|
|
|
276,547 |
|
Fair value of derivative on the date of issuance
|
|
|
- |
|
|
|
287,728 |
|
Fair value of derivative (stock), end of period
|
|
$ |
626,579 |
|
|
$ |
601,313 |
|
Preferred Series C Warrants
As discussed in Note 8, the Company analyzed the embedded
conversion features of the Series C Preferred Stock and determined
that the Warrants qualified as a derivative liability and is
required to be bifurcated and accounted for as such since the host
and the embedded instrument are not clearly and closely related.
The Company performed a valuation of the conversion feature. In
performing the valuation, the Company applied the guidance in ASC
820, “Fair Value Measurements”, to nonfinancial assets and
liabilities that are recognized or disclosed at fair value on a
nonrecurring basis. ASC 820 defines fair value as the price that
would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the
measurement date (exit price). To measure fair value, the Company
incorporates assumptions that market participants would use in
pricing the asset or liability and utilizes market data to the
maximum extent possible.
In instances where the determination of the fair value measurement
is based on inputs from different levels of the fair value
hierarchy, the level in the fair value hierarchy within which the
entire fair value measurement falls is based on the lowest level
input that is significant to the fair value measurement in its
entirety. The Company’s assessment of the significance of a
particular input to the fair value measurement in its entirety
requires judgment and considers factors specific to the asset or
liability.
The Company considered the inputs in this valuation to be level 3
in the fair value hierarchy under ASC 820 and used an equity
simulation model to determine the value of conversion feature of
the Warrants based on the assumptions below:
|
|
2021
|
|
|
2020
|
|
Annual volatility rate
|
|
|
167 |
% |
|
|
156 |
% |
Risk free rate
|
|
|
0.25 |
% |
|
|
0.13 |
% |
Remaining Term
|
|
1.00 years
|
|
|
1.5 years
|
|
Fair Value of common stock
|
|
$ |
0.90 |
|
|
$ |
0.78 |
|
For the periods ended June 30, 2021 and December 31, 2020, an
active market for the Company’s common stock did not exist.
Accordingly, the fair value of the Company’s common stock was
estimated using a valuation model with level 3 inputs.
The below table represents the change in the fair value of the
derivative liability during the periods ended June 30, 2021 and
December 31, 2020.
Period Ended
|
|
2021
|
|
|
2020
|
|
Fair value of derivative (warrants), beginning of period
|
|
$ |
817,613 |
|
|
$ |
49,066 |
|
Change in fair value of derivative
|
|
|
12,819 |
|
|
|
367,781 |
|
Fair value of derivative on the date of issuance
|
|
|
- |
|
|
|
400,766 |
|
Fair value of derivative(warrants), end of period
|
|
$ |
830,432 |
|
|
$ |
817,613 |
|
Series D Notes Kicker Warrants
As discussed in Note 8, the Company analyzed the conversion
features of the Series D Notes and determined that the Warrants
qualified as a derivative liability. The fair value was required to
be allocated among the notes, conversion features, and the
warrants, and then remeasured at each reporting date. The Company
performed a valuation of the conversion feature. In performing the
valuation, the Company applied the guidance in ASC 820, “Fair
Value Measurements”, to nonfinancial assets and liabilities
that are recognized or disclosed at fair value on a nonrecurring
basis. ASC 820 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date (exit price). To measure fair value, the Company incorporates
assumptions that market participants would use in pricing the asset
or liability and utilizes market data to the maximum extent
possible.
In instances where the determination of the fair value measurement
is based on inputs from different levels of the fair value
hierarchy, the level in the fair value hierarchy within which the
entire fair value measurement falls is based on the lowest level
input that is significant to the fair value measurement in its
entirety. The Company’s assessment of the significance of a
particular input to the fair value measurement in its entirety
requires judgment and considers factors specific to the asset or
liability.
The Company considered the inputs in this valuation to be level 3
in the fair value hierarchy under ASC 820 and used an equity
simulation model to determine the value of conversion feature of
the Series D Warrants based on the assumptions below:
|
|
2021
|
|
|
2020
|
|
Annual volatility rate
|
|
|
167 |
% |
|
|
156 |
% |
Risk free rate
|
|
|
0.25 |
% |
|
|
0.13 |
% |
Remaining Term
|
|
8.88 years
|
|
|
10 years
|
|
Fair Value of common stock
|
|
$ |
0.90 |
|
|
$ |
0.78 |
|
For the periods ended June 30, 2021 and December 31, 2020, an
active market for the Company’s common stock did not exist.
Accordingly, the fair value of the Company’s common stock was
estimated using a valuation model with level 3 inputs.
The below table represents the change in the fair value of the
derivative liability during the periods ended June 30, 2021 and
December 31, 2020.
Period Ended
|
|
2021
|
|
|
2020
|
|
Fair value of derivative (warrants), beginning of period
|
|
$ |
952,634 |
|
|
$ |
- |
|
Fair value of derivative on the date of issuance
|
|
|
- |
|
|
|
409,998 |
|
Change in fair value of derivative
|
|
|
147,032 |
|
|
|
542,636 |
|
Fair value of derivative(warrants), end of period
|
|
$ |
1,099,665 |
|
|
$ |
952,634 |
|
NOTE 12 –
NON-CONTROLLING INTEREST
The Company’s Non-Controlling Interest recorded in the consolidated
financial statements relates to an interest in DynaResource de
México, S.A. de C.V. of 50% through May 13, 2013, and 20% until
February 24, 2020 when the minority interest was eliminated.
Changes in Non-Controlling Interest for the year ended December 31,
2020 was as follows:
|
|
2020
|
|
Beginning balance
|
|
$ |
(5,723,663 |
) |
Operating income (loss)
|
|
|
(61,589 |
) |
Share of Other Comprehensive Income (loss)
|
|
|
(11,669 |
) |
Elimination of Non-Controlling Interest
|
|
|
5,796,921 |
|
Ending balance
|
|
$ |
- |
|
NOTE 13 – FAIR
VALUE OF FINANCIAL INSTRUMENTS
The ASC guidance for fair value measurements and disclosure
establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1 measurements)
and the lowest priority to unobservable inputs (Level 3
measurements). The three levels of the fair value hierarchy are
described below:
|
Level 1 Inputs –
|
Quoted prices for identical instruments in active markets.
|
|
Level 2 Inputs –
|
Quoted prices for similar instruments in active markets; quoted
prices for identical or similar instruments in markets that are not
active; and model-derived valuations whose inputs are observable or
whose significant value drivers are observable.
|
|
Level 3 Inputs – |
Instruments with primarily unobservable value drivers.
|
As of June 30, 2021, and December 31, 2020, the Company’s financial
assets were measured at fair value using Level 3 inputs, with the
exception of cash, which was valued using Level 1 inputs. A
description of the valuation of the Level 3 inputs is discussed in
Note 11.
Fair Value Measurement at June 30, 2021 Using:
|
|
|
|
|
Quoted Prices
in Active
Markets For Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
|
$ |
2,556,676 |
|
|
|
- |
|
|
|
- |
|
|
|
2,556,676 |
|
Totals
|
|
$ |
2,556,676 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,556,676 |
|
Fair Value Measurement at December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
|
$ |
2,371,560 |
|
|
|
- |
|
|
|
- |
|
|
|
2,371,560 |
|
Totals
|
|
$ |
2,371,560 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,371,560 |
|
NOTE 14 – REVENUE
CONCENTRATION
The Company had certain customers whose revenue individually
represented 10% or more of the Company’s total revenue, or whose
accounts receivable balances individually represented 10% or more
of the Company’s total accounts receivable, as follows:
For each of the six months ended June 30, 2021 and 2020, three and
two customers accounted for 100% of revenue, respectively.
At June 30, 2021 and December 31, 2020, three and four customer
accounted for 100% of accounts receivable, respectively.
NOTE 15 – NOTES
PAYABLE
In June 2017, the Company entered into financing agreements for
unpaid mining concession taxes on the Francisco Arturo mining
concession for the period July 1, 2014 to December 31, 2015 in the
amount of $533,580. The Company paid an initial 20% payment in the
amount of $106,716 and financed the balance over 36 months at 18%
interest.
In February 2018, the Company entered into a financing agreement
for unpaid mining concessions taxes on the Francisco Arturo mining
concession for the year ended December 31, 2016 in the amount of
$552,990. The Company paid an initial payment of $110,598 and
financed the balance over 36 months at 18%.
In June 2018, the Company entered into financing agreements for the
unpaid mining concession taxes on the Francisco Arturo mining
concession for the year ended December 31, 2017 and the period
ending June 30, 2018 in the amount of $1,739,392. The Company paid
an initial 20% payment of $347,826 and financed the balance over 36
months at 21.84%
In February 2019, the Company entered into a financing agreement
for unpaid mining concession taxes on the Francisco Arturo mining
concession for the year ended December 31, 2018 in the amount of
$335,350. The Company paid an initial 20% payment of $67,070 and
financed the balance over 36 months at an interest rate of 21%.
In June 2018, the Company applied for a reduction of the Francisco
Arturo mining concession, from 69,121 hectares to 3,280 hectares.
On July 31, 2018, the application for reduction was approved and
the Company paid an initial amount of 985,116 MNP (Pesos), for the
second semester 2018 mining concessions taxes on the reduced
Francisco Arturo mining concession. The Company continues to accrue
an amount of $22,500 (USD) per semester on the reduced Francisco
Arturo mining concession.
As of June 2019, the Company ceased making monthly payments on the
above noted Francisco Arturo concession notes and has petitioned
the Hacienda for a reduction in the liability equal to the
reduction in the Francisco Arturo concession above. For financial
reporting purposes the Company continues to carry all notes at
unpaid principal amount and accrues interest on a monthly basis. At
June 30, 2021 $879,240 of accrued interest on the notes was
included in accrued liabilities on the consolidated balance
sheet.
In October 2019, the Company entered into a financing agreement for
unpaid mining concession taxes on the core mining concessions in
the amount of $299,474. The Company paid an initial 20% payment of
$59,895 and financed the balance over 36 months at an interest rate
of 22%.
The following is a summary of the transaction during the periods
ended June 30, 2021 and December 31, 2020:
|
|
|
|
|
|
Balance December 31, 2019
|
|
|
2,272,431 |
|
Exchange Rate Adjustment
|
|
|
(124,352 |
) |
2020 Principal Payments
|
|
|
(66,644 |
) |
Balance December 31, 2020
|
|
|
2,081,435 |
|
Exchange Rate Adjustment
|
|
|
(2,395 |
) |
2021 Principal Payments
|
|
|
(36,460 |
) |
Balance June 30, 2021
|
|
$ |
2,042,580 |
|
|
|
|
|
|
At
June 30, 2021 future maturities of notes payable are as
follows:
|
|
|
|
|
|
|
|
|
|
Year Ending June 30:
|
|
|
|
|
2022
|
|
$ |
2,009,461 |
|
2023
|
|
|
33,119 |
|
|
|
$ |
2,042,580 |
|
NOTE 16 – REVOLVING
CREDIT LINE FACILITY
On February 4, 2021 Mineras de DynaResource SA de CV (“Seller”)
entered into a Revolving Credit Line Facility and Commercial
Offtake Agreement (the “RCL"), with a commercial buyer. Under the
terms of the RCL:
|
·
|
The Company will deliver 100% of
its produced concentrates to the buyer and provider of the RCL,
through December 31, 2022; unless extended by the Company; |
|
·
|
An initial RCL was established by
buyer in the amount of $3.75M USD; |
|
·
|
At May 1, 2021, the RCL increased
to an amount equal to 80% of prior 3 month’s revenue; |
|
·
|
Each successive month, the RCL
shall be adjusted according to the company’s prior 3 month’s
revenue; |
|
·
|
The RCL shall never be less than
$3.75M USD; |
|
·
|
The RCL will be interest free for
45 days; |
|
·
|
The RCL is to be repaid through
deliveries of Concentrates or Cash within 120 days; |
Deposits under Revolving Credit Line Facility
Under the terms of the RCL, Mineras de DynaResource received the
following advances from the buyer:
(1)
|
$2.5M advance on February 4, 2021. Settled on March 26, 2021.
|
(2)
|
$3.75M advance on March 30, 2021. Settled on May 12, 2021.
|
(3)
|
$3.75M advance on May 12, 2021. Settled on June 16, 2021.
|
(4)
|
$6.75M advance on June 18, 2021.
|
NOTE 17 –
SUBSEQUENT EVENTS
The Company has evaluated events from June 30, 2021,
through the date whereupon the financial statements were issued,
and has determined the below described events subsequent to the end
of the period.
Revolving credit line activity:
At August 1, 2021, the amount of the RCL was increased to
$8.89M USD.
On August 4, 2021, Mineras de Dyna Resource S.A. de C.V. completed
settlement of an advance in the amount of $6.75M USD from the Buyer
of Concentrate products through a combination of product delivery
and cash payment.
On August 9, 2021, Mineras de DynaResource S.A. de C.V. received an
advance from the Buyer of Concentrate Products produced from San
Jose de Gracía in the amount of $8.25M USD.
Item 2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q includes forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, which we refer to in this annual report as the
Securities Act, and Section 21E of the Securities Exchange Act of
1934, as amended, which we refer to in this annual report as the
Exchange Act. Forward-looking statements are not statements of
historical fact but rather reflect our current expectations,
estimates and predictions about future results and events. These
statements may use words such as “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “predict,” “project” and similar
expressions as they relate to us or our management. When we make
forward-looking statements, we are basing them on our management’s
beliefs and assumptions, using information currently available to
us. These forward-looking statements are subject to risks,
uncertainties and assumptions, including but not limited to, risks,
uncertainties and assumptions discussed in this annual report.
Factors that can cause or contribute to these differences include
those described under the heading “Management Discussion and
Analysis and Plan of Operation.”
If one or more of these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be
incorrect, actual results may vary materially from what we
projected. Any forward-looking statement you read in this annual
report reflects our current views with respect to future events and
is subject to these and other risks, uncertainties and assumptions
relating to our operations, results of operations, growth strategy
and liquidity. All subsequent written and oral forward-looking
statements attributable to us or individuals acting on our behalf
are expressly qualified in their entirety by this paragraph. You
are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date of this annual report.
The Company expressly disclaims any obligation to release publicly
any updates or revisions to these forward-looking statements to
reflect any change in its views or expectations. The Company can
give no assurances that such forward-looking statements will prove
to be correct.
CAUTIONARY NOTE TO UNITED STATES INVESTORS—INFORMATION
CONCERNING PREPARATION OF RESOURCE AND RESERVE
ESTIMATES
The Company is an “OTC Reporting Issuer” as that term is defined in
BC Multilateral Instrument 51-105, Issuers Quoted in the U.S.
Over-the-Counter Markets, promulgated by the British Columbia
Securities Commission.
In Canada, an issuer is required to provide technical information
with respect to mineralization, including reserves and resources,
if any, on its mineral exploration properties in accordance with
Canadian requirements, which differ significantly from the
requirements of the United States Securities and Exchange
Commission (the “SEC”) applicable to registration statements and
reports filed by United States companies pursuant to the Securities
Act or the Exchange Act. As such, certain disclosures of
mineralization under Canadian standards may not be comparable to
similar information made public by United States companies subject
to the reporting and disclosure requirements of the SEC and not
subject to Canadian securities legislation.
While these terms are recognized and required by Canadian
securities legislation (under National Instrument 43-101 (“NI
43-101”), entitled Standards of Disclosure for Mineral
Projects), the SEC does not recognize these terms. Investors
in the United States are cautioned not to assume that any part or
all of the mineral deposits in these categories will ever be
converted to reserves. In addition, inferred mineral resources have
a great amount of uncertainty as to their existence and economic
and legal feasibility. It cannot be assumed that all or any part of
a measured mineral resource, indicated mineral resource or inferred
mineral resource will ever be upgraded to a higher category. Under
Canadian securities legislation, estimates of inferred mineral
resources may not form the basis of feasibility or pre-feasibility
studies, although they may form, in certain circumstances, the
basis of a “preliminary economic assessment” as that term is
defined in NI 43-101. U.S. investors are cautioned not to assume
that any part or all of any reported measured, indicated, or
inferred mineral resource estimates referred to in the DynaMéxico
NI 43-101 Technical Report and DynaMéxico 43-101 Mineral Resource
Estimate (compiled for DynaResource de Mexico SA de CV) are
economically or legally mineable.
Under U.S. standards, as set forth in SEC Industry Guide 7,
mineralization may not be classified as a “reserve” unless a
determination has been made that the mineralization could be
economically and legally produced or extracted at the time the
reserve determination is made. The SJG Property as described in
this Annual Report on Form 10-K is without known reserves. Mineral
resources which are not classified as mineral reserves do not have
“demonstrated economic viability.” The quantity of resources and
the quality (grade) of resources reported as “Indicated” and
“Inferred” mineral resources in the DynaMéxico 43-101 Mineral
Resource Estimate compiled for DynaResource de Mexico SA de CV,
under Canadian National Instrument 43-101 and filed by the Company
with SEDAR, are not
disclosed in this Form 10-Q. There has been insufficient
exploration to define any mineral reserves on the SJG Property, and
it is not certain if further exploration will result in the
definition of mineral reserves.
The Company
The Company is a minerals investment, management, and exploration
company, and currently conducting test mining and pilot milling
operations through an operating subsidiary in México, with specific
focus on precious and base metals in México. The Company was
originally incorporated in the State of California on September 28,
1937, under the name West Coast Mines, Inc. In November 1998, the
Company re-domiciled from California to Delaware and changed its
name to DynaResource, Inc. (“DynaUSA”).
We currently own 80% of the outstanding shares of DynaMéxico, and
DynaMéxico currently holds 20% of the outstanding shares of
DynaMéxico. DynaMéxico owns 100% of the mining concessions,
equipment, camp and related facilities which comprise the San Jose
de Gracía Property (“SJG”), in northern Sinaloa State, México. We
also own 100% of Mineras de DynaResource S.A. de C.V.
(“DynaMineras”), the exclusive operator of the San José de Gracía
Project, under contract with DynaMéxico. DynaMineras currently
conducts test mining and pilot milling operations, and other
exploration activities in México. The Company also has another
wholly owned subsidiary, DynaResource Operaciones, S.A. de C.V.
(“DynaOperaciones”). DynaOperaciones entered into a personnel
management agreement with DynaMineras and, under the terms of that
agreement, DynaOperaciones is the exclusive management company for
registered employees.
Segment Information
Not required for small reporting Companies
Products
The end use product produced at our test mining and pilot milling
operations at SJG is in the form of gold-silver concentrates.
Gold-silver concentrates, or simply concentrate, is raw precious
metals materials that has been crushed and ground finely to a
sand-like product where gangue (waste) and non-precious metals are
removed or reduced, thus concentrating the precious metals
component. Concentrates processed and produced from San Jose de
Gracía are shipped to third-party smelters, refineries or third
parties for further processing or re-sale.
During the first six months of 2021, we reported the delivery and
sale of 9,436 net Oz gold contained in concentrates. All
gold-silver concentrate originated from the San Jose de Gracía
Property in México.
Gold-silver concentrates are sold at a discount to the prevailing
spot market price, based on the price per ounce of gold and silver
quoted at the London PM fix, with the actual net precious metals
prices received depending on the sales contract. Concentrates are
priced by individual concentrate lots of 36 to 72 tons, or as a
series of lots under contract, whereby the final selling price and
gold-silver quantities are subject to final adjustments at the time
of final purchase settlement.
Gold and Silver Pilot Processing Methods
Gold and silver are extracted from mined mineralized material, by
crushing, grinding, milling, and further by simple gravity and
flotation recoveries. The mineralized material is extracted by
underground mining methods. The processing plant at the San José de
Gracía mine is composed of conventional crushing and grinding
circuits, and with gravity and flotation recovery methods. The
gravity and flotation concentrates are dewatered and shipped to
purchasers in semi-truck trailers.
Gold and Silver Reserves / No Known Reserves
The Company currently has no mineral “reserves” as defined by SEC
Industry Guide 7 promulgated by the SEC.
General Government Regulations
México
Mining in México is subject to numerous federal, state and local
laws, regulations and ordinances governing mineral rights,
operations and environmental protection.
Mineral Concession Rights. Exploration and exploitation of
minerals in México may be carried out through Mexican companies
incorporated under Mexican law by means of obtaining mining
concessions. Mining concessions are granted by the Mexican
government for a period of fifty years from the date of their
recording in the Public Registry of Mining and are renewable for a
further period of fifty years upon application within five years
prior to the expiration of such concession in accordance with the
Mining Law and its regulations. Mining concessions are subject to
annual work requirements and payment of annual surface taxes which
are assessed and levied on a semi-annual basis. Such concessions
may be transferred or assigned by their holders, but such transfers
or assignments must be registered with the Public Registry of
Mining in order to be valid against third parties. The holder of a
concession must pay semi-annual duties in January and July of each
year on a per hectare basis and in accordance with the amounts
provided by the Federal Fees Law. During the month of May of each
year, the concessionaire must file with the General Bureau of
Mines, the work assessment reports made on each concession or group
of concessions for the preceding calendar year. The regulations of
the Mining Law provide tables containing the minimum investment
amounts that must be made on a concession. This amount is updated
annually in accordance with the changes in the Consumer Price
Index.
Surface Rights. In México, while mineral rights are
administered by the federal government through federally issued
mining concessions, Ejidos (communal owners of land
recognized by the federal laws in México) control surface access
rights to the land. An Ejido may sell or lease lands
directly to a private entity. While the Company has agreements or
is in the process of negotiating agreements with the Ejido
that impact all of its projects in México, some of these agreements
may be subject to renegotiations.
Mining Royalties. In October 2013, the Mexican lower house
passed a bill levying a tax-deductible mining royalty of 7.5% on
earnings before the deduction of interest, taxes, depreciation and
amortization, along with an additional 0.5% surcharge on precious
metals revenue for mining companies. The effective date of the law
was January 1, 2014. Although there are a few uncertainties
surrounding the scope, calculation and enforcement of the royalty,
based on the Company's current interpretation of the bill, the
royalty or surcharge was not material for 2020.
Environmental Law. The Environmental Law in México, called
the "General Law of Ecological Balance and Protection to the
Environment" ("General Law"), provides for general environmental
policies, with specific requirements for certain activities such as
exploration set forth in regulations called "Mexican official
norms". Responsibility for enforcement of the General Law, the
regulations and the Mexican official norms is with the Ministry of
Environment and Natural Resources, which regulate all environmental
matters with the assistance of Procuraduria Federal de
Protección al Ambiente (known as "PROFEPA").
2020 Forestry Law. The 2020 Forestry Law provides for
general policies for the use and protection of the surface, and for
plants, soil and trees. The regulation of the Forestry Law is with
the Ministry of Environment and Natural Resources, with the
assistance of PROFEPA.
Residues Law. The Residues Law, also known as Norm 141,
provides for general policies for the deposit and storage of
residue and waste. The regulation of the Residues Law is with the
Ministry Of Environment and Natural Resources, with the assistance
of PROFEPA.
The primary laws and regulations used by the State of Sinaloa,
where our San Jose de Gracía property is located, in order to
govern environmental protection for mining and exploration are: The
General Law, the 2020 Forestry Law, Residues Law, as well as their
specific regulations on air, water and residues, and the Mexican
official norms (known as "NOM-120"). In order to comply with the
environmental regulations, a concessionaire must obtain a series of
permits during the exploitation and exploration stage. The time
required to obtain the required permits is dependent on a few
factors including the type of vegetation and trees impacted by
proposed activities.
Mining Permits. The Secretariat of Environmental and
Natural Resources, the Mexican Government environmental authority
("SEMARNAT"), is responsible for issuing environmental permits
associated with mining. Three main permits required before
construction can begin are: Environmental Impact Statement (known
in México as Manifesto Impacto Ambiental) ("MIA"), Land
Use Change (known in México as Estudio Justificativo Para
Cambio Uso Sueldo) ("ETJ"), and Risk Analysis (known in México
as Analisis de Riesgo) ("RA"). A construction permit is
required from the local municipality and an archaeological release
letter must be obtained from the National Institute of Anthropology
and History (known as "INAH"). An explosives permit is required
from the ministry of defense before construction can begin. The
Environmental Impact Statement is required to be prepared by a
third-party contractor and submitted to SEMARNAT and must include a
detailed analysis of climate, air quality, water, soil, vegetation,
wildlife, cultural resources and socio-economic impacts. The Risk
Analysis study (which is included into the Environmental Impact
Statement and submitted as one complete document) identifies
potential environmental releases of hazardous substances and
evaluates the risks in order to establish methods to prevent,
respond to, and control environmental emergencies. The Land Use
Change requires that an evaluation be made of the existing
conditions of the land, including a plant and wildlife study, an
evaluation of the current and proposed use of the land, impacts to
naturally occurring resources, and an evaluation of
reclamation/re-vegetation plans.
Customers
The Company sells its concentrates to the buyer who offers the best
terms based upon price, treatment costs, refining costs, and other
terms of payment. During the six months ended June 30, 2021, the
Company sold gold-silver concentrates to three purchasers.
Employees
As of June 30, 2021, we had 173 employees, including 168 employees
based in México, and 5 in the United States. Consultants are
retained from time to time. Employees based in México and the
United States include laborers, engineers, geologists, information
technologists, office administrators, managers and executives. None
of our employees in México are covered by union contracts and the
Company believes we have good relations with our employees.
The San Jose de Gracia Mineral Property
We classify our mineral property as an "Exploration Property". We
do not suggest that we have proven or probable reserves at our
property as defined by the SEC. Under U.S. standards, as set forth
in SEC Industry Guide 7, mineralization may not be classified as a
“reserve” unless a determination has been made that the
mineralization could be economically and legally produced or
extracted at the time the reserve determination is made. The SJG
Property as described in this Annual Report on Form 10-K is without
known reserves. Mineral resources which are not classified as
mineral reserves do not have “demonstrated economic viability.” The
quantity of resources and the quality (grade) of resources reported
as “Indicated” and “Inferred” mineral resources in the mineral
resource estimate compiled for DynaMéxico, under and filed by the
Company on SEDAR, are not
disclosed in this Form 10K. There has been insufficient
exploration to define any mineral reserves on the SJG Property, and
it is not certain if further exploration will result in the
definition of mineral reserves.
San Jose de Gracia Mineral Property
San Jose de Gracía Property (“SJG”) is a high-grade mineralized
system which reports historical production of 1,000,000 Oz. gold
(“Au”), from a series of underground workings and is located in the
state of Sinaloa, México. The Company is focused on the exploration
and future exploitation of this vein-hosted, near surface, and over
400 meters down dip gold potential, that occurs within fault
breccia veins; and has been traced on surface and underground over
a 15 Sq. kilometer area.
DynaMéxico owns 100% of the mineral concessions at the SJG
Property, and all mineral concessions are contiguous. The SJG
Property is comprised of 33 concessions covering approximately
9,920 hectares (24,513 acres).
Current Mining Concessions - San José de
Gracía
Claim
Name
|
Claim
Number
|
Staking
date
|
Expiry
|
Hectares
|
Taxes / ha
(pesos)
|
AMPL. SAN NICOLAS
|
183815
|
22/11/1988
|
21/11/2038
|
17.4234
|
111.27
|
AMPL. SANTA ROSA
|
163592
|
30/10/1978
|
29/10/2028
|
25.0000
|
111.27
|
BUENA VISTA
|
211087
|
31/03/2000
|
30/03/2050
|
17.9829
|
63.22
|
EL CASTILLO
|
214519
|
02/10/2001
|
01/10/2051
|
100.0000
|
31.62
|
EL REAL
|
212571
|
07/11/2000
|
07/11/2052
|
2038.0000
|
31.62
|
EL REAL 2
|
216301
|
30/04/2002
|
29/04/2052
|
280.1555
|
31.62
|
FINISTERRE FRACC. A
|
219001
|
28/01/2003
|
27/01/2053
|
18.7856
|
31.62
|
FINISTERRE FRACC. B
|
219002
|
28/01/2003
|
27/01/2053
|
174.2004
|
31.62
|
GUADALUPE
|
189470
|
05/12/1990
|
04/12/2040
|
7.0000
|
111.27
|
LA GRACIA I
|
215958
|
02/04/2002
|
01/04/2052
|
300.0000
|
31.62
|
LA GRACIA II
|
215959
|
02/04/2002
|
01/04/2052
|
230.0000
|
31.62
|
LA LIBERTAD
|
172433
|
15/12/1983
|
14/12/2033
|
97.0000
|
111.27
|
LA NUEVA AURORA
|
215119
|
08/02/2002
|
07/02/2052
|
89.3021
|
31.62
|
LA NUEVA ESPERANZA
|
226289
|
06/12/2005
|
05/12/2055
|
40.0000
|
7.6
|
LA UNION
|
176214
|
26/08/1985
|
25/08/2035
|
4.1098
|
111.27
|
LOS TRES AMIGOS
|
172216
|
27/10/1983
|
26/10/2033
|
23.0000
|
111.27
|
MINA GRANDE
|
163578
|
10/10/1978
|
09/10/2028
|
6.6588
|
111.27
|
NUEVO ROSARIO
|
184999
|
13/12/1989
|
12/12/2039
|
32.8781
|
111.27
|
PIEDRAS DE LUMBRE 2
|
215556
|
05/03/2002
|
04/03/2052
|
34.8493
|
31.62
|
PIEDRAS DE LUMBRE 3
|
218992
|
28/01/2003
|
27/01/2053
|
4.3098
|
31.62
|
PIEDRAS DE LUMBRE
No.4
|
212349
|
29/09/2000
|
28/09/2050
|
0.2034
|
63.22
|
PIEDRAS DE LUMBRE
UNO
|
215555
|
05/03/2002
|
04/03/2052
|
40.2754
|
31.62
|
SAN ANDRES
|
212143
|
31/08/2000
|
30/08/2050
|
385.0990
|
63.22
|
SAN JOSÉ
|
208537
|
24/11/1998
|
23/11/2048
|
27.0000
|
111.27
|
SAN MIGUEL
(1)
|
183504
|
26/10/1988
|
25/10/2038
|
7.0000
|
111.27
|
SAN NICOLAS
|
163913
|
14/12/1978
|
13/12/2028
|
55.5490
|
111.27
|
SAN SEBASTIAN
|
184473
|
08/11/1989
|
07/11/2039
|
40.0000
|
111.27
|
SANTA MARIA
|
218769
|
17/01/2003
|
16/01/2053
|
4.2030
|
31.62
|
SANTA ROSA
|
170557
|
13/05/1982
|
12/05/2032
|
31.4887
|
111.27
|
SANTO TOMAS
|
187348
|
13/08/1986
|
12/08/2036
|
312.0000
|
111.27
|
TRES AMIGOS 2
|
212142
|
31/08/2000
|
30/08/2050
|
54.4672
|
63.22
|
FINISTERRE 4
|
231166
|
18/01/2008
|
17/01/2058
|
2142.1302
|
5.08
|
FRANCISCO ARTURO
|
230494
|
06/09/2007
|
27/03/2057
|
3,279.56
|
|
TOTAL
|
|
|
|
9,920.00
|
|
Surface Lease Rights
In addition to the surface rights held by DynaMéxico pursuant to
the Mining Act of México and its Regulations (Ley
Minera y su Reglamento), DynaMineras maintains access and
surface rights to the SJG Project pursuant to the 20-year Land
Lease Agreement (above). The 20 Year Land Lease Agreement with the
Santa Maria Ejido Community surrounding San Jose de Gracía is dated
January 6, 2014 and continues through 2033. It covers an area of
4,399 hectares surrounding the main mineral resource areas of SJG
and provides for annual lease payments by DynaMineras of $1,359,443
Pesos (approx. $66,500 USD as of June 30, 2021), commencing in
2014.
The Land Lease Agreement provides DynaMineras with surface access
to the core resource areas of SJG (4,399 hectares), and allows for
all permitted mining, pilot production and exploration activities
from the owners of the surface rights (Santa Maria Ejido
community).
The Company expects DynaMineras will be successful in expanding the
size and scope of the resources at SJG through continued drilling
and development programs at San Pablo, Tres Amigos, La Ceceña,
Palos Chinos, San Pablo East, La Purisima, and La Prieta. The
Company expects extensions to mineralization in all directions and
down dip from the main target areas.
Mineral Reserves / No Known Reserves
Under U.S. standards, as set forth in SEC Industry Guide 7,
mineralization may not be classified as a “reserve” unless a
determination has been made that the mineralization could be
economically and legally produced or extracted at the time the
reserve determination is made. The SJG property is without known
reserves. Mineral resources which are not classified as mineral
reserves do not have “demonstrated economic viability.” The
quantity of resources and the quality (grade) of resources reported
as “Indicated” and “Inferred” mineral resources in the mineral
resource estimate compiled for DynaMéxico is not disclosed in this Form 10-Q.
There has been insufficient exploration to define any mineral
reserves on the property, and it is not certain if further
exploration will result in the definition of mineral reserves.
Technical Report and Resource Estimate According to
Canadian National Instrument 43-101 (2012)
In 2012, DynaMéxico commissioned Servicios y Proyectos Mineros
(“SPM”) for the production of Technical Report 43-101 (“43-101”) at
San Jose de Gracía. Additionally, DynaMéxico commissioned Mr.
Robert Sandefur, a senior reserve analyst for Chlumsky, Armbrust
& Meyer LLC, Lakewood, CO (“CAM”) to produce a mineral resource
estimate for the 4 main vein systems at the property.
Parameters Used to Estimate the Mineral Resource
Estimate--The data base for the San Jose de Gracía Project
consists of 372 drill holes of which 361 are diamond drill holes
(“DDH”) and the remaining 11 were reverse circulation holes “(RC”),
with a total drilling of 75,878 meters. The NI 43-101 Mineral
Resource Estimate, prepared in 2012, concentrates on four main
mineralized vein systems at SJG: Tres Amigos, San Pablo, La Union,
and La Purisima. Of the 372 drill holes, 368 were drilled to test
these four main vein systems and the remaining four holes tested
the Argillic Zone. Technical personnel of Minop S.A. de C.V.
(“Minop”), a subsidiary (or affiliate) of Goldgroup Mining Inc.,
built three dimensional solids to constrain estimation to the
interpreted veins in each swarm. The 172 holes most recently
drilled (2009-2011), were allocated as follows: Tres Amigos (64
holes), San Pablo (49 holes), La Union (24 holes), La Purisima (32
holes) and Argillic Zone (3 holes). The data base also includes
rock and chip sampling, regional stream sediment sampling, and IP
Surveys.
Density--A total of 5,540 pieces of core were measured for
specific gravity using the weight in air vs. weight in water
method. This represents an additional 3,897 measurements taken in
the 2009-11 drill seasons with density measurements taken from all
mineral zones. Dried samples were coated with paraffin wax before
being measured. The results tabulated have been sorted by lithology
and mineralized veins. The average specific gravity of 5,051 wall
rock samples was 2.59 while the average specific gravity for 489
samples of vein material is 2.68. CAM and Servicios y Proyectos
Mineros have reviewed the procedures and results and opine that the
results are suitable for use in mineral resource estimation.
Mineral Resource Estimate - Construction of
Wireframes--Mineral Resources were estimated by Mr. Sandefur
within wireframes constructed by technical personnel of Minop.
Minop was contracted by Mineras de DynaResource S.A. de C.V.
(“DynaMineras”).
Mineral Resource Estimate - Explanation of Resource
Estimation--Resource estimation was done in MineSight and
MicroModel computer systems with only those composites that were
inside the wireframe used in the estimate. Estimation was done
using kriging with the omni-directional variogram derived from all
the data in each area for gold using the relative variogram derived
from the log variogram. High grades were restricted by capping the
assays at a breakpoint based on the cumulative frequency curves.
Estimation was done using search radii of 100 x 100 x 50 m “blocks”
oriented subparallel to the general strike and dip of the vein
system in each area. A sector search, corresponding to the faces of
the search box with a maximum of two points per sector was used in
estimation. A density of 2.68 based on within ‘vein density’
samples was used in the resource estimate. Within each of the four
areas there are approximately 20 to 40 veins in the vein swarm.
Resources were estimated by kriging using data from all veins in
the swarm. In general, gold accounts for at least 80% of the value
of contained metal at the project, so the variograms for gold were
used in estimation of the four other metals.
The veins at San Jose de Gracía have been historically mined for
many years and historic mined volumes are not available. The one
exception is the approximate 42,000 tonnes of ore processed by
DynaMéxico during its pilot production activities in 2003-2006. The
resource table is not adjusted for any historic mining. To validate
that historic mining had not significantly reduced the resource,
CAM reviewed the database for all assays greater than 1 gram per
ton gold that were next to missing values at the bottom of drill
holes. Only four assays satisfying this criterion were found, and
on the basis of this review, Mr. Sandefur does not believe that
significant mining has occurred within the volumes defined by the
wireframes.
Servicios y Proyectos Mineros performed a database review and
considers that a reasonable level of verification has been
completed, and that no material issues have been left unidentified
from the drilling programs undertaken.
Mineral Resource Estimate and 43-101 Technical Report - Data
Verification--Mr. Ramon Luna Espinoza (“Mr. Luna”) initially
visited the San Jose de Gracía Project in November 2010 and
conducted site inspections at SJG in November 2011 and January
2012. Mr. Sandefur conducted a site inspection of the SJG Project
in January 2012. While at the Property in November 2011, Mr. Luna
inspected the areas of Tres Amigos, La Prieta, Gossan Cap, San
Pablo, La Union, and La Purisima, and historic mining sites. In
January 2012, Mr. Sandefur and Mr. Luna inspected the areas of Tres
Amigos, San Pablo, La Union, and La Purisima. Pictures of the areas
were taken. Many of the drill pads for the drilling programs of
2007 to 2011 were clearly located and identified. Mr. Luna also
inspected at San José de Gracía, the core logging and storage
facilities, the geology offices, the meteorological station, the
plant nursery, and the mill. Mr. Sandefur also inspected the core
logging and storage facilities.
The Company received from DynaMéxico on February 14, 2012, a
National Instrument 43-101 Mineral Resource Estimate for San Jose
de Gracía. The NI 43-101 Resource Estimate was prepared by Mr.
Robert Sandefur, BS, MSc, P.E., a Qualified Person as defined under
NI 43-101, and a senior reserve analyst for Chlumsky, Armbrust
& Meyer LLC, Lakewood, CO (“CAM”). The Resource Estimate
concentrates on four separate main vein systems at SJG: Tres
Amigos, San Pablo, La Union, and La Purisima.
The mineral resource estimates prepared by Mr. Robert Sandefur for
this Technical Report included Indicated Resources at Tres Amigos
and San Pablo. Table summaries of Indicated and Inferred Resources
are contained in the 2012 DynaMéxico-CAM Mineral Resource Estimate.
The Resource Estimate has been filed, along with the Technical
Report on SEDAR; but is not
disclosed in this Form 10-K.
Water Concession
The Company has secured the Water Rights Concession for the area
surrounding SJG. The Director of Water Administration of the
National Water Commission of México (CONAGUA) formally certified in
writing the rights of DynaResource de México, S.A. de C.V. to
legally “use”, exploit and extract 1,000,000 cubic meters of water
per year from the DynaMéxico extraction infrastructure located
within the perimeter of the mining concessions comprising the San
Jose de Gracía Mining Property in Sinaloa State, México. CONAGUA
determined that the DynaMéxico water rights are not subject to any
water rights concession or any other water extraction restriction.
Water extracted by DynaMéxico will be subject to applicable levies
imposed by the Mexican tax authorities in accordance with current
Mexican tax laws.
Company
The Company is a minerals investment, management, and exploration
company, and currently conducting test mining and pilot milling
operations through an operating subsidiary in México, with specific
focus on precious and base metals in México. The Company was
incorporated in the State of California on September 28, 1937,
under the name West Coast Mines, Inc. In November 1998, the Company
re-domiciled from California to Delaware and changed its name to
DynaResource, Inc. (“DynaUSA”).
We currently conduct operations in México through our operating
subsidiaries. We currently own 80% of the outstanding shares of
DynaResource de México, S.A. de C.V. (“DynaMéxico”), and DynaMéxico
currently holds 20% of its outstanding shares recovered from
Goldgroup Resources Inc. DynaMéxico owns 100% of mining
concessions, equipment, camp and related facilities which comprise
the San Jose de Gracía Property, in northern Sinaloa State, México.
We also own 100% of Mineras de DynaResource S.A. de C.V.
(“DynaMineras”), the exclusive operator of the San José de Gracía
Project, under contract with DynaMéxico. DynaOperaciones is the
exclusive management company for registered employees.
Project Improvements, Expansion and Increased Output (2017
To 2021)
The Company continues its business plan of operations at San Jose
de Gracía, which is to improve, increase and expand test mining and
pilot milling operations and generally, to increase production of
gold ounces. Since January 2015 startup of the test mining and
milling activities, the Company has increased daily output from an
initial 75 tons per 24-hour operating day, to a current 200 tons
per 24-hour operating day, and during first quarter 2021 the
Company expects to achieve production output of 300 tons per
24-hour operating day. (Note the Summary of Test Mining and Pilot
Mill Operations for 2018 to 2021 below).
Since January 2017, the Company has expended over $13.8 million USD
in non-operating costs, generally classified as project
improvements and expansion costs which have been expensed in the
company’s financial statements. These funds have been provided
primarily from cash flows from operations. An itemized list of
these non-operating costs is described below:
Mill Expansion:
|
|
$ |
1,927,000 |
|
Tailings Pond Expansion
|
|
|
265,000 |
|
Machinery and Equipment
|
|
|
968,000 |
|
Mining Camp Expansion
|
|
|
146,000 |
|
Medical Facility
|
|
|
126,000 |
|
Mine Development - San
Pablo
|
|
|
2,748,000 |
|
Mine Expansion - San Pablo
East
|
|
|
915,000 |
|
Mine Expansion – Tres
Amigos
|
|
|
1,599,000 |
|
SIG Mining Concessions
|
|
|
1,392,000 |
|
Surface Rights and
Permitting
|
|
|
468,000 |
|
Debt Retirement
|
|
|
484,000 |
|
Legal Fees
|
|
|
2,635,000 |
|
Total
|
|
$ |
13,773,000 |
|
The Company is currently reporting all costs of mine operations,
improvements, and expansion as expenses in accordance with United
States General Accepted Accounting Principal (GAAP) requirements.
The result of expensing all costs is that the Company has
accumulated a net loss carry forward from México operations of $25
million USD which is available to offset future taxable
earnings.
Summary of Test Mining and Pilot Mill Operations for 2016
to 2020:
Year
|
|
Total
Tonnes
Mined
&
Processed
|
|
|
Reported
Mill
Feed
Grade
(g/t
Au)
|
|
|
Reported
Recovery
%
|
|
|
Gross Gold
Concentrates Produced
(Au
oz.)
|
|
|
Net Gold
Concentrates
Sold
(Au
oz.)
|
|
2016
|
|
|
33,172 |
|
|
|
12.70 |
|
|
|
79.70 |
% |
|
|
10,836 |
|
|
|
8,668 |
|
2017
|
|
|
35,170 |
|
|
|
12.95 |
|
|
|
85.00 |
% |
|
|
12,636 |
|
|
|
10,740 |
|
2018
|
|
|
52,038 |
|
|
|
9.82 |
|
|
|
86.11 |
% |
|
|
14,147 |
|
|
|
13,418 |
|
2019
|
|
|
66,031 |
|
|
|
5.81 |
|
|
|
86.86 |
% |
|
|
10,646 |
|
|
|
9,713 |
|
2020
|
|
|
44,218 |
|
|
|
5.65 |
|
|
|
87.31 |
% |
|
|
7,001 |
|
|
|
5,828 |
|
Total
|
|
|
230,629 |
|
|
|
8.76 |
|
|
|
88.40 |
% |
|
|
55,266 |
|
|
|
48,367 |
|
Test pilot operations in 2020 yielded 44,218 tons mined and
processed from underground mining activity and pilot mill
operations; and the production of approximately 7,001 gross Oz Au
(and net of dry weights, buyer’s price discount and refining and
treatment costs, approximately 5,828 Oz. Au) contained in
gold-silver concentrates, and the receipt of $9,048,831 in revenues
from the sale of gold-silver concentrates.
Summary of Test Mining and Pilot Mill Operations for
the six months ended June 30, 2021 and
2020:
|
|
Total
Tonnes
Mined
&
Processed
|
|
|
Reported
Mill
Feed
Grade
(g/t
Au)
|
|
|
Reported
Recovery
%
|
|
|
Gross
Gold
Concentrates
Produced
(Au
oz.)
|
|
|
Net
Gold
Concentrates
Sold (Au
oz.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30, 2021
|
|
|
41,376 |
|
|
|
8.98 |
|
|
|
86.74 |
% |
|
|
10,320 |
|
|
|
9,436 |
|
Six Months Ended
June 30, 2020
|
|
|
8,608 |
|
|
|
3.33 |
|
|
|
83.71 |
% |
|
|
772 |
|
|
|
624 |
|
Test pilot operations in Q1 2021 yielded 17,342 tons mined and
processed through mill operations; and the production of 3,571
gross Oz Au (and net weights, buyer’s price discount and refining
and treatment costs, approximately 3,024 Oz. Au) contained in
gold-silver concentrates, and the receipt of $4,912,712 in revenues
from the sale of gold-silver concentrates.
Test pilot operations in Q2 2021 yielded 24,034 tons mined and
processed through mill operations; and the production of 6,749
gross Oz Au (and net weights, buyer’s price discount and refining
and treatment costs, approximately 6.256 Oz. Au) contained in
gold-silver concentrates, and the receipt of $10,526,313 in
revenues from the sale of gold-silver concentrates.
Additional Test Mining and Mill Operations
Disclosure
DynaMineras expects to continue its test underground mining
activity and pilot milling operations in 2021, and projects the
output of 300 tons per 24-hour operating day from the mine and mill
during the third quarter.
Results for the three and six months ended June 30, 2021
and 2020
REVENUE. Revenues for the three months ended June 30, 2021 and 2020
were $10,526,313 and $(3,409), respectively. Year to date revenues
for the six months ended June 30, 2021 and 2020 were $15,439,025
and $414,635, respectively. The increase is a result of the
Company’s opening of the Tres Amigos mine and the expansion of mill
capacity to 300 tones per day. As anticipated the opening of the
Tres Amigos mine has resulted in an increase in yield from 3.33 to
8.98 au per ton. The increase mill capacity resulting of the
processing of 24,034 tonnes of ore in Q2. During the prior year
mining operations and milling were shutdown from March to July 2020
to open the Tres Amigos mine and expand the mill.
PRODUCTION COSTS RELATED TO SALES. Production costs related to
sales for the three months ended June 30, 2021 and 2020 were
$778,885 and $0, respectively. Production costs related to sales
for the six months ended June 30, 2021 and 2020 were $1,160,151 and
$211,575, respectively. These are expenses directly related to the
milling, packaging and shipping of gold and other precious metals
product. This represents a decrease in the cost per ton of milling
ore. The decrease was due to Company’s ceasing mill operations from
March to June 2020 to complete the financing and facility upgrade
which allowed the Company to open the Tres Amigos mine and increase
the output from the mill.
MINE PRODUCTION COSTS. Mine production costs for the three months
ended June 30, 2021 and 2020 were $1,442,932 and $0 respectively.
Mine production costs for the six months ended June 30, 2021 and
2020 were $2,249,402 and $533,901 respectively. These costs were
directly related to the extraction of mine tonnage to be processed
at the mill. The increase was a result of increased tonnage mined.
The 2020 cost primarily represented the processing of inventory
from the prior year.
MINE EXPLORATION COSTS. Mine exploration costs for the three months
ended June 30, 2021 and 2020 were $1,273,241 and $0, respectively.
Mine exploration costs for the six months ended June 30, 2021 and
2020 were $2,285,989 and $40,825, respectively. These were the
costs of extracting waste material to reach the materials to be
extracted for processing. The increase was a result of opening the
Tres Amigos mine and the limited mining in the 2020 period. There
were no exploration costs from February to June of the prior
year.
MINE EXPANSION COSTS: Mine expansion costs for the three months
ended June 30, 2021 and 2020 were $0 and $639,656, respectively.
Mine expansion costs for the six months ended June 30, 2021 and
2020 were $0 and $909,190, respectively. These were the costs
associated with the expansion of the mining facilities and the cost
associated with preparing the Tres Amigos for production in the
2020 period. There have been no mine expansion activities in
2021.
TRANSPORTATION. Transportation costs for the three months ended
June 30, 2021 and 2020 were $355,134 and $(446), respectively.
Transportation costs for the six months ended June 30, 2021 and
2020 were $593,698 and $75,734, respectively. These were the costs
of transporting the product to the customer for treatment and sale.
The increase is consistent with the overall increase in production
and revenue.
CAMP, WAREHOUSE AND SUPPORT FACILITIES. Camp, warehouse and support
facility cost for the three months ended June 30, 2021 and 2020
were $723,527 and $421,282, respectively. Camp, warehouse and
support facility cost for the six months ended June 30, 2021 and
2020 were $1,258,722 and $873,324, respectively. These were the
support costs of the mining facilities including housing, food,
security and warehouse operations. The increase was a result of the
increased activity at the camp during the six months ended June 30,
2021 compared to the shutdown of mining activity in the six months
ended June 30, 2020.
PROPERTY HOLDING COSTS. Property holding costs for the three months
ended June 30, 2021 and 2020 were $36,903 and $31,305,
respectively. Property holding costs for the six months ended June
30, 2021 and 2020 were $79,650 and $68,129, respectively. These
costs were concessions taxes, leases on land and other direct costs
of maintaining the property.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the three months ended June 30, 2021 and 2020 were
$651,992 and $1,097,315 respectively. General and administrative
expenses for the six months ended June 30, 2021 and 2020 were
$1,166,969 and $1,517,571 respectively. These were the costs of
operating the Company not directly associated with the mine
operations including management, accounting, and legal expenses.
The decrease was largely a result of legal fees associated with the
Company’s successful recovery of the non-controlling stock and
legal cost of the Company’s new financing incurred in the second
quarter of 2020.
OTHER INCOME (EXPENSE). Other income for the six months ended June
30, 2021 and 2020 was $(1,890,365) and $(1,437,832) respectively.
Included in this category in 2021 was interest expense of
$(730,419), change in derivative of $(185,116) and currency
transaction gain of $136,281 and arbitration award expense of
$1,111,111. Included in this category in 2020 was interest expense
of $(404,445), change in derivative of $(689,275), currency
transaction loss of $(339,665) and other expenses of $(4,427). The
2020 derivative liability increase is the result of the extension
of stock warrants and the issuance of new convertible debt and
stock warrants as part of the financing closed in the second
quarter of 2020. The 2020 increase was limited to changes in stock
prices and remaining life of the underlying securities. Likewise,
the increase in interest expense is reflective of the Company’s
increase in debt. See the legal summary for a more detail
discussion of the arbitration award.
NON-CONTROLLING INTEREST. The non-controlling interest portion of
the net loss for the six months ended June 30, 2021 and 2020 was $0
and $61,589, respectively. This represented the non-controlling
interest share of Dyna México’s loss. The 2020 allocation included
only the non-controlling interest’s share of the net loss for
January and February as the non-controlling interest was eliminated
at the end of February 2020.
OTHER COMPREHENSIVE INCOME (LOSS). Comprehensive income (loss)
includes the Company’s net income (loss) plus the unrealized
currency translation gain (loss) for the period. The Company’s
other comprehensive loss for the six months ended June 30, 2021 and
2020 consisted of unrealized currency gains (losses) of $(371,407)
and $1,144,987, respectively. The change is due to the variances in
the peso exchange rates throughout the two periods.
Liquidity and Capital Resources
As of June 30, 2021, the Company had working capital of
$(5,282,043), comprised of current assets of $18,477,783 and
current liabilities of $23,759,826. This represented an increase of
$496,949 from the working capital maintained by the Company of
$(5,778,992) as of December 31, 2020. The primary reason for the
increase was the increase in accounts receivable and inventory.
Net cash provided by (used in) operations for the six months ended
June 30, 2021 and 2020 was $8,271,206 and $(3,429,944),
respectively. The increase is primarily the result of the Company’s
operating profit and increase in customer advances as a result of
the Company’s increased production in its mining and pilot milling
operations during the six months in 2021.
Net cash provided by (used) in investing activities for the six
months ended June 30, 2021 and 2020 was $0 and $0, respectively.
Expenditures necessary for the expansion of mining operations
totaled $111,702 and $21,219 in the six months ended June 30, 2021
and 2020, respectively, would normally have been included in this
category were expenses due to the company’s lack of proven and
probable reserves.
Net cash provided by (used in) financing activities for the six
months ended June 30, 2021 and 2020 was $(36,460) and $3,178,185,
respectively. In the 2020 period, the Company received $3,275,000
loan proceeds and $45,000 of advances from stockholders. The
Company used $(36,460) and $(141,815) for repayments of long-term
debt and convertible notes in the six months ended June 30, 2021
and 2020, respectively.
Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance sheet
arrangements, which have or are reasonably likely to have a
material adverse effect on our financial condition, results of
operations or liquidity.
Plan of Operation
The Plan of operation for the next twelve months includes
DynaMineras continuing the improvement and expansion of the test
mining and pilot milling operations at SJG. The Company commenced
its testing activities in fall 2015 at the rate of approximately
100 tons per 24-hour operating day from the mine and approximately
the same output from the processing plant. Over the past five
years, the Company has gradually increased its output to
approximately 200 tons per 24-hour operating day from the mines and
processing plant. In 2021, the Company completed its phases of
expansion to reach the output of approximately 300 tons per 24-hour
operating day from the mine and the processing plant.
The Company funds its general and administrative expenses in the
US, from the Company’s operating subsidiaries, DynaMineras and
DynaOperaciones. These amounts are eliminated in consolidation. The
Company believes that cash on hand, and including cash flow
generated from its current operations, is adequate to fund its
ongoing general and administrative expenses through the subsequent
twelve months.
Capital Expenditures
The Company’s primary activities relate to the test mining and
pilot milling operations of the SJG property through its 100% owned
operating subsidiary, DynaMineras. DynaMineras is conducting
activities at SJG under the terms of the Exploitation Amendment
Agreement (the “EAA”, or “operating agreement”) with
DynaMéxico.
No Known Reserves
The SJG property is without known reserves. Under U.S. standards,
mineralization may not be classified as a “reserve” unless a
determination has been made that the mineralization could be
economically and legally produced or extracted at the time the
reserve determination is made.
Exploitation Amendment Agreement (“EAA”)
On May 15, 2013, DynaMineras entered into an Exploitation Amendment
Agreement (“EAA”) with DynaMéxico. The EAA grants to DynaMineras
the right to finance, explore, develop and exploit the SJG
Property, in exchange for: (A) Reimbursement of all costs
associated with financing, maintenance, exploration, development
and exploitation of the SJG Property, which costs are to be charged
and billed by DynaMineras to DynaMéxico; and, (B) After Item (A)
above, the receipt by DynaMineras of 75% of gross receipts received
by DynaMéxico from the sale of all minerals produced from SJG, to
the point that DynaMineras has received 200% of its advanced funds;
and, (C) after items (A) and (B) above; the receipt by DynaMineras
of 50% of all gross receipts received by DynaMéxico from the sale
of all minerals produced from SJG, and throughout the term of the
EAA; and, (D) in addition to Items (A), (B), and (C) above,
DynaMineras shall receive a 2.5% NSR (“Net Smelter Royalty”) on all
minerals sold from SJG over the term of the EAA. The total Advances
made by DynaMineras to DynaMéxico as of December 31, 2014 is
$4,025,000. The EAA is the third and latest Amendment to the
original Contract Mining Services and Mineral Production Agreement
(the “Operating Agreement”), which was previously entered into by
DynaMineras with DynaMéxico in April 2005, wherein DynaMineras was
named the Exclusive Operating Entity at SJG. The Operating
Agreement was previously amended in September 2006 (the “First
Amendment”) and amended again at July 15, 2011 (the “Second
Amendment”). The Term of the Second Amendment is 20 years, and the
EAA (Third Amendment) provides for the continuation of the 20 Year
Term from the date of the Second Amendment (July 15, 2011).
Exclusive Operating Entity at San Jose de
Gracía
Under agreement with DynaMéxico, Mineras de DynaResource S.A. de
C.V. (“DynaMineras”) has been named the exclusive operating entity
at the San Jose de Gracía Project. DynaResource owns 100% of
DynaMineras.
DynaMéxico General Powers of Attorney
The Chairman-CEO of DynaUSA also serves as the President of
DynaMéxico and as the President of DynaMineras. The President of
DynaMéxico holds broad powers of attorney granted by the
shareholders of DynaMéxico which gives the current President
significant and broad authority within DynaMéxico.
Note Receivable and Investments in Affiliate
DynaResource Nevada, Inc., a Nevada Corporation (“DynaNevada”),
with one operating subsidiary in México, DynaNevada de México, S.A.
de C.V. (“DynaNevada de México”) have common officers, directors
and shareholders. The total amount loaned by the Company to
DynaNevada at December 31, 2010 was $805,760. The terms of the Note
Receivable provided for a “Convertible Loan,” repayable at 5%
interest over a 3-year period, and convertible at the Company’s
option into Common Stock of DynaNevada at $0.25 / Share. On
December 31, 2010, the Company converted its receivable from
DynaNevada into 3,223,040 Shares of DynaNevada; and as a result,
the Company owns 19.92% of the outstanding shares of DynaNevada.
DynaNevada is therefore a related entity, and through its
subsidiary in México (DynaNevada de México), (“DynaNevada de
México”), has entered into an Option agreement with Grupo México
(“IMMSA”) in México, for the exploration and development of
approximately 3,000 hectares in the State of San Luis Potosi (“the
Santa Gertrudis Property”). The Company had a receivable from
DynaResource Nevada, Inc. of $70,294 and $71,465 at June 30, 2021
and December 31, 2020 respectively. The Company has an investment
balance in DynaResource Nevada, Inc. of $70,000 and $70,000 as of
June 30, 2021 and December 31, 2020, respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
Not applicable.
Item 4. Controls and
Procedures
Evaluation of Disclosure
Controls and Procedures
We carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2021.
This evaluation was accomplished under the supervision and with the
participation of our chief executive officer / principal executive
officer and our financial consultant who concluded that our
disclosure controls and procedures are not effective to ensure that
all material information required to be filed in the annual report
on Form 10-K has been made known to them. The evaluation did not
include a 404A assessment. For purposes of this section, the term
disclosure controls and procedures mean controls and other
procedures of an issuer that are designed to ensure that
information required to be disclosed by the issuer in the reports
that it files or submits under the Act (15 U.S.C. 78a et seg.) is
recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms. Disclosure,
controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be
disclosed in our reports filed under the Securities Exchange Act of
1934, as amended (the "Act") is accumulated and communicated to the
issuer's management, including its principal executive and
principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding
required disclosure.
Changes in Internal
Controls over Financial Reporting
The Company has not made any changes in its internal controls over
financial reporting that occurred during the period covered by this
report on Form 10-Q that have materially affected, or is reasonably
likely to materially affect, its internal control over financial
reporting.
PART II
ITEM 1 LEGAL
PROCEEDINGS
Arbitration filed by Goldgroup / DynaMéxico Complaint
against Goldgroup
On March 14, 2014, Goldgroup filed for arbitration in the United
States with the American Arbitration Association ("AAA"), citing
the Earn In Agreement dated September 1, 2006 as the basis for the
arbitration filing. The Company filed an answer on April 10, 2014,
disputing that any issues exist which provide for arbitration.
DynaResource de Mexico filed Civil Claims again Goldgroup
Mining Inc., and Goldgroup Resources Inc. requesting Damages of
$50M USD
On December 9, 2014, DynaMéxico filed an Ordinary commercial
lawsuit (Civil Claims) against Goldgroup Mining Inc., its parent
company Goldgroup Resources Inc., and the AAA, in the Thirty Sixth
Civil Court in the Federal District of México, under file 1120
number / 2014 ("the DynaMéxico Trial"). The DynaMéxico Trial sought
to terminate the U.S.-based arbitration proceedings, as DynaMéxico
believes there is no legal basis for arbitration, and to nullify
the arbitration proceedings since Goldgroup previously sought
recourse in Mexican courts. In the DynaMéxico Trial, DynaMéxico
also requests that substantial damages (in the amount of US $50
million) be awarded to DynaMéxico against Goldgroup for:
|
h)
|
Wrongfully using and disseminating
confidential information and data belonging to DynaMéxico;
|
|
I)
|
Asserting that Goldgroup owns any interest in
the San Jose de Gracía Project in northern Sinaloa, México, rather
than accurately disclosing that Goldgroup owns a common shares
equity interest (shareholder’s interest) in DynaMéxico;
|
|
j)
|
Improperly disclosing the percentage of
common shares equity interest (shareholder’s interest) owned by
Goldgroup in DynaMéxico;
|
|
k)
|
Improperly disclosing or implying that
Goldgroup is the operator of the San Jose de Gracía Project;
|
|
l)
|
Attempting to delay, stop, or otherwise
impair the financing of, and further development of, the SJG
Project;
|
|
m)
|
Making numerous threats against DynaMéxico
management and officers;
|
|
n)
|
Failing to properly disclose that broad
powers of attorney for acting on behalf of DynaMéxico are held by
an individual not affiliated with Goldgroup.
|
On October 5, 2015, the Thirty Sixth Civil Court of the Superior
Court of Justice of the Federal District of México (Tribunal
Superior de Justicia del Distrito Federal), file number 1120/2014
declared, among other resolutions, that:
|
a)
|
The AAA must “cease and desist” from the
arbitration proceeding;
|
|
b)
|
The AAA does not have jurisdiction to hear
any conflict and/or interpretation arising from the Earn In/Option
Agreement, dated September 1, 2006; and
|
|
c)
|
The AAA does not have jurisdiction to hear
disputes arising between shareholders of DynaMexico, which disputes
do not arise directly and immediately from the Earn In/Option
Agreement, dated September 1, 2006.
|
$48M Damages Awarded to DynaMéxico
Also on October 5, 2015, DynaMéxico was awarded in excess of US $48
million in damages from Goldgroup Resources, Inc. by virtue of a
Sentencia Definitiva (the “Definitive Sentence”) issued by the
Thirty Sixth Civil Court of the Superior Court of Justice of the
Federal District of México (Tribunal Superior de Justicia del
Distrito Federal), File number 1120/2014. The Definitive Sentence
included the considerations and resolutions by the Court, and
additional Resolutions were also ordered in favor of DynaMéxico
(together the damages award and the additional Resolutions are
referred to as, the “Oct. 5, 2015 Resolution”).
A concise translation to English of the Oct. 5, 2015 Resolution
(the resolution portion of the Definitive Sentence) is set forth
below:
FIRST:
|
The action and
litigation based on commercial law filed by DynaMéxico is valid and
enforceable, and where Goldgroup and the American Arbitration
Association were found to be in default, was proper.
|
SECOND:
|
Goldgroup is declared
in breach of its corporate duties, for failure to refrain from
claiming direct ownership of 50% of the San José de Gracía Mining
Project.
|
THIRD:
|
Goldgroup is condemned
and ordered to pay to DynaMéxico the amount of USD $20,000,000
(Twenty Million Dollars) in damages caused by Goldgroup to
DynaMéxico, deriving from its breach of obligations in refraining
from claiming direct ownership of 50% of the San Jose de Gracía
Mining Project; which amount should be paid within five days upon
execution of this order and resolution.
|
FOURTH:
|
Goldgroup is condemned
and ordered to pay to DynaMéxico the amount of USD $28,280,808.34
(Twenty Eight Million Two Hundred and Eighty Thousand Eight Hundred
and Eight and 34/100 Dollars), for breach of its corporate duty and
covenants with regards to the San Jose de Gracía mining project, as
a result of depriving profits from DynaMéxico which DynaMéxico
could have earned for the sale of gold produced and extracted
during the years 2013 and 2014; amounts that should be paid within
five days upon execution of this order and resolution.
|
FIFTH:
|
Goldgroup is condemned
and ordered to pay losses and damages to DynaMéxico, which
Goldgroup continues to cause, until full payment of the
above-mentioned amounts has been made, which damages, and losses
shall be calculated by an expert opinion in a corresponding legal
procedure related to this litigation.
|
SIXTH:
|
Pursuant to Article
1424 of the Commercial Code of México, the arbitration provision
established under clause 8.16 of the Earn In/Option Agreement,
dated as of September 1, 2006, is ineffective and impossible to
execute.
|
SEVENTH:
|
This court declares
that any controversy arising from the Ear In/Option Agreement must
be brought and resolved under Mexican Law and by competent Mexican
Courts with proper jurisdiction, in recognition of the waiver and
exclusion of the arbitration clause (contained in the Earn
In/Option Agreement) by both parties.
|
EIGHT:
|
This Court declares
that the American Arbitration Association must abstain from hearing
arbitration procedure number 50 501 T 00226 14, or any other
ongoing and/or future arbitration proceeding already filed or that
may be filed by the co-defendant Goldgroup against
DynaResource.
|
NINTH:
|
This Court declares
that the American Arbitration Association does not have
jurisdiction to hear any conflict and/or interpretation arising
from the Earn In/Option Agreement, dated September 1, 2006.
|
TENTH:
|
This Court declares
that the American Arbitration Association does not have
jurisdiction to hear disputes arising between shareholders of
DynaMéxico, which disputes do not arise directly and immediately
from the Earn In/Option Agreement, dated September 1, 2006.
|
ELEVENTH:
|
This Court declares
that the American Arbitration Association does not have
jurisdiction to hear any matters where Koy Wilber Diepholz, who is
the President of the Board of Directors of DynaMéxico and has been
personally sued in relation to the arbitration clause established
under clause 8.16 of the Earn In/Option Agreement, dated September
1, 2006, since he signed the mentioned instrument in representation
of the Company and not in his personal capacity.
|
TWELFTH:
|
The expenses and costs
associated with these proceedings are hereby waived.
|
THIRTEENTH:
|
LET IT SO BE PUBLISHED.
A Copy of this order and Sentence shall be found in the
corresponding records.
|
ORDERED, adjudged and decreed by the Thirty Sixth
Civil Judge of the Superior Court of the Federal District, Mr.
JULIO GABRIEL IGLESIAS GOMEZ.
The October 5, 2015 Resolution constitutes a public record which
may be viewed through the Courts in México City.
México City Court Approves Lien on Shares of DynaMéxico
owned by Minority Interest Holder
On October 5, 2016, the Thirty-Sixth Civil Court of the Superior
Court of Justice of the Federal District of México (Tribunal
Superior de Justicia del Distrito Federal) approved a Lien
(referred to by the court as an “Embargo”), in favor of DynaMéxico,
upon Stock Certificates in the name of Goldgroup Resources Inc.
(“Goldgroup”). The Stock Certificates subject to the Lien
(“Embargo”) constitute Shares of DynaMéxico (“the Goldgroup
DynaMéxico Shares”).
The Goldgroup DynaMéxico Shares were seized as a partial recovery
of assets by DynaMéxico after DynaMéxico was awarded more than $48M
USD (Forty-Eight Million Dollars) in damages against Goldgroup (the
“Damages against Goldgroup”) on October 05, 2015, as described in a
Sentencia Definitiva (the “Definitive Sentence”) issued by the same
court, the Thirty Sixth Civil Court of the Superior Court of
Justice of the Federal District of México, File number 1120/2014.
Excerpts from the Definitive Sentence appear below. In addition to
the Damages against Goldgroup, the Definitive Sentence also
included additional Resolutions ordered in favor of DynaMéxico (the
Damages against Goldgroup and the additional Resolutions are
together referred to as the “Oct. 5, 2015 Resolution”).
Denial of Amparo Appeal
On August 24, 2017 a Federal Amparo Judge (“Juzgado de Distrito”)
in the State of Vera Cruz, México, dismissed Goldgroup Resources
Inc’s Amparo Trial Challenge to the $48 M USD damages award
previously granted in favor of DynaMéxico. Pursuant to the
dismissal ruling, the $48M USD damages award, previously granted to
DynaMéxico by the Thirty-Sixth Civil Court of the Superior Court of
Justice of the Federal District of México on October 5, 2015, was
effectively confirmed.
México Circuit Court of Appeals – Notice of Intent for
Final Ruling in Favor of DynaResource de México
On May 27, 2019, The Eleventh Collegiate Court in Civil
Matters of the First Circuit (“México Circuit Court”, and the Court
of Final Appeal for Goldgroup Resources Inc.) issued a written
notice confirming it was ruling against the Amparo Appeal filed by
Goldgroup Resources Inc. and in Favor of DynaResource de México,
S.A. de C.V. In an effort to stay the issuance of the
Ruling by the México Circuit Court, Goldgroup Resources Inc. filed
a request to The Supreme Court of México to review the Amparo
Appeal decision.
Rejection of Goldgroup Resources Inc. request to the
Supreme Court of México
On July 3, 2019 an Official Ruling from The Supreme Court
of México was issued to Reject the Request of Goldgroup Resources
Inc. (the “México Supreme Court Rejection to Goldgroup”).
The Justices of the First Chamber of the Supreme Court of Justice
of México issued a Rejection Notice to Goldgroup Resources Inc.,
“due to the lack of legitimacy presented by Goldgroup”; and in
issuing the Rejection Notice to Goldgroup, the Supreme court
thereby reverted the Amparo Appeal back to the México Circuit Court
where the Official and Final Ruling from the México Circuit Court
is expected to be issued.
Final Legal Ruling in México (DynaMéxico Final Legal
Ruling)
On December 6, 2019 the 11th Federal Circuit Collegiate
Court in México issued its Final Ruling (“the DynaMéxico Final
Legal Ruling”).
The DynaMéxico Final Legal Ruling is Favorable to DynaMéxico, and
denies the Amparo challenge of Goldgroup Resources Inc., the
subsidiary of Goldgroup Mining Inc. (“GGA.TO”). The DynaMéxico
Final Legal Ruling constitutes the Final Appeal of Goldgroup
Resources Inc.; and is Not subject to further appeal or
protest.
The DynaMéxico Final Legal Ruling is the result and culmination of
7 years of legal action performed by DynaMéxico and is the Final
Ruling of the 11th Federal Circuit Collegiate Court.
With this DynaMéxico Final Legal Ruling issued, all matters before
the Court in México with respect to DynaMéxico and Goldgroup
Resources Inc. are fully resolved and are no longer subject to
appeal or reconsideration.
Legal Summary - Consequence of the México Final Legal
Ruling:
|
4.
|
The $48,280,808.34 USD damages award
(dated October 05, 2015) in favor of DynaMéxico and against
Goldgroup Resources Inc. is now Final. Goldgroup Resources’
challenge(s) to that award have been fully denied and the damages
award is Final.
|
|
|
|
|
5.
|
The Lien against the Shares of
DynaMéxico owned by Goldgroup Resources Inc. (established October
5, 2016, the “Lien against Goldgroup Shares”) is now fully
confirmed, Final, and enforceable.
|
|
|
|
|
6.
|
Ownership of the shares of DynaMéxico
currently held by Goldgroup Resources (currently representing 20%
of the outstanding shares of DynaMéxico) are subject to the Lien
against Goldgroup Shares.
|
DynaMéxico Recovery of 100% of Goldgroup
Shares
On February 20, 2020, a México City court issued
its Final Judgment, effectively foreclosing on all shares of
DynaMéxico formerly held by Goldgroup Resources Inc. and awarding
those shares to DynaMéxico (the “DynaMéxico Foreclosure
Judgment”).
The DynaMéxico Foreclosure Judgment awarded to DynaMéxico 100% of
the Shares of DynaMéxico previously owned by Goldgroup Resources
Inc. (a Subsidiary Company in México owned 100% by Goldgroup Mining
Inc., Vancouver, BC., “GGA.TO”). Prior to the DynaMéxico
Foreclosure Judgment, Goldgroup Resources Inc. owned shares of
DynaMéxico constituting 20% of the total outstanding shares of
DynaMéxico (the “Goldgroup Shares of DynaMéxico”). The Goldgroup
Shares of DynaMéxico were held under Lien by DynaMéxico since
October 2016. DynaUSA previously owned 80% of the outstanding
shares of DynaMéxico.
DynaUSA and DynaMéxico filed an Original Petition for
Recognition of the $48M USD Foreign Judgment in US. District Court,
134th Judicial District in Dallas County,
Texas
|
·
|
On December 5, 2020, DynaUSA and
DynaMéxico filed an Original Petition for Recognition of the $48M
USD Foreign Judgment in US. District Court in Dallas County
Texas. |
|
·
|
On February 4, 2021, DynaUSA and
DynaMéxico filed a First Amended Petition for Recognition of the
$48M USD Foreign Judgment in US. District Court, 134th
Judicial District, Dallas County, Texas. |
|
·
|
On May 12, 2021, The US District
Court for Dallas County issued a ruling stating the Court was not
obligated to recognize the $48M Judgment in the US.; but found the
$48M Judgment to be final, conclusive and enforceable under Mexican
Law. |
DynaUSA and DynaMéxico Appeal of the US. District Court
Ruling
On May 14, 2021, DynaUSA and DynaMéxico filed a Notice of Appeal of
the US District Court Ruling.
Arbitration Ruling
In direct contradiction to the October 5, 2015, Definitive Sentence
issued by court in México, on August 25, 2016, the American
Arbitration Association - International Centre for Dispute
Resolution, Denver office (the “AAA”) issued an Arbitration Ruling
(the “Arbitration Ruling”) in favor of Goldgroup Resources Inc.
against DynaMéxico and DynaResource, Inc. The Arbitration Ruling
was the result of a proceeding in which neither DynaMéxico nor
DynaResource participated, since the Definitive Sentence issued by
the court in México effectively prohibited their participation in
the Arbitration proceeding and should have prohibited Goldgroup
Resources Inc. participation.
The Arbitration Ruling provides the following: (i) the Earn
In/Option Agreement is still in force, and consequently Goldgroup
may appoint two directors to the DynaMéxico board, and may
participate in the appointment of a fifth director; (ii) the
DynaMéxico Management Committee is reinstated, and must approve all
budgets and expenditures; (iii) amounts expended by DynaMéxico that
were not approved by the Management Committee are subject to
repayment by DynaResource; (iv) the issuance of additional shares
by DynaMéxico (and consequent dilution of Goldgroup’s equity
interest) was in violation of the Earn In/Option Agreement; and (v)
DynaResource and DynaMéxico are responsible for Goldgroup’s costs
and professional fees associated with the Arbitration Ruling.
Unlike most arbitration proceedings in the U.S., the Arbitration
Ruling is not final. Since the Arbitration Ruling is subject to
international rules, the ruling may be vacated by U.S. courts, or
simply not recognized by U.S. courts, on several grounds.
Accordingly, both DynaMéxico and DynaResource have timely requested
relief from the United States Federal District Court in Colorado,
via the filing of a Petition for Nonrecognition of Foreign Arbitral
Award and/or Motion to Vacate Arbitration Award (the “Petition for
Nonrecognition”), and a supporting brief. The Petition for
Nonrecognition relies heavily upon the Mexican court’s Definitive
Sentence, key excerpts of which appear immediately below.
The Mexican court has already ruled that “any controversy arising
from the Earn In/Option Agreement must be brought and resolved
under Mexican Law and by competent Mexican Courts with proper
jurisdiction.” Consequently, the monetary awards against
DynaResource – which are based upon a finding that the Earn
In/Option Agreement is still in force – will not be enforceable if
the Mexican court rules that the Earn In/Option Agreement is
terminated. The Company believes that the potential for the
assessment of a material monetary judgment against DynaResource is
remote.
|
(a)
|
The Arbitration Ruling contains an
acknowledgement by the AAA that the AAA was named as a defendant in
the legal demand filed by DynaMéxico in the Thirty Sixth Civil
Court of the Superior Court of Justice of the Federal District of
México (the “DynaMéxico Legal Demand”). The Arbitration Ruling also
contains a statement that the AAA was not properly served notice of
the DynaMéxico Legal Demand;
|
|
(b)
|
DynaMéxico obeyed the October 5, 2015 Court
Order and did not attend the Arbitration hearing;
|
|
(c)
|
DynaMéxico will pursue all legal remedies in
order to obtain a full dismissal of the Arbitration Ruling;
|
|
(d)
|
The Arbitration Ruling contains an
acknowledgement by the AAA that the AAA was named as a defendant in
the legal demand filed by DynaMéxico in the Thirty Sixth Civil
Court of the Superior Court of Justice of the Federal District of
México (the “DynaMéxico Legal Demand”). The Arbitration Ruling also
contains a statement that the AAA was not properly served notice of
the DynaMéxico Legal Demand;
|
DynaUSA and DynaMéxico filed Motion to Vacate Arbitration
Ruling
On November 17, 2016, DynaUSA and DynaMéxico filed a Motion to
Vacate the Arbitration Ruling in United States District Court,
District of Colorado.
Recommendation to Vacate Arbitration Ruling issued by
United States Magistrate Judge
On February 13, 2018 a Recommendation to Vacate the Arbitration
Ruling was issued by a United States Magistrate Judge of the United
States District Court, District of Colorado.
Arbitration Award against DynaResource, Inc. and
DynaResource de México, S.A. de C.V.
On May 9, 2019, the United States District Court for the District
of Colorado confirmed the August 2016 Arbitration award against
DynaResource, Inc. and DynaResource de México, S.A. de C.V. The
district court’s decision overruled the recommendation previously
issued by the magistrate judge to sustain the DynaResource
entities’ motion to vacate the arbitration award. Each of
DynaResource, Inc. and DynaResource de México, S.A. de C.V. intends
to exercise all its rights, as appropriate, including an
appeal.
DynaResource Entities Filings in US
District Court in Response to Arbitration Ruling
|
|
|
|
|
·
|
DynaUSA and DynaMéxico
filed Motion to Alter Judgment |
|
|
|
|
|
On June 6, 2019, DynaUSA and
DynaMéxico file a Motion to Alter Judgment. |
|
|
|
|
·
|
DynaUSA and DynaMéxico
filed Motion for Stay of Judgment Pending Appeal and to Waive
Bond |
|
|
|
|
|
On June 7, 2019, DynaUSA and
DynaMéxico filed A Motion for Stay of Judgment Pending Appeal and
to Waive Bond. |
|
|
|
|
·
|
DynaUSA and DynaMéxico
filed Motion for Leave to Supplement the Record |
|
|
|
|
|
On July 13, 2019, DynaUSA and
DynaMéxico filed A Motion for Leave to Supplement the Record with
the following information: |
|
|
|
|
·
|
“Rejection
of Goldgroup Resources Inc. request to the Supreme Court of
México” |
|
|
|
|
|
On July 3, 2019, an Official Ruling
from The Supreme Court of México was issued to Reject the Request
of Goldgroup Resources Inc. (the “México Supreme Court Rejection to
Goldgroup”). The Justices of the First Chamber of the Supreme Court
of Justice of México issued a Rejection Notice to Goldgroup
Resources Inc., “due to the lack of legitimacy presented by
Goldgroup”; and in issuing the Rejection Notice to Goldgroup, the
Supreme court thereby reverted the Amparo Appeal back to the México
Circuit Court where the Official and Final Ruling from the México
Circuit Court is expected to be issued. |
|
|
|
|
·
|
DynaUSA and DynaMéxico
filed Reply in Support of Motion to Alter Judgment. |
|
|
|
|
|
On July 23, 2019, DynaUSA and
DynaMéxico filed a Reply in Support of Motion to Alter Judgment.
Goldgroup Resources was confirmed to be misleading the US District
Court with inaccurate reports of the ruling of the México Supreme
Court Rejection. |
|
|
|
|
·
|
Final Legal Ruling in
México (DynaMéxico Final México Legal Ruling) |
|
|
|
|
|
On December 6, 2019, the
11th Federal Circuit Collegiate Court in México issued
its Final Ruling (“the DynaMéxico Final México Legal Ruling”). |
|
|
The DynaMéxico Final México Legal Ruling is
Favorable to DynaMéxico, and denies the Amparo challenge of
Goldgroup Resources Inc., the subsidiary of Goldgroup Mining Inc.
(“GGA.TO”). The DynaMéxico Final México Legal Ruling constitutes
the Final Appeal of Goldgroup Resources Inc.; and is Not subject to
further appeal or protest.
|
|
|
|
|
|
|
The DynaMéxico Final Legal Ruling is the
result and culmination of 7 years of legal action performed by
DynaMéxico and is the Final Ruling of the 11th Federal
Circuit Collegiate Court. With this DynaMéxico Final Legal Ruling
issued, all matters before the Court in México with respect to
DynaMéxico and Goldgroup Resources Inc. in México are fully
resolved and are no longer subject to appeal or
reconsideration.
|
|
|
|
|
|
·
|
Legal Summary -
Consequence of the México Final Legal Ruling: |
|
|
|
|
|
|
o
|
The $48,280,808.34 USD
damages award (dated October 05, 2015) in favor of DynaMéxico and
against Goldgroup Resources Inc. is now Final. Goldgroup Resources’
challenge(s) to that award have been fully denied and the damages
award is Final. |
|
|
o
|
The Lien against the Shares
of DynaMéxico owned by Goldgroup Resources Inc. (established
October 5, 2016, the “Lien against Goldgroup Shares”) is now fully
confirmed, Final, and enforceable. |
ITEM 2. Unregistered Sales of Equity Securities
and Use of Proceeds
None.
ITEM 3. Default Upon Senior
Securities
None.
ITEM 4. Mine Safety
Disclosures
As the Company has no mines located in the United States or any of
its territories, the disclosure required by this Item is not
applicable.
ITEM 5. Other Information
None.
ITEM 6. Exhibits
Exhibit Number;
Name of Exhibit
SIGNATURES
In accordance with 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.
DynaResource, Inc.
|
|
|
|
|
By: |
/s/ K.W. (“K.D.”)
Diepholz |
|
|
K.W. (“KD”) Diepholz, Chairman / CEO
|
|
|
|
|
Date: August 11, 2021 |
|
Dynaresource (QB) (USOTC:DYNR)
Historical Stock Chart
From Apr 2022 to May 2022
Dynaresource (QB) (USOTC:DYNR)
Historical Stock Chart
From May 2021 to May 2022