UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K



[ X ] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended: December 31, 2018



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 registrant 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)



Registrant’s telephone number,
including area code: (972) 868-9066



Securities registered pursuant to Section 12(b) of the Act:



None



Securities registered pursuant to Section 12(g) of the Act:



Common Stock; $0.01 Par Value

(Title of Class)



Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.



Yes [ ] No [X]



Indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or Section 15(d) of the Act.



Yes [ ] No [X]



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 preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days:



Yes [X] No [ ]



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (p. 232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).



Yes [X] No [ ]





1









Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (p. 229.405 of this chapter) is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]



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



|Large accelerated filer | ☐                                               | Accelerated filer         | ☐
|----------------------- | ----------------------------------------------- | ------------------------- | -
|Non-accelerated filer   | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☒
|                        |                                                 | Emerging growth company   | ☐



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 [X]



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



Yes [ ] No [X]



The aggregate market value of the voting and
non-voting common equity, par value $0.01 per share, held by non-affiliates computed by reference to the price at which the common
equity was last sold, as of the last business day of the registrant’s most recently completed fiscal year end, December 31,
2018, was $14,751,511 based on the closing price of $1.20 per share as reported on the OTCQB.  For purposes of this computation,
all officers, directors, subsidiaries, and 10% beneficial owners of the registrant are deemed to be affiliates.  Such determination
should not be deemed an admission that such officers, directors or 10% beneficial owners are, in fact, affiliates of the registrant.



There were 17,722,825 shares outstanding of
each of the registrant’s classes of common stock (only 1 class) as of the latest practicable date (March 31, 2019).



DOCUMENTS INCORPORATED BY REFERENCE



Listed below are documents incorporated herein by reference.



None.





2









TABLE OF CONTENTS



|PART I       
|-------------
|             
|ITEM 1.      
|ITEM 1A.     
|ITEM 1B.     
|ITEM 2.      
|ITEM 3.      
|ITEM 4.      
|             
|             
|             
|ITEM 5.      
|ITEM 6.      
|ITEM 7.      
|ITEM 7A.     
|ITEM 8.      
|ITEM 9.      
|ITEM 9.      
|ITEM 9B.     
|PART III     
|             
|ITEM 10.     
|ITEM 11.     
|ITEM 12.     
|ITEM 13.     
|ITEM 14.     
|             
|PART IV      
|             
|             
|ITEM 15.     
|ITEM 16.     
|             
|EXHIBIT INDEX
|             
|Exhibit 31.1 
|Exhibit 31.2 
|Exhibit 32.1 









3









FORWARD-LOOKING STATEMENTS



This annual report on Form 10-K 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 headings “Risk Factors” and “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 NI 43-101 Technical Report and 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 have
not “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 DynaResource de Mexico SA de CV, under
the NI 43-101 Mineral Resource Estimate filed by the Company on SEDAR, are not disclosed in this Form 10-K. SEDAR is Canada’s
System for Electronic Document Analysis and Retrieval, the mandatory document
filing and retrieval system for Canadian public companies. 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.









4













PART I



|ITEM 1. | BUSINESS
|------- | --------



History and Organization



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 a lien on 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 Gracia 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 Gracia Project, under contract with DynaMéxico. DynaMineras currently conducts
test mining and pilot milling operations, and other exploration activities in México.



In 2000, the Company formed DynaMéxico
for the purpose of acquiring and holding mineral properties and mining concessions in México. DynaMéxico owns a portfolio
of mining concessions which comprise the San José de Gracia Project (“SJG”). The mining concessions which comprise
the SJG District cover 69,121 hectares (170,802 acres) on the west side of the Sierra Madre mountain range. At the incorporation
of DynaMéxico, 100 shares of Fixed Capital Series “A” shares were issued, with DynaUSA receiving 99 shares and
its CEO receiving 1 share.



In 2005, the Company formed DynaMineras. DynaMineras
entered into an operating agreement with DynaMéxico on April 15, 2005. Because of that agreement and subsequent amendments
to that agreement, DynaMineras is the exclusive operating entity for the SJG Project.



Also in 2005, the Company formed another wholly
owned subsidiary, DynaResource Operaciones, S.A. de C.V. (“DynaOperaciones”). DynaOperaciones entered into a personnel
management agreement with DynaMineras and, because of that agreement, is the exclusive management company for personnel and consultants
involved at the SJG Project.



From January 2008 through March 2011, DynaMéxico
issued 100 Variable Capital Series “B” Shares to Goldgroup Resources Inc., a wholly owned subsidiary of Goldgroup Mining
Inc., in Vancouver, BC. (“Goldgroup”), in exchange for Goldgroup’s total capital contributions of $18,000,000
to DynaMéxico. At the time of the issuance of the 100 Series B Shares to Goldgroup, Goldgroup owned 50% of the outstanding
capital shares of DynaMéxico.



On May 17, 2013, DynaUSA agreed to acquire
a stock certificate for 300 Series “B” Variable Capital Shares of DynaMéxico, in exchange for the settlement
of accounts receivable from DynaMéxico in the amount of $31,090,710 Mexican Pesos (approximately $2.4 million USD). After
giving effect to the issuance of the 300 Series B Shares on June 21, 2013, DynaUSA owns 80% of the total outstanding Capital of
DynaMéxico. (See table representation of the outstanding Capital of DynaMéxico below). The exchange of shares by
DynaMéxico for amounts payable to DynaUSA was unanimously approved by shareholders at a meeting of the shareholders of DynaMéxico,
held on the second call for shareholder's meeting on May 17, 2013 in Mazatlán, Sinaloa, México. The date of issuance
of the 300 Series B Share Certificate was June 21, 2013. As a result of the issuance to DynaUSA of the 300 Variable Capital shares
for amounts owed to DynaUSA, the accounts payable amount owed by DynaMéxico to DynaUSA was retired in full.



After giving effect to the issuance to DynaUSA
of the 300 Series B Variable Capital shares of DynaMéxico as described above, the current outstanding Capital of DynaMéxico
is set forth in the table below:



|DynaMéxico
        Shareholder |  | Fixed Capital Series "A" Shares |     |  | Variable Capital Series "B" Shares |  |     | Total Capital Shares(Series A and B) | 
|------------------------------ |  | ------------------------------- | --- |  | ---------------------------------- |  | --- | ------------------------------------ | 
|DynaResource, Inc.             |  |                                 | 099 |  |                                    |  | 300 |                                      | 
|Koy W. (“K.D.”) Diepholz       |  |                                 | 001 |  |                                    |  | -   |                                      | 
|Goldgroup Resources Inc.       |  |                                 | -   |  |                                    |  | 100 |                                      | 
|                               |  |                                 |     |  |                                    |  |     |                                      | 
|Total Capital Issued           |  |                                 | 100 |  |                                    |  | 400 |                                      | 









DynaUSA currently owns 80% of the outstanding
capital shares of DynaMéxico.





5









Company Ownership and Description of Subsidiaries



A description of the subsidiaries owned by
the Company and its ownership in each is summarized below:



DynaResource de México, S.A. de C.V.:

80% Owned by DynaResource, Inc.



|● | 100% owner of the San Jose de Gracia Property;
|- | ----------------------------------------------



Mineras de DynaResource, S.A. de C.V.:

100% Owned by DynaResource, Inc.



|● | Exclusive Operator of the San Jose de Gracia Project;
|- | -----------------------------------------------------



|● | Entered into Exploitation Agreement (“EAA”) with DynaMéxico (See below);
|- | ------------------------------------------------------------------------



|● | Entered into 20-year surface Rights agreement with the Santa Maria Ejido;
|- | -------------------------------------------------------------------------



DynaResource Operaciones de San Jose de Gracia,
S.A. de C.V.:

100% Owned by DynaResource, Inc.



|● | Personnel Management Company at San Jose de Gracia;
|- | ---------------------------------------------------



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 the following:



(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, 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; a 2.5% 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, 2017 are $6,125,000.



(C) After items (A) and (B) above,
50% of all gross receipts received by DynaMéxico from the sale of all minerals produced from SJG, and throughout the term
of the EAA.



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 and DynaMéxico in April 2005, and in which DynaMineras was named the Exclusive Operating Entity
at SJG. The Operating Agreement was first 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).



Our objective is to increase the value of our
shares through the exploration, development and extraction of gold, silver and other valuable minerals. We generally conduct our
exploration activities as sole operator and our current flagship property is San Jose de Gracia.



Our principal executive office is located at
222 W. Las Colinas Blvd., Suite 1910 North Tower, Irving, Texas 75039. We can be reached by phone at (972) 868-9066 and by fax
at (972) 868-9067. The Company’s website is www.dynaresource.com.



In this report, “DynaResource, Inc.”,
the “Company”, “DynaUSA”, “our” and “we” refer to DynaResource, Inc. DynaResource
de México SA de CV, the 100% owner of the mining concessions, camp, equipment, and related interests to San Jose de Gracia
Property, is referred to a “DynaMéxico”. DynaUSA owns 80% of DynaMéxico. Mineras de DynaResource SA de
CV, the named exclusive operator at San Jose de Gracia Property under agreement with DynaMéxico, is referred to as “DynaMineras”.
DynaUSA owns 100% of DynaMineras. DynaResource Operaciones de San Jose de Gracia SA de CV, and the named manager of personnel and
consultants who are actively involved at San Jose de Gracia under agreement with DynaMineras and DynaMéxico, is referred
to as “DynaOperaciones”. DynaUSA owns 100% of DynaOperaciones. The San Jose de Gracia Property is referred to as “SJG”,
or the “SJG Property”, or the “SJG Project”, or the “SJG District”. DynaMéxico owns
100% of the SJG District. Further in this report, “Au” represents gold; “Ag” represents silver; “oz.”
represents ounces; “gpt” represents grams per metric tonne; “ft” represents feet; “m” represents
meter, “km” represents kilometer; and “sq” represents square.





6









Segment Information



Our only current operating segment is México.



Products



The end use product produced at our test mining
and pilot milling operations at SJG is either in the form of primarily gold-silver Dore, or primarily gold-silver concentrates.
The end use product from current activities generally consists of approximately 100% concentrate and 0% Dore. Dore is an alloy
consisting primarily of gold and silver but also containing other metals. Dore is sent to refiners to produce bullion that meets
the required market standard of 99.95% gold and 99.9% silver. 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 Gracia
are shipped to third-party smelters, refineries or third parties for further processing or re-sale.



During 2018,
we reported the delivery and sale of 13,418 net Oz gold contained in concentrates. All gold-silver concentrate originated from
the San Jose de Gracia Property in México.



Gold-silver concentrates are sold at a small
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 Gracia mine is composed of conventional crushing
and grinding circuits, and with gravity and flotation recovery methods. The gravity and flotation concentrates are dewatered or
dried, and shipped to purchasers in semi-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.





7









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 2016.



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").



The primary laws
and regulations used by the State of Sinaloa, where our San Jose de Gracia property is located, in order to govern environmental
protection for mining and exploration are: The General Law, 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 year ended
December 31, 2018, the Company sold gold-silver concentrates to the following purchasers:



|Dore:                     | None.                                    
|------------------------- | -----------------------------------------
|Gold-Silver Concentrates: | Mercuria Commodities Trading S.A. de C.V.



Employees



As of December 31, 2018, we had 210 employees,
including 205 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.



|ITEM 1A. | RISK FACTORS
|-------- | ------------



This report, including Management’s Discussion and Analysis
of Financial Condition and Results of Operations, contains forward-looking statements that may be affected by several risk factors.
The following information summarizes all material risks known to us at the date of filing this report.



Risks Relating to Our Company



Nature of Mineral Exploration and Mining



The Company is involved in the business of
exploration and development of resource properties, which carries the inherent risk of failure.





8









The exploration and development of mineral
deposits involve significant risks which a combination of careful evaluation, experience and knowledge may not eliminate. There
is no assurance that the Company’s exploration programs will result in discoveries of commercial mineralized bodies.



The Company’s future is dependent upon
the success of its exploration programs, and the success of its test mining and pilot milling programs. The exploration and development
of mineral deposits involve significant risks over significant periods of time. It is impossible to ensure that the current or
proposed exploration programs on the Company’s property will result in a profitable mining operation.



Whether a mineralized deposit will be commercially
viable depends on many factors, such as size and grade of the deposit, proximity to infrastructure, financing costs, regulations,
environmental protection, commodities prices, taxes, and political risks. The impact of these factors cannot be accurately predicted,
but the combination of factors may result in the Company’s failure to provide a return on investment.



Competitive Business Conditions



The Company competes with many larger, well
capitalized companies, which places the Company at a competitive disadvantage.





The Company competes with many companies in
the mining business, including large, established mining companies with substantial capabilities, personnel, and financial resources.
There is a limited supply of desirable mineral lands available for claim-staking, lease, or acquisition in México, where
the Company’s activities are focused. The Company may be at a competitive disadvantage in acquiring mineral properties, since
it competes with companies which have greater financial resources and larger technical staffs. From time to time, specific properties
or areas which would otherwise be attractive for acquisition or exploration are unavailable due to their previous acquisition by
competitors or due to the Company’s lack of financial resources.



Competition in the industry extends to the
technical expertise to find, advance, and operate mineral properties; the labor to operate the properties; and the capital for
the purpose of funding exploration and development activities on such properties. Many competitors explore for and mine precious
metals and conduct refining and marketing operations on a world-wide basis. Such competition may make it more difficult for the
Company to recruit or retain qualified employees, to obtain equipment and personnel to assist in its exploration and production
activities, or to acquire the capital necessary to fund operations.



Government Regulations



The Company conducts its resource exploration
and development activities in México, subject to rules and regulations for owning and maintaining mining concessions and
surface rights, environmental protection, water rights, hazardous wastes, explosives, reclamation, and others. There can be no
certainty that the Company maintains full compliance with all government regulations.



México. Exploration and development
of minerals in México may be carried out through Mexican companies incorporated under Mexican law by means of obtaining
exploration and development (exploitation) concessions. The Company’s concessions are granted by the Mexican government,
or acquired from previous owners, are filed in the Public Registry of Mining, and are scheduled to expire from 2028 through 2058.
Holders of exploration concessions may, prior to the expiration of such concessions, apply for one or more development concessions
covering all or part of the area covered by an exploration concession.



Environmental law in México provides
for general environmental policies, with specific requirements set forth under regulations of the Ministry of Environment, Natural
Resources and Fishing, which regulate all environmental matters with the assistance of the National Institute of Ecology and the
Procuraduria Federal de Proteccion al Ambiente.



The primary laws and regulations governing
environmental protection for mining in México are found in the General Law, the Ecological Technical Standards, and also
in the air, water and hazardous waste regulations, among others. In order to comply with the environmental regulations, a concessionaire
must obtain a series of permits during the exploration stage. Generally, these permits are issued on a timely basis after the completion
of an application by a concession holder. The Company believes it is currently in full compliance with the General Law and its
regulations in relation to its mineral property interests in México.



Commodities Prices



Any potential economic success of the Company’s
properties will depend to a large extent to the market price of commodities, the future price of which is impossible to predict.



The current value and potential value for properties
obtained by the Company is directly related to the market price for gold. The market price of gold may also have a significant
influence on the market price of the Company’s common stock. If the Company obtains positive drill results and a property
progresses to a point where a commercial production decision can be made, the decision to put a mine in production and to commit
funds necessary for that purpose would be made long before any revenue from production would be received. A decrease in the market
price of gold at any time during future exploration or development may prevent a property from being economically mined or result
in the write-off of assets whose value is impaired as a result of lower gold prices.



9









The price of gold is affected by numerous factors
beyond the Company’s control, including inflation, fluctuation of the United States dollar and foreign currencies, global
and regional demand, the purchase or sale of gold by central banks, and the political and economic conditions of major gold producing
countries throughout the world. During the last five years, the market price of gold has fluctuated between approximately $1,057
and $1,895 per ounce. The volatility of gold prices represents a substantial risk which is impossible to fully eliminate. In the
event gold prices decline and remain low for prolonged periods of time, the Company might be unable to explore, develop, or produce
revenue from its properties.



The volatility of mineral prices represents
a substantial risk which no amount of planning or technical expertise can fully eliminate. In the event mineral prices decline
and remain low for prolonged periods of time, we might be unable to develop our properties, which may adversely affect our results
of operations, financial performance and cash flows. Our results of operations have been and could continue to be materially and
adversely affected by the impairment of assets. An asset impairment charge may result from the occurrence of unexpected adverse
events that impact our estimates of expected cash flows generated from our producing properties or the market value of our non-producing
properties.



The volatility in gold, silver and copper prices
is illustrated by the following table, which sets forth, for the periods indicated, the average market prices in U.S. dollars per
ounce of gold and silver, based on the average daily London P.M. fix, and per pound of copper based on the London Metal Exchange
Grade A copper settlement price.



|Metal  |  | 2012 |          |  | 2013 |   |          | 2014 |  |   | 2015     |  |  | 2016 |          |  | 2017 |   |          | 2018 | 
|------ |  | ---- | -------- |  | ---- | - | -------- | ---- |  | - | -------- |  |  | ---- | -------- |  | ---- | - | -------- | ---- | 
|Gold   |  | $    | 1,669.00 |  |      | $ | 1,411.00 |      |  | $ | 1,266.00 |  |  | $    | 1,175.00 |  |      | $ | 1,236.00 |      | 
|Silver |  |      | 31.15    |  |      |   | 23.79    |      |  |   | 19.08    |  |  |      | 13.90    |  |      |   | 17.14    |      | 
|Copper |  |      | 3.61     |  |      |   | 3.32     |      |  |   | 3.11     |  |  |      | 2.09     |  |      |   | 2.54     |      | 



As of March 31, 2019, the price of gold was
$1,295 per ounce. Should a downward trend in prices occur, there is a possibility that we may record impairment charges in 2018,
or in future years.



Revenue



The Company suspended its test pilot production
activity in June 2006 in order to focus on exploration activities. The Company re-commenced test mining and pilot production work
in 2014. There is a risk that the Company would expend available cash and funding in test mining and milling activities, and administration
costs, and would not be able to obtain further funding to continue its work.



In 2007, the Company focused on the exploration
of the vast SJG district. Funds received by DynaMéxico pursuant to the Earn In/Option Agreement (See Earn In / Option Agreement
– Financing of Drilling – Exploration Programs (2006 – 2011), were utilized for exploration and related activities.



In 2015, the Company commenced test mining
and pilot milling operations. And during 2018, the Company improved and expanded its operations in order to increase outputs from
the test mining and pilot milling activities.



The Company and its subsidiaries have $2,685,576
cash on hand at December 31, 2018. The Company could incur test pilot production expenses and corporate expenses greater than the
amount of available cash on hand. The Company may need to raise additional funds in order to support its activities. If the Company
needs to raise additional capital, its common stock could be diluted. Further, if the Company is unable to raise funds to meet
its obligations, the value of its common stock may decline.



Substantial Control of Chairman / Preferred
Shares



The Company’s Chairman / CEO owns 100%
of the outstanding shares of Series A preferred stock. The Series A preferred shares retain the right to elect a majority of the
members of the Company’s Board of Directors. Such ownership and concentration of control may have the effect of delaying,
deferring or preventing a change in control of the Company, even if the transaction could be determined to be beneficial to Company’s
stockholders.



Capital Needs



The Company may need to raise additional capital,
which may not be available or may be too costly, and which, if not obtained, could cause the Company to cease operations.



The Company’s capital requirements could
be greater than its operating income. The Company believes it has adequate cash on hand for the foreseeable future, but it does
not have sufficient cash to indefinitely sustain operating losses. The Company’s liquidity depends on its ability to raise
capital through the sale of common stock or through debt or equity offerings. Additional financing may not be available, or, if
available, may be on terms unacceptable or unfavorable. If additional capital is required and not obtained, or if the Company is
not able to produce sufficient revenue from operations, or otherwise operate at a profit, the value of investment in the Company
could decline or be lost entirely.





10









Illiquid Market



The Company has a limited public market trading
on the Over the Counter Market (“OTC”), and an active trading market may never materialize, and an investor
may not be able to sell stock.



There is currently only a limited public market
for the Company’s Common Stock and there can be no assurance that a more robust trading market will develop further or be
maintained in the future. An active trading market may not develop and if not, the market value could decline to a value below
the amount investors paid for stock. Additionally, if the market is not active or illiquid, investors may not be able to sell the
securities of the Company.



Penny Stock Classification



If a public trading market for the Company’s
common stock materializes, it may be classified as a ‘penny stock’ which would result in additional requirements for
trading the stock. These additional requirements could affect the liquidity of the stock.





The SEC has adopted regulations which generally
define a “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific
exemptions. The market price of the Company’s Common Stock may trade at less than $5.00 per share and accordingly may be
a “penny stock.” Brokers and dealers effecting transactions in “penny stock” must disclose certain information
concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable
to purchase the securities. These rules may restrict the ability of brokers or dealers to sell the Common Stock and may affect
an investor’s ability to sell such shares.



Title Matters



No Guarantee of Title



The Company has investigated title to all mineral
claims and properties, and, to the best of its knowledge, title to all mineral claims and properties comprising the SJG District
is in good standing. However, there can be no assurance of complete title, nor guarantee of title.  The mineral claims and
properties may be affected by undetected defects in title, such as the reduction in size of the mineral claims and other third-party
claims affecting the Company's rights.



Our business requires substantial capital
investment and we may be unable to raise additional funding on favorable terms to develop additional mining operations.



We will need to obtain additional financing,
either in the form of debt or equity financing, to fund development of additional mining operations at the San Jose de Gracia project
and to continue our administrative activities. Our ability to obtain necessary funding, in turn, depends upon a few factors, including
the state of the economy and applicable commodity prices. We may not be successful in obtaining the required financing for San
Jose de Gracia or other purposes, on terms that are favorable to us or at all, in which case, our ability to continue operating
would be adversely affected. Failure to obtain such additional financing could result in delay or indefinite postponement of further
exploration or potential development and the possible partial or total loss of our interest in certain properties.



The feasibility of mining at our San
Jose de Gracia property has not been established in accordance with SEC Industry Guide 7, and any funds spent on exploration and
development could be lost.



A "reserve," as defined by Industry
Guide 7 of the SEC, is that part of a mineral deposit which could be economically and legally extracted or produced at the time
of the reserve determination. A reserve requires a SEC-compliant feasibility study or other report demonstrating with reasonable
certainty that the deposit can be economically extracted and produced. Since we have not received a SEC-compliant report on any
of our properties, we currently have no reserves as defined by SEC Industry Guide 7, and there are no assurances that we will be
able to prove that there are reserves on our properties.



The mineralized material identified on our
properties, including the San Pablo mine where we are currently conducting test mining activities does not and may never demonstrate
economic viability. Substantial expenditures are required to establish reserves through drilling and additional study and there
is no assurance that reserves will be established. The feasibility of mining at San Jose de Gracia, or any other property has not
been, and may never be, established. Whether a mineral deposit can be commercially viable depends upon a few factors, including
the particular attributes of the deposit, including size, grade, metallurgical recoveries and proximity to infrastructure; metal
prices, which can be highly variable; and government regulations, including environmental and reclamation obligations. If we are
unable to establish some or all of our mineralized material as proven or probable reserves in sufficient quantities to justify
commercial operations, our investment in that property may be lost, and the market value of our securities may suffer.





11









There are significant risks and uncertainty
associated with construction, commencing or expanding test mining and pilot production activities or changing operational plans
without a current feasibility, pre-feasibility or scoping study. As such, the San Jose de Gracia property may ultimately be determined
to lack one or more geological, engineering, legal, operating, economic, social, environmental, and other relevant factors reasonably
required to serve as the basis for a final decision to successfully complete all or part of these projects.



The figures for our estimated mineralized
material are based on interpretation and assumptions and may yield less mineral production under actual conditions than is currently
estimated.



Unless otherwise indicated, mineralization
figures presented in our filings with Canadian securities regulatory authorities (on SEDAR), news releases and other public statements
that may be made from time to time are based upon estimates made by independent geologists and our internal geologists. When making
determinations about whether to advance any of our projects to development, we must rely upon such estimated calculations as to
the mineralized material and grades of mineralization on our properties. Until mineralized material is actually mined and processed,
mineralized material and grades of mineralization must be considered as estimates only.



These estimates are imprecise and depend upon
geological interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable.
We cannot ensure that:



these estimates will be accurate;



mineralization estimates will be
accurate; or



this mineralization can be mined
or processed profitably.







Any material changes in mineral estimates and
grades of mineralization may affect the economic viability of placing a property into production and such property's return on
capital. There can be no assurance that minerals recovered in small scale tests will be recovered in large-scale tests under on-site
conditions or in production scale. The estimates contained in our public filings in Canada (on SEDAR) have been determined and
valued based on assumed future prices, cut-off grades and operating costs that may prove to be inaccurate. Extended declines in
market prices for gold and/or silver may render portions of our mineralization estimates uneconomic and result in reduced reported
mineralization or adversely affect the commercial viability of one or more of our properties. Any material reductions in estimates
of mineralization, or of our ability to extract this mineralization, could have a material adverse effect on our results of operations
or financial condition.



Legislation has been enacted that affects
the mining industry



In México, in October 2013, the Mexican
lower house passed a bill proposing 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% on precious metals revenue for precious metals mining companies. In
addition, the long-term corporate tax rate is expected to remain at 30% rather than being reduced to 28% as originally planned.
The Mexican Senate approved the provisions of the Tax Reform on October 31, 2013. The effective date of the law was January 1,
2014.



Dependence upon Key Personnel



The Company is dependent upon the efforts and
abilities of its management team.



The loss of any member of the management team
could have a material adverse effect upon the business and prospects of the Company. In the event of such loss, the Company will
seek suitable competent replacements, but there is no assurance that the Company will be able to retain such replacements. The
Company has obtained a Key Man Life Insurance program for its Chairman and CEO, which would pay the proceeds of such policy to
the Company in the event of his death.



Uncertainty of Resource Estimate



There can be no certainty that any resource
estimate by the Company’s consultants would ever be realized in production.



The current formal resource estimate in respect
of the SJG Property (the “NI 43-101 Mineral Resource Estimate") is based on limited information, such as historical
data, drilling programs, the production activity conducted by the Company in 2003–2006, and various reports, manual calculations
and opinions. No assurance can be given that the anticipated tonnages and grades will be achieved or that the estimated or indicated
level of recovery will be achieved. The grade of mineralization actually recovered or produced could differ significantly from
the resource estimates. In addition, 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 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 the NI 43-101 Mineral Resource Estimate filed
by the Company on SEDAR, are not disclosed in this Form 10-K. 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 definition of mineral reserves.





12









No Known Reserves



Historical Production of Gold at the
San Jose de Gracia Property May Not Be Indicative of Future Production or Revenue



The SJG Property is a high-grade mineralized
system with reported historical production of over 1,000,000 Oz. Gold. The production occurred in the early 1900’s, prior
to the Mexican Revolution. Since that time, the property has seen small scale mining operations, from small scale local owners,
to the Company’s pilot production activities in 2003–2006 and 2014 to present. Due to the uncertainties associated
with exploration, including variations in geology and structure, there is no assurance that the Company’s efforts will be
successful in identifying mineralization in sufficient quantities to define proven or probable reserves, and further there is no
assurance that any such reserves could be developed into a commercial operation. Investors in the Company’s securities should
not rely on historical operations as an indication that the SJG property will be developed into a commercial production in the
future. The Company expects to incur losses unless and until such time as one or more of its properties enters into commercial
production and generates sufficient revenue to fund continuing operations.



Environmental and Regulatory Concerns



The Company operates in an industry where there
are significant environmental and regulatory requirements. The inability of the Company to satisfy these requirements could cause
the value of its common stock to decline.





The current or future operations of the Company,
including acquisition, leasing, and sales activities, involve mineral properties which require permits from various federal, state
and local governmental authorities. Such future operations are and will be governed by laws and regulations governing prospecting,
development, mining, production, exports, taxes, labor standards, occupational health, waste disposal, toxic substances, land use,
environmental protection, mine safety and other matters.  Companies engaged in the development and operation of mines and
related facilities generally experience increased costs, and delays in production and other schedules as a result of the need to
comply with applicable laws, regulations and permits. Additional permits and studies, which may include environmental impact studies
conducted before permits can be obtained, are necessary prior to operation of properties in which the Company has interests.  Required
permits could adversely affect the Company's ability to negotiate agreeable acquisition, lease, or sales terms and therefore adversely
affect the price of the Company’s common stock.



Our business is subject to U.S. Foreign
Corrupt Practices Act and similar worldwide anti-bribery laws, a breach or violation of which could lead to civil and criminal
fines and penalties, loss of licenses or permits and reputational harm.



We operate in certain jurisdictions that have
experienced governmental and private sector corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery
laws may conflict with certain local customs and practices. For example, the U.S. Foreign Corrupt Practices Act and anti-bribery
laws in other jurisdictions, generally prohibit companies and their intermediaries from making improper payments for the purpose
of obtaining or retaining business or other commercial advantage, and often carry substantial penalties. There can be no assurance
that our internal control policies and procedures always will protect it from recklessness, fraudulent behavior, dishonesty or
other inappropriate acts committed by the Company's affiliates, employees or agents. As such, our corporate policies and processes
may not prevent all potential breaches of law or other governance practices. Violations of these laws, or allegations of such violations,
could lead to civil and criminal fines and penalties, litigation, and loss of operating licenses or permits, and may damage the
Company's reputation, which could have a material adverse effect on our business, financial position and results of operations
or cause the market value of our common shares to decline.



We are subject to foreign currency risk.



While we transact most of our business in U.S.
dollars, expenses, such as labor, operating supplies, and property and equipment, are denominated in Mexican pesos. As a result,
currency exchange fluctuations may impact our operating costs. The appreciation of non-U.S. dollar currencies against the U.S.
dollar increases costs and the cost of purchasing property and equipment in U.S. dollar terms in México, which can adversely
impact our operating results and cash flows. Conversely, a depreciation of non-U.S. dollar currencies usually decreases operating
costs and property and equipment purchases in U.S. dollar terms in foreign countries.



The value of cash and cash equivalents denominated
in foreign currencies also fluctuates with changes in currency exchange rates. Appreciation of non-U.S. dollar currencies results
in a foreign currency gain on such investments and a depreciation in non-U.S. dollar currencies results in a loss. We have not
utilized market risk sensitive instruments to manage our exposure to foreign currency exchange rates but may in the future actively
manage our exposure to foreign currency exchange rate risk. We also hold portions of our cash reserves in Mexican currency.





13









Increased operating and capital costs
could affect our profitability.



Costs at any particular mining location are
subject to variation due to a few factors, such as variable ore grade, changing metallurgy and revisions to mine plans in response
to the physical shape and location of the mineralized bodies, as well as the age and utilization rates for the mining and processing-related
facilities and equipment. In addition, costs are affected by the price and availability of input commodities, such as fuel, electricity,
labor, chemical reagents, explosives, steel and concrete and mining and processing-related equipment and facilities. Reported costs
may also be affected by changes in accounting standards. A material increase in costs at any significant location could have a
significant effect on our profitability and operating cash flow.



We could have significant increases in capital
and operating costs over the next several years in connection with the development of new projects and in the sustaining and/or
expansion of test mining and pilot processing operations. Costs associated with capital expenditures have escalated on an industry-wide
basis over the last several years, as a result of factors beyond our control, including the prices of oil, steel and other commodities
and labor, as well as the demand for certain mining and processing equipment. Increased capital expenditures may have an adverse
effect on the profitability of and cash flow generated from existing operations, as well as the economic returns anticipated from
new projects.



Majority Ownership of DynaMéxico



DynaUSA owns 80% of the outstanding share capital
of DynaMéxico – the 100% owner of the SJG Project. Because of this shared ownership (80%/20%), any current benefits
to be derived from the ownership of DynaMéxico could be distributed on an 80%/20% basis.



A wholly owned subsidiary of DynaResource,
Inc. -- Mineras de DynaResource S.A. de C.V. (“DynaMineras”) -- maintains an exclusive operating agreement with DynaMéxico.
Additionally, another wholly owned subsidiary of DynaResource, Inc. -- DynaResource Operaciones de San Jose De Gracia S.A. de C.V.
(“DynaOperaciones”) maintains an exclusive agreement to manage the personnel registered as employees in México.



The Company’s Chairman and CEO is also
President of DynaMéxico and President of DynaMineras, and the CEO holds a broad power of attorney granted by the shareholders
of DynaMéxico. The power of attorney gives the CEO broad authority to act for DynaMéxico. The power of attorney held
by the CEO is consistent with the laws in México, whose laws are based on a civil code.



The nature of mineral exploration and
production activities involves a high degree of risk and the possibility of uninsured losses that could materially and adversely
affect our operations.



Exploration for and production of minerals
is highly speculative and involves greater risk than many other businesses. Many exploration programs do not result in the discovery
of mineralization, and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. Few properties
that are explored are ultimately advanced to production. Our current exploration efforts are, and future development and mining
operations we conduct will be, subject to all of the operating hazards and risks normally incident to exploring for and developing
mineral properties, such as, but not limited to:



|● | economically insufficient mineralized material;
|- | -----------------------------------------------



|● | fluctuations in production costs that may make mining uneconomical;
|- | -------------------------------------------------------------------



|● | availability of labor, contractors, engineers, power, transportation and infrastructure;
|- | ----------------------------------------------------------------------------------------



|● | labor disputes;
|- | ---------------



|● | potential delays related to social, public health, and community issues;
|- | ------------------------------------------------------------------------



|● | unanticipated variations in grade and other geologic problems;
|- | --------------------------------------------------------------



|● | environmental hazards;
|- | ----------------------



|● | difficult surface or underground conditions;
|- | --------------------------------------------



|● | water conditions;
|- | -----------------



|● | industrial accidents;
|- | ---------------------



|● | metallurgical and other processing problems;
|- | --------------------------------------------



|● | mechanical and equipment performance problems;
|- | ----------------------------------------------



|● | failure of pit walls or dams;
|- | -----------------------------





14









|● | unusual or unexpected rock formations;
|- | --------------------------------------



|● | personal injury, fire, flooding, cave-ins and landslides; and
|- | -------------------------------------------------------------



|● | decrease in reserves or mineralized material due to a lower gold, silver, or copper price.
|- | ------------------------------------------------------------------------------------------



Any of these risks can materially and adversely
affect, among other things, the development of properties, production quantities and rates, costs and expenditures, potential revenues
and production dates. We currently have no insurance to guard against any of these risks, except in very limited circumstances.
If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur
a write-down of our investment in these interests. All these factors may result in losses in relation to amounts spent which are
not recoverable.



We do not insure against all risks to
which we may be subject in our operations.



While we currently maintain insurance to insure
against general commercial liability claims and physical assets at our properties in México, we do not maintain insurance
to cover all of the potential risks associated with our operations. We may also be unable to obtain insurance to cover other risks
at economically feasible premiums or at all. Insurance coverage may not continue to be available or may not be adequate to cover
liabilities. We might also become subject to liability for environmental, pollution or other hazards associated with mineral exploration
and production which may not be insured against, which may exceed the limits of our insurance coverage, or which we may elect not
to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that
could materially adversely affect our financial condition and our ability to fund activities on our property. A significant loss
could force us to reduce or terminate our operations.



Shortages of critical parts and equipment
may adversely affect our operations and development projects.



The mining industry has been impacted, from
time to time, by increased demand for critical resources such as input commodities, drilling equipment, trucks, shovels and tires.
These shortages have, at times, impacted the efficiency of our operations, and resulted in cost increases and delays in rehabilitation
and refurbishing of projects, thereby impacting operating costs, capital expenditures, and production and construction schedules.



Our operations are subject to permitting
requirements which could require us to delay, suspend or terminate our operations on our mining properties.



Our test mining and pilot milling operations,
and including future exploration and drilling programs, require permits from the state and federal governments, including permits
for the use of water and for drilling wells for water. We may be unable to obtain these permits in a timely manner, on reasonable
terms or on terms that provide us sufficient resources to develop our properties, or at all. Even if we are able to obtain such
permits, the time required by the permitting process can be significant. If we cannot obtain or maintain the necessary permits,
or if there is a delay in receiving these permits, our timetable and business plan for exploration of our properties will be adversely
affected, which may in turn adversely affect our results of operations, financial condition, cash flows and market price of our
securities.





Title to mineral properties can be uncertain,
and we are at risk of loss of ownership of one or more of our properties.



Our ability to explore and operate our properties
depends on the validity of our title to that property. Our concessions in México are subject to continuing government regulation
and failure to adhere to such regulations could result in termination of the concessions.



We cannot ensure that we will have an
adequate supply of water to complete desired exploration or development of our mining properties.



Our test mining and pilot milling operations
require significant quantities of water for mining, ore processing and related support facilities. Our operations in México
are in areas where water is scarce and competition among users for continuing access to water is significant. Continuous operations
at our mines is dependent on our ability to maintain our water rights. Although each of our operations currently has sufficient
water rights and claims to cover our operational demands, we cannot predict the future circumstances relating to our water rights,
claims and uses. Water shortages may also result from weather or environmental and climate impacts out of the Company's control.



We are subject to litigation risks.



All industries, including the mining industry,
are subject to legal claims, with and without merit. Defense and settlement costs can be substantial, even with respect to claims
that have no merit. Due to the inherent uncertainty of the litigation process, the resolution of any legal proceeding, including
regulatory proceedings, could have a material adverse effect on our financial position and results of operations.





15









Risks Relating to Our Common Stock



A small number of existing shareholders
own a significant portion of DynaResource, Inc. common stock, which could limit your ability to influence the outcome of any shareholder
vote.



The Chairman/CEO currently owns approximately
10.5% of total outstanding common shares and the management and members of the Board of Directors as a group own approximately
30.64% of common shares outstanding. These blocks of ownership could limit another stockholders’ ability to influence the
outcome of any shareholder vote.



Our stock price may be volatile, and
as a result you could lose all or part of your investment.



In addition to other risk factors identified
herein and to volatility associated with equity securities in general, the value of your investment could decline due to the impact
of any of the following factors upon the market price of our common stock:



|● | Changes in the worldwide price for gold, silver and/or copper;
|- | --------------------------------------------------------------



|● | Volatility in the equities markets;
|- | -----------------------------------



|● | Disappointing results from our exploration or test mining and pilot milling and production efforts;
|- | ---------------------------------------------------------------------------------------------------



|● | Test pilot production rates lower than those targeted;
|- | ------------------------------------------------------



|● | Political and regulatory risks;
|- | -------------------------------



|● | Weather conditions, including unusually heavy rains;
|- | ----------------------------------------------------



|● | Failure to meet our revenue or profit goals or operating budget;
|- | ----------------------------------------------------------------



|● | Decline in demand for our common stock;
|- | ---------------------------------------



|● | Downward revisions in securities analysts' estimates or changes in general market conditions;
|- | ---------------------------------------------------------------------------------------------



|● | Technological innovations by competitors or in competing technologies;
|- | ----------------------------------------------------------------------



|● | Investor perception of our industry or our prospects;
|- | -----------------------------------------------------



|● | Actions by government central banks; and
|- | ----------------------------------------



|● | General economic trends.
|- | ------------------------



During the 2018 calendar year the price of
our stock has ranged from a low of $.78 to a high of $1.25. In addition, stock markets in general have experienced extreme price
and volume fluctuations and the market prices of securities have been highly volatile. These fluctuations are often unrelated to
operating performance and may adversely affect the market price of our common stock. As a result, you may be unable to resell your
shares at a desired price.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------



Not Applicable



|ITEM 2. | PROPERTIES
|------- | ----------



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 10-K. 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 Gracia 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.





16









DynaMéxico owns 100% of the mineral
concessions at the SJG Property, and all mineral concessions are contiguous. The SJG Property is currently the only property in
which DynaMéxico retains an interest. The Company owns 80% of the outstanding capital shares of DynaMéxico. DynaMéxico
holds title to 33 concessions covering approximately 69,121 hectares (170,802 acres).



Property Location



The property is located in and around San Jose
de Gracia, Sinaloa State, México which is approximately 100 km northeast of Guamuchil, near the west coast of México.
It is located on the west side of the Sierra Madre mountain range in the Sierra Madre Gold-Silver Belt. The topography is generally
rugged with elevations varying from 400 meters in the valley bottoms to over 1,600 meters in the higher Sierra. Several roads on
the property are accessible throughout the year, with the possible exception of July through September when the rainy season sometimes
causes flooding and runoff to make the roads difficult to navigate.



Access



The San José de Gracia Project can be
accessed by road, via a sealed highway from Culiacan, the capital city of the State of Sinaloa (located to the south of the San
José de Gracia Project) or the city of Guamuchil (located to the southwest of SJG), to the small town of Sinaloa de Leyva,
then by gravel mountainous road to the village of San José de Gracia.



The San José de Gracia Project can also
be accessed by air. A gravel airstrip is located adjacent to the village of San José de Gracia which is located at the southwestern
portion of the property at the SJG Project, and the airstrip is suitable for light aircraft.



Climate and Operating Season



The climate is semi-tropical with a rainy season
dominating from late June through September. Operations at the San José de Gracia Project are, in part, dependent on the
weather and some activities may be suspended during the rainy season.



Infrastructure and Local Resources



Power



A power line to the San José de Gracia
Project has been installed by the Comisión Federal de Electricidad, the only authorized power producer in México.
The power line was installed in March 2012 from the municipality of Sinaloa de Leyva (La Estancia area), a distance of approximately
75 kilometers.



The power line is currently 220 volts maximum
capacity, which supports domestic use only, including the office and camp facilities at SJG, such as water pump, air conditioning,
refrigeration, lights, internet, and fans, as well as local residential use. Currently, the SJG Project produces its own diesel-generated
power for industrial use.



Water



The water source for the SJG camp is from a
well located close to the river which runs just west of the village of San José de Gracia. DynaMéxico has obtained
the water concession rights for this water source, which provide for usage of 1,000,000 cubic meters per year. DynaMéxico
estimates its current consumption of water to be approximately 10,000 liters per week.







Accommodations



The mine site area camp maintains facilities
which can accommodate 50 persons. The village of San José de Gracia maintains few stores, which offer only minimal goods.



Offices – Camp Facilities



DynaMéxico maintains an administrative
and logistics office in Guamuchil, located 100 kilometers southwest of the SJG property. The SJG Project sources many of its supplies
from Guamuchil, and from Los Mochis and Culiacan. A satellite dish installed at the SJG Property provides communications from the
SJG Property to Guamuchil.



Lab



A field laboratory is maintained within the
camp facility. The Company utilized the lab for assaying services during its production activities in 2003-2006. In the second
half of 2016, the laboratory has been refurbished by DynaMineras and is currently utilized by on site personnel to provide assays
for mined material, feed material, gravity and flotation concentrates, and tailings. DynaMineras anticipates utilizing the lab
facility in the future for providing internal assays to support the exploration, test mining, and pilot milling activities.





17









Regional Geology & Mineral Deposits



San José de Gracia lies within the Sierra
Madre Occidental (“SMO”) Gold-Silver Belt, in a second-order graben directly east of the regional-scale Grete Graben.
 The SMO is recognized as a highly prospective mineral belt for gold, silver and poly-metallic deposits. The basement to the
Sierra Madre Occidental consists of deformed Paleozoic sedimentary strata, which are non-conformably overlain by Tertiary mafic
to felsic volcanic and volcanoclastic strata known as the Lower Volcanic Series (“LVS”). Strata of the LVS are recognized
as being spatially related to gold and silver mineralization in the region.  Volcanic and sedimentary strata are capped by
a thick sequence of non-deformed Late Tertiary ignimbrites, known as the Upper Volcanic Series (“UVS”).



Property Geology



The oldest rocks exposed at San José
de Gracia are deformed Paleozoic shale, sandstone, conglomerate and minor limestone, which are non-conformably overlain by andesite
and rhyodacite flows and tuffs of the LVS.  Volcanic and sedimentary strata are cut by quartz-feldspar porphyry, porphyritic
diorite bodies and fine-grained mafic dykes, which may be co-temporal with the LVS.  Ignimbrites of the UVS are exposed at
higher elevations on the property and are thought to act as a post mineralization cap rock, thereby indicating an Early to Mid-Tertiary
(Paleocene to Eocene) age for gold mineralization at San José de Gracia.



Geologic Structure



Detailed mapping within the project area has
defined several stages of deformation, beginning with compression during the Laramide Orogeny which affected the Paleozoic basement
and formed flat-lying reverse faults, which have been reactivated as conduits for gold-bearing fluids in the La Prieta trend.  Extension
in Tertiary time led to the development of second order structures, trending south, southwest and southeast; which formed the major
structural orientations for mineralization at San José de Gracia.  The latest phase of deformation is characterized
by late-stage extension and southwest tilting.



Property Mineralization



High grade gold mineralization at San José
de Gracia is found in vein structures hosted within andesite and rhyodacite of the Lower Volcanic Series (“LVS”) and
underlying Paleozoic sediments as fault breccia veins and crackle breccias that exhibit multiple stages of reactivation and fluid
flow, as evidenced by crustiform/colloform textures and cross cutting veins.  Locally, veins exhibit sharp, clay gouge hanging
wall and footwall contacts with slickensides, indicating reactivation of structurally-hosted veins subsequent to mineralization.
 Gold grades can also be carried within the mineralized halo adjacent to the principal veins as quartz-chlorite stockwork.
 In addition to vein-hosted mineralization, broad zones of un-mineralized clay alteration, developed southwest of the main
mineralized trends, may overlie lower-grade, disseminated gold mineralization at depth.



Alteration at San José de Gracia is
laterally and vertically zoned from discrete zones of silicification to broad zones of illite to clay alteration with increasing
elevation and/or distance from the main feeder structures.  Faulting and tilting of the mineralization system have affected
the surface distribution of alteration and in general has exposed deeper portions of the system in the northeast and exposed shallower,
more distal portions of the hydrothermal system in the southwest part of the property.





The characterization of the mineralization
at San Jose de Gracia can be described as low sulphidation polymetallic epithermal gold type. Six principal mineralized trends
have been identified at San José de Gracia, from south to north. These consist of the:



|1. | La Purisima Ridge trend;
|-- | ------------------------



|2. | Palos Chinos trend;
|-- | -------------------



|3. | La Parilla to Veta Tierra trend (Including San Pablo East);
|-- | -----------------------------------------------------------



|4. | San Pablo trend;
|-- | ----------------



|5. | La Prieta trend, and
|-- | --------------------



|6. | Los Hilos to Tres Amigos trend.
|-- | -------------------------------



Licenses and Concessions



The SJG District is comprised of 33 mining
concessions covering 9,920 hectares (24,513 acres) and is located within the Sierra Madre gold-silver belt, where the majority
of hydrothermal deposits in México are located. The Company’s mining concessions, all of which are formally held by
DynaMéxico, are granted by the Mexican government, or acquired from previous owners. The Company’s concessions are
comprised of a combination of exploration concessions and development concessions, are filed in the Public Registry of Mining,
and are scheduled to expire from 2028 through 2058. The concessions can be renewed prior to the expiry dates. The table below contains
a listing of the mineral concessions currently held by DynaMéxico.





18









Under amendments to the Mining Act of
México that came into effect on December 2006, the classifications of Mining Exploration Concessions and Mining Exploitation
Concessions were replaced by a single classification of Mining Concessions valid for a renewable term of 50 years, commencing from
the initial issuance date. To be converted into Mining Concessions at the time these amendments came into force, former exploration
and exploitation concessions had to be in good standing at the time of conversion. All of the SJG concessions were converted to
50-year Mining Concessions at the time the amendments to the Mining Act came into effect. To renew the 50-year term, Mining Concessions
must be in good standing at the time application is filed. An application for renewal must be filed within 5 years prior to expiration
of the term.



To maintain Mining Concessions in good standing,
the registered owner must (a) pay bi-annual mining duties (“assessment taxes”) in advance, by January 31 and July 31
each year, (b) file assessment work reports by May 30 each year, for the preceding year (some exception rules apply), and (c) file
by January 31 each year, statistical reports on exploration / exploitation work conducted for the preceding year.



The Notice of Commencement of Production Activities
and Annual Production Reports must be filed annually by January 31 each year for those concessions where mineral ore extraction
is taking place. As a general provision, registered owners of Mining Concessions must follow environmental and labor laws and regulations
in order to maintain their Mining Concessions in good standing.



As of the date of this Form 10-K, the 33 mining
concessions comprising the SJG Property are in good standing with respect to the payment of taxes and the filing of assessment
work obligations imposed by the Mining Act of México and its Regulations. Included among the 33 mining concessions
are 32 currently registered in the sole name of DynaMéxico. DynaMéxico holds one mining concession (San Miguel t.183504)
that in order to produce legal effects requires the consent or relinquishment of first rights of refusal from registered owners
to the 50% undivided title. See the note following the table of mining concessions below, describing the steps needed to be taken
by DynaMéxico to obtain title to the San Miguel mining concession.



In July 2018 in connection with settlement
of prior years’ concessions, DynaMéxico’s reduced its Francisco Arturo concession from 62,481 hectares to 3,274
hectors. This reduced the total concessions holdings from 69,121 hectares (170,802 acres) to 9,920 hectares (24,513 acres)



Current Mining Concessions - San José
de Gracia



|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 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             







19









|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            |        |            |            | 9,919.58  |       



(1) According
to the records of the Mines Registry Office, the registered owners to 100% undivided title to the San Miguel (t.183504) mining
concession are: Maria Trinidad Acosta Salazar (25%), Miguel López Medina (25%), Josefa González Castro (25%) and
Otilia Tracy Vizcarra (25%). On October 17, 2000 and March 8, 2001, DynaMéxico signed with each of Miguel Lopez Medina and
Josefa Gonzalez Castro, respectively, agreements for the transfer to DynaMéxico of 50% undivided title to the San Miguel
(t.183504) mining concession (the “San Miguel Transfer Agreements”).



In respect to the San Miguel Transfer
Agreements, DynaMéxico has been advised that in order for the San Miguel Transfer Agreements to produce legal effects and
be eligible for registration before the Mines Registry Office, DynaMéxico is required to first obtain the legal consent
to such transfers, or the written relinquishment of first rights of refusal, from Maria Trinidad Acosta Salazar and Otilia
Tracy Vizcarra (or court-appointed estate executor). In addition to the San Miguel Transfer Agreements, DynaMéxico has entered
into the following Promise to Sell and Purchase Agreements (the “San Miguel Promise to Sell and Purchase Agreements”):



(a) Promise to Sell and Purchase
Agreement signed on March 8, 2001 among DynaMéxico and Maria Trinidad Acosta Salazar, the registered owner to 25% undivided
title to the San Miguel (t.183504) mining concession, and



(b) Promise to Sell and Purchase
Agreement signed on December 15, 2000 among DynaMéxico and Margarita Tracy Vizcarra, the sister of the deceased Otilia Tracy
Vizcarra.



In respect to the San Miguel
Promise to Sell and Purchase Agreements, DynaMéxico has been advised that:



(a) with respect to the Promise
to Sell and Purchase Agreement signed on March 8, 2001 among DynaMéxico and Maria Trinidad Acosta Salazar, to contact Ms.
Maria Trinidad Acosta Salazar to demand compliance with such agreement by executing the definitive transfer to DynaMéxico
of the 25% undivided title to the San Miguel (t.183504) mining concession registered in her name, and



(b) with respect to the Promise
to Sell and Purchase Agreement signed on December 15, 2000 among DynaMéxico and Margarita Tracy Vizcarra, the sister of
the deceased Otilia Tracy Vizcarra,the estate of Otilia Tracy Vizcarra requires the appointment of a court-appointed
executor that would be capable under Mexican law to formally grant the estate ́s consent for the execution of the San Miguel
Transfer Agreements, to relinquish the estate ́s first rights of refusal or to request court approval for the transfer to
DynaMéxico of the 25% undivided interest in the San Miguel (t.183504) mining concession registered in the name of the deceased
Otilia Tracy Vizcarra.



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 Gracia 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. $74,000 USD as of April 10, 2018), commencing in 2014. Additionally, under
the description of the 20 Year Land Lease, DynaMineras constructed a Medical Facility at SJG in year 2017.



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, La Union, La Purisima, and La Prieta. The Company expects extensions to mineralization
in all directions and down dip from the main target areas.





20









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-K. 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.



Sierra Madre Gold-Silver Belt in México









San Jose de Gracia - History



Historical production records from San Jose
de Gracia (“SJG”) reported 1,000,000 Oz gold production from a series of underground workings. The major areas report
471,000 Oz. produced at the La Purisima area of SJG, at an average grade of 66.7 g/t.; and 215,000 Oz. produced from the La Prieta
area, at an average grade of 27.6 g/t. Mineralization at SJG has been traced on surface and underground over 15 sq. km.



DynaMéxico was formed in March 2000,
for the purpose of acquiring the concessions comprising the SJG District, and to consolidate all ownership of SJG under DynaMéxico.



Lack of Historical Surface Disturbance or
Contamination



Historical production at San Jose de Gracia
occurred prior to the Mexican Revolution (pre-1910). The Company is not aware of any surface disturbance or contamination issues
found on the surface or in the groundwater due to historical mining activities.



Since acquisition and consolidation of the
project under DynaResourcede Mexico SA de CV. (“DynaMéxico”), all activities conducted at San Jose
de Gracia have been permitted in accordance with Mexico regulations, the specifics of which are described below:



On June 17, 2013, DynaResource de Mexico received
from the Secretaria de Medio Ambiente Y Recursos Naturales (“Semarnat”), the federal environmental authority in Mexico,
the approval and permission which allows for the rehabilitation and operation of the pilot mill facility at San Jose de Gracia
(the “Semarnat Permit”). Under the terms of the Semarnat Permit, DynaMéxico is responsible for maintaining the
San Jose de Gracia pilot mill facility, as well as the adjacent tailings pond area, in compliance with Semarnat regulations.



On September 30, 2013 DynaResource de Mexico
also received from Semarnat, the approval and permission which allows for the exploitation and mining activities at the San Pablo
Area of San Jose de Gracia (the “Semarnat Exploitation Permit”). Under the terms of the Semarnat Exploitation Permit,
DynaMéxico’s exploitation and mining activities are restricted to the San Pablo Area of San Jose de Gracia.



Drilling – Exploration Programs (1997
– 2000)



A drill program was conducted at SJG in 1997
to 1998 by a prior majority owner. Approximately 6,172 meters drilling was completed in 63 core drill holes. Significant intercepts,
including bonanza grades, outlined the down dip potential of the Northeast section (150 Meter NE to SW extent of the Drilling)
of the Los Hilos to Tres Amigos Trend of SJG. Surface and underground sampling in 1999 to 2000 confirmed high grades in historic
workings and surface exposures throughout the project area. These high grades outline the presence of mineralization shoots developed
within the veins. The mineralized shoots appear to be controlled by dilational jogs and/or vein intersections. A total of
544 samples were collected in 1999 to 2000 and assayed an average 6.51 g/t gold.



Pilot Production Activities (2003 –
2006)



DynaMéxico, conducting activities through
its operating sister companies DynaMineras and DynaOperaciones, mined high-grade veins at the San Pablo area of SJG from mid-2003
to June 2006. 18,250 Oz. gold was produced and sold from mill feed tonnage of 42,000 tonnes, at an average grade of approximately
15-20 g/t. Production costs were reported at approximately $175/Oz. gold in this small scale, pilot production operation. The small-scale
mining and production activities at SJG consisted of improvements to an existing mill, including the installation of a gravity
/ flotation processing circuit, and initial test runs with tailings were completed in 2002. Actual mining at the high-grade San
Pablo area of the property commenced in March 2003.





21









|Mined and Milled Tonnage           | 42,000 tonnes
|---------------------------------- | -------------
|Production (Oz Au)                 | 18,250 Oz    
|Average Grade                      | 15-20 g/t    
|Recovery Efficiency (Plant)        | 85%          
|Recovery in Concentrate (Sales)    | 90%          
|Production Cost (Average, 4 Years) | $175 / Oz    



Suspension of Pilot Operations (2006)



The Company initiated the test mining and pilot
mill operations in 2003 and, at that time, gold prices were depressed. Exploration funding opportunities, while available, were
deemed to be too dilutive by Company management. Subsequently, in 2006, commodities prices were rising, and the Company was able
to negotiate acceptable financing in order to fund exploration activities. Therefore, the Company suspended its test mining and
pilot mill operations in 2006 in order to focus on the exploration of the vast SJG District. While the test mining and pilot milling
operations were considered successful (see results in the table above), small scale operations were not expected to provide the
necessary capital in order to fund exploration of a project the size of SJG.



The earlier,
limited-scope pilot operations provided significant benefits in terms of confirming production test mining and milling grades,
metallurgy and process, efficiency of recoveries, and operational costs – all of which is valuable for larger scale production
plans.





Earn In / Option Agreement – Financing
of Drilling – Exploration Programs (2006 – 2011)



The Company entered into an Earn In / Option
Agreement with Goldgroup Resources Inc., a subsidiary of Goldgroup Mining Inc., Vancouver, BC. (“Goldgroup”), dated
September 1, 2006 (the “Goldgroup Earn In”). The terms of the Goldgroup Earn In provided for Goldgroup to contribute
$18,000,000financing to DynaMéxico, in stages over the 5-year period, for exploration
expenditures at SJG, in exchange for 50% of the outstanding share capital of DynaMéxico. The Goldgroup Earn In was completed
March 15, 2011, and Goldgroup held 50% of outstanding capital of DynaMéxico at that date.



On June 21, 2013, DynaResource acquired a Certificate
for 300 Series “B” Variable Capital Shares of DynaMéxico, in exchange for the settlement of accounts receivable
from DynaMéxico in the amount of $31,090,710 Mexican Pesos (approximately $2.4 M USD). After the issuance and receipt of
the 300 Series B Shares, DynaUSA holds 80% of the total outstanding share capital of DynaMéxico.



Drilling programs (2007 – 2011)



Drilling programs completed by the Company’s
subsidiaries produced a total of 298 drill holes covering 68,741 meters of drilling from 2007 through March 2011. Results of the
drilling activity, including the results of previous drilling in 1997-1998, appear in an “SJG Drill Intercepts Summary File
through 11-298”, as Exhibit 99.1 to our Form 10-Q for the period ended June 30, 2011 filed with the SEC on August 22, 2011,
and available on EDGAR at:



http://sec.gov/Archives/edgar/data/1111741/000112178111000241/ex99one.htm.



Additionally, the updated Drill Summary File
is posted on the Company’s web site at www.dynaresource.com.



Magnetic and IP Surveys (2009)



Magnetic and IP (“Induced Polarization”)
surveys were conducted throughout the SJG district in 2009, covering an area of approximately 15 Sq. kilometers. IP is the primary
geophysical target at SJG and is expected to identify pyrite-based mineralization hosting gold. Initial Survey Grid lines were
located approximately perpendicular to inferred geologic strike. The data response from these grid lines indicate one or more IP
sources that dip northwest. Additional grid lines were crossed with the initial lines and appear to identify two separate IP sources.
Grid lines to the South appear to indicate an IP source at > 250 Meters.



Correlation between ground magnetic and
IP--In general the correlation between the Magnetic and IP response and data was excellent.



Correlation with recent Drilling Programs
and known Mineralization--The data response of the surveys correlated to the recent drilling programs and to the areas of known
mineralization at SJG was excellent. Considering this excellent correlation to known mineralization, additional areas of SJG showing
similar data response could be indicative of additional target areas.





22









Identification of Additional Resource Target
Areas--Significant survey responses were reported for the following areas and are projected for follow up drilling:



San Pablo-Up Dip; San Pablo-Displacement
Zone;

Tres Amigos-Down Dip and
Northwest; Tres Amigos-Extension Northeast;

Orange Tree-Down Dip; La
Prieta

La Ceceña, Los Hilos,
and Tepehauje;

Palos Chinos;

La Purisima; Down dip at
Southeast end;

Argillic Zone; + 250 M.
down dip;



Technical Report 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 Gracia. 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 Gracia 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 Gracia 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 Gracia 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 San José de Gracia’s
core logging and storage facilities, the geology offices, the meteorological station, the plant nursery, and the mill. Mr. Sandefur
also inspected San José de Gracia’s core logging and storage facilities.





23









The Company received from DynaMéxico
on February 14, 2012, a National Instrument 43-101 Mineral Resource Estimate for San Jose de Gracia. 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.



Selected Drill Hole Intercepts by
Target Area (Excerpt from The Updated 2012 DynaMéxico Luna-CAM SJG Technical Report)



Tres Amigos



|Drill hole | Area        | From m | To m   | length (m) | Au g/t | Ag g/t | Cu%  | Pb%  | Zn% 
|---------- | ----------- | ------ | ------ | ---------- | ------ | ------ | ---- | ---- | ----
|97-013     | Tres Amigos | 95.00  | 107.50 | 12.50      | 20.80  | 21.80  | 0.43 | 0.06 | 0.15
|97-039     | Tres Amigos | 40.20  | 43.20  | 3.00       | 29.50  | 44.60  | 0.58 | 0.95 | 7.45
|97-045     | Tres Amigos | 100.00 | 106.00 | 6.00       | 11.46  | 3.40   | 0.03 | 0.02 | 0.17
|97-047     | Tres Amigos | 124.94 | 132.00 | 7.06       | 7.51   | 15.40  | 0.09 | 0.27 | 3.42
|08-115     | Tres Amigos | 153.30 | 159.00 | 5.70       | 8.31   | 8.30   | 0.17 | 0.00 | 0.07
|08-116     | Tres Amigos | 134.80 | 138.10 | 3.30       | 21.74  | 9.90   | 0.06 | 0.04 | 0.15
|10-150     | Tres Amigos | 285.61 | 288.49 | 2.88       | 10.93  | 14.24  | 0.32 | 0.01 | 0.03
|10-150     | Tres Amigos | 312.80 | 321.81 | 9.01       | 3.97   | 2.35   | 0.09 | 0.00 | 0.03
|10-151     | Tres Amigos | 208.38 | 216.20 | 7.82       | 22.19  | 14.70  | 0.36 | 0.01 | 0.06
|10-154     | Tres Amigos | 73.00  | 74.75  | 1.75       | 21.89  | 9.30   | 0.00 | 0.00 | 0.02
|10-175     | Tres Amigos | 241.59 | 245.40 | 3.81       | 6.37   | 3.41   | 0.02 | 0.00 | 0.03
|10-177     | Tres Amigos | 228.63 | 245.00 | 16.37      | 10.58  | 9.75   | 0.25 | 0.02 | 0.09
|10-179     | Tres Amigos | 75.3   | 77.02  | 1.72       | 105.51 | 49.60  | 0.03 | 0.01 | 0.06
|10-179     | Tres Amigos | 174.85 | 179.52 | 4.67       | 5.70   | 15.89  | 0.11 | 0.00 | 0.16
|10-226     | Tres Amigos | 205.05 | 213.09 | 8.04       | 18.47  | 19.77  | 0.42 | 0.13 | 0.22
|10-227     | Tres Amigos | 176.95 | 186.75 | 9.80       | 8.42   | 11.92  | 0.41 | 0.04 | 0.33
|10-230     | Tres Amigos | 244.91 | 249.45 | 4.54       | 18.09  | 15.48  | 0.53 | 0.02 | 0.03
|10-234     | Tres Amigos | 214.61 | 217.97 | 3.36       | 15.05  | 13.45  | 0.23 | 0.01 | 0.01
|10-237     | Tres Amigos | 92.44  | 92.84  | 0.40       | 883.91 | 195.00 | 0.24 | 0.77 | 5.35
|11-257     | Tres Amigos | 60.84  | 63.33  | 2.49       | 5.37   | 9.28   | 0.25 | 0.01 | 0.40
|11-257     | Tres Amigos | 92.00  | 94.66  | 2.66       | 5.00   | 6.74   | 0.25 | 0.02 | 1.16
|11-260     | Tres Amigos | 63.40  | 71.15  | 7.75       | 7.84   | 10.68  | 0.16 | 0.12 | 2.28
|11-271     | Tres Amigos | 115.40 | 120.15 | 4.75       | 13.93  | 18.56  | 0.54 | 0.02 | 0.14







San Pablo



|Drill hole | Area      | From m | To m   | length (m) | Au g/t | Ag g/t | Cu%  | Pb%  | Zn% 
|---------- | --------- | ------ | ------ | ---------- | ------ | ------ | ---- | ---- | ----
|07-012     | San Pablo | 19.70  | 23.90  | 4.20       | 10.45  | 10.00  | 0.15 | 0.00 | 0.01
|07-026     | San Pablo | 65.90  | 67.80  | 1.90       | 34.00  | 18.70  | 0.21 | 0.01 | 0.05
|07-027     | San Pablo | 142.80 | 148.85 | 6.05       | 13.72  | 28.60  | 1.06 | 0.02 | 0.04
|07-031     | San Pablo | 94.25  | 98.05  | 3.80       | 31.32  | 69.60  | 1.01 | 0.23 | 0.74
|08-051     | San Pablo | 183.55 | 192.60 | 9.05       | 22.95  | 13.60  | 0.40 | 0.00 | 0.03
|08-090     | San Pablo | 190.70 | 191.90 | 1.20       | 11.55  | 48.50  | 1.00 | 0.02 | 0.02







24









|08-092 | San Pablo | 124.80 | 125.80 | 1.00 | 23.31  | 0.50   | 0.00 | 0.01 | 0.00
|------ | --------- | ------ | ------ | ---- | ------ | ------ | ---- | ---- | ----
|08-097 | San Pablo | 227.69 | 229.75 | 2.06 | 17.04  | 20.00  | 0.56 | 0.03 | 0.04
|09-133 | San Pablo | 126.80 | 129.80 | 3.00 | 13.10  | 10.25  | 0.32 | 0.00 | 0.02
|09-138 | San Pablo | 150.62 | 153.59 | 2.97 | 8.80   | 10.46  | 0.28 | 0.00 | 0.02
|09-139 | San Pablo | 132.18 | 137.68 | 5.50 | 20.51  | 25.82  | 0.70 | 0.00 | 0.01
|10-197 | San Pablo | 48.15  | 51.82  | 3.67 | 7.96   | 13.18  | 0.49 | 0.00 | 0.03
|10-203 | San Pablo | 70.65  | 76.15  | 5.50 | 332.86 | 143.90 | 0.02 | 0.00 | 0.01
|10-207 | San Pablo | 80.15  | 83.20  | 3.05 | 16.74  | 24.17  | 0.54 | 0.01 | 0.02
|10-215 | San Pablo | 186.80 | 190.27 | 3.47 | 15.82  | 14.68  | 0.41 | 0.03 | 0.02
|10-221 | San Pablo | 69.98  | 71.98  | 2.00 | 13.14  | 23.93  | 0.62 | 0.00 | 0.01
|10-224 | San Pablo | 122.82 | 125.05 | 2.23 | 5.29   | 18.70  | 0.69 | 0.02 | 0.04
|10-224 | San Pablo | 148.60 | 154.95 | 6.35 | 7.04   | 13.31  | 0.57 | 0.00 | 0.01
|10-236 | San Pablo | 112.96 | 117.03 | 4.07 | 11.38  | 22.92  | 0.68 | 0.00 | 0.01
|11-249 | San Pablo | 108.20 | 109.93 | 1.73 | 8.21   | 30.29  | 0.80 | 0.00 | 0.02
|11-250 | San Pablo | 101.72 | 104.81 | 3.09 | 20.15  | 53.44  | 0.88 | 0.24 | 0.54
|11-268 | San Pablo | 92.65  | 94.25  | 1.60 | 11.74  | 21.13  | 0.37 | 0.01 | 0.04



San Pablo East



|Drill hole | Area        | From m | To m   | length (m) | Au g/t | Ag g/t | Cu%  | Pb%  | Zn% 
|---------- | ----------- | ------ | ------ | ---------- | ------ | ------ | ---- | ---- | ----
|08-076     | San Pablo E | 32.75  | 34.85  | 2.10       | 36.09  | 47.80  | 0.43 | 0.80 | 1.06
|10-208     | San Pablo E | 150.61 | 152.67 | 2.06       | 6.60   | 10.30  | 0.40 | 0.00 | 0.01
|11-252     | San Pablo E | 55.25  | 59.70  | 4.45       | 4.26   | 12.05  | 0.37 | 0.01 | 0.04
|11-256     | San Pablo E | 51.61  | 52.85  | 1.24       | 144.08 | 138.60 | 1.06 | 1.61 | 1.78
|11-256     | San Pablo E | 99.93  | 101.29 | 1.36       | 9.04   | 3.30   | 0.01 | 0.00 | 0.01
|11-298     | San Pablo E | 49.15  | 49.85  | 0.7        | 49.39  | 20.80  | 0.20 | 0.01 | 0.03





La Purisima



|Drill hole | Area        | From m | To m   | length (m) | Au g/t | Ag g/t | Cu%  | Pb%  | Zn% 
|---------- | ----------- | ------ | ------ | ---------- | ------ | ------ | ---- | ---- | ----
|07-021     | La Purisima | 158.70 | 160.80 | 2.10       | 75.90  | 76.00  | 1.61 | 0.07 | 0.00
|07-039     | La Purisima | 197.55 | 200.80 | 3.25       | 10.93  | 4.60   | 0.04 | 0.00 | 0.01
|10-161     | La Purisima | 87.70  | 99.67  | 11.97      | 3.12   | 4.86   | 0.36 | 0.00 | 0.01
|10-204     | La Purisima | 128.02 | 131.86 | 3.84       | 4.06   | 3.15   | 0.09 | 0.00 | 0.00
|10-204     | La Purisima | 173.15 | 174.58 | 1.43       | 7.21   | 5.57   | 0.08 | 0.00 | 0.01
|10-206     | La Purisima | 121.73 | 124.04 | 2.31       | 14.63  | 3.45   | 0.02 | 0.00 | 0.00
|11-282     | La Purisima | 152.40 | 153.92 | 1.52       | 7.79   | 1.40   | 0.04 | 0.00 | 0.00
|11-285     | La Purisima | 85.06  | 87.92  | 2.86       | 3.93   | 0.80   | 0.03 | 0.00 | 0.00
|11-285     | La Purisima | 98.50  | 102.15 | 3.65       | 6.70   | 3.87   | 0.20 | 0.00 | 0.01
|11-289     | La Purisima | 109.73 | 112.78 | 3.05       | 9.50   | 7.05   | 0.11 | 0.02 | 0.00
|11-293     | La Purisima | 38.11  | 39.27  | 1.16       | 10.06  | 0.50   | 0.01 | 0.00 | 0.00
|11-293     | La Purisima | 158.75 | 160.55 | 1.80       | 12.65  | 2.84   | 0.10 | 0.00 | 0.01



Block Model Calculation in Surpac Software--The
Company has compiled its manual calculation and internal interpretation of the mineralization at SJG defined by drilling and production
to date. The Company has also built the block model of mineralization at SJG using Surpac (Gemcom) software. The current block
model at SJG confirms mineralization at San Pablo, Tres Amigos, La Union, Palos Chinos, and La Purisima, with portions of the mineralization
in a high-grade category, and including mineralization at San Pablo and Tres Amigos, and is consistent with the CAM SJG Mineral
Resource Estimate described above. The Company will continue this Surpac modeling work as additional drill programs are planned
and completed.



Exploration and Mining Permit Requirements
(México)



In respect of permit requirements for mineral
exploration and mining in México, the most relevant applicable laws, regulations and official technical norms are the following:
The Federal Mining Act, and its Regulations, the Federal Environmental Protection and Ecological Equilibrium Act,
and its Regulations, the Federal Sustainable Forestry Development Act and its Regulations, the Federal Explosives and
Firearms Act, the National Waters Act and the Mexican Official Norm 120.





25









To carry out mineral exploration activities,
holders of mining concessions in México are required to file at the offices of the Secretaria de Medio Ambiente Y Recursos
Naturales, the Federal Environmental Authority in México (“SEMARNAT”) a “Notice of Commencement of Exploration
Activities” under the guidelines of the Mexican Official Norm 120 (“Norm 120”). SEMARNAT is the office
of the Federal Government of México responsible for the review and issuance of a Change of Soil Use Permit (“CSUP”),
the review of a Technical Justification Study (referenced below) and the filing of Norm 120. Norm 120 is a notice to SEMARNAT only
and has no processing time.



If contemplated mineral exploration activities
fall outside of the parameters defined under Norm 120, a CSUP Application is required to be filed at the SEMARNAT under the guidelines
of the Federal Sustainable Forestry Development Act and its Regulations. To meet the requirements for issuance of a CSUP,
the applicant must also file a Technical Study (“Technical Justification Study”) to justify the change of soil use
from forestry to mining, to demonstrate that biodiversity will not be compromised, and to demonstrate that there will be no soil
erosion or water quality deterioration on completion of the mineral exploration activities.



As a pre-requisite for issuance of a CSUP,
Article 118 of the Federal Sustainable Forestry Development Act provides for the posting of a bond to the Mexican Forestry
Fund for remediation, restoration and reforestation of the areas impacted by the mineral exploration activities.



To carry out mining activities in México,
holders of mining concessions are also required to file an “Environmental Impact Assessment Study” (“Environmental
Impact Study”) under the guidelines of the Federal Environmental Protection and Ecological Equilibrium Act and its
Regulations, in order to evaluate the environmental impact of the contemplated mining activities.



As a pre-requisite for approval of an Environmental
Impact Study, the Federal Environmental Protection and Ecological Equilibrium Act and its Regulations require the posting
of a bond to guarantee remediation and rehabilitation of the areas impacted by the mining activities.



If the use of explosives materials is required
for execution of mineral exploration or mining activities, an Application for General Permit for Use, Consumption and Storage of
Explosive (“Explosives Permit”) is required to be filed at the offices of the Secretariat of National Defense (“SEDENA”)
under the guidelines of the Federal Explosives and Firearms Act.





Under the Federal Mining Act, holders
of mining concessions in México have the right to the use of the water coming from the mining works. However, certification
of water rights and/or issuance of water rights concessions are required from the National Water Commission (“CONAGUA”)
under the guidelines of the National Waters Act.



DynaMéxico Permit Filings
/ Permits History (2003 – 2018)



|● | On February 10, 2003, SEDENA granted DynaMéxico an Explosives Permit for use and storage of explosives materials in SJG.
|- | ------------------------------------------------------------------------------------------------------------------------



|● | In June 2006, DynaMéxico ceased use of explosives materials in its mining activities at SJG and requested suspension of the Explosives Permit. The Explosives Permit has been temporarily suspended by SEDENA and DynaMéxico will be required to file a re-activation application to re-activate the Explosives Permit.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|● | On June 28, 2010, DynaMéxico filed a Preventive Exploration Notice at the office of SEMARNAT in connection with contemplated mineral exploration activities at the La Prieta, San Pablo, La Purisima, La Unión, Tres Amigos and La Ceceña areas of the San José de Gracia Project.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|● | On July 21, 2010, SEMARNAT authorized DynaMéxico to conduct the mineral exploration activities referenced in the Preventive Exploration Notice, for a term of 36 months, as SEMARNAT determined that such activities fall within the framework of Norm 120. SEMARNAT’s approval was subject to the following conditions: (a) DynaMéxico’s filing of a CSUP Application (referenced below) and approval thereof by SEMARNAT, and (b) posting of a bond in the amount of $134,487 Mexican Pesos to guarantee remediation and rehabilitation measures following the conclusion of the mineral exploration activities referenced in the Preventive Exploration Notice. The bond was timely posted by DynaMéxico.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|● | On August 9, 2010, DynaMéxico filed a CSUP Application and a Technical Justification Study at the offices of SEMARNAT to carry out certain mineral exploration activities at the La Prieta, San Pablo, La Purisima, La Unión, Tres Amigos and La Ceceña areas of the San José de Gracia Project.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|● | On December 20, 2010, SEMARNAT approved the CSUP Application and Technical Justification Study filed by DynaMéxico with respect to the San José de Gracia Project and authorized DynaMéxico to conduct mineral exploration activities on 5.463 hectares of the San José de Gracia Project for a term of 36 months.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







26









|● | On March 8, 2012, the Director of Water Administration of CONAGUA certified in writing the rights of DynaMéxico to use exploit and extract 1,000,000 cubic meters of water per year from the extraction infrastructure located in San José de Gracia. CONAGUA determined that DynaMéxico’s 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 under applicable tax laws.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|● | On June 17, 2013, DynaMéxico received from SEMARNAT, the approval and permission which allows for the rehabilitation and operation of the pilot mill facility at SJG ("the SEMARNAT-SJG Mill Permit," and, the "SEMARNAT Permit"). Under the terms of the SEMARNAT-SJG Mill Permit, DynaMéxico will be responsible to maintain the SJG pilot mill facility, and including the adjacent tailings pond area, in compliance with the regulations described in la Norma Oficial Mexicana ("NOM-141-SEMARNAT-2003).
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|● | On July 31, 2013, SEMARNAT authorized DynaMéxico to conduct the mineral exploration activities referenced in the Preventive Exploration Notice, for a term of an additional 18 months, extending the initial term of 36 months as SEMARNAT had determined on July 10, 2010. SEMARNAT determined that such activities fall within the framework of Norm 120.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|● | On December 31, 2013, DynaMéxico received from SEMARNAT the approval and permission which allows for mining activities and the exploitation of the San Pablo area of San Jose de Gracia.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|● | On January 6, 2014, DynaMineras entered into a 20 Year Land Lease Agreement with the Santa Maria Ejido Community surrounding San Jose de Gracia. The 20 Year Land Lease Agreement 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. $74,000 USD as of April 10, 2018), commencing in 2014. Additionally, under the description of the Land Lease Agreement, DynaMineras constructed a Medical Facility at SJG during 2017. The land lease agreement provides DynaMineras with surface access to the core resource areas of SJG (4,399 hectares), and allows for all permitted test mining, pilot production and exploration activities from the owners of the surface rights (Santa Maria Ejido community).
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



DynaMéxico Bonding Requirements
(2010)



|● | Under the Exploration Permit issued to DynaMéxico on July 21, 2010, SEMARNAT imposed upon DynaMéxico a bonding obligation in the amount of $134,487 Mexican Pesos to guarantee remediation and rehabilitation measures following the conclusion of the mineral exploration activities referenced in the Preventive Exploration Notice. The bond was timely posted by DynaMéxico.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|● | Under the CSUP issued to DynaMéxico on December 20, 2010, SEMARNAT imposed upon DynaMéxico a bonding obligation of $116,911 Mexican Pesos for reforestation and remediation measures with respect to the San José de Gracia Project. The bond was timely posted by DynaMéxico.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 Gracia 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.



Test Underground Mining and Pilot Mill Operations
(2015)



In July 2015, the Company commenced a capital
investment program designed to increase tonnage and output from the test mining operations, and to increase volume and output through
the pilot mill facility. Through DynaMineras, the Company was engaged in the implementation of this capital investment program
from July through December 2015.





27









Capital Investment (2015)



The capital investment program consisted of
a net total of $3,565,000 USD and is generally described below:



|● | Contract Mining ($713,000); including $250,000 Deposit (advance for services), and $513,000 in direct mining costs, explosives, and payments to contractor;
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



|● | Mine related costs ($290,000); including mine plan development, permits, assays, consulting, mine supplies, and equipment items expensed;
|- | -----------------------------------------------------------------------------------------------------------------------------------------



|● | Mill and Camp ($613,000); Improvements to the Mill and Camp, including pre-operation expenses;
|- | ----------------------------------------------------------------------------------------------



|● | Personnel Costs ($673,000); including payroll and consulting expenses;
|- | ----------------------------------------------------------------------



|● | Equipment ($636,000); long term equipment purchases including transportation, mine loading and hauling, generators, compressors and pumps;
|- | ------------------------------------------------------------------------------------------------------------------------------------------



|● | Overhead ($285,000); including legal expenses, consulting, and administration;
|- | ------------------------------------------------------------------------------



|● | IVA ($272,000); Value added taxes paid, and refundable;
|- | -------------------------------------------------------



|● | Land Use and Rental ($83,000);
|- | ------------------------------



Year 2017 Improvements and Expansion



During 2017 the Company initiated and completed
the following capital projects at SJG to improve and expand test mining and pilot milling operations:





|● |  | Medical facility (SJG Clinic):                                        | $ | 107,500;   | 
|- |  | --------------------------------------------------------------------- | - | ---------- | 
|  |  |                                                                       |   |            | 
|● |  | Expanding camp, office, and infrastructures:                          | $ | 145,500;   | 
|  |  |                                                                       |   |            | 
|● |  | Expanding tailings pond, installing liners:                           | $ | 265,000;   | 
|  |  |                                                                       |   |            | 
|● |  | Improving, setting new foundation, and re-installing the Denver Mill: | $ | 257,000;   | 
|  |  |                                                                       |   |            | 
|● |  | Installing Mill #3:                                                   | $ | 258,000;   | 
|  |  |                                                                       |   |            | 
|● |  | Machinery & Equipment:                                                | $ | 200,000;   | 
|  |  |                                                                       |   |            | 
|● |  | Transportation:                                                       | $ | 40,000;    | 
|  |  |                                                                       |   |            | 
|  |  | Total                                                                 | $ | 1,273,500; | 









Year 2018 Improvements and Expansion



During 2018 the Company initiated capital projects
at SJG in the amount of $1,039,000 USD to improve and expand test mining and pilot milling operations:





|● |  | Machinery & Equipment: | $ | 224,000;   | 
|- |  | ---------------------- | - | ---------- | 
|  |  |                        |   |            | 
|● |  | Transportation:        | $ | 3,000;     | 
|  |  |                        |   |            | 
|● |  | Medical facility:      | $ | 15,000;    | 
|  |  |                        |   |            | 
|● |  | Installing Mill #3:    | $ | 797,000;   | 
|  |  |                        |   |            | 
|  |  | Total:                 | $ | 1,039,000; | 









28









Summary of Test Mining and Pilot Mill Operations
for 2015, 2016, 2017, and 2018:



|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.)
|---- | -------------------------------------- | ----------------------------------------- | --------------------------- | ------------------------------------------------- | -------------------------------------------
|2015 | 7,180                                  | 8.30                                      | 78.0%                       | 1,495                                             | 1,308                                      
|2016 | 33,172                                 | 12.70                                     | 79.7 %                      | 10,836                                            | 8,668                                      
|2017 | 35,170                                 | 12.95                                     | 85 %                        | 12,636                                            | 10,740                                     
|2018 | 52,038                                 | 9.82                                      | 86.11%                      | 14,147                                            | 13,418                                     



DynaMineras expects to continue to increase its test underground
mining activity and pilot milling operations in 2019; and projects the increased output to 300 tons/day from the mine and mill
during 2019.



Additional Test Mining and Mill Operations Disclosure



The flow sheet for obtaining and processing mineralized material
is described below:



Contract
Mining: Mineralize material is mined from San Pablo mine by the contract miner, and according to the formal mine plan developed
by the Company.



Mining
Patio: Freshly mined mineralized material is transported by the contract miner outside the San Pablo Mine to the mine patio;



Pilot
Mill Facility – General Description and Flow Sheet;



Mill
Patio: Mineralized material is transported by Company dump trucks and articulated dump truck to the mill patio.



Crushing
Circuit: Freshly mined mineralized material is loaded from the mill patio into the crushing circuit, comprised of a jaw crusher
and cone crusher; and 1/2” crushed material is fed by conveyor belt to the fine mineralized material bin. The mineralized
material is then sent by conveyor belt to the primary ball mill, which is a Hardinge conical mill.



Hardinge
Mill: The mineralized material is then ground to -100 mesh particle size; and then fed to a holding tank;



Holding
Tank: The mineralized material is pumped from the holding tank to the cyclone;



Cyclone:The course material plus (-100 Mesh) is fed to the Ball Mill #2, the Denver Mill; and fine material less (-100 Mesh) is fed
to another holding tank.



Fine
Screening System (Sweco Screen): The fine mineralized material is fed from the holding tank to the Sweco Screen; the fine
mineralized material less (-200 Mesh) is fed to the spirals; the oversized material is fed to Ball Mill# 2.



Denver
Mill: All mineralized material reground in the Denver Mill, is then fed to the holding tank prior to the Cyclone.



Spiral
Gravity Concentration: Approximately 25% of the mineralized material is fed from the spirals to the Wifley table. Approximately
75% of the mineralized material is fed from the spiral concentration to the flotation conditioning tank.



Wifley
Shaking Table: The concentrate from the spirals feed the Wifley shaking table, producing a high-grade gravity concentrate.
The high-grade gravity concentrate is bagged and shipped for sale. (There are no chemicals present in the gravity concentrate.)
It is estimated that the gravity concentrate produced is approx. 40% of the total recovered gold; and estimated that a 300-400
g/t Au would be the final gravity concentrate grade.



Flotation
Conditioning Tank: The tailings from spirals and from the Wifley table are fed to the flotation conditioning tank. A low calculation
of chemicals is added, with metered feeder, directly to the flotation feed tank. Sodium sulfide, a granular solid, is added also
to the agitated flotation feed tank.



Flotation
Chemicals: The following chemicals are added to the flotation feed tank: Na2S
(Sodium Sulfide), 400 g/mt (solid); Aero 343 Xanthate Collector 40-80 g/mt (liquid); Cytec 7249 conditioner 50 g/mt (liquid);
Cytec 4037 Conditioner 20–40 g/mt (liquid); and Aerofroth 70 or 73 Frother 30 g/mt (liquid).



Rougher
Flotation: The Rougher flotation consists of a bank of 8 flotation cells (or Hybrid float cell), which is fed by the conditioning
tank. The rougher concentrate recovered from the rougher float cells or the first hybrid cell is bagged for shipment and sale.
A very low percentage of chemicals remains in the rougher concentrate.





29











Scavenger
and Cleaner Concentrate: The tailings of the rougher concentrate could be fed to the scavenger and cleaner float cells (or,
a second hybrid cell). The cleaner concentrate would then be bagged and shipped for sale. A very low percentage of chemicals remains
in the cleaner concentrate.



Circuit
Tailings: The tailings from the flotation area are fed to the tailings impoundment area. Less than 10% of chemicals added
at the conditioning tank remain in the tailings slurry. Chemicals do not appear in the water of the tailings; as confirmed by
analysis.



Power:A 45 KW efficient diesel generator will supply power to the camp, mill lights and to the laboratory. Two 50 KW back-up diesel
generators (Selmec, Kamag) are also available for camp use.



The
mill primary generator is a 310 KW Cat Diesel and there is a 455 KW Cat Diesel mill back-up generator.



Diesel
fuel is stored in a 10,000-liter storage tank that feeds the two large generators by gravity flow to a common 500-liter head tank.
The fuel storage tank is contained within a secondary cement impoundment with controlled and oil-trapped drainage.



Electrical:The Company is in process of connecting electrical power sufficient to supply electrical power for the camp and mill.



|ITEM 3. | 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.



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 seeks 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 the 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 Gracia 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 Gracia 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, 2016, in an appellate
ruling, 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
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------







30









|(c) | The AAA does not have jurisdiction to hear disputes arising between shareholders of DynaMéxico, which disputes do
|--- | -----------------------------------------------------------------------------------------------------------------



|(d) | not arise directly and immediately from the Earn In/Option Agreement, dated September 1, 2006.
|--- | ----------------------------------------------------------------------------------------------



$48M Damages Award to DynaMéxico



Also on October 5, 2015, in an appellate ruling,
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 Gracia 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 Gracia 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 Gracia 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 Earn 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.
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







31









|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 record.
|----------- | -----------------------------------------------------------------------------------------------------





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 reviewed through the Courts in México City.



Mexico 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 Mexico (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 $ 48 M 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, Mexico, 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 Mexico on October 5, 2015 – was effectively confirmed.



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 as well.



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 the vast majority of 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 a number of 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.





32









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.



|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 Earn 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 ongoing arbitration already filed or to be filed by the defendant Goldgroup, based on the Earn In/Option Agreement dated September 1, 2006.
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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.
|--------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(C) 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.



(D) DynaMéxico obeyed the
October 5, 2015 Court Order and did not attend the Arbitration hearing.



(E) DynaMéxico will pursue
all legal remedies in order to obtain a full dismissal of the Arbitration Ruling.



(F) The October 5, 2015 Court Order
and the $48 million USD award of damages against Goldgroup Resources Inc. remains in full force and effect as issued. DynaMéxico
is currently pursuing all available remedies in order to collect $48 million USD in damages from Goldgroup Resources Inc. (See
Court Approves Lien on Shares of DynaMéxico owned by Goldgroup Resources, above).



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.



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.





33









DynaResource and DynaMéxico filed a
response on January 9, 2016, and the matter was. 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, 2019, 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-K.





|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.





34







PART II



|ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------



The Company’s common stock is traded
on the OTC Markets under the symbol "DYNR".  The following table sets forth, for the periods indicated, the high
and low bid quotations which reflect inter-dealer prices, without retail mark-up or mark-down and without commissions; and may
not reflect actual transactions. All amounts are denominated in U.S. dollars.



|Year ended December 31, 2018 |  | Low |      |  | High | 
|---------------------------- |  | --- | ---- |  | ---- | 
|First Quarter                |  |     | 1.05 |  |      | 
|Second Quarter               |  |     | 1.14 |  |      | 
|Third Quarter                |  |     | 1.14 |  |      | 
|Fourth Quarter               |  |     | 0.78 |  |      | 





|Year ended December 31, 2017 |  | Low |      |  | High | 
|---------------------------- |  | --- | ---- |  | ---- | 
|First Quarter                |  |     | 1.00 |  |      | 
|Second Quarter               |  |     | 1.01 |  |      | 
|Third Quarter                |  |     | 0.90 |  |      | 
|Fourth Quarter               |  |     | 0.90 |  |      | 



As of March 31, 2019, there were outstanding
17,722,825 shares of our common stock, which were held by approximately 569 shareholders of record. This figure does not include
shareholders that hold their shares in street name or with a broker.



Dividend Policy



No cash dividends on the Company common stock
have been declared or paid since the Company's inception. Payment of future dividends, if any, will be at the discretion of our
Board of Directors after taking into account various factors, including the terms of any credit arrangements, our financial condition,
operating results, current and anticipated cash needs and plans for growth. Our initial earnings, if any, will likely be retained
to finance our growth. At the present time, we are not party to any agreement that would limit our ability to pay dividends.



During the fiscal year ended December 31, 2018,
except as included in our Quarterly Reports on Form 10-Q or in our Current Reports on Form 10-K, we have not sold any equity
securities not registered under the Securities Act.



During the fiscal years ended December 31,
2018 and 2017, no securities of the Company were authorized for issuance under equity compensation plans.



|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------



Not applicable.







|ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



FORWARD-LOOKING STATEMENTS



This Annual Report on Form 10-K 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.”





35









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.





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”). DynaMéxico owns 100% of mining concessions, equipment, camp and related facilities which
comprise the San Jose de Gracia 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 Gracia Project, under contract with
DynaMéxico.



In 2000, the Company formed DynaResource de
México S.A. de C.V. (“DynaMéxico”) for the purpose of acquiring and holding mineral properties and mining
concessions in México and, specifically for acquiring and consolidating the Mining District of San Jose de Gracia. DynaMéxico
completed the consolidation of the entire SJG District to DynaMéxico in 2003 (approx. 15 sq. km. at that time), with the
exception of the San Miguel Mining Concession (7 Hectares, for which DynaMéxico is proceeding towards accomplishing the
transfer of title, under previously signed sale and purchase agreements).





36









In 2005, the Company formed Mineras de DynaResource
S.A. de C.V. (“DynaMineras”), a wholly owned subsidiary. DynaMineras entered into an operating agreement with DynaMéxico
on April 15, 2005. As a consequence of that agreement and subsequent amendments to that agreement, DynaMineras is the exclusive
operating entity for the SJG Project.



Also in 2005, the Company formed another wholly
owned subsidiary, DynaResource Operaciones, S.A. de C.V. (“DynaOperaciones”). DynaOperaciones entered into a personnel
management agreement with DynaMineras and, as a consequence of that agreement, is the exclusive management company for personnel
and consultants involved at the SJG Project.



DynaMéxico currently owns a portfolio
of mining concessions, equipment, camp and related facilities which comprise the San José de Gracia Project (“SJG”).
The mining concessions cover 69,121 hectares (170,802 acres) on the west side of the Sierra Madre mountain range, in northern Sinaloa
State.



The Company currently owns 80% of the outstanding
shares of DynaMéxico. We also own 100% of Mineras de DynaResource S.A. de C.V. (“DynaMineras”), the exclusive
operator of the San José de Gracia Project, under contract with DynaMéxico, and we own 100% of DynaResource Operaciones
de San Jose de Gracia, S.A. de C.V., (“DynaOperaciones”), a company which manages the personnel registered to work
at the San Jose de Gracia Project.



San Jose de Gracia - History



Historical production records from San Jose
de Gracia (“SJG”) report 1,000,000 Oz gold production from a series of underground workings. The major areas report
471,000 Oz. produced at the La Purisima area of SJG, at an average grade of 66.7 g/t.; and 215,000 Oz. produced from the La Prieta
area, at an average grade of 27.6 g/t. Mineralization at SJG has been traced on surface and underground over 15 sq. km.



DynaMéxico was formed in March 2000,
for the purpose of acquiring the concessions comprising the SJG District, and to consolidate all ownership of SJG under DynaMéxico.
DynaMéxico focused on acquisition and consolidation work through 2003 and reported a virtually clear title and consolidated
ownership to the district at December 31, 2013.



Drilling – Exploration Programs (1997
– 2000)



A drill program was conducted at SJG in 1997
to 1998 by a prior majority owner. Approximately 6,172 meters drilling was completed in 63 core drill holes. Significant intercepts,
including bonanza grades, outlined the down dip potential of the Northeast section (150 Meter NE to SW extent of the Drilling)
of the Los Hilos to Tres Amigos Trend of SJG. Surface and underground sampling in 1999 to 2000 confirmed high grades in historic
workings and surface exposures throughout the project area. These high grades outline the presence of mineralization shoots developed
within the veins. The mineralized shoots appear to be controlled by dilational jogs and/or vein intersections. A total of
544 samples were collected in 1999 to 2000 and assayed an average 6.51 g/t gold.



Structure of Company / Operations



Activities in México are currently conducted
by DynaMineras; with the management of personnel being contracted by DynaMineras through to DynaOperaciones. Executive Management
of DynaResource, Inc. and consultants manage the operating companies in México; while the Chairman/CEO of DynaUSA is the
President of each of DynaMéxico, DynaMineras and DynaOperaciones. Fees for management and administration are charged by
DynaMineras and DynaOperaciones, which are eliminated in consolidation.



Exclusive Operating Entity at
San Jose de Gracia



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 Gracia
Project. DynaResource owns 100% of DynaMineras.







DynaMéxico General Powers of Attorney



The Chairman-CEO of DynaUSA also serves as
the President of DynaMéxico. 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.



Company Ownership and Description of Subsidiaries





37









A description of the subsidiaries owned by
the Company and its ownership in each is summarized below:



DynaResource de México, S.A. de C.V.:

80% Owned by DynaResource, Inc.



|● | 100% owner of the San Jose de Gracia Property;
|- | ----------------------------------------------



Mineras de DynaResource, S.A. de C.V.:                                                                                                              
                           
                  100% Owned by DynaResource, Inc.



|● | Exclusive Operator of the San Jose de Gracia Project;
|- | -----------------------------------------------------



|● | Entered into Exploitation Agreement (“EAA”) with DynaMéxico (See EAA below);
|- | ----------------------------------------------------------------------------



|● | Entered into a 20-year Surface Rights Agreement with the Santa Maria Ejido (See Surface Rights Agreement below);
|- | ----------------------------------------------------------------------------------------------------------------



DynaResource Operaciones de San Jose de Gracia,
S.A. de C.V.:                                                                                                                     100%
Owned by DynaResource, Inc.



|● | Personnel Management Company at San Jose de Gracia;
|- | ---------------------------------------------------



Pilot Production Activities (2003 –
2006)



DynaMéxico, conducting operations through
DynaMineras, mined high-grade veins at the San Pablo area of SJG from mid-2003 to June 2006. 18,250 Oz. gold was produced and sold
from mill feed tonnage of 42,000 tonnes, at an average grade of approximately 15-20 g/t. Production costs were reported at approximately
$175/Oz. gold in this small scale, pilot production operation (See results in table below). The pilot operations at SJG consisted
of the installation of a gravity/flotation processing circuit to an existing mill, and initial test runs with tailings were completed
in 2002. Actual test mining at the high-grade San Pablo area of the property commenced in March 2003.



|Mined and Milled Tonnage           | 42,000 tonnes
|---------------------------------- | -------------
|Production (Oz Au)                 | 18,250 Oz    
|Average Grade                      | 15-20 g/t    
|Recovery Efficiency (Plant)        | 85%          
|Recovery in Concentrate (Sales)    | 90%          
|Production Cost (Average, 4 Years) | $175 / Oz    



Suspension of Production Activities (2006)



The Company initiated the test production activity
in 2003 and, at that time, gold prices were depressed. Exploration funding opportunities, while available, were deemed to be too
dilutive by Company management. Subsequently, in 2006, commodities prices were improving, and the Company was able to negotiate
financing in order to fund exploration activities. Therefore, the Company suspended test mining activities in 2006 in order to
focus on the exploration of the vast SJG District. While the test mining and pilot milling operations were considered successful
(see results in the table above), a small-scale production operation was not expected to provide the necessary capital in order
to fund exploration of the vast SJG District. The limited-scope pilot production activity provided significant benefits through
confirmation of production grades, metallurgy and process, efficiency of recoveries, and production costs.



Drilling programs (2007 – 2011)



Drilling programs completed by the Company’s
subsidiaries produced a total of 298 drill holes covering 68,741 meters of drilling from 2007 through March 2011. Results of the
drilling activity, including the results of previous drilling in 1997-1998, appear in an “SJG Drill Intercepts Summary File
through 11-298”, as Exhibit 99.1 to our Form 10-Q for the period ended June 30, 2011 filed with the SEC on August 22, 2011,
and available on EDGAR at: [http://www.sec.gov/Archives/edgar/data/1111741/000112178111000241/ex99one.htm]. Additionally, the updated
Drill Summary File is posted on the Company’s web site at www.dynaresource.com.



Technical Report According to Canadian National Instrument 43-101
(2012)



In 2012, DynaMéxico
commissioned Servicios y Proyectos Mineros (“SPM”) for the production
of a Technical Report according the Canadian National Instrument 43-101 (“the DynaMéxico NI 43-101 Technical Report”)
at San Jose de Gracia. 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 (the “DynaMéxico NI 43-101 Mineral Resource Estimate”).



38









Parameters Used to Estimate the DynaMéxico
NI 43-101 Mineral Resource Estimate--The data base for the San Jose de Gracia 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 DynaMéxico 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.



DynaMéxico NI 43-101 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 DynaMineras.



DynaMéxico NI 43-101 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 SJG Project, so the variograms for gold
were used in estimation of the four other metals.



The veins at San Jose de Gracia 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.



DynaMéxico NI 43-101 Mineral Resource
Estimate and DynaMéxico NI 43-101 Technical Report - Data Verification--Mr. Ramon Luna Espinoza (“Mr. Luna”)
initially visited the San Jose de Gracia 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 San José de Gracia’s core logging and storage facilities, the geology offices, the meteorological
station, the plant nursery, and the mill. Mr. Sandefur also inspected San José de Gracia’s core logging and storage
facilities.



The Company received from DynaMéxico
on February 14, 2012, a Mineral Resource Estimate according to Canadian National Instrument 43-101 for San Jose de Gracia (the
“DynaMéxico NI 43-101 Mineral Resource Estimate’). The DynaMéxico NI 43-101 Mineral 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 DynaMéxico NI 43-101 Mineral Resource Estimate
concentrates on four separate main vein systems at SJG: Tres Amigos, San Pablo, La Union, and La Purisima.





39









The DynaMéxico NI 43-101 Mineral Resource
Estimate prepared by Mr. Robert Sandefur for the DynaMéxico NI 43-101 Technical Report included Indicated Resources at Tres
Amigos and San Pablo. The “DynaMéxico NI 43-101 Mineral Resource Estimate also included an Inferred Resource for the
four vein systems. Table summaries of Indicated and Inferred Resources are contained in the DynaMéxico NI 43-101 Mineral
Resource Estimate. The DynaMéxico NI 43-101 Mineral Resource Estimate has been filed, along with the DynaMéxico NI
43-101 Technical Report, on SEDAR; but is not disclosed in this Form 10-Q.





Updated Technical Report According to Canadian
National Instrument 43-101 (2012)



The Company received from DynaMéxico,
an updated Technical Report according to Canadian National Instrument 43-101, which included the DynaMéxico NI 43-101 Mineral
Resource Estimate (the “Updated DynaMéxico NI 43-101 Technical Report”). The Updated DynaMéxico NI 43-101
Technical Report was approved by DynaMéxico, and filed by the Company on SEDAR; but is not disclosed in this Form 10-Q.



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 unpaid advances made by DynaMineras
to DynaMéxico as of December 31, 2018 is $2,373,500. And, in addition, the total balance owed by DynaMéxico to the
Company as of December 31, 2018 is $4,000,000. 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).



Surface Rights Agreement



On January 6, 2014 DynaMineras entered into
a 20-year surface rights agreement with the Santa Maria Ejido Community surrounding the San
Jose de Gracia Property (the “20 Year SRA”). The 20 Year SRA 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. $74,000 USD),
commencing in 2014. The 20-year SRA provides DynaMineras with surface access to the core resource areas of SJG, and allows
for all permitted mining, pilot production and exploration activities from the owners of the surface rights (Santa Maria Ejido
community).



Additionally,
DynaMineras expects to construct a Medical Facility and a Community Center within the SJG community in year 2015. DynaMineras reports
that land and building for which the medical facility and community center will be constructed have been approved for re-zoning
by the local community; and plans are being drawn for constructing the facilities.



Rehabilitation and Start-up of Pilot Mill
Facility at San Jose de Gracia



Under the terms of the Exploitation Amendment
Agreement (“EAA”), as described above, DynaMineras has rehabilitated the pilot mill facility at SJG and it has rehabilitated
the San Pablo mine. The SJG pilot mill facility (a gravimetric-flotation circuit) is designed to process bulk samples mined from
selected target areas of SJG, including San Pablo. Operations at SJG are managed by DynaMineras and are projected to be similar
to those conducted by DynaMéxico during 2003-2006.





40









Test Underground Mining and Pilot Mill Operations
(2015)



In July 2015, the Company commenced a capital
investment program designed to increase tonnage and output from the test mining operations, and to increase volume and output through
the pilot mill facility. Through DynaMineras, the Company was engaged in the implementation of this capital investment program
from July through December 2015.



Capital Investment (2015)



The capital investment program consisted of
a net total of $3,565,000 USD as generally described below:



Contract Mining ($713,000);
including $250,000 Deposit (advance for services), and $513,000 in direct mining costs, explosives, and payments to contractor;



Mine
related costs ($290,000); including mine plan development, permits, assays, consulting, mine supplies, and equipment items
expensed;



Mill and Camp ($613,000);
Improvements to the Mill and Camp, including pre-operation expenses;



Personnel Costs ($673,000);
including payroll and consulting expenses;



Equipment ($636,000); long
term equipment purchases including transportation, mine loading and hauling, generators, compressors and pumps;



Overhead ($285,000);
including legal expenses, consulting, and administration;



IVA ($272,000);
Value added taxes paid, and refundable;



Land Use and Rental
($83,000);



Year 2017 Improvements and Expansion



During 2017 the Company initiated capital projects
at SJG in the amount of $1,273,500 USD to improve and expand test mining and pilot milling operations:









|● |  | Medical facility:                                                     | $ | 107,500;   | 
|- |  | --------------------------------------------------------------------- | - | ---------- | 
|  |  |                                                                       |   |            | 
|● |  | Expanding camp, office, and infrastructures:                          | $ | 145,500;   | 
|  |  |                                                                       |   |            | 
|● |  | Expanding tailings pond, installing liners:                           | $ | 265,000;   | 
|  |  |                                                                       |   |            | 
|● |  | Improving, setting new foundation, and re-installing the Denver Mill: | $ | 257,000;   | 
|  |  |                                                                       |   |            | 
|● |  | Installing Mill #3:                                                   | $ | 258,000;   | 
|  |  |                                                                       |   |            | 
|● |  | Machinery & Equipment:                                                | $ | 200,000;   | 
|  |  |                                                                       |   |            | 
|● |  | Transportation:                                                       | $ | 40,000;    | 
|  |  |                                                                       |   |            | 
|  |  | Total                                                                 | $ | 1,273,500; | 









Year 2018 Improvements and Expansion



During 2018 the Company initiated capital projects
at SJG in the amount of $1,039,000 USD to improve and expand test mining and pilot milling operations:





|● |  | Machinery & Equipment: | $ | 224,000;   | 
|- |  | ---------------------- | - | ---------- | 
|  |  |                        |   |            | 
|● |  | Transportation:        | $ | 3,000;     | 
|  |  |                        |   |            | 
|● |  | Medical facility:      | $ | 15,000;    | 
|  |  |                        |   |            | 
|● |  | Installing Mill #3:    | $ | 797,000;   | 
|  |  |                        |   |            | 
|  |  | Total:                 | $ | 1,039,000; | 









41













Summary of Test Mining and Pilot Mill Operations
for 2015, 2016, 2017 and 2018:



|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.)
|---- | -------------------------------------- | ----------------------------------------- | --------------------------- | ------------------------------------------------- | -------------------------------------------
|2015 | 7,180                                  | 8.30                                      | 78.0%                       | 1,495                                             | 1,308                                      
|2016 | 33,172                                 | 12.70                                     | 79.7 %                      | 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                                     



DynaMineras expects to continue to increase its test underground
mining activity and pilot milling operations in 2018; and projects the increased output to 250 tons/day from the mine and mill
during 2018.



Structure of Company / Operations



Activities in México are conducted by
Mineras de DynaResource S.A. de C.V. (“DynaMineras”); with the management of personnel being contracted by DynaMineras
through to the personnel management subsidiary, DynaResource Operaciones, S.A. de C.V. (“DynaOperaciones”). Management
of DynaResource, Inc. and consultants continue to manage the operating companies in México; while the Chairman/CEO of DynaUSA
is the President of each of the operating companies in México. Fees for Management and administration are charged by DynaMineras
and DynaOperaciones, which are eliminated in consolidation.



Exploitation Amendment Agreement



In 2013, DynaMineras, in accordance with the
terms of the Exploitation Amendment Agreement, commenced the rehabilitation of the San Pablo Mine and the refurbishment of the
pilot production facility at SJG. DynaMéxico received permits as discussed above for the rehabilitation and operation of
the pilot mill facility and the exploitation and mining of the San Pablo area of SJG. The basis for the mining activity and the
operation of the pilot mill facility are the NI 43-101 Mineral Resource Estimate, the Technical Report, the block models prepared
as a result of the recent drilling activity, and the recent production history of 2003-2006.





Competitive Advantage



The Company, through its subsidiaries, has
been conducting business in México since March 2000. During this period the Company believes it has structured its subsidiaries
properly and strategically, and during which time the Company has retained key personnel and developed key relationships and support.
The Company believes its experience and accomplishments and relationships in México give it a competitive advantage, even
though many competitors may be larger and have more capital resources.



DynaMéxico retains 100% of the rights
to concessions over the area of the San José de Gracia property and it currently sees no competition for mining on the lands
covered by those concessions. The sale of gold and any bi-products would be subject to global market prices, which prices fluctuate
daily. DynaMéxico was successful in selling gold concentrates produced from SJG in prior years, and the Company expects
a competitive market for produced concentrates and/or other mineral products in the future. Actual prices received by DynaMineras
in the sale of concentrates or other products produced from San Jose de Gracia would depend upon these global market prices, less
deductions.



The Company’s operating subsidiaries,
DynaMineras and DynaOperaciones, receive monthly fees for management of the SJG activities and personnel. These fee amounts are
eliminated in consolidation. Other than those intercompany fees, the Company reported revenue of $14,059,697 in 2018 and $10,850,091
in 2017.



Capital Requirements



The mining industry in general requires significant
capital in order to take a property from the exploration, to development to production. These costs remain a significant barrier
to entry for the average company but once in production, there is a ready market for the final products, In the case of SJG, the
final product would be mainly gold, the price of which is determined by global markets, so there is not a dependence on a customer
base.



Gold



Gold Uses.     Gold
generally is used for fabrication or investment. Fabricated gold has a variety of end uses, including jewelry, electronics, dentistry,
industrial and decorative uses, medals, medallions and official coins. Gold investors buy gold bullion, official coins and jewelry.





42









Gold Supply.    A
combination of current mine production, recycling and draw-down of existing gold stocks held by governments, financial institutions,
industrial organizations and private individuals make up the annual gold supply. Based on public information available for the
years 2008 through 2014, on average, current mine production has accounted for approximately 64% of the annual gold supply.



Gold Price.    The
following table presents the annual high, low and average daily afternoon fixing prices for gold over the past ten years on the
London Bullion Market ($/ounce):



|Year |  | High |       |  | Low |   |       | Average | 
|---- |  | ---- | ----- |  | --- | - | ----- | ------- | 
|2009 |  | $    | 1,213 |  |     | $ | 810   |         | 
|2010 |  | $    | 1,421 |  |     | $ | 1,058 |         | 
|2011 |  | $    | 1,895 |  |     | $ | 1,319 |         | 
|2012 |  | $    | 1,792 |  |     | $ | 1,540 |         | 
|2013 |  | $    | 1,694 |  |     | $ | 1,192 |         | 
|2014 |  | $    | 1,380 |  |     | $ | 1,140 |         | 
|2015 |  | $    | 1,303 |  |     | $ | 1,057 |         | 
|2016 |  | $    | 1,366 |  |     | $ | 1,151 |         | 
|2017 |  | $    | 1,379 |  |     | $ | 1,101 |         | 
|2018 |  | $    | 1,355 |  |     | $ | 1,178 |         | 







Source: Kitco, Reuters and the London Bullion Market
Association



On March 19, 2019, the afternoon fixing
gold price on the London Bullion Market was $1,295 per ounce.



Condition of Physical Assets and Insurance



Our business is capital intensive and requires
ongoing capital investment for the replacement, modernization or expansion of equipment and facilities. We and our subsidiaries
maintain insurance policies against property loss. Such insurance, however, contains exclusions and limitations on coverage, particularly
with respect to environmental liability and political risk. There can be no assurance that claims would be paid under such insurance
policies in connection with a particular event.







Environmental Matters



Our activities are largely outside the United
States and subject to governmental regulations for the protection of the environment. We conduct our operations so as to protect
public health and the environment and believe our operations are in compliance with applicable laws and regulations in all material
respects. DynaMéxico is involved with maintaining tailings ponds and test mining and pilot production activities (through
DynaMineras) with the oversight of SEMARNAT, the federal environmental agency of México.

Results
for the Years Ended December 31, 2018 and 2017





Summary of Test Mining and Pilot Mill Operations
for 2017 and 2018:



|Year | Total Tons
        Mined & Processed | Reported Mill Feed Grade
        (g/t Au) | Reported Recovery
        % | Gross Gold Concentrates Produced
        (Au oz.) | Net Gold Concentrates Sold
        (Au oz.)
|---- | ------------------------------------ | ----------------------------------------- | --------------------------- | ------------------------------------------------- | -------------------------------------------
|2017 | 35,170                               | 12.95                                     | 85.00 %                     | 12,636                                            | 10,740                                     
|2018 | 52,038                               | 9.82                                      | 86.11 %                     | 14,147                                            | 13,418                                     



DynaMineras expects to continue to increase its test underground
mining activity and pilot milling operations in 2018; and projects the increased output from to 250 tons/day from the mine and
mill during 2018.



Test pilot operations in 2018 yielded 52,038
Tons mined and processed from underground test mining activity and pilot milling operations; and the production of approximately
14,147 gross Oz Au, and net of dry weight adjustments at the buyer’s facilities, the production of approximately 13,418 Oz
Au. The Company reports net revenue of $14,059,697 net of buyer’s price discount and refining and treatment costs.





43









Test pilot operations in 2017 yielded 35,170
Tons mined and processed from underground test mining activity and pilot milling operations; and the production of approximately
12,636 gross Oz Au, and net of dry weight adjustments at the buyer’s facilities, the production of approximately 10,740 Oz
Au. The Company reports net revenue of $10,850,091 net of buyer’s price discount and refining and treatment costs.



DynaMineras expects to continue its test underground mining activity
and pilot milling operations in 2019; and projects the output of 300 tons/day from the mine and mill in 2019.



REVENUE. Revenues for the years ended December
31, 2018 and 2017 were $14,059,697 and $10,850,091, respectively. The Company continued the test mining and pilot mill processing
at San Jose de Gracia, including the production and sale of precious metals concentrates. The increase is reflective of the increase
tonnage mined detailed above as a result of the opening of the San Jose Garcia East mine as well as increase production activity
from the expansion of operating in the second half of 2017.



PRODUCTION COSTS RELATED TO SALES. Production
costs related to sales for the years ended December 31, 2018 and 2017 were $1,716,721 and $1,558,084, respectively. These are expenses
directly related to the milling, packaging and shipping of gold and other precious metals product. The increase is consistent with
the increase production and revenue.



MINE PRODUCTION COSTS. Mine production costs
for the years ended December 31, 2018 and 2017 were $2,807,474 and $1,178,162 respectively. These costs are directly related to
the extraction of mine tonnage to be processed at the mill. The increase is consistent with the increase tonnage mined.



MINE EXPLORATION COSTS. Mine exploration costs
for the years ended December 31, 2018 and 2017 were $3,639,791 and $3,218,831, respectively. These are the cost of extracting waste
material to reach the materials to be extracted for processing. The percentage increase was less than the production increase as
a result of more targeted mining.



MINE EXPANSION COSTS: Mine expansion costs for the years ended December
31, 2018 and 2017 were $426,896 and $253,231, respectively. These were the cost associated with preparing the San Jose de Gracia
East Mine for production. The Company completed the mine expansion project in the first half of 2018 and begin actively mining
the San Jose de Gracia East mine in the second quarter.



TRANSPORTATION. Transportation costs for the
years ended December 31, 2018 and 2017 were $645,504 and $576,315, respectively. These are the costs of transporting the product
to the customer for treatment and sale. The increase was consistent with the increased revenue



CAMP, WAREHOUSE AND SUPPORT FACILITIES. Camp,
warehouse and support facility cost for the years ended December 31, 2018 and 2017 were $2,796,279 and $1,226,897, respectively.
These are the support cost of the mining facilities including housing, food, security and warehouse operations. The camp capacity
was doubled in the second half of 2017 resulting in a full year of expenses in 2018.



PROPERTY HOLDING COSTS. Property holding costs
for the years ended December 31, 2018 and 2017 were $1,310,220 and $702,599, respectively. These costs are concessions taxes, leases
on land and other direct costs of maintaining the property. The increase was a result of increase concessions on the Francisco
Arturo lease and settlement of prior year concessions for amount in excess of the accrual.



GENERAL AND ADMINISTRATIVE
EXPENSES. General and administrative expenses for the years ended December 31, 2018 and 2017 were $2,203,366 and $2,609,675 respectively.
These are the cost of operating the Company not directly associated with the mine operations including management, accounting and
legal expenses.



OTHER INCOME (EXPENSE). Other income for the
years ended December 31, 2018 and 2017 was $1,553,851 and $3,155,274, respectively. Included in this category in 2018 is interest
expense of $(391,757), other expense of $(323,034), Change in Derivative Liability of $2,206,825, gain on sale of assets of $10,492
and currency transaction gain (loss) of $51,325. Included in this category in 2017 is interest expense of $(158,944), change in
derivative of $1,924,582 and currency transaction gain or (loss) of $1,388,573.



NON-CONTROLLING INTEREST. The non-controlling
interest portion of the net loss for the years ended December 31, 2018 and 2017 was $386,089 and $125,501, respectively. This represents
the non-controlling interest share of DynaMéxico’s loss.



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 years ended December 31, 2018 and 2017 consisted of unrealized currency losses
of $178,473 and $(1,781,773) respectively.



Liquidity and Capital Resources



As of December 31, 2018, the Company had working
capital of $(1,783,693), comprised of current assets of $6,567,578 and current liabilities of $8,351,271, of which $974,683 is
a derivative liability. This represents an increase of $41,161 from the working capital maintained by the Company of $(1,824,854)
with a derivative liability of $3,181,508 as of December 31, 2017. The primary reason for this deficit is recognition of financial
statement derivatives incurred in the issuance of Preferred C shares in 2015. The Company continued to ramp up the operations to
the refurbishment of the pilot mill facility and the rehabilitation of the San Pablo mine at San Jose de Gracia.



44









Net cash provided (used) in operations for
the year ended December 31, 2018 was $508,249 compared to $2,058,586 in the year ended December 31, 2017. The decrease is primarily
the result of the decrease in net income of $2,527,709 for the year ended December 31, 2017 to a net (loss) of $(211,518) in the
current year offset by an increase in payables and customer advances.



Net cash (used) in investing activities for
the years ended December 31, 2018 and 2017 was $(1,019,607) and $(1,273,189), respectively. Both years amount consisted of capital
expenditures necessary for the expansion of mining operations detailed elsewhere.



Cash provided (used) provided by financing
activities for the year ended December 31, 2018 was $(512,136) compared to $2,328,106 for the year ended December 31, 2017. The
swing was a result of $2,500,000 in proceeds from the issuance of stock as a result of the exercise of warrants in the year ended
December 31, 2017. There were no funds raised from the issuance of stock in the current year. In additions cash used for repayment
of debt rose from $171,894 in the prior year to $512,136 this year.





Non-controlling Interest



Under the terms of the Earn In Agreement (September
1, 2006 to March 15, 2011), Goldgroup Mining Inc. and its wholly owned subsidiary Goldgroup Resources, Inc. (Goldgroup), through
2010, had contributed capital to DynaMéxico in order to acquire 25% of the outstanding shares (a shareholder interest) of
DynaResource de México, S.A. de C.V. (DynaMéxico). In March 2011, Goldgroup had contributed a total of $18 M USD
capital to DynaMéxico in order to acquire a total of 50% of the outstanding shares (a shareholder interest) of DynaMéxico.
From March 2011 through May 2013, Goldgroup owned 50% of the outstanding shares of DynaMéxico, and since May 2013 to current
date Goldgroup owns 20% of the outstanding shares of DynaMéxico. The applicable portion of the earnings or loss attributable
to Goldgroup is offset in this section. In the years ended December 31, 2018 and 2017 the portion of the net loss attributable
to Goldgroup was $(386,089) and $(125,501), respectively.



Off-Balance
Sheet Arrangements



As of December 31, 2018, we did not have
any off-balance sheet arrangements (as that phrase is defined by SEC rules applicable to this report) 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
funds its general and administrative expenses in the US. The Company’s operating subsidiaries, DynaMineras and DynaOperaciones,
receive monthly fees for management of SJG activities and personnel. 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 2018. The Company may seek additional debt funding during the next 24 months depending on results
of its pilot operations, market conditions, and other factors.



Capital Expenditures



The Company’s primary activities relate
to the exploitation 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.



Sampling Process-Core Drill Holes



The geological data reported from core drill
holes contained in this report was verified by an appropriate quality control person using industry standard quality controls and
quality assurance protocols utilized in exploration activities. Standard reference samples and various duplicates are inserted
in each batch of assays. Drill core samples are cut by saw on site and samples splits are prepared for shipment, sealed and then
shipped for assaying. Samples were sent to a certified assayer (Inspectorate Exploration & Mining Services Ltd., Vancouver,
BC.) and analyzed for gold by fire assay and for silver and 34 other trace and major elements in accordance with standard industry
practices.





45









Drilling Programs



In the period September 2006 through December
31, 2011, funding from Goldgroup provided for DynaMéxico’s completing approximately 68,741 meters drilling at San
Jose de Gracia, resulting in a defined NI 43-101 Mineral Resource Estimate as described in the 2012 DynaMéxico-CAM SJG Mineral
Resource Estimate. The Company expects DynaMineras to plan continued and subsequent drilling programs at San Pablo, Tres Amigos,
La Ceceña, Palos Chinos, La Union, La Purisima, and La Prieta / Rosario / Rudolpho. The Company expects further drilling
programs to confirm extensions to mineralization in all directions and down dip from the main target areas.



Mineralization at San José de Gracia



The Company was informed by DynaMéxico
that it had outlined significant mineralization from drilling activity at San Pablo, Tres Amigos, La Union, and La Purisima areas
of SJG as described in the recent NI 43-101 2012 DynaMéxico-CAM SJG Mineral Resource Estimate. Further drilling is expected
to outline additional mineralization at these 4 major target areas at SJG, while additional mineralization is also expected to
be defined at La Prieta and the area Northeast of Tres Amigos. Other areas at SJG indicate clear potential to develop additional
mineralization.



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 Gracia



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 Gracia
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.





Rehabilitation and Start-up of Pilot Mill
Facility at San Jose de Gracia



Under the terms of the Exploitation Amendment
Agreement (“EAA”), as described above, DynaMineras has rehabilitated the pilot mill facility at SJG. The SJG pilot
mill facility (a gravimetric-flotation circuit) is now processing bulk samples mined from selected target areas of SJG. Operations
at SJG are managed by DynaMineras and are similar to those conducted by DynaMéxico during 2003-2006.



Capital Advances to Subsidiaries



DynaResource de México (“DynaMéxico”)





46









In May 2013, the Company acquired additional
shares in the outstanding equity in DynaMéxico in exchange for the retirement of accounts receivable of $2,393,803, which
amount was due from DynaMéxico at December 31, 2012. As a result, as of May 17, 2013, the Company owns 80% of the outstanding
equity of DynaMéxico.



At December 31, 2014, the Company issued 1,333,333
shares of its common stock to DynaMineras in exchange for $4,000,000 receivable it held from DynaMéxico.



As of December 31, 2018, and December 31, 2017
DynaMineras owed the Company $6,392,705 and $6,346,500, respectively.



As of December 31, 2018, and December 31, 2017
DynaMéxico owed the Company $4,000,000 and $4,000,000, respectively.



As of December 31, 2018, and December 31, 2017
DynaOperaciones owed the Company $225,000 and $225,000, respectively.



As of December 31, 2018, and December 31, 2017
DynaMéxico owed DynaMineras $2,373,500 and $2,539,639, respectively.



As of December 31, 2018, and December 31, 2017
DynaOperaciones owed DynaMineras $7,134,808 and $6,077,325, respectively.



Beginning on December 31, 2012, the Company
and DynaMineras agreed with DynaMéxico to accrue interest on the total amount receivable until repaid or otherwise retired.
The interest rate to be accrued is agreed to be simple annual interest at the rate quoted by the Bank of México.



Future Advances to DynaMineras and DynaMéxico
from the Company



The Company expects to make additional advances
to DynaMineras and DynaMéxico. Future advances from DynaMineras to DynaMéxico will be made under the terms of the
Exploitation Amendment Agreement. Other advances are agreed to be accrued in the same manner as previous receivables, until or
unless otherwise agreed between DynaMéxico and the Company.



Advances from Goldgroup Mining Inc. (“Goldgroup”)
to DynaMéxico



In 2014, Goldgroup advanced $111,500 to DynaMéxico
and in 2013 Goldgroup advanced $120,000 USD to DynaMéxico. This total $231,500 is being carried by DynaMéxico as
a Due to Non-Controlling Interest at December 31, 2018 and 2017.



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 share capital of DynaNevada. DynaNevada is 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”). In March 2010, DynaNevada de México completed
the Option with IMMSA so that it now owns 100% of Santa Gertrudis. In June 2010, DynaNevada de México acquired an additional
6,000 Hectares in the State of Sinaloa (“the San Juan Property”). The Company has loaned additional funds to DynaNevada
since 2010 for maintenance of concessions and other nominal required fees and expenses. The Company had a receivable from DynaResource
Nevada, Inc. of $0 and $0 at December 31, 2018 and 2017 respectively. The Company has investment balance in DynaResource Nevada,
Inc. of $70,000 and $70,000 as of December 31, 2018 and 2017, respectively.



Minority Interest Holder in DynaMéxico
Attempts to Interfere with Activities at San Jose de Gracia (2016)



Goldgroup Mining Inc., Vancouver, BC. (“GGA.TO”
– “Goldgroup Mining”), a Minority Interest Holder in DynaMéxico through a Mexican subsidiary Goldgroup
Resources Inc., issued a press release on June 27, 2016 claiming to announce a closing of mining operations at the SJG Project,
which was misleading, deceptive, and proved to be false. Goldgroup Mining issued the June 27 press release without independently
confirming the facts – and admitted its failure to confirm the facts in the release. DynaMéxico corrected the misleading
press release issued by Goldgroup Mining as described below:







1. DynaMéxico herein states
the facts:



(a) Following an unscheduled inspection
of the mining operations at the SJG Project on June 26, 2016 by a Sinaloa State governmental agency, an order of temporary work
stoppage was quickly overturned by Sinaloa State court order.





47









(b) The Sinaloa State Court ruled
that the unscheduled inspection and the temporary suspension of mining operations at the SJG Project, were improper. The Sinaloa
State Court further ordered the immediate removal of the temporary suspension.



(c) Following the Sinaloa State
Court Order, all mining operations at SJG promptly resumed normal activities.



2. DynaMéxico herein states
further facts:



(a) Following a second unscheduled
inspection of the mining and milling operations at the SJG Project on August 18, 2016 by a Sinaloa State governmental agency, an
order of temporary work stoppage was quickly overturned by a second Sinaloa State court order.



(b) The Sinaloa State Court ruled
that the unscheduled inspection and the temporary suspension of mining and milling operations at the SJG Project, were again improper.
Once again, the Sinaloa State Court further ordered the immediate removal of the temporary suspension.



(c) Following the second Order issued
by the Sinaloa State Court, all mining and milling operations at SJG once again promptly resumed normal activities.



3. The award of damages in excess of $48 million
USD against Goldgroup Resources Inc. (“Goldgroup Resources”, a wholly owned subsidiary of Goldgroup Mining Inc.), by
virtue of a sentence issued on October 5, 2015 by the Thirty Sixth Civil Court of the Superior Court of Justice of the Federal
District of México, remains as ordered by the court.



4. On October 5, 2016, the Thirty-Sixth Civil
Court of the Superior Court of Justice of the Federal District of Mexico (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”).



(a) Goldgroup Mining Inc., the parent
company (“Goldgroup Mining”), has not disclosed the $48 million award of damages, Nor the Lien against the Shares,
nor has Goldgroup Mining disclosed the unsuccessful efforts of its subsidiary to challenge the $ 48 million damages award, in its
Annual Information Form -- the equivalent of its annual report to shareholders.



(b) An unrelated lawsuit, in which
the amount in controversy was only $3 million, was disclosed by Goldgroup Mining Inc.



(c) Goldgroup Resources currently
holds a minority interest in the outstanding share capital of DynaMéxico. Goldgroup Resources has challenged this level
of ownership through the legal system, but this challenge has also been unsuccessful. The ownership of Goldgroup Resources in the
capital of DynaMéxico remains at 20%.



(d) Goldgroup Mining, the parent
company, has not disclosed the unsuccessful efforts of Goldgroup Resources to challenge this ownership level in DynaMéxico,
in its Annual Information Form.



(e) Since 2005, the exclusive operator
of the SJG Project, under contract with (and an affiliate of) DynaMéxico, is Mineras de DynaResource S.A. de C.V. (“DynaMineras”).
This operating control of the SJG Project has continued uninterrupted since 2005, before Goldgroup Resource contributed any capital
investment to DynaMéxico.



(f) Goldgroup Mining, the parent
company, has not disclosed that DynaMineras has operating control of the SJG Project, in its Annual Information Form.



(g) Since 2000, the President of
DynaMéxico holds broad powers of attorney granted by the shareholders of DynaMéxico. The powers of attorney give
the President broad authority to act for DynaMéxico. The powers of attorney existed before Goldgroup Resources contributed
any capital investment to DynaMéxico.



(h) Goldgroup Mining, the parent
company, has not disclosed the existence of the powers of attorney held by the President of DynaMéxico, in its Annual Information
Form.



DynaMéxico’s further clarifying
statements regarding the SJG Project:



(a) In recent years, Goldgroup Mining
and Goldgroup Resources (“Goldgroup”) have continuously misrepresented ownership interest and shareholder position
related to DynaMéxico and the SJG Project;



(b) DynaMéxico, since May
2000, owns 100% of the mining concessions and related interest comprising the SJG Project;



(c)
At no time has Goldgroup owned any interest in the SJG Project; rather its only ownership interests have been earned under agreement
as a common shares equity interest (shareholder’s interest) of DynaMéxico;





48









(d) DynaResource, Inc., Irving,
Texas (OTCQB: DYNR - “DynaUSA”) currently owns 80% of the outstanding share Capital of DynaMéxico; Goldgroup
currently owns 20% of the outstanding share capital of DynaMéxico;



(e) At no time during its involvement
as a common shares equity interest holder (shareholder) of DynaMéxico, has Goldgroup been an operator at the SJG Project;



|(f) | There is no joint venture agreement with Goldgroup involving the SJG Project;
|--- | -----------------------------------------------------------------------------



(g)Since
the earning of its shareholder’s interest in DynaMéxico (March 2011), Goldgroup has continuously refused to contribute
funds to the ongoing maintenance, advance, and further development of the SJG Project;



(h)Consistently
and continuously since March 2011, Goldgroup has sought to, and threatened to stop, delay, or otherwise impair and negatively impact
the financing, maintenance, advance and further development of the SJG Project;



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-K.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|-------- | ---------------------------------------------------------



Not applicable.





49







|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------



Incorporated into and forming an integral part
of this Form 10-K are the audited financial statements for the Company for the years ended December 31, 2018 and 2017. The financial
statements as of December 31, 2018 and 2017 of the Company included in this Form 10-K have been audited by Whitley Penn LLP, an
independent registered public accounting firm, as set forth in their report.



Financial Statements included in the Form 10-K:



Report of Independent Registered Public Accounting
Firm



Consolidated Balance Sheets as of December 31, 2018
and 2017



Consolidated Statements of Operations for the Years
Ended December 31, 2018 and 2017



Consolidated Statement of Changes
in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2018 and 2017



Consolidated Statements of Cash
Flows for the Years Ended December 31, 2018 and 2017



Notes to the Consolidated Financial
Statements for the Years Ended December 31, 2018 and 2017





50







REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To
the Board of Directors and Stockholders of

DynaResource,
Inc.



Opinion
on the Financial Statements



We
have audited the accompanying consolidated balance sheets of DynaResource, Inc. and subsidiaries (the “Company”) as
of December 31, 2018 and 2017, and the related consolidated statements of income and comprehensive income, changes in stockholders’
equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2018 and 2017, and the results of their operations and their cash flows for the years then ended,
in conformity with accounting principles generally accepted in the United States of America.



Basis
for Opinion



These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.



We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but
not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.
Accordingly, we express no such opinion.



Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.



We
have served as the Company’s auditor since 2018.





/s/
Whitley Penn LLP





Dallas,
Texas

April
8, 2019





51











|DYNARESOURCE, INC.         
|---------------------------
|CONSOLIDATED BALANCE SHEETS
|DECEMBER 31, 2018 AND 2017 



|                                                                                                  |  | 2018 |             |   | 2017 |  
|------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | -
|ASSETS                                                                                            |  |      |             |   |      |  
|Current Assets                                                                                    |  |      |             |   |      |  
|Cash and Cash Equivalents                                                                         |  | $    | 2,685,576   |   |      | $
|Accounts Receivable                                                                               |  |      | 1,074,724   |   |      |  
|Inventories                                                                                       |  |      | 1,588,778   |   |      |  
|Foreign Tax Receivable                                                                            |  |      | 845,564     |   |      |  
|Other Current Assets                                                                              |  |      | 372,936     |   |      |  
|Total Current Assets                                                                              |  |      | 6,567,578   |   |      |  
|                                                                                                  |  |      |             |   |      |  
|Mining Equipment and Fixtures (Net of Accumulated                                                 |  |      |             |   |      |  
|Depreciation of $1,203,562 and $974,154)                                                          |  |      | 2,449,354   |   |      |  
|Mining Concessions                                                                                |  |      | 4,132,678   |   |      |  
|Investment in Affiliate                                                                           |  |      | 70,000      |   |      |  
|Other Assets                                                                                      |  |      | 96,409      |   |      |  
|                                                                                                  |  |      |             |   |      |  
|TOTAL ASSETS                                                                                      |  | $    | 13,316,019  |   |      | $
|                                                                                                  |  |      |             |   |      |  
|LIBILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                     |  |      |             |   |      |  
|Current Liabilities:                                                                              |  |      |             |   |      |  
|Accounts Payable                                                                                  |  | $    | 2,283,803   |   |      | $
|Accrued Expenses                                                                                  |  |      | 1,567,840   |   |      |  
|Customer Advances                                                                                 |  |      | 1,750,000   |   |      |  
|Due to Non-Controlling Interest                                                                   |  |      | 231,500     |   |      |  
|Derivative Liabilities                                                                            |  |      | 974,683     |   |      |  
|Convertible Notes Payable                                                                         |  |      | 838,125     |   |      |  
|Current Portion of Long-Term Debt                                                                 |  |      | 705,320     |   |      |  
|Total Current Liabilities                                                                         |  |      | 8,351,271   |   |      |  
|                                                                                                  |  |      |             |   |      |  
|Long Term Debt, Less Current Portion                                                              |  |      | 1,097,915   |   |      |  
|                                                                                                  |  |      |             |   |      |  
|TOTAL LIABILITES                                                                                  |  |      | 9,449,186   |   |      |  
|                                                                                                  |  |      |             |   |      |  
|Preferred Stock, Series C, $0.0001 per value, 1,733,221 shares Authorized, issued and outstanding |  |      | 4,333,053   |   |      |  
|COMMITMENTS AND CONTINGENCIES                                                                     |  |      |             |   |      |  
|STOCKHOLDERS' EQUITY (DEFICIT)                                                                    |  |      |             |   |      |  
|Preferred Stock, Series A, $0.0001 par value, 1,000 shares                                        |  |      |             |   |      |  
|authorized, issued and outstanding                                                                |  |      | 1           |   |      |  
|Common Stock, $0.01 par value, 25,000,000 shares authorized                                       |  |      |             |   |      |  
|17,722,825 and 17,722,825 issued and outstanding                                                  |  |      | 177,228     |   |      |  
|Preferred Rights                                                                                  |  |      | 40,000      |   |      |  
|Additional Paid In Capital                                                                        |  |      | 56,622,159  |   |      |  
|Treasury Stock, 778,980 and 778,980 shares                                                        |  |      | (2,223,891  | ) |      |  
|Accumulated Other Comprehensive income                                                            |  |      | 1,247,198   |   |      |  
|Accumulated Deficit                                                                               |  |      | (50,723,786 | ) |      |  
|Total DynaResource Inc. Stockholders' Equity                                                      |  |      | 5,138,909   |   |      |  
|Non-Controlling Interest                                                                          |  |      | (5,605,129  | ) |      |  
|TOTAL EQUITY (DEFICIT)                                                                            |  |      | (466,220    | ) |      |  
|                                                                                                  |  |      |             |   |      |  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                              |  | $    | 13,316,019  |   |      | $



The accompanying notes are an integral part
of these consolidated financial statements.



52







DYNARESOURCE,
INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND
2017



|                                               |  | 2018 |            |   | 2017 |  
|---------------------------------------------- |  | ---- | ---------- | - | ---- | -
|REVENUE                                        |  | $    | 14,059,697 |   |      | $
|COSTS AND EXPENSES OF MINING OPERATION         |  |      |            |   |      |  
|Production Cost Applicable to Sales            |  |      | 1,716,721  |   |      |  
|Mine Production Costs                          |  |      | 2,807,474  |   |      |  
|Mine Exploration Costs                         |  |      | 3,639,791  |   |      |  
|Mine Expansion Costs                           |  |      | 426,896    |   |      |  
|Camp, Warehouse and Facilities                 |  |      | 2,796,279  |   |      |  
|Transportation                                 |  |      | 645,504    |   |      |  
|Property Holding Costs                         |  |      | 1,310,220  |   |      |  
|General and Administrative                     |  |      | 2,203,366  |   |      |  
|Depreciation and Amortization                  |  |      | 278,815    |   |      |  
|Total Operating Expenses                       |  |      | 15,825,066 |   |      |  
|NET OPERATING (LOSS)                           |  |      | (1,765,369 | ) |      |  
|                                               |  |      |            |   |      |  
|OTHER INCOME (EXPENSE)                         |  |      |            |   |      |  
|Foreign Currency Gains                         |  |      | 51,325     |   |      |  
|Gain on Sale of Assets                         |  |      | 10,492     |   |      |  
|Interest Expense                               |  |      | (391,757   | ) |      |  
|Derivatives Mark-to-Market Gain                |  |      | 2,206,825  |   |      |  
|Other Income (Expense)                         |  |      | (323,034   | ) |      |  
|Total Other Income                             |  |      | 1,553,851  |   |      |  
|                                               |  |      |            |   |      |  
|NET INCOME (LOSS) BEFORE TAXES                 |  |      | (211,518   | ) |      |  
|PROVISION FOR INCOME TAXES                     |  |      | -          |   |      |  
|                                               |  |      |            |   |      |  
|NET INCOME (LOSS)                              |  | $    | (211,518)  |   |      | $
|                                               |  |      |            |   |      |  
|DEEMED DIVIDEND FOR SERIES C PREFERRED         |  |      | (173,320   | ) |      |  
|LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST  |  |      | 386,089    |   |      |  
|                                               |  |      |            |   |      |  
|NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS |  | $    | 1,251      |   |      | $
|                                               |  |      |            |   |      |  
|EARNINGS PER SHARE ATTRIBUTABLE TO THE         |  |      |            |   |      |  
|EQUITY HOLDERS OF DYNARESOURCE, INC.           |  |      |            |   |      |  
|                                               |  |      |            |   |      |  
|Basic Earnings Per Common Share                |  | $    | 0.00       |   |      | $
|Weighted Average Shares Outstanding - Basic    |  |      | 17,722,825 |   |      |  
|                                               |  |      |            |   |      |  
|Diluted Earnings Per Common Share              |  | $    | 0.00       |   |      | $
|Weighted Average Shares Outstanding - Diluted  |  |      | 17,722,825 |   |      |  
|                                               |  |      |            |   |      |  
|OTHER COMPREHENSIVE INCOME (LOSS)              |  |      |            |   |      |  
|Foreign Currency Translation Gain (Loss)       |  |      | 178,473    |   |      |  
|TOTAL OTHER COMPREHENSIVE INCOME (LOSS)        |  |      | 178,473    |   |      |  
|                                               |  |      |            |   |      |  
|TOTAL COMPREHENSIVE INCOME (LOSS)              |  | $    | (33,045    | ) |      | $
|                                               |  |      |            |   |      |  
|ATTRIBUTABLE TO:                               |  |      |            |   |      |  
|EQUITY HOLDERS OF DYNARESOURCE, INC.           |  | $    | 155,916    |   |      | $
|NON-CONTROLLING
    INTEREST                   |  | $    | (188,961   | ) |      | $



The accompanying notes
are an integral part of these consolidated financial statements.





53









DYNARESOURCE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY

YEARS ENDED DECEMBER 31, 2018 AND 2017



|                                  |  | Preferred
        Series A
        Shares |       |  | Series A
        Amount |   |   | Common
        Shares |  |  | Common
        Amount |  |  | Preferred
        Rights |         |  | Paid In
        Capital |   |        | Treasury
        Shares |  |   | Treasury
        Amount |   |  | Accumulated
        Comprehensive
        Income |           |   | Accumulated
        Deficit |   |            | Non-
        Controlling
        Interest |  |   | Total      |  
|--------------------------------- |  | ----------------------------------------- | ----- |  | ----------------------- | - | - | --------------------- |  |  | --------------------- |  |  | ------------------------ | ------- |  | ----------------------- | - | ------ | ----------------------- |  | - | ----------------------- | - |  | ------------------------------------------------ | --------- | - | --------------------------- | - | ---------- | ----------------------------------------- |  | - | ---------- | -
|                                  |  |                                           |       |  |                         |   |   |                       |  |  |                       |  |  |                          |         |  |                         |   |        |                         |  |   |                         |   |  |                                                  |           |   |                             |   |            |                                           |  |   |            |  
|Balance, December 31, 2016        |  |                                           | 1,000 |  |                         | $ | 1 |                       |  |  | 16,722,825            |  |  | $                        | 167,228 |  |                         | $ | 40,000 |                         |  | $ | 55,083,783              |   |  |                                                  | 1,112,313 |   |                             | $ | (3,175,515 | )                                         |  | $ | 3,771,532  |  
|Sale of Common Stock for Cash     |  |                                           |       |  |                         |   |   |                       |  |  | 1,000,000             |  |  |                          | 10,000  |  |                         |   |        |                         |  |   | 2,490,000               |   |  |                                                  |           |   |                             |   |            |                                           |  |   |            |  
|Issuance of Treasury Shares       |  |                                           |       |  |                         |   |   |                       |  |  |                       |  |  |                          |         |  |                         |   |        |                         |  |   | (951,624                | ) |  |                                                  | (333,333  | ) |                             |   | 951,624    |                                           |  |   |            |  
|Other Comprehensive Income (Loss) |  |                                           |       |  |                         |   |   |                       |  |  |                       |  |  |                          |         |  |                         |   |        |                         |  |   |                         |   |  |                                                  |           |   |                             |   |            |                                           |  |   | (2,505,679 | )
|Net Income (Loss)                 |  |                                           |       |  |                         |   |   |                       |  |  |                       |  |  |                          |         |  |                         |   |        |                         |  |   |                         |   |  |                                                  |           |   |                             |   |            |                                           |  |   |            |  
|                                  |  |                                           |       |  |                         |   |   |                       |  |  |                       |  |  |                          |         |  |                         |   |        |                         |  |   |                         |   |  |                                                  |           |   |                             |   |            |                                           |  |   |            |  
|                                  |  |                                           |       |  |                         |   |   |                       |  |  |                       |  |  |                          |         |  |                         |   |        |                         |  |   |                         |   |  |                                                  |           |   |                             |   |            |                                           |  |   |            |  
|Balance, December 31, 2017        |  |                                           | 1,000 |  |                         |   | 1 |                       |  |  | 17,722,825            |  |  |                          | 177,228 |  |                         |   | 40,000 |                         |  |   | 56,622,159              |   |  |                                                  | 778,980   |   |                             |   | (2,223,891 | )                                         |  |   | 1,265,853  |  



|                           |  |  |       |  |  |   |   |  |  |  |            |  |  |   |         |  |  |   |        |  |  |   |            |  |  |  |         |  |  |   |            |   |  |   | (18,655   | ) |  |   |             |   |  |   | 197,128    |   |  |   | 178,473   |  
|-------------------------- |  |  | ----- |  |  | - | - |  |  |  | ---------- |  |  | - | ------- |  |  | - | ------ |  |  | - | ---------- |  |  |  | ------- |  |  | - | ---------- | - |  | - | --------- | - |  | - | ----------- | - |  | - | ---------- | - |  | - | --------- | -
|Net Income (Loss)          |  |  |       |  |  |   |   |  |  |  |            |  |  |   |         |  |  |   |        |  |  |   |            |  |  |  |         |  |  |   |            |   |  |   |           |   |  |   | 174,571     |   |  |   | (386,089   | ) |  |   | (211,518) |  
|                           |  |  |       |  |  |   |   |  |  |  |            |  |  |   |         |  |  |   |        |  |  |   |            |  |  |  |         |  |  |   |            |   |  |   |           |   |  |   |             |   |  |   |            |   |  |   |           |  
|                           |  |  |       |  |  |   |   |  |  |  |            |  |  |   |         |  |  |   |        |  |  |   |            |  |  |  |         |  |  |   |            |   |  |   |           |   |  |   |             |   |  |   |            |   |  |   |           |  
|Balance, December 31, 2018 |  |  | 1,000 |  |  | $ | 1 |  |  |  | 17,722,825 |  |  | $ | 177,228 |  |  | $ | 40,000 |  |  | $ | 56,622,159 |  |  |  | 778,980 |  |  | $ | (2,223,891 | ) |  | $ | 1,247,198 |   |  | $ | (50,723,786 | ) |  | $ | (5,605,129 | ) |  | $ | (466,220  | )







The accompanying notes are an integral part
of these consolidated financial statements.





54







DYNARESOURCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2018 AND
2017



|                                                                                    |  | 2018 |            |   | 2017 |  
|----------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|CASH FLOWS FROM OPERATING ACTIVITES:                                                |  |      |            |   |      |  
|Net Income (Loss)                                                                   |  | $    | (211,518   | ) |      | $
|Adjustments to reconcile net income (loss) to cash provided by operating activities |  |      |            |   |      |  
|Change in Derivatives                                                               |  |      | (2,206,825 | ) |      |  
|Depreciation and Amortization                                                       |  |      | 278,815    |   |      |  
|Gain on Sale of Asset                                                               |  |      | (10,492    | ) |      |  
|Change in Operating Assets and Liabilities                                          |  |      |            |   |      |  
|Accounts Receivable                                                                 |  |      | (751,409   | ) |      |  
|Inventories                                                                         |  |      | (680,796   | ) |      |  
|Foreign Tax Receivable                                                              |  |      | (113,323   | ) |      |  
|Other Assets                                                                        |  |      | (369,054   | ) |      |  
|Customer Advances                                                                   |  |      | 1,750,000  |   |      |  
|Accounts Payable                                                                    |  |      | 1,480,512  |   |      |  
|Accrued Expenses                                                                    |  |      | 1,342,339  |   |      |  
|CASH FLOWS PROVIDED BY OPERATING ACTIVITIES                                         |  |      | 508,249    |   |      |  
|                                                                                    |  |      |            |   |      |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                               |  |      |            |   |      |  
|Purchase of Equipment                                                               |  |      | (1,043,322 | ) |      |  
|Disposal of Equipment                                                               |  |      | 23,715     |   |      |  
|CASH FLOWS USED IN INVESTING ACTIVITIES                                             |  |      | (1,019,607 | ) |      |  
|                                                                                    |  |      |            |   |      |  
|CASH FLOW FROM FINANCING ACTIVITIES:                                                |  |      |            |   |      |  
|Proceeds from Sale of Common Stock                                                  |  |      | -          |   |      |  
|Payments of Promissory Notes - Related Parties                                      |  |      | (112,500   | ) |      |  
|Payments of Long-Term Debt                                                          |  |      | (399,636   | ) |      |  
|CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES                                |  |      | (512,136   | ) |      |  
|                                                                                    |  |      |            |   |      |  
|Effects of Foreign Exchange                                                         |  |      | 180,335    |   |      |  
|                                                                                    |  |      |            |   |      |  
|NET INCREASE (DECREASE) IN CASH                                                     |  |      | (843,159   | ) |      |  
|CASH AT BEGINNING OF PERIOD                                                         |  |      | 3,528,735  |   |      |  
|CASH AT END OF PERIOD                                                               |  | $    | 2,685,576  |   |      | $
|                                                                                    |  |      |            |   |      |  
|SUPPLEMENTAL DISCLOSURES                                                            |  |      |            |   |      |  
|Cash Paid for Interest                                                              |  | $    | 396,748    |   |      | $
|Cash Paid for Income Taxes                                                          |  | $    | -          |   |      | $
|NON-CASH TRANSACTION                                                                |  |      |            |   |      |  
|Issuance of Treasury Shares                                                         |  | $    | -          |   |      | $
|Conversion of Accounts Payable to Long-Term Debt                                    |  | $    | 1,833,698  |   |      | $



The accompanying notes are an integral part
of these consolidated financial statements.





55





DYNARESOURCE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2018 and 2017



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 Gracia Project (“SJG”) in northern
Sinaloa State, México. The SJG District covers 69,121 hectares (170,802 acres) on the west side of the Sierra Madre mountain
range. The Company currently owns 80% of the outstanding capital of DynaMéxico.



In 2005, the Company formed DynaResource Operaciones
de San Jose De Gracia S.A. de C.V. (“DynaOperaciones”), and acquired effective control of Mineras de DynaResource,
S.A. de C.V. (formerly Minera Finesterre S.A. de C.V., “DynaMineras”). The Company owned 25% of DynaMineras and acquired
effective control of DynaMineras by acquiring the option to purchase the remaining 75% of the Shares of DynaMineras. The Company
finalized the option and acquisition of DynaMineras in January 2010, and now owns 100% of DynaMineras.  The results of
these subsidiaries are consolidated with those of the Company.



From January 2008 through March 2011, DynaMéxico
issued 100 Variable Capital Series “B” shares to Goldgroup Resources, Inc., a wholly owned subsidiary of Goldgroup
Mining Inc. Vancouver BC (“Goldgroup”), in exchange for Goldgroup’s contribution of $18,000,000 to DynaMéxico.
At March 14, 2011, Goldgroup owned 50% of the outstanding capital shares of DynaMéxico.



On June 21, 2013, DynaResource acquired a Certificate
for 300 Series “B” Variable Capital Shares of DynaMéxico, in exchange for the settlement of accounts receivable
from DynaMéxico in the amount of $31,090,710 Mexican Pesos (approximately $2.4 million USD). After the issuance and receipt
of the 300 Series B Shares, DynaUSA holds 80% of the total outstanding Capital of DynaMéxico.



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 revenue and expense. 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.





56









Principles of Consolidation



The financial statements include the accounts
of DynaResource, Inc., as well as DynaResource de México, S.A. de C.V. (80% 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, is 20% owned by Goldgroup Mining, Inc. On May 17, 2013, the ownership changed from 50% to 20%. The
Company accounts for this outside interest as “non-controlling interest”.



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 December 31, 2018 and 2017, 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.



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 December 31, 2018, and 2017, 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 December 31, 2018 and December 31, 2017
are $845,564 and $732,341, 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 $1,588,778 and $907,982 as of December 31, 2018 and December 31, 2017, 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 of December 31, 2018, none 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 Gracia Property, as exploration stage projects since no proven or probable reserves
have been established under Industry Guide 7. In 2017 the Company entered the construction stage of the project. Under the construction
stage non-mining assets are capitalized once recoverability has been established through generating a proven revenue stream from
the mine.







57









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
with the exception of mining equipment. Construction stage non-mining assets used in support activities such as ore processing,
transportation, security, warehouse and camp facilities are capitalized and depreciated over their estimated useful lives. Mining
equipment is depreciated using the units-of-production method based on tonnes processed over the estimated total mine life. Office
furniture, equipment and light vehicles 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. Trailers, heavy vehicles and other site equipment are being depreciated on a straight-line method over
estimated economic lives from 5 to 15 years. Buildings are being depreciated on straight line method over an estimated economic
life of 20 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 Gracia Property, capitalized
costs and mineral property interests are amortized using the straight-line method once production begins. As of December 31, 2018,
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 9,919 hectares at the San Jose de Gracia 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 taking into account 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.





58









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 December 31, 2018, and 2017,
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.



Pre-Pilot Production Costs



During 2016, the Company has conducted rehabilitation
activity at the San Pablo mine and has refurbished the Pilot Mill Facility at San Jose de Gracia and, in general prepared for test
mining and pilot milling (“Pilot Production”) Operations. The costs associated with the rehabilitation, preparation,
clean up and facilitation of this process are expensed as pre-pilot production costs.



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.



Foreign Currency
Translation

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) year end 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 years ended December 31, 2018 and 2017 (Mexican Pesos per
one U.S. dollar):



|                                                    |       |  | Dec 31, 2018 |       |  | Dec 31, 2017 | 
|--------------------------------------------------- | ----- |  | ------------ | ----- |  | ------------ | 
|                                                    |       |  |              |       |  |              | 
|Current exchange rate                               | Pesos |  |              | 19.63 |  |              | 
|                                                    |       |  |              |       |  |              | 
|Weighted average exchange rate for the period ended | Pesos |  |              | 19.23 |  |              | 







59









The Company recorded currency transaction gains
of $51,325 for the year ended December 31, 2018 and $1,388,573 in 2017.



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.



On December 22, 2017, the 2017 Tax Cuts and
Jobs Act (the “Act”) was signed into law. Among other provisions, the Act reduced the highest corporate tax rate from
35% to 21%. With the passage of the Act, the Company‘s deferred tax assets and liabilities were restated as of the effective
date of the law to reflect the new applicable rate. The reduction to the net deferred tax asset was charged to tax expense in the
period of the change and offset by a valuation allowance stemming from historical net operating loss carryforwards.



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 adopted ASC 606 “Revenue
from contracts with customers” on January 1, 2018 using the modified retrospective approach. 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.



During the year ended December 31, 2018 there was $0 of revenue
recognized during the period from customer deposit liabilities (deferred contract revenue), and $0 of customer deposits refunded
to the customer on order cancellation.



As of December 31, 2018, there are $1,750,000 in customer deposit
liabilities for payments received during the period for contracts expected to ship in 2019. Under terms of the Company’s
sales contract this amount is to be applied as payment on the customer account at a rate of $250,000 per month throughout the year.



As of and for the year ended December 31, 2018, there are $0significant
contract deferred costs such as sales commissions or costs deferred.



We have elected to account for shipping and handling costs as fulfillment
costs after the customer obtains control of the goods.



Prior to the adoption of this standard
the Company recognized revenue in accordance with ASC 605-10, "Revenue Recognition in Financial Statements".   Revenue
was recognized when persuasive evidence of an arrangement exists, delivery or service has occurred, the sale price is fixed or
determinable and receipt of payment is probable. Revenues earned from the sale of precious metal concentrates are recognized when
both the buyer and seller agree on the % of gold as determined by sample assays and when it is delivered to the Buyer. Subsequently,
a “final settlement” was calculated an adjustment was recorded when any remaining balance was paid.

60







The change in accounting principle from
ASC 605 to ASC 606 did not impact the amount of revenue recognized in the Company’s financial statements.

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.



The Company accounts for stock options issued
and vesting to non-employees in accordance with ASC Topic 505-50 “Equity -Based Payment to Non-Employees” and
accordingly the value of the stock compensation to non-employees is based upon the measurement date as determined at either (a) the
date at which a performance commitment is reached, or (b) at the date at which the necessary performance to earn the equity
instruments is complete. Accordingly, the fair value of these options is being “marked to market” quarterly until the
measurement date is determined.



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 options and
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, as their effect would be considered anti-dilutive.



The Company had 2,523,689 warrants outstanding
at December 31, 2018 exercisable at $2.50 per share, which upon exercise, would result in the issuance of 2,523,689 shares of common
stock. The Company also had convertible debt instruments as of December 31, 2018 which, upon conversion at a valuation of $2.50
per share, would result in the issuance of 335,250 shares of stock.



The Company had 2,523,689 warrants outstanding
at December 31, 2017 exercisable at $2.50 per share, which upon exercise, would result in the issuance of 2,523,689 shares of common
stock. The Company also had convertible debt instruments as of December 31, 2017 which, upon conversion at a valuation of $2.50
per share, would result in the issuance of 380,250 shares of stock.



|                                                              |  | Years ended December 31 |           
|------------------------------------------------------------- |  | ----------------------- | ----------
|                                                              |  | 2018                    |           
|Net income attributable to common shareholders                |  | $                       | 1,251     
|Shares:                                                       |  |                         |           
|Weighted average number of common shares outstanding, Basic   |  |                         | 17,722,825
|                                                              |  |                         |           
|Weighted average number of common shares outstanding, Diluted |  |                         | 17,722,825
|                                                              |  |                         |           
|Basic earnings per share                                      |  | $                       | 0.00      
|                                                              |  |                         |           
|Diluted earnings per share                                    |  | $                       | 0.00      





61









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.”





Recently Issued Accounting Pronouncements



Stock compensation





In May 2017, the FASB issued ASU 2017-09, Compensation
– Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09). ASU 2017-09 provides clarity and
reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock
Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this update provide guidance
about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting
in Topic 718. The amendments in this update are effective for all entities for annual periods, and interim periods within those
annual periods, beginning after December 15, 2017. Early adoption is permitted. As such, The Company adopted these provisions as
of the fiscal year beginning on January 1, 2018. The amendments in this update should be applied prospectively to an award modified
on or after the adoption date.



Leases



In February 2016, FASB issued ASU 2016-02—
Leases (Topic 842). The update is intended to increase transparency and comparability among organizations by recognizing lease
assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in
this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
Early application of the amendments in this update is permitted. As such, The Company is required to adopt these provisions as
of the fiscal year beginning on January 1, 2019. The Company is currently evaluating the impact of FASB ASU 2016-02 and expects
the adoption thereof will have a material effect on The Company’s presentation of balance sheet assets and liabilities based
on the present value of future lease payments but does not expect a material effect on the presentation of expenses and cash flows.







NOTE 2 – INVENTORIES



The Company commenced
underground test mining and pilot milling activities (“pilot production”) in the 2nd
quarter of 2014. Rehabilitation of the San Pablo Mine and refurbishing of the Pilot Mill Facility
and construction of the adjacent tailings pond continued through 2016. 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 December 31, 2018 and December 31, 2017, respectively, were as follows:



|                                                                                           |  | 2018 |           |  | 2017 |  
|------------------------------------------------------------------------------------------ |  | ---- | --------- |  | ---- | -
|                                                                                           |  |      |           |  |      |  
|Mined Tonnage, Gold-Silver Concentrates, and/or Gravity Tailings (Flotation Feed Material) |  | $    | 1,588,778 |  |      | $
|Total Inventories                                                                          |  | $    | 1,588,778 |  |      | $



62







NOTE 3 – PROPERTY



Property consists of the following at December
31, 2018 and December 31, 2017:



|                                |  | 2018 |            |   | 2017 |  
|------------------------------- |  | ---- | ---------- | - | ---- | -
|                                |  |      |            |   |      |  
|Camp buildings and improvements |  | $    | 470,974    |   |      | $
|Machinery and equipment         |  |      | 2,040,256  |   |      |  
|Transportation equipment        |  |      | 225,695    |   |      |  
|Office furniture and fixtures   |  |      | 78,802     |   |      |  
|Office equipment                |  |      | 164,113    |   |      |  
|Construction in progress        |  |      | 673,076    |   |      |  
|Sub-total                       |  |      | 3,652,916  |   |      |  
|Less: Accumulated depreciation  |  |      | (1,203,562 | ) |      |  
|Total Property                  |  | $    | 2,449,354  |   |      | $





The Company purchased equipment of $1,043,322
and $1,273,189 in the years ended December 31, 2018 and 2017, respectively.



Depreciation has been provided over each asset’s
estimated useful life.  Depreciation expense was $278,815 and $153,862 for the years ended December 31, 2018 and 2017,
respectively.



NOTE 4 – MINING CONCESSIONS



Mining properties consist of the following
at December 31, 2018 and December 31, 2017:



|                            |  | 2018 |           |  | 2017 |  
|--------------------------- |  | ---- | --------- |  | ---- | -
|San Jose de Gracia (“SJG”): |  |      |           |  |      |  
|                            |  |      |           |  |      |  
|Total Mining Concessions    |  | $    | 4,132,678 |  |      | $
|                            |  |      |           |  |      |  



Depletion expense was $0 and $0 for the years
ended December 31, 2018 and 2017, respectively.



NOTE 5 – INVESTMENT IN AFFILIATE/RECEIVABLES
FROM AFFILIATE/OTHER ASSETS



Through December 31, 2018, the Company loaned
a total of $805,760 to 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”). 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 $.25 / Share.   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 exercised
its option to convert the note receivable and other receivable from DynaNevada into shares of common stock at a rate of $.25 /
Share. 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 cash and the remainder
unproven mining properties. Based upon the above, Management estimated the value of the Company’s DynaNevada shares as of
December 31, 2018 and December 31, 2017 to be $70,000 and $70,000, respectively. The loss was taken to “other income (loss)
on the income statement in previous years.



In 2016 the Company deemed $159,143 of receivable
for funds, previously advanced to DynaNevada in order for DynaNevada to meets its basis filing and reporting obligations with the
Mexican authorities relating to tax returns and paying taxes on its mining concessions, to be uncollectable and wrote them off.
As of December 31, 2018, and December 31, 2017 the Company had no remaining receivable from DynaNevada.



At December 31, 2018 and December 31, 2017,
the Company had a receivable from DynaNevada de Mexico of $68,376 and $0, respectively.





63











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 Gracia. 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. In April 2015, the Company received note extensions (allonges) from all Series I note holders to
ensure that all Series I Notes were in good standing and extended the maturity date of the Series I Notes to December 31, 2016. 
The Company paid $5,625 to one Series I debt holder during 2017. The remaining
eight of the Series I noteholders totaling $759,375 have subsequently been extended to December 30, 2019.



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 $5.00 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 on December 31, 2020.





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 Gracia. 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. In 2018 The Company paid off one note for $112,500. The remaining two Series II Notes totaling $78,750 have been extended
to December 30, 2019.



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 $5.00 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 on December 31, 2020.



On June 30, 2015, the Company entered into
conversion agreements with six (6) note holders. Principal and interest in the amount of $809,784 plus $33,120 of accrued interest
(total of $842,903) was contracted to convert into 337,162 common shares. In addition, 337,162 warrants were issued which provide
the option to purchase common shares at $2.50, with all warrants expiring December 31, 2017. The Company recorded $826,347 inducement
expense related to these conversion transactions. On August 17, 2015, these common shares and warrants were issued.



At December 31, 2018, the principal and capitalized
interest balance on the remaining Series I Notes was $759,375, and the principal and capitalized interest on the Series II Notes
was $78,750, for a total Note balance of $838,125. At December 31, 2017, the principal and capitalized interest balance on the
remaining Series I Notes was $759,375, and the principal and capitalized interest on the Series II Notes was $191,250, for a total
Note balance of $950,625. The accrued interest for these notes was $25,150 and $30,141 as of December 31, 2018 and 2017, respectively.







64











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 tax rate of 21%
and 34%, respectively (blended for U.S. and México) of significant items comprising the Company’s net deferred tax
amounts as of December 31, 2018 and December 31, 2017 are as follows:



Deferred Tax Asset Related to:

|                                        |  | 2018 |             | 2017
|--------------------------------------- |  | ---- | ----------- | ----
|Prior Year                              |  | $    | 12,565,297  |     
|Tax Expense (Benefit) for Current Year  |  |      | 604,586     |     
|Permanent Difference Due to Rate Change |  |      | —           |     
|Total Deferred Tax Asset                |  |      | 13,169,883  |     
|Less: Valuation Allowance               |  |      | (13,169,883 | )   
|Net Deferred Tax Asset                  |  | $    | —           |     



The income tax provision for the Company as
of December 31, 2018 and 2017 differs from those computed using the statutory federal tax rates of 21% and 34% due to the following
differences:



|                                               |  | 2018 |          | 2017
|---------------------------------------------- |  | ---- | -------- | ----
|Book Income                                    |  | $    | (211,518 | )   
|Tax Expense at Statutory Rates                 |  |      | (44,419  | )   
|Permanent Difference Due to Rate Change        |  |      | —        |     
|Other Permanent Differences                    |  |      | (560,167 | )   
|Change in Valuation Allowance                  |  |      | 604,586  |     
|Other                                          |  |      | —        |     
|Provision for (Benefit from) Income Taxes, Net |  | $    | —        |     





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 $51,100,000
at December 31, 2018 and will expire in the years 2027 through 2033.



The realization of deferred tax benefits is
contingent upon future earnings and is fully reserved at December 31, 2018.



On December 11, 2013, the Mexican government
enacted a tax reform that increased the effective tax rate applicable to the Company's Mexican operations. The law, effective January 1,
2014, increased the future corporate income tax rate to 30%, created a 10% withholding tax on dividends paid to non-resident shareholders
and created a new Extraordinary Mining duty which is equal to 0.5% of gross revenues from the sale of gold, silver and platinum.
Furthermore, the reform introduced a Special Mining Duty of 7.5%. The Special Mining Duty is deductible for income tax purposes.
The Special Mining Duty is generally applicable to earnings before income tax, depreciation, depletion, amortization and interest.
There will be no deductions related to development type costs, but exploration and prospecting costs are deductible when incurred.
Certain non-deducted exploration expenditures incurred prior to January 1, 2014 are also deductible in the calculation of
the Special Mining Duty. For the years ended December 31, 2018 and 2017, the Company had no taxes payable under the 7.5% Special
Mining Duty.



The Company or its subsidiaries file income
tax returns in the United States and México. These tax returns are subject to examination by local taxation authorities
provided the tax years remain open to audit under the relevant statute of limitations. The following summarizes the open tax years
by major jurisdiction:



United States:   2015 to 2018

México:       
    2014 to 2018



The Company does not have any other material
items of temporary or permanent differences, which give rise to deferred tax assets or liabilities.







65













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 45,001,000 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 and (ii) twenty-five million
(25,000,000) shares of Common Stock, par value $0.01 per share (“Common Stock”).



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. In October 2007, the Company issued 1,000 shares of Series A
Preferred Stock to its CEO. At December 31, 2018 and December 31, 2017, there were 1,000 and 1,000 shares of Series A Preferred
Stock outstanding, respectively.



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 are convertible
to common shares at $2.50 per share, through February 20, 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 $4,333,053 payable annually on June 30. At December 31, 2017 and 2018
dividends of $173,320 per year 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.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|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.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In 2015, due to underlying anti-dilutive provisions
contained in the Series C Preferred Shares and the Golden Post Warrant, the Company incurred derivative liabilities of $1,531,789
in connection with the Series C Preferred Shares, and $2,963,378 in connection with the Golden Post Warrant. Additionally, the
Company fully accreted the discount related to the Series C Preferred Shares and the Golden Post Warrant in the amount of $4,637,179,
which is reflected “below” the net income (loss) amount. Also, in 2015, the Company reported $87,374 deemed dividend
for Golden Post Rail related to its 4% dividend terms. As the Company has not declared these dividends, it is required only as
an item “below” the net income (loss) amount. At December 31, 2018 the total Derivative Liability was $974,683 which
included $402,909 for the Series C Preferred Shares, and $571,774 in connection with the Golden Post Warrant. The Deemed Dividend
for 2018 and 2017 was $173,320, and $173,320 respectively.



Due to the nature of this transaction as mandatorily
redeemable, the preferred shares are classified as “temporary equity” on the balance sheet.





66









|                                                           |  | Preferred Series C |          
|---------------------------------------------------------- |  | ------------------ | ---------
|                                                           |  |                    |          
|Carrying Value, December 31, 2016                          |  | $                  | 4,333,053
|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, December 31, 2017                          |  |                    | 4,333,053
|                                                           |  |                    |          
|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, December 31, 2018                          |  |                    | 4,333,053



Preferred Stock (Undesignated)



In addition to the 1,000 shares designated
as Series A Preferred Stock and the 1,733,221 shares designated as Series C Preferred Shares, the Company is authorized to issue
an additional 16,266,779 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 December 31, 2018 and December 31, 2017,
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 25,000,000
common shares at a par value of $0.01 per share. These shares have full voting rights. At December 31, 2018 and December 31, 2017,
there were 17,722,825 and 17,722,825 shares outstanding, respectively. No dividends were paid for the years ended December
31, 2018 and 2017, respectively.



Preferred Rights



The Company issued “Preferred Rights”
for the rights to percentages of revenues generated from the San Jose de Gracia Pilot Production Plant and received $158,500 in
2003 and $626,000 in 2002. This has been reflected as “Preferred Rights” in stockholders’ equity. As of December
31, 2004, $558,312 was repaid and as of December 31, 2005, an additional $186,188 was repaid, leaving a current balance of $40,000
and $40,000 as of December 31, 2018 and December 31, 2017, respectively.





Stock Issuances



2018 Activity



None.



2017 Activity



During the year
ended December 31, 2017, the Company issued 1,000,000 common shares for the exercise of stock warrants at $2.50 a share for total
proceeds of $2,500,000. In addition, the Company issued 333,333 shares of treasury stock as additional compensation for exercise
of the warrants at above market price.





67









Treasury Stock



During the year ended December 31, 2017
the Company issued 333,333 treasury shares as additional compensation for the exercise of stock warrants at an above market price
as discussed above. No treasury stock was issued during the year ended December 31, 2018. At December 31, 2018 and 2017, 778,980
and 778,790 treasury shares were outstanding.



Warrants



2018 activity



The Company had 2,523,689 warrants outstanding
at December 31, 2018. There were no warrants issued or exercised in 2018 and no warrants expired in 2018.





2017 activity



The Company had 2,523,689 warrants outstanding
at December 31, 2018. 1,000,000 warrants were exercised at $2.50 a share during the year and 70,000 warrants expired.



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, 2016     |  |                  | 3,593,689  |   |                                 | $ | 2.45 |                                                     |  |  | 2.51            | 
|Granted                          |  |                  | -          |   |                                 | $ | -    |                                                     |  |  |                 | 
|Exercised                        |  |                  | (1,000,000 | ) |                                 | $ | 2.50 |                                                     |  |  |                 | 
|Forfeited                        |  |                  | (70,000    | ) |                                 | $ | 2.50 |                                                     |  |  |                 | 
|Balance at December 31, 2017     |  |                  | 2,523,689  |   |                                 | $ | 2.45 |                                                     |  |  | 1.51            | 
|Granted                          |  |                  | -          |   |                                 | $ | -    |                                                     |  |  |                 | 
|Exercised                        |  |                  | -          |   |                                 | $ | -    |                                                     |  |  |                 | 
|Forfeited                        |  |                  | -          |   |                                 | $ | -    |                                                     |  |  |                 | 
|Balance at December 31, 2018     |  |                  | 2,523,689  |   |                                 | $ | 2.45 |                                                     |  |  | 0.51            | 
|Exercisable at December 31, 2018 |  |                  | 2,523,689  |   |                                 | $ | 2.45 |                                                     |  |  | 0.51            | 



NOTE 9
– RELATED PARTY TRANSACTIONS



Related Party Transactions



The Company follows FASB ASC subtopic 850-10,
Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Pursuant to
ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities
would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15,
to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing
trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company;
f) 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; and g) other parties that can significantly influence the management or operating policies of the transacting parties
or that have 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.



Material
related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements,
expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated
in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall
include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such
other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the
dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any
change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties
as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.





68









Dynacap Group Ltd.



The Company paid $113,750 and $165,250 to Dynacap
Group, Ltd. (“Dynacap”, an entity controlled by the CEO of the Company) for consulting and other fees during the years
ended December 31, 2018 and 2017, respectively.



Advances from Goldgroup Mining Inc. (“Goldgroup”)
to DynaMéxico



In 2014, Goldgroup advanced $111,500 to DynaMéxico
and in 2013 Goldgroup advanced $120,000 USD to DynaMéxico. This total $231,500 is being carried by DynaMéxico as
a Due to Non-Controlling Interest.







NOTE 10 – COMMITMENTS AND CONTINGENCIES



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%).



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 Gracia 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 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 incurred rent expense of $86,011
and $71,399 for the office lease in the years ended December 31, 2018 and 2017, respectively.



Future minimum lease obligations are as follow
for the years ending December 31:



|YEAR  |  | AMOUNT |        
|----- |  | ------ | -------
|2019  |  | $      | 82,474 
|2020  |  | $      | 84,280 
|2021  |  | $      | 86,086 
|2022  |  | $      | 87,892 
|2023  |  | $      | 14,849 
|TOTAL |  | $      | 355,581





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.





69









Damages Awarded to DynaMéxico in
México Litigation



On October 5, 2015, DynaResource de México
SA de C.V. (“DynaMéxico”), was awarded in excess of $48 M USD (Forty-Eight Million Dollars) in damages from
Goldgroup Resources, Inc. (the “Goldgroup Damages”) 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 Goldgroup Damages and the additional
Resolutions are referred to as, the “Oct. 5, 2015 Resolution”). The October 5, 2015 Resolution is described in Part
II, Item 1. Legal Proceedings. As of December 31, 2018, the decision remains under appeal.



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 a 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. (See Item 3. Legal Proceedings. And,
see Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations).



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:





|                           | 2018    |  | 2017   
|-------------------------- | ------- |  | -------
|Annual volatility rate     | 86%     |  | 153%   
|Risk free rate             | 2.48%   |  | 2.20%  
|Holding Period             | 5 years |  | 5 years
|Fair Value of common stock | $1.13   |  | $1.11  



For the year ended December 31, 2018, 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 years ended December 31, 2018 and 2017:



|Year Ended                                          |  | 2018 |            |   | 2017 |  
|--------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|Fair value of derivative (stock), beginning of year |  | $    | 1,531,789  |   |      | $
|Change in fair value of derivative                  |  |      | (1,128,880 | ) |      |  
|Fair value of derivative on the date of issuance    |  |      | -          |   |      |  
|Fair value of derivative(stock), end of year        |  | $    | 402,909    |   |      | $





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.





70









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:





|                           |  | 2018 |         | 2017
|-------------------------- |  | ---- | ------- | ----
|Annual volatility rate     |  |      | 86      | %   
|Risk free rate             |  |      | 2.48    | %   
|Holding Period             |  |      | 5 years |     
|Fair Value of common stock |  | $    | 1.20    |     



For the year ended December 31, 2018, 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 years ended December 31, 2018 and 2017:



|Year Ended                                             |  | 2018 |            | 2017
|------------------------------------------------------ |  | ---- | ---------- | ----
|Fair value of derivative (warrants), beginning of year |  | $    | 1,649,719  |     
|Change in fair value of derivative                     |  |      | (1,077,945 | )   
|Fair value of derivative on the date of issuance       |  |      | —          |     
|Fair value of derivative(warrants), end of year        |  | $    | 571,774    |     



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% thereafter. Changes in Non-Controlling Interest for the years ended December 31, 2018 and December
31, 2017, respectively were as follows:



|                                               |  | Year
                                         Ended December
                                         31, 2018 |            | Year
                                         Ended December
                                         31, 2017
|---------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------- | ---------- | --------------------------------------------------------------------------------------------------------------
|                                               |  |                                                                                                                |            |                                                                                                               
|Beginning
    balance                          |  | $                                                                                                              | (5,416,168 | )                                                                                                             
|Operating
    income (loss)                    |  |                                                                                                                | (197,128   | )                                                                                                             
|Share
    of Other Comprehensive Income (loss) |  |                                                                                                                | 386,089    |                                                                                                               
|Ending
    balance                             |  | $                                                                                                              | (5,605,129 | )                                                                                                             



The Company began allocating a portion of other
comprehensive income (loss) to the non-controlling interest with the adoption of ASC 160 as of January 1, 2009.



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.





71









As of December 31, 2018, and December 31, 2017,
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 December 31, 2018
    Using: |  |   |           |  | Quoted
    Prices in Active Markets For Identical Assets (Level 1) |   |   | Significant
        Other Observable Inputs (Level 2) |  |   | Significant
        Unobservable Inputs (Level 3) | 
|------------------------------------------------------ |  | - | --------- |  | ------------------------------------------------------------------ | - | - | ----------------------------------------------------- |  | - | ------------------------------------------------- | 
|                                                       |  |   |           |  |                                                                    |   |   |                                                       |  |   |                                                   | 
|Assets:                                                |  |   |           |  |                                                                    |   |   |                                                       |  |   |                                                   | 
|None                                                   |  |   | -         |  |                                                                    |   | - |                                                       |  |   | -                                                 | 
|Totals                                                 |  | $ | -         |  |                                                                    | $ | - |                                                       |  | $ | -                                                 | 
|                                                       |  |   |           |  |                                                                    |   |   |                                                       |  |   |                                                   | 
|Liabilities:                                           |  |   |           |  |                                                                    |   |   |                                                       |  |   |                                                   | 
|Derivative Liabilities                                 |  | $ | 974,683   |  |                                                                    |   | - |                                                       |  |   | -                                                 | 
|Totals                                                 |  | $ | 974,683   |  |                                                                    | $ | - |                                                       |  | $ | -                                                 | 
|Fair Value Measurement at December
    31, 2017 Using: |  |   |           |  |                                                                    |   |   |                                                       |  |   |                                                   | 
|Assets:                                                |  |   |           |  |                                                                    |   |   |                                                       |  |   |                                                   | 
|None                                                   |  |   | -         |  |                                                                    |   | - |                                                       |  |   | -                                                 | 
|Totals                                                 |  | $ | -         |  |                                                                    | $ | - |                                                       |  | $ | -                                                 | 
|                                                       |  |   |           |  |                                                                    |   |   |                                                       |  |   |                                                   | 
|                                                       |  |   |           |  |                                                                    |   |   |                                                       |  |   |                                                   | 
|Liabilities:                                           |  |   |           |  |                                                                    |   |   |                                                       |  |   |                                                   | 
|Derivative Liabilities                                 |  | $ | 3,181,508 |  |                                                                    |   | - |                                                       |  |   | -                                                 | 
|Totals                                                 |  | $ | 3,181,508 |  |                                                                    | $ | - |                                                       |  | $ | -                                                 | 



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 twelve months ended December
31, 2018 and 2017, one and two customers accounted for 100% of revenue, respectively.



At both December 31, 2018 and 2017, one customer
accounted for 100% of accounts receivable.



NOTE 15 – NOTES PAYABLE



In June 2017, the Company entered into financing
agreements for unpaid mining concession taxes 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 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 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%



72











The following is a summary of the transaction
during the years ended December 31, 2018 and 2017:



|Property Holding Taxes June 1, 2014 – December 31, 2015 |  | $ | 533,580  |  
|------------------------------------------------------- |  | - | -------- | -
|Initial payment of 20%                                  |  |   | (106,716 | )
|2017 principal payments                                 |  |   | (59,553  | )
|Balance at December 31, 2017                            |  |   | 367,311  |  



|Exchange Rate Adjustment                               |  |  | 1,861     |  
|------------------------------------------------------ |  |  | --------- | -
|Property Holding Taxes January 1, 2016 – June 30, 2018 |  |  | 2,292,122 |  
|Initial payment of 20%                                 |  |  | (458,423  | )
|2018 principal payments                                |  |  | (399,636  | )
|Balance at December 31, 2018                           |  |  | 1,803,235 |  



|At December 31, 2018 future maturities of
        notes payable are as follows
        Year Ending December 31: |  |   |          
|--------------------------------------------------------------------------------------------------------------- |  | - | ---------
|2019                                                                                                            |  | $ | 705,320  
|2020                                                                                                            |  |   | 766,298  
|2021                                                                                                            |  |   | 331,617  
|Total                                                                                                           |  | $ | 1,803,235





NOTE 16 – SUBSEQUENT EVENTS





On February 18, 2019 the Company entered into
a financing agreement for unpaid mining concession taxes for the year ended December 31, 2018 in the amount of $382,286. The Company
paid an initial 20% payment of $65,667 and financed the balance over 36 months at an interest rate of 21%.

















73












ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.



None.



ITEM 9A. CONTROLS AND PROCEDURES



Evaluation of Disclosure on 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 December 31, 2017. 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
means 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.



Management’s Annual Report on Internal
Control Over Financial Reporting



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f)
of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles
in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts
and expenditures of the Company are being made only in accordance with authorizations of management of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s
assets that could have a material effect on the financial statements.



Because of inherent limitations, a system of
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.



Our management conducted an evaluation of the
effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 Internal Control—Integrated Framework)
at December 31, 2018. Based on its evaluation, our management concluded that, as of December 31, 2018, our internal control over
financial reporting was not effective. We have identified two areas which contain material weaknesses. First; the size of the Company
and limitations inherent in companies with limited accounting staff prevent the desired multiple checks and balances prior to processing
daily operations. We need more compensating controls. Though adequate processes are in place and functioning, subsequent reviews
are deemed necessary to identify unauthorized transactions. Secondly; the same inherent current limitation on company staffing
requires specialized outside accounting assistance to implement additional procedures that are effective, and another review to
the process, 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 material weaknesses identified will be addressed with the implementation of revised internal control procedures to
be developed and approved by the Board of Directors and the Companies external auditors. A material weakness is a deficiency, or
a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on
a timely basis.



This annual report does not include an attestation report
of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s
report was not subject to the attestation by the Company’s registered public accounting firm pursuant to rules of the SEC
that permit the Company to provide only management’s report in this annual report.





74









Changes in Internal Controls over Financial
Reporting



We have not made any changes in our internal
controls over financial reporting that occurred during the period covered by this report on Form 10-K that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.



This annual report does not include an attestation
report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s
report was not subject to the attestation by the Company’s registered public accounting firm pursuant to rules of the SEC
that permit the Company to provide only management’s report in this annual report.



ITEM 9B.    OTHER INFORMATION



None.



PART III



ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE



The Company has a code of business conduct
and ethics that applies to all employees, officers and directors. The code of business conduct and ethics is available on our website
at www.dynaresource.com and we will post any amendments to, or waivers from, the code of
ethics on that website.



The following table lists the names and ages
of the executive officers, directors and key consultants of the Company. The directors will continue to serve until the next annual
shareholders meeting, or until their successors are elected and qualified. All Directors have been elected to serve through 2018.
All officers serve at the discretion of the President, Chairman of the Board of Directors, and members of the Board of Directors.



|Name                               |  | Age |  | Position                                                                    |  | Held Since   
|---------------------------------- |  | --- |  | --------------------------------------------------------------------------- |  | -------------
|K. W. (“K.D.”) Diepholz            |  | 61  |  | Chairman of The Board                                                       |  | May 1995     
|1303 Regency Court                 |  |     |  | CEO/President                                                               |  | May 1997     
|Southlake, Texas 76092             |  |     |  | Treasurer                                                                   |  | May 1997     
|                                   |  |     |  |                                                                             |  |              
|Dr. Jose Vargas Lugo               |  | 58  |  | Director of Operations - México, President - México                         |  | August 2011  
|Enrique Dunant Y5 de Mayo #963 L-3 |  |     |  | Director;                                                                   |  | May 2013     
|Fracc, Los Parques                 |  |     |  |                                                                             |  | August 2013  
|Guamuchil, Sin CP 81460            |  |     |  |                                                                             |  |              
|                                   |  |     |  |                                                                             |  |              
|Eduardo Luna                       |  | 74  |  | Senior Advisor to President of Mineras de DynaResource;                     |  | February 2017
|                                   |  |     |  |                                                                             |  |              
|Sierra Grande #134                 |  |     |  | Director                                                                    |  | February 2017
|Fraccionamiento Lomas de Mazatlán  |  |     |  |                                                                             |  |              
|Mazatlán, Sinaloa México 82110     |  |     |  |                                                                             |  |              
|                                   |  |     |  |                                                                             |  |              
|Pedro Ignacio Teran Cruz           |  | 59  |  | Executive Vice President, Director of Exploration and Resource Development; |  | 2008-2013;   
|Sierra Grande #134                 |  |     |  | Board Member                                                                |  | March 2016   
|Fraccionamiento Lomas de Mazatlán  |  |     |  |                                                                             |  |              
|Mazatlán, Sinaloa México 82110     |  |     |  |                                                                             |  | December 2014
|                                   |  |     |  |                                                                             |  |              
|John C. Wasserman                  |  | 79  |  | Independent Director                                                        |  | December 2015
|222 W. Las Colinas Blvd.           |  |     |  |                                                                             |  |              
|Suite 1910 North Tower             |  |     |  |                                                                             |  |              
|Irving, TX. 75039                  |  |     |  |                                                                             |  |              
|                                   |  |     |  |                                                                             |  |              
|Dale G. Petrini                    |  | 64  |  | Independent Director                                                        |  | December 2016
|222 W. Las Colinas Blvd.           |  |     |  |                                                                             |  |              
|Suite 1910 North Tower             |  |     |  |                                                                             |  |              
|Irving, TX. 75039                  |  |     |  |                                                                             |  |              
|Philip K. Rose                     |  | 30  |  | Independent Director                                                        |  | July 2015    
|222 W. Las Colinas Blvd.           |  |     |  |                                                                             |  |              
|Suite 1910 North Tower             |  |     |  |                                                                             |  |              
|Irving, TX. 75039                  |  |     |  |                                                                             |  |              





75









|                                  |  |    |  |                                                          |  |              
|--------------------------------- |  | -- |  | -------------------------------------------------------- |  | -------------
|Bradford J. Saulter               |  | 59 |  | Vice President – Investor Relations                      |  | May 1998     
|7618 Straits Lane                 |  |    |  |                                                          |  |              
|Rowlett, Texas 75088              |  |    |  |                                                          |  |              
|Nicolas Miguel                    |  |    |  | Controller for Mexico Operations;                        |  | May 2017     
|Sierra Grande #134                |  |    |  |                                                          |  |              
|Fraccionamiento Lomas de Mazatlán |  |    |  |                                                          |  |              
|Mazatlán, Sinaloa México 82110    |  |    |  |                                                          |  |              
|                                  |  |    |  |                                                          |  |              
|Raul Garcia Reimbert              |  | 57 |  | Special Advisor to President of Mineras de DynaResource; |  | November 2016
|Sierra Grande #134                |  |    |  |                                                          |  |              
|Fraccionamiento Lomas de Mazatlán |  |    |  |                                                          |  |              
|Mazatlán, Sinaloa México 82110    |  |    |  |                                                          |  |              





K.W. (“K.D.”) Diepholz.
Mr. Diepholz has been involved in the resource sectors, primarily as an investor/entrepreneur, since 1980. He founded KWD Properties
Corp. an Oil and Gas exploration and production company in 1983 and served as an executive manager to this Oil and Gas concern,
and as a General partner to several limited partnerships. Mr. Diepholz has served in a variety of capacities with DynaResource,
Inc. from 1994 to the present, and has served as Chairman of the Board, President, CEO and Treasurer since 1995. Mr. Diepholz has
special skills in the areas of negotiation, business development, project planning and management, corporate financing, acquisition
analysis, investment program interpretation and structuring, and executive management. Mr. Diepholz has been instrumental to the
Company in the negotiations of the following: the acquisition of 24.9% Net Profits Interest in the San José de Gracia in
1995; the acquisition of an additional 25% interest in San José de Gracia in 1998; the acquisition and consolidation of
100% of the rights to the San José de Gracia from prior owners, culminating in March 2000; the acquisition and consolidation
of several outstanding Concessions at the San José de Gracia from previous Mexican owners during 2000-2003; the direction
and management of the test mining and pilot mill operations at San José de Gracia during 2003-2006; the negotiation of the
Stock Purchase/Earn In Agreement in 2006; the negotiation of the surface rights agreement with the Santa Maria Ejido in 2013; the
negotiation of the financing agreement with Golden Post Rail, LLC, and the general financing of, and the general management of
the Company since inception. In addition to his roles with the Company, Mr. Diepholz serves as Chairman and CEO of DynaResource
Nevada, Inc., an affiliated company, and as President of DynaNevada de Mexico, a wholly owned subsidiary of DynaResource Nevada
Inc. Mr. Diepholz is also the current President of the following subsidiaries of the Company in Mexico: DynaResource de Mexico,
Mineras de DynaResource, and DynaResource Operaciones.



Dr.
Jose Vargas Lugo. Dr. Vargas is a licensed physician with graduate from the Universidad Nacional Autonoma de México
(UNAM) and is a 4th year law student at Universidad Autonoma
de Sinaloa (UAS). Dr. Vargas commenced his involvement with the mining business with Minera Industrial Peñoles as a Medical
Assistant to the Mining Services Division of Peñoles in Fresnillo, Zacatecas. Since 1993, Dr. Vargas has been a supplier
of industrial goods and services in and around the municipalities of Sinaloa de Leyva and Mocorito Sinaloa. Dr. Vargas has worked
with companies such as Compañia Minera El Rosarito, which was conducting operations at San Jose de Gracia during the period
1993 – 1995. Dr. Vargas later provided services and supplies to Mineras Finesterre at San Jose de Gracia, and to Minera
Pangea, which was owned by Queenstake Resources, then Nevada Pacific, and now US. Gold. Dr. Vargas began working with DynaResource
de México in spring 2000; as it commenced activities to acquire and consolidate the San Jose de Gracia District. Over the
past + 10 Years, Dr. Vargas has proven to be an integral part of the Company’s activities at San Jose de Gracia and in Sinaloa
State; involved in all facets of the Company’s business. Dr. Vargas has proven instrumental in the areas of public relations,
community relations, governmental affairs, environmental matters, and overall management of the company’s business activities
in México.



Eduardo Luna. Mr. Luna is a respected
and successful senior executive with over 40 years’ experience in the mining industry. Mr. Luna’s experience includes
serving as a Member of the Board of Directors for major mining companies which have achieved success at the highest level of the
mining industry. Mr. Luna currently serves as a member of the Board of Directors of Silver Wheaton. Mr. Luna has also served as
a Member of the Board of Directors of Goldcorp Inc., Alamos Gold Inc., and Primero Mining Corp.



In addition to his roles on company boards,
Mr. Luna served in a variety of operational capacities. From 1991 to 2005, Mr. Luna served as President of Luismin SA de CV in
Mexico, which operated the Tayoltita Project for Goldcorp in Mexico. Mr. Luna also served as an Executive Vice President of Goldcorp.
More recently, Mr. Luna served as President of Mexican Operations for Primero Mining from 2010-2015, the time frame during which
Primero Mining operated the Tayoltita Project.



During his distinguished
career, Mr. Luna has received several mining industry recognitions and appointments, which include:



|● | National Mining Award, Mexico, 1997;
|- | ------------------------------------



|● | President of the Mexican Chamber of Mines;
|- | ------------------------------------------







76









|● | President of the Consulting Board for the School of Mines, Universidad de Guanajuato;
|- | -------------------------------------------------------------------------------------



|● | Member of the Advisory Boards of the School of Mines of National University of Mexico and University of Zacatecas;
|- | ------------------------------------------------------------------------------------------------------------------



|● | President of The Silver Institute 2002 – 2003.
|- | ----------------------------------------------



Mr. Luna received a Bachelor’s degree
in Mining Engineering from Universidad de Guanajuato, 1971; an MBA from Tecnológico de Monterrey, 1979; and an Advanced
Management degree from Harvard Business School.



In 1997 Mr. Luna was appointed Trustee of Fundación
Pro Niños de la Calle, a charity that works with children living on the streets of Mexico City.





Pedro Ignacio Teran Cruz. Mr. Teran
is a graduate Geologist from the Universidad de Sonora, México. He has over 28 years’ experience in mineral exploration,
mine development is a successful and respected Geological Consultant in México and is credited with defining significant
resources at several projects. From 1986 to 1992, he was Project Geologist for Minera Real de Angeles, SA de CV (Frisco/Placer
Dome Inc, now Alamos Gold), in which under his participation, explored and discovered the "Mulatos Gold Deposit" Sonora,
México, and later as a Project Manager, the "San Felipe Gold Project" BC, México, both now in production.
From 1992 to 1996, Mr. Teran worked as a Mine Geologist with Hecla Mining Co and explored and advanced into production the open
pit "La Choya Gold Mine". From 1996 to 1999, Mr. Teran worked as Geology Superintendent for Compañia Minera Lluvia
de Oro (Santa Cruz Gold, Now NWM Mining Corp.) and at the open pit "Lluvia de Oro Gold Mine", Sonora, México.
From 1999 to 2001, Mr. Teran worked as a Consultant Geology performing due diligences for Tara Gold Resources in several projects
located in la Sierra Madre Occidental. From 2001 to 2005, he worked as Manager of Geology Department for the Compañia Minera
Pangea SA de CV (Queenstake Resources, Nevada Pacific and now McEwen Mining), in the "El Magistral Gold Mine" Sinaloa,
México. Under his direction of exploration, the reserves were increased substantially and formed part of the team to put
the project in production. During 2005 and part of 2006, Mr. Teran worked as Data Manager for Linear Gold Corp. in the "Ixhuatan
Project" Chiapas, México. He built the computer block model and Resources Estimation. From 2006 to 2008, he worked
as Project Manager for Pediment Exploration Ltd., now Argonaut Gold Inc. in the "San Antonio Gold Project" located in
BCS, México.



Since 2008, Mr. Teran began working as a Consultant
Geologist with DynaResource, Inc. in the "San Jose de Gracia Gold Project" located in Sinaloa, México, an advanced
exploration project. Mr. Teran now is working 100% of his time with the DynaResource Team and with full focus at San Jose de Gracia.



Bradford J. Saulter. Attended University
of Texas, Austin, Texas; Marketing Department of Metagram, Inc., a Dallas National Marketing Company; Regional Manager for Lugar,
Lynch, & Associates, A Dallas Financial Services Company, Involved in Sales & Marketing of Various Investment Products;
Independent Marketing Consultant; Series 22 & 63 Securities License; Vice President / Marketing - Dynacap Group Ltd. (1992
- Present); Director: Farm Partners, Inc. (1992 - Present), Vice President – Investor Relations - DynaResource, Inc., Dallas,
Texas (1995 to present).



John C. Wasserman. Mr. Wasserman is
a Partner with Wasserman, Bryan, Landry & Honold, LLP Law firm, Perrysburg Ohio. He is a stockholder of the Company and brings
the following credentials to the Board of Directors:



University of Detroit (PHB); Ohio State University,
Law School (JD) – Graduate work in business administration; University of Toledo – Undergraduate and Graduate work
in business administration; Admitted to practice before Ohio Supreme Court, U.S. Supreme Court, U.S. District Court for Northern
District of Ohio, Sixth Circuit U.S. Court of Appeals; Member, Ohio State, Lucas County, Ohio (past President) and Toledo, Ohio
Bar Associations; Board Member, Corporate and Board Secretary, Blue Water Satellite, Inc.; Board Member, TechTol of Toledo, Inc.;
Member and current chair of the City of Waterville, Ohio Planning Commission; Member of the ten year Plan Committee of Waterville,
Ohio; Member, Past Board Member, Secretary Treasurer and President of Toledo, Ohio Rotary; Past Assistant District Governor, Area
4 of District 6600 of Rotary International; Member of Timberlake Investments, LLC, an investment LLC; Board Member, Victory Center
of Toledo, Ohio; Member, Succession Committee, DynaResource, Inc.; Member/Managing Partner/Member, numerous LLCs/Partnerships for
real estate developments and investments.



Mr. Wasserman has been employed with the Ohio
Attorney General office, as Special Counsel; and with Ohio Bureau of Unemployment, as Hearing Officer; and as a Former Acting Judge,
Maumee, Ohio, Municipal Court; Past Toledo, Ohio Exchange Club Member (President). Mr. Wasserman was selected one of Jaycees Top
Ten Young men of Toledo, Ohio; was Co Author – Management Considerations of a Business Entity in the Environment of Chapter
XI Reorganization Proceedings Under the New Federal Bankruptcy Code Effective October 1, 1979 published in Midwest Business Administration
Association; was an Expert witness in real estate mandamus case: Lucas County Common Pleas Court, State ex rel Ad Hoc Committee
of Waterville Citizens for Initiative and Referendum Petitions, Etc., Realtor vs. City of Waterville and Dale Knepper, Clerk of
Council, City of Waterville, Respondents, Case No. CI-2013-1137.





77









Dale G. Petrini. Mr. Petrini brings over 40 years of extensive
international project and manufacturing experience to the Board of DynaResource, Inc. During his 40+ years with The Dow Chemical
Company, Houston, Texas, Mr. Petrini was the engineering sponsor, advisor and led the project development for several international
mega projects totally over $50 billion USD. In his latest role for Dow, he was responsible for the project development of mega
project growth opportunities in Latin America.



Previously, Mr. Petrini was responsible for
Global Construction Management and Global Capital Procurement for Dow with offices and personnel located throughout the world.
In addition, he was the Plant Manager for several production units and led the respective business management teams.



Mr. Petrini earned his civil engineering degree
from The University of Michigan and is a registered licensed professional engineer. He holds dual citizenship in the US and EU.



David B. Orta, CPA (Controller USA)



Mr. Orta joined DynaResource, Inc. in January
2018 as Controller for the USA operations. Mr. Orta earned his BBA in Accounting from St. Mary’s University in San Antonio,
Texas and is a Certified Public Accountant in the State of Texas.



Prior to joining DynaResource, Inc., Mr. Orta
worked for CGI Technologies and Solutions in Dallas, Texas from January 2000 to January 2017 as Director of Consulting in charge
of the CGI’s oil & gas accounting outsourcing division. From July 1994 to December 1999, Mr. Orta served as Vice President
and Controller for Rowe Energy Services, Inc. in Houston, Texas which provided consulting and accounting outsourcing services to
oil & gas clients. Prior to Rowe, Mr. Orta worked in accounting management positions for Amax Oil & Gas, Inc. in Houston,
Texas and SPG Exploration Corp. in San Antonio, Texas.



Mr. Orta brings over 35 years accounting experience
to the company.



Philip K. Rose. Mr. Rose is the appointee
to the Board of Directors by Golden Post, LLC., the holder of the Series C convertible preferred shares. Mr. Rose is a 2011 graduate
of Texas Christian University in Fort Worth, Texas.



Consultants



Nicolas Miguel Padilla (Comptroller in México):



Mr. Padilla received his Degree in Public Accounting
from the Universidad Michoacana de San Nicolás de Hidalgo, School Generation 1978-1982. Mr. Padilla is Certificated by CENEVAL
Año 2010 Professional Patent No. 7330509.



Most recently, Mr. Padilla was employed by
Primero Servicios Mineros, S.A. de C.V., Primero Mining Corp., at the Unidad Tayoltita; where he was Comptroller-Manager
from February 2014 Until September 2016. Prior to serving as Comptroller for Primero, Mr. Padilla served as Superintendent of Administration
from July 2010 to July 2011, and Mr. Padilla served as Manager of Administration and Services-Comptroller from August 2011 to January
2014.



Previous to serving Primero, Mr. Padilla served
as Chief Accountant for Los Filos S.A. de C.V., a subsidiary of Goldcorp, Inc. during the period April 2004 to June 2010. And before
serving Los Filos S.A. de C.V. as Chief Accountant, Mr. Padilla served as Superintendent of Administration-Comptroller for Luismin,
S.A. de C.V., a subsidiary of Goldcorp, Inc., during the period November 1990 to March 2004.



Mr. Padilla joined Mineras de DynaResource
S.A. de C.V., a subsidiary of DynaResource, Inc., as Comptroller-Mexico, in June 2017.



Raul Garcia Reimbert. (Security and Risk
Advisor)



Mr. Garcia Reimbert is a graduated engineer
in Mining and Metallurgist and Lawyer from the Universidad Nacional Autonoma de Mexico, he also has a Master as a Mine Expert Engineer
from the Ecole des Mines, Nancy, France and several specializations in Holistic Risk Management, Crisis Management and Business
Administration that provides over 35 years of experience in the mining industry and risk management activities. Mr. Garcia Reimbert
is the fifth generation of miners in his family.



Mr.  Garcia Reimbert served as Plan Engineer
at SICARTSA (1981 -1983) and as Corporate Risk Manager at Grupo Peñoles / Fresnillo (1983 - 2011). From 2011 up to date,
Mr. Garcia Reimbert is the CEO of Cabinet Reimbert, a company specialized in Risk Management, Security, Environmental, Community
and Legal Solutions for the Mining industry and others. His portfolio includes global and local mining companies, global manufacturing
companies, as well as governmental agencies.





78









Mr. Garcia Reimbert was also a professor for
15 years at the Universidad Nacional Autonoma de Mexico, and from 2015 at Federal Governmental agencies. Mr. Garcia Reimbert also
serves as the National Treasurer of The Mexican Mines, Metallurgists, and Geologist Engineers Society. Mr. Gracia Reimbert has
received recognitions as The Best Mexican Risk Manager in 1999 and One of the Most Influential Security Specialists in Mexico for
2016.



Mr. Garcia Reimbert, was retained as Special
Advisor to DynaResource in November 2016.



To the knowledge of the Company, no present
or former director, executive officer, or person nominated to become a director or executive of the Company, or consultants to
the Company, has ever:



|1. | Filed a bankruptcy petition by or against any business of which such person was a general partner or executive officer whether at the time of the bankruptcy or with two years prior to that time;
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2. | Had any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------



|3. | Been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and,
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. | Been found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed suspended or vacated.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





79









ITEM 11.     EXECUTIVE COMPENSATION



The following officers received the following
compensation for the years ended December 31, 2018 and 2017. These officers(*) do not have employment contracts with the Company.



|Name and principal position             |  | Year |  | Salary   |  | Bonus |  | Stock
        Awards |  | Option
        Awards |  | Non-equity
        incentive plan compensation |  | Nonqualified deferred compensation |  | All other
        compensation
        *
|--------------------------------------- |  | ---- |  | -------- |  | ----- |  | -------------------- |  | --------------------- |  | ---------------------------------------------- |  | ---------------------------------- |  | ----------------------------------------
|K.W. (“K.D.”) Diepholz,                 |  | 2018 |  | $250,000 |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | None                                    
|CEO/President                           |  | 2017 |  | $251,039 |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | $45,000                                 
|                                        |  |      |  |          |  |       |  |                      |  |                       |  |                                                |  |                                    |  |                                         
|Dr. Jose Vargas Lugo; EVP., s           |  | 2018 |  | $90,000  |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | None                                    
|President of México Operation           |  | 2017 |  | $90,000  |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | None                                    
|                                        |  |      |  |          |  |       |  |                      |  |                       |  |                                                |  |                                    |  |                                         
|Eduardo Luna                            |  | 2018 |  | $166,670 |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | None                                    
|Sr. Advisor to                          |  | 2017 |  | $166,670 |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | None                                    
|President of Mineras de DynaResource    |  |      |  |          |  |       |  |                      |  |                       |  |                                                |  |                                    |  |                                         
|                                        |  |      |  |          |  |       |  |                      |  |                       |  |                                                |  |                                    |  |                                         
|*Rene L.F. Mladosich;                   |  | 2018 |  | None     |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | None                                    
|former GM of San Jose de Gracia Project |  | 2017 |  | $54,250  |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | None                                    
|                                        |  |      |  |          |  |       |  |                      |  |                       |  |                                                |  |                                    |  |                                         
|Pedro Ignacio Teran Cruz,               |  | 2018 |  | $120,000 |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | None                                    
|Dir. of Exp. and Resource Dev.          |  | 2017 |  | $120,000 |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | None                                    
|                                        |  |      |  |          |  |       |  |                      |  |                       |  |                                                |  |                                    |  |                                         
|Bradford J. Saulter,                    |  | 2018 |  | $90,000  |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | None                                    
|VP, Investor Relations                  |  | 2017 |  | $90.000  |  | None  |  | None                 |  | None                  |  | None                                           |  | None                               |  | $20,000                                 





|David Orta          |  | 2018 |  | $125,000 |  | None |  | None |  | None |  | None |  | None |  | None
|------------------- |  | ---- |  | -------- |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- |  | ----
|Controller Dyna USA |  | 2017 |  | None     |  | None |  | None |  | None |  | None |  | None |  | None





* As disclosed in the financial statements,
the Company paid consulting fees to Dynacap Group, Ltd.





|                                        |  |                                                                     | Option Awards |                                                                        | Stock Awards
|--------------------------------------- |  | ------------------------------------------------------------------- | ------------- | ---------------------------------------------------------------------- | ------------
|Name and principal position             |  | Number of Securities Underlying Unexercised options (#) exercisable |               | Number of Securities Underlying Unexercised options (#) un-exercisable |             
|                                        |  |                                                                     |               |                                                                        |             
|K.W. (“K.D.”) Diepholz                  |  | None                                                                |               | None                                                                   |             
|CEO/President                           |  |                                                                     |               |                                                                        |             
|                                        |  |                                                                     |               |                                                                        |             
|Dr. Jose Vargas Lugo                    |  | None                                                                |               | None                                                                   |             
|President of México Operations          |  |                                                                     |               |                                                                        |             
|                                        |  |                                                                     |               |                                                                        |             
|Rene L.F. Mladosich                     |  | None                                                                |               | None                                                                   |             
|GM of San Jose de Gracia Project (2016) |  |                                                                     |               |                                                                        |             
|                                        |  |                                                                     |               |                                                                        |             
|Robert (“Chip”) Allender, Jr.           |  | None                                                                |               | None                                                                   |             
|Director of Mining Operations (2016)    |  |                                                                     |               |                                                                        |             
|                                        |  |                                                                     |               |                                                                        |             
|Pedro Ignacio Teran Cruz; Dir. of Expl. |  | None                                                                |               | None                                                                   |             







80









|                    |  |      |  |      |  |      |  |     |  |     |  |     
|------------------- |  | ---- |  | ---- |  | ---- |  | --- |  | --- |  | ----
|David Orta          |  | None |  | None |  | None |  | N/A |  | N/A |  |     
|Controller Dyna USA |  |      |  |      |  |      |  |     |  |     |  | None
|                    |  |      |  |      |  |      |  |     |  |     |  |     
|Bradford J. Saulter |  | None |  | None |  | None |  | N/A |  | N/A |  | None
|                    |  |      |  |      |  |      |  |     |  |     |  |     
|John C. Wasserman   |  | None |  | None |  | None |  | N/A |  | N/A |  | None







|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------



The following table sets forth the amount and
nature of beneficial ownership of each of the executive officers and directors of the Company and each person known to be a beneficial
owner of more than five percent of the issued and outstanding shares of common stock of the Company as of December 31, 2018.  The
following table sets forth the information based on 17,722,825(1) common shares issued and outstanding (1) as of December 31, 2018.



|COMMON STOCK |  | Beneficial Owner                                                      |  | Address                                                                             |  | Common Shares |  | Percent Ownership
|------------ |  | --------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------- |  | ------------- |  | -----------------
|             |  |                                                                       |  |                                                                                     |  |               |  |                  
|Common Stock |  | K.W. (“K.D.”) Diepholz
        Chairman / CEO                         |  | 222 W. Las Colinas Blvd.
        Suite 1910 North Tower
        Irving, Texas 75039 |  | 1,865,100     |  | 10.50%           
|Common Stock |  | Mineras de DynaResource
        SA de CV.                             |  | CP 82110, Mazatlán, Sinaloa, Mexico                                                 |  | 504,300       |  | 2.8%             
|Common Stock |  | Gareth Nichol                                                         |  | Denver, Colorado                                                                    |  | 2,333,333     |  | 13.16%           
|Common Stock |  | Dr. Jose Vargas Lugo
        EVP, Director                            |  | Plutarco Elías Calles 47
        Guamúchil Sin. Mex. 81450                          |  | 274,508       |  | 1.5%             
|             |  |                                                                       |  |                                                                                     |  |               |  |                  
|Common Stock |  | Pedro I. Teran Cruz
        EVP; Director                             |  | Hermosillo, Sonora Mexico                                                           |  | 37,500        |  | .21%             
|Common Stock |  | Bradford J. Saulter
        VP., Investor Relations                   |  | 222 W. Las Colinas Blvd.
        Suite 1910 North Tower
        Irving, Texas 75039 |  | 124,439       |  | .70%             
|Common Stock |  | John C. Wasserman
        Director;                                   |  | Waterville, Ohio 43566                                                              |  | 134,389       |  | .758%            
|Common Stock |  | Dale G. Petrini
        Director                                      |  | Houston, Texas 77027                                                                |  | 156,330       |  | .935%            
|Common Stoc  |  | Eduardo Luna;
        Director                                        |  | Mexico City; Mexico                                                                 |  |               |  |                  
|**           |  | Philip A. Rose (2)
        Director                                   |  | Westlake, Texas                                                                     |  |               |  |                  
|             |  |                                                                       |  |                                                                                     |  |               |  |                  
|             |  | All Officers, Directors and Beneficial owners as a Group (10 holders) |  |                                                                                     |  | 5,429,899     |  | 30.64 %          











81











|(1) | Does Not Include (i) 1,733,221 shares of common stock issuable upon the conversion of 1,733,221 shares of Series C Convertible Preferred Stock, which are currently convertible, and (ii) 2,166,527 shares of common stock issuable upon the exercise of a warrant, which is exercisable, and subsequent conversion into common shares.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Mr. Rose is a Director of the Company, elected by the holder of the Series C Preferred Shares.
|--- | ----------------------------------------------------------------------------------------------



No officer or director holds options which
are either (a) vested or (b) will vest within 60 days.



OPTIONS/WARRANTS



The officers and directors and those 5% beneficial
owners held the following options/warrants as of December 31, 2017:



None



PREFERRED SHARES (SERIES A)



|Preferred Series |  | Beneficial Owner                    |  | Address                                          |  | Preferred Shares |  | Percent Ownership
|---------------- |  | ----------------------------------- |  | ------------------------------------------------ |  | ---------------- |  | -----------------
|Series “A”       |  | K.W. (“K.D.”)
        Diepholz, CEO |  | 1303 Regency Court
        Southlake, Texas76092 |  | 1,000            |  | 100.0%           





PREFERRED SHARES (SERIES C)



|Preferred Series |  | Beneficial Owner |  | Address                                          |  | Preferred Shares |  | Percent Ownership
|---------------- |  | ---------------- |  | ------------------------------------------------ |  | ---------------- |  | -----------------
|Series “C”       |  | Golden Post LLC. |  | 1110 Post Oak Place
        Westlake, Texas76262 |  | 1,733,221        |  | 100.0%           



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------



Dynacap Group Ltd.



The Company paid $113,750 and $165,250 to Dynacap
Group, Ltd. (“Dynacap”, an entity controlled by the CEO of the Company) for consulting and other fees during the years
ended December 31, 2018 and 2017, respectively. Dynacap retained two subcontractors who provided accounting, administrative and
executive support services to the Company during recent years.



Cash Advances by Management



None



Stock Issued to Management



None



The Company is not aware of any other material
relationships or related transactions between the Company and any officers, directors or holders of more than five percent of any
class of outstanding securities of the issuer.





|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------



(1) Audit Fees



The aggregate fees billed for professional
services rendered by our auditors, for the audit of the registrant's annual financial statements and review of the financial statements
included in the registrant's Form 10-K and Form 10-Q(s) or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements, for fiscal years 2018 and 2017 was $146,780 and $100,000, respectively.



(2) Audit Related Fees



None



(3) Tax Fees



None





82









(4) All Other Fees



None



(5) Audit Committee Policies and Procedures



The Company does not have an audit committee.



(6) If greater than 50 percent, disclose the
percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent
employees.



Not applicable.





















83







PART IV



ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



The exhibits listed in the accompanying exhibit
index are filed (except where otherwise indicated) as part of this report.



|No.    | Description                                                                                                                                                                                         
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 * | Certification of the Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                
|31.2 * | Certification of the Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                
|32.1 * | Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



* Filed herewith.



ITEM 16. 10K SUMMARY



|              
|--------------
|Not Applicable







Exhibit Number; Name of Exhibit



|31.1 | Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------



|31.2 | Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------



|32.1 | Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

































84











SIGNATURES



In accordance with Section 13 or 15(d) of the Exchange Act,
the Company caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.





|                     | DYNARESOURCE, INC. |                                                                                     
|-------------------- | ------------------ | ------------------------------------------------------------------------------------
|                     |                    |                                                                                     
|Dated: April 8, 2019 | By:                | /s/ K.W. (“K.D.”) DIEPHOLZ                                                          
|                     |                    | K.W. (K.D.) Diepholz, Chairman of the Board of Directors and Chief Executive Officer
|                     |                    |                                                                                     





In accordance with the Exchange Act, this Report has been signed
below by the following persons on behalf of the Company and in the capacities and on the dates indicated.





|Signature                  |  | Title                                                                                        |  | Date         
|-------------------------- |  | -------------------------------------------------------------------------------------------- |  | -------------
|                           |  |                                                                                              |  |              
|/s/ K.W. (“K.D.”) DIEPHOLZ |  | Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) |  | April 8, 2019
|K.W. (K.D.) Diepholz       |  |                                                                                              |  |              
|                           |  |                                                                                              |  |              
|/s/ K.W. (“K.D.”) DIEPHOLZ |  | Acting Chief Financial Officer (Principal Financial and Accounting Officer)                  |  | April 8, 2019
|K.W. (K.D.) Diepholz       |  |                                                                                              |  |              













85