SECURITIES
AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q





(Mark One)



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



For the quarterly period ended September 30,
2016



OR



[ ] TRANSITION REPORT UNDER SECTION 13 OF
15(d) OF THE EXCHANGE ACT OF 1934



From the transition period ___________ to ____________.



Commission File Number 000-30371



DYNARESOURCE, INC.

(Exact name of small business issuer as specified
in its charter)











|Delaware                                                           |  | 94-1589426                       
|------------------------------------------------------------------ |  | ---------------------------------
|(State or other jurisdiction of incorporation
    or organization) |  | (IRS Employer Identification No.)











222 W Las Colinas Blvd., Suite 744 East Tower,
Irving, Texas 75039

(Address of principal executive offices)



(972) 868-9066

(Issuer's telephone number)



N/A

(Former name, former address and former fiscal
year, if changed since last report)



Indicate by check mark whether the registrant
(1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days:

Yes [X] No [ ]



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

| |                             |  |                              
| | --------------------------- |  | -----------------------------
| | Large Accelerated Filer [ ] |  | Accelerated Filer [ ]        
| | Non-Accelerated Filer [ ]   |  | Smaller Reporting Company [X]





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



Yes [ ] No [X]



As of November 15, 2016, there were 16,722,825 shares of Common
Stock of the issuer outstanding.





1






TABLE OF CONTENTS







|               |                                                            |      
|-------------- | ---------------------------------------------------------- | -----
|PART I.        | FINANCIAL STATEMENTS                                       |      
|               |                                                            |      
|ITEM 1.        | Financial Statements                                       | 3-6  
|               | Notes to Financial Statements                              | 7-13 
|               |                                                            |      
|ITEM 2.        | Management's Discussion and Analysis and Plan of Operation | 14-24
|ITEM 3.        | Quantitative and Qualitative Disclosure About Market Risk  | 25   
|ITEM 4.        | Controls and Procedures                                    | 25   
|               |                                                            |      
|               |                                                            |      
|PART II.       | OTHER INFORMATION                                          |      
|               |                                                            |      
|ITEM 1.        | Legal Proceedings                                          | 26   
|               |                                                            |      
|ITEM 2.        | Unregistered Sales of Securities and Use of Proceeds       | 29   
|               |                                                            |      
|ITEM 3.        | Default Upon Senior Securities                             | 29   
|               |                                                            |      
|ITEM 4.        | Mine Safety Disclosures                                    | 29   
|               |                                                            |      
|ITEM 5.        | Other Information                                          | 29   
|               |                                                            |      
|ITEM 6.        | Exhibits                                                   | 29   
|               |                                                            |      
|               |                                                            |      
|CERTIFICATIONS |                                                            |      
|EXHIBIT 31.1   | CHIEF EXECUTIVE OFFICER CERTIFICATION                      |      
|               |                                                            |      
|EXHIBIT 31.2   | CHIEF FINANCIAL OFFICER CERTIFICATION                      |      
|               |                                                            |      
|EXHIBIT 32.1   | CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350           |      
|               |                                                            |      
|               |                                                            |      





2








PART I

ITEM 1. 	FINANCIAL STATEMENTS

DYNARESOURCE, INC.

Consolidated
BALANCE SHEETS

|                                                                                                                  |  | September 30, |             | December 31,
|----------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | ------------
|                                                                                                                  |  | 2016          |             | 2015        
|                                                                                                                  |  | (Unaudited)   |             | (Audited)   
|ASSETS                                                                                                            |  |               |             |             
|Current Assets:                                                                                                   |  |               |             |             
|Cash and Cash Equivalents                                                                                         |  | $             | 2,353,642   |             
|Accounts Receivable                                                                                               |  |               | 564,316     |             
|Inventories                                                                                                       |  |               | 557,450     |             
|Foreign Tax Receivable and Other Current                                                                          |  |               | 1,164,318   |             
|Total Current Assets                                                                                              |  |               | 4,639,726   |             
|                                                                                                                  |  |               |             |             
|Mining Equipment and Fixtures (Net of Accumulated                                                                 |  |               |             |             
|Depreciation of $835,441 and $823,044                                                                             |  |               | 614,263     |             
|Mining Concessions                                                                                                |  |               | 4,132,678   |             
|Investments in Affiliate                                                                                          |  |               | 70,000      |             
|Receivables from Affiliate                                                                                        |  |               | 141,686     |             
|Other Assets                                                                                                      |  |               | 18,190      |             
|                                                                                                                  |  |               |             |             
|TOTAL ASSETS                                                                                                      |  | $             | 9,616,543   |             
|                                                                                                                  |  |               |             |             
|LIABILITIES AND EQUITY                                                                                            |  |               |             |             
|Current Liabilities:                                                                                              |  |               |             |             
|Accounts Payable                                                                                                  |  | $             | 276,065     |             
|Convertible Notes Payable                                                                                         |  |               | 956,250     |             
|Due to Non-Controlling Interest                                                                                   |  |               | 231,500     |             
|Advances—Related Party                                                                                            |  |               | —           |             
|Accrued Expenses                                                                                                  |  |               | 1,059,267   |             
|Derivative Liabilities                                                                                            |  |               | 5,382,737   |             
|Total Current Liabilities                                                                                         |  |               | 7,905,819   |             
|                                                                                                                  |  |               |             |             
|TOTAL LIABILITIES                                                                                                 |  |               | 7,905,819   |             
|                                                                                                                  |  |               |             |             
|Preferred Stock, Series C, $.0001 par value, 1,733,221 Shares Authorized, 1,733,221 Shares Issued and Outstanding |  | $             | 4,333,053   |             
|Stockholders’ Equity:                                                                                             |  |               |             |             
|Preferred Stock, Series A, $.0001 par value, 1,000 shares                                                         |  |               |             |             
|Authorized, 1,000 and 1,000 Issued and Outstanding                                                                |  | $             | 1           |             
|Preferred Stock, $.0001 par value, 19,000,000 shares                                                              |  |               |             |             
|Authorized, no shares issued and outstanding                                                                      |  |               | —           |             
|Common Stock, $.01 par value, 25,000,000 shares authorized,                                                       |  |               |             |             
|16,722,825 and 16,722,825 shares issued and outstanding                                                           |  |               | 167,228     |             
|Preferred Rights                                                                                                  |  |               | 40,000      |             
|Additional Paid In Capital                                                                                        |  |               | 55,083,783  |             
|Treasury Stock                                                                                                    |  |               | (3,175,515  | )           
|Accumulated Other Comprehensive Income                                                                            |  |               | 6,635,797   |             
|Accumulated Deficit                                                                                               |  |               | (54,644,389 | )           
|Total DynaResource, Inc. Stockholders’ Equity                                                                     |  |               | 4,106,905   |             
|Non-controlling Interest                                                                                          |  |               | (6,729,234  | )           
|                                                                                                                  |  |               |             |             
|TOTAL EQUITY (DEFICIT)                                                                                            |  | $             | (2,622,329  | )           
|                                                                                                                  |  |               |             |             
|TOTAL LIABILITIES AND EQUITY                                                                                      |  | $             | 9,616,543   |             
|                                                                                                                  |  |               |             |             

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





3








DYNARESOURCE, INC.

Consolidated Statements of Operations

(Unaudited)

|                                                                                                                          |  | Three Months September 30, 2016 |            | Three Month September 30, 2015 |  | Nine Months September 30, 2016 |            | Nine Months September 30, 2015
|------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ---------- | ------------------------------ |  | ------------------------------ | ---------- | ------------------------------
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|REVENUES                                                                                                                  |  | $                               | 3,027,305  |                                |  | $                              | —          |                               
|COSTS AND EXPENSES OF MINING                                                                                              |  |                                 |            |                                |  |                                |            |                               
|OPERATIONS                                                                                                                |  |                                 |            |                                |  |                                |            |                               
|Production Costs Applicable to Sales                                                                                      |  |                                 | 443,703    |                                |  |                                | —          |                               
|Mine Operating Cost                                                                                                       |  |                                 | 747,403    |                                |  |                                | —          |                               
|Refining and Treatment Cost                                                                                               |  |                                 | 313,670    |                                |  |                                | —          |                               
|Pre-Pilot Production Costs                                                                                                |  |                                 | —          |                                |  |                                | 662,420    |                               
|Property Holding Costs                                                                                                    |  |                                 | 110,978    |                                |  |                                | 178,564    |                               
|General and Administrative                                                                                                |  |                                 | 653,429    |                                |  |                                | 565,420    |                               
|Share Based Compensation                                                                                                  |  |                                 | —          |                                |  |                                | 791,400    |                               
|Depreciation and Amortization                                                                                             |  |                                 | 29,495     |                                |  |                                | 35,443     |                               
|Total Operating Expenses                                                                                                  |  |                                 | 2,298,678  |                                |  |                                | 2,233,247  |                               
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|NET OPERATING INCOME (LOSS)                                                                                               |  |                                 | 728,627    |                                |  |                                | (2,233,247 | )                             
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|OTHER INCOME (EXPENSES)                                                                                                   |  |                                 |            |                                |  |                                |            |                               
|Foreign Currency (Losses)                                                                                                 |  |                                 | (460,885   | )                              |  |                                | (1,359,680 | )                             
|Interest Expenses                                                                                                         |  |                                 | (29,883    | )                              |  |                                | (35,759    | )                             
|Inducement Costs                                                                                                          |  |                                 | —          |                                |  |                                | (293,822   | )                             
|Derivatives
    Adj. Mark-to-Market Gain (Loss)                                                                           |  |                                 | (204,279   | )                              |  |                                | 60,515     |                               
|Other Income                                                                                                              |  |                                 | 185        |                                |  |                                | 432        |                               
|Total Other Income (Expenses)                                                                                             |  |                                 | (694,862   | )                              |  |                                | (1,628,314 | )                             
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|NET INCOME (LOSS) BEFORE TAXES                                                                                            |  |                                 | 33,765     |                                |  |                                | (3,861,561 | )                             
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|TAXES                                                                                                                     |  |                                 | —          |                                |  |                                | —          |                               
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|NET INCOME (LOSS)                                                                                                         |  | $                               | 33,765     |                                |  | $                              | (3,861,561 | )                             
|Cumulative Dividend for Series C Preferred                                                                                |  | $                               | (40,000    | )                              |  | $                              | (43,687    | )                             
|Accretion Expense of Preferred Stock to Redemption Value                                                                  |  | 4                               | —          |                                |  | $                              | —          |                               
|ATTRIBUTABLE TO NON-CONTROLLING INTERESTS                                                                                 |  | $                               | 2,294      |                                |  | $                              | 262,976    |                               
|ATTRIBUTABLE TO COMMON SHAREHOLDERS                                                                                       |  | $                               | (3,941     | )                              |  | $                              | (3,642,272 | )                             
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|EARNINGS
                                         PER SHARE DATA ATTRIBUTABLE TO THE EQUITY HOLDERS OF DYNARESOURCE, INC. |  |                                 |            |                                |  |                                |            |                               
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|Basic and Diluted Earnings (Loss) per Common Share                                                                        |  | $                               | .00        |                                |  | $                              | (.22       | )                             
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|Weighted Average Shares Outstanding, Basic and Diluted                                                                    |  |                                 | 16,722,825 |                                |  |                                | 16,380,368 |                               
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|OTHER COMPREHENSIVE INCOME (LOSS)                                                                                         |  |                                 |            |                                |  |                                |            |                               
|NET INCOME (LOSS) PER ABOVE                                                                                               |  | $                               | 33,765     |                                |  | $                              | (3,861,561 | )                             
|Accretion Expense of Preferred Stock to Redemption Value                                                                  |  |                                 | —          |                                |  |                                | —          |                               
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|Foreign Currency Exchange (Losses)                                                                                        |  |                                 | (1,083,766 | )                              |  |                                | (1,435,514 | )                             
|TOTAL OTHER COMPREHENSIVE (LOSS)                                                                                          |  |                                 | (1,083,766 | )                              |  |                                | (1,435,514 | )                             
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|TOTAL COMPREHENSIVE INCOME (LOSS)                                                                                         |  | $                               | (1,050,001 | )                              |  | $                              | (5,297,075 | )                             
|                                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|ATTRIBUTABLE TO:                                                                                                          |  |                                 |            |                                |  |                                |            |                               
|EQUITY HOLDERS OF DYNARESOURCE, INC.                                                                                      |  | $                               | 219,610    |                                |  | $                              | (5,400,312 | )                             
|NON-CONTROLLING INTERESTS                                                                                                 |  | $                               | (1,269,611 | )                              |  | $                              | (103,237   | )                             
|TOTAL COMPREHENSIVE (LOSS)                                                                                                |  | $                               | (1,050,001 | )                              |  | $                              | (5,297,075 | )                             

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



4








DYNARESOURCE, INC.

Consolidated
Statements of Changes in Stockholders’ Equity









|                            | PreferredSeries A | Series A | Common     | Common  | Preferred | Additional
                                                                                Paid In | Treasury  | Treasury    | Other
                                                                                Comprehensive | Accumulated  |  |          
|--------------------------- | ----------------- | -------- | ---------- | ------- | --------- | -------------------------------------------------------------------------------------------------- | --------- | ----------- | --------------------------------------------------------------------------------------------------- | ------------ |  | ---------
|                            | Shares            | Amount   | Shares     | Amount  | Rights    | Capital                                                                                            | Shares    | Amount      | Income                                                                                              | Deficit      |  | Total    
|                            |                   |          |            |         |           |                                                                                                    |           |             |                                                                                                     |              |  |          
|                            |                   |          |            |         |           |                                                                                                    |           |             |                                                                                                     |              |  |          
|Balance, January 1, 2016    | 1,000             | 1        | 16,722,825 | 167,228 | 40,000    | 55,083,783                                                                                         | 1,112,313 | (3,175,515) | 4,822,094                                                                                           | (54,800,910) |  | 2,136,681
|                            |                   |          |            |         |           |                                                                                                    |           |             |                                                                                                     |              |  |          
|Other Comprehensive Income  |                   |          |            |         |           |                                                                                                    |           |             | 1,813,703                                                                                           |              |  | 1,813,703
|Net Income                  |                   |          |            |         |           |                                                                                                    |           |             |                                                                                                     | 316,521      |  | 316,521  
|Dividends                   |                   |          |            |         |           |                                                                                                    |           |             |                                                                                                     | (160,000)    |  | (160,000)
|Non-Controlling Interest    |                   |          |            |         |           |                                                                                                    |           |             |                                                                                                     |              |  |          
|                            |                   |          |            |         |           |                                                                                                    |           |             |                                                                                                     |              |  |          
|                            |                   |          |            |         |           |                                                                                                    |           |             |                                                                                                     |              |  |          
|Balance, September 30, 2016 | 1,000             | 1        | 16,722,825 | 167,228 | 40,000    | 55,083,783                                                                                         | 1,112,313 | (3,175,515) | 6,635,797                                                                                           | (54,644,389) |  | 4,106,905
|                            |                   |          |            |         |           |                                                                                                    |           |             |                                                                                                     |              |  |          
|                            |                   |          |            |         |           |                                                                                                    |           |             |                                                                                                     |              |  |          
|                            |                   |          |            |         |           |                                                                                                    |           |             |                                                                                                     |              |  |          



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





5






DYNARESOURCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                       |  |                    |            |                   
|------------------------------------------------------ |  | ------------------ | ---------- | ------------------
|                                                       |  | September 30, 2016 |            | September 30, 2015
|                                                       |  | (Unaudited)        |            | (Unaudited)       
|CASH FLOWS FROM OPERATING ACTIVITIES                   |  |                    |            |                   
|Net Income (Loss)                                      |  | $                  | 166,370    |                   
|Adjustments to reconcile net loss to cash              |  |                    |            |                   
|(used in) Operating activities                         |  |                    |            |                   
|Issuance of Common Stock for Services to Related Party |  |                    | —          |                   
|Issuance of Treasury Shares for Services               |  |                    | —          |                   
|Inducement Expense                                     |  |                    | —          |                   
|Adjustment Mark to Market for Pref,
    Stk., Series C |  |                    | —          |                   
|Depreciation and Amortization                          |  |                    | 77,626     |                   
|                                                       |  |                    |            |                   
|Change in Operating Assets and Liabilities:            |  |                    |            |                   
|Accounts Receivable                                    |  |                    | (462,358   | )                 
|Inventory                                              |  |                    | (500,133   | )                 
|Receivables from Affiliate                             |  |                    | (8,602     | )                 
|Foreign Tax Receivable                                 |  |                    | (464,472   | )                 
|Other Current Assets                                   |  |                    | (189,863   | )                 
|Accounts Payable                                       |  |                    | 22,669     |                   
|Accrued Liabilities                                    |  |                    | 339,208    |                   
|Other Assets                                           |  |                    | (1,689     | )                 
|CASH FLOWS (USED IN) OPERATING ACTIVITIES              |  |                    | (1,021,244 | )                 
|                                                       |  |                    |            |                   
|CASH FLOWS FROM INVESTING ACTIVITIES                   |  |                    |            |                   
|Proceeds from Sale                                     |  |                    |            |                   
|Purchase of Property                                   |  |                    | (127,997   | )                 
|Other Assets                                           |  |                    | —          |                   
|CASH FLOWS (USED IN) INVESTING ACTIVITIES              |  |                    | (127,997   | )                 
|                                                       |  |                    |            |                   
|CASH FLOWS FROM FINANCING ACTIVITIES                   |  |                    |            |                   
|Proceeds from Advance from Related Party               |  |                    | —          |                   
|Proceeds from Sale of Preferred
    Stock, Series C    |  |                    | —          |                   
|Proceeds from Promissory Notes                         |  |                    | —          |                   
|Proceeds from Sale of Common
    Stock                 |  |                    | —          |                   
|Payment on Advance to Related Party                    |  |                    | (150,000   | )                 
|Payment of Dividends                                   |  |                    | (160,000   | )                 
|Payment of Note Payable                                |  |                    | —          |                   
|CASH FLOWS PROVIDED BY FINANCING ACTIVITIES            |  |                    | (310,000   | )                 
|                                                       |  |                    |            |                   
|Effect of Foreign Exchange                             |  |                    | 1,890,284  |                   
|                                                       |  |                    |            |                   
|NET INCREASE (DECREASE) IN CASH                        |  |                    | 431,043    |                   
|                                                       |  |                    |            |                   
|CASH AT BEGINNING OF PERIOD                            |  |                    | 1,922,599  |                   
|                                                       |  |                    |            |                   
|CASH AT END OF PERIOD                                  |  | $                  | 2,353,642  |                   
|                                                       |  |                    |            |                   
|SUPPLEMENTAL DISCLOSURES                               |  |                    |            |                   
|Cash Paid for Interest                                 |  | $                  | 89,648     |                   
|Cash Paid for Income Taxes                             |  | $                  | —          |                   
|                                                       |  |                    |            |                   
|NON-CASH TRANSACTIONS                                  |  |                    | —          |                   
|Issuance of Common Stock for Treasury Stock            |  |                    |            |                   
|Conversion of Interest to Notes                        |  |                    |            |                   
|Derivative Liability due to Golden Post                |  |                    |            |                   
|Accretion of Preferred Stock to Redemptive Value       |  |                    |            |                   
|Conversion of Advance to Common Stock                  |  |                    |            |                   
|Conversion of Note Payable to Common Stock             |  |                    |            |                   
|Issuance of Treasury Shares to Subsidiary              |  |                    |            |                   

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





6






DYNARESOURCE, INC.

Notes
to the UNAUDITED Consolidated Financial Statements

September 30, 2016 and 2015

NOTE 1 – NATURE OF OPERATIONS
AND BASIS OF PRESENTATION

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.

The interim consolidated financial statements
included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”).  Certain information and note disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
has been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures included
are adequate to make the information presented not misleading.

In management’s opinion, the unaudited
Consolidated Statements of Operations and Comprehensive Income for the nine months ended September 30, 2016 and 2015, the
Consolidated Balance Sheets as at September 30, 2016 (unaudited) and December 31, 2015, the unaudited Consolidated Statement
of Changes in Shareholders’ Equity for the nine months ended September 30, 2016, and the unaudited Consolidated Statements
of Cash Flows for the nine months ended September 30, 2016 and 2015, contained herein, reflect all adjustments, consisting
solely of normal recurring items, which are necessary for the fair presentation of the Company’s financial position, results
of operations and cash flows on a basis consistent with that of the Company’s prior audited annual consolidated financial
statements.  However, the results of operations for the interim periods may not be indicative of results to be expected for
the full fiscal year.  Therefore, these financial statements should be read in conjunction with the audited financial statements
and notes thereto and summary of significant accounting policies included in the Company’s Form 10-K for the year ended
December 31, 2015. Certain prior-period amounts have been reclassified to conform to the current period presentation. 
Except as noted below, there have been no material changes in the footnotes from those accompanying the audited consolidated financial
statements contained in the Company’s Form 10-K for the year ended December 31, 2015. The consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiaries.  All inter-company accounts and transactions
have been eliminated.

NOTE 2 – INVENTORY

Inventories are carried at the lower
of cost or net realized value and consist of mined tonnage, gravity-flotation concentrates, and gravity tailings (or, flotation
feed material). Inventory balances of September 30, 2016 and December 31, 2015, respectively, were as follows:

|                                                        |  | 2016 |         | 2015
|------------------------------------------------------- |  | ---- | ------- | ----
|                                                        |  |      |         |     
|Mined Tonnage (Stock Piled, Non-Crushed)                |  | $    | 490,450 |     
|Gravity-Flotation Concentrates (Not Delivered for Sale) |  | $    | 67,000  |     
|Total Inventories                                       |  | $    | 557,450 |     
|                                                        |  |      |         |     

The significant in inventory is due
to the increase in mining production and staging the materials from mine to crusher and final consolidation for shipment to the
refiner.

NOTE 3 – INVESTMENT IN AFFILIATE/RECEIVABLES
FROM AFFILIATE/OTHER ASSETS

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”), 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 currently has
a receivable from DynaResource Nevada, Inc. of $141,686 and an investment balance of $70,000 as of September 30, 2016. The balances
as of December 31, 2015 were $159,143 in receivables and $70,000 in investment, respectively.



7






NOTE 4 – 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 common 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, and generated from the bulk sampling
material (if any, and up to fifty thousand tonnes) processed through the existing, or improved mill facilities at San Jose
de Gracia. Such net profits (if any) are to be calculated after deducting all expenses related to the processing of the bulk
sample material, and after a prior deduction of thirty-three percent (33%) from the profits, to be deposited in
a sinking fund cash reserve. This net profit percentage (if any) would be paid quarterly in arrears based on the profits generated
(if any) for the prior quarter. At the time of the issuance of the Series I Notes, there were no proven or probable reserves
and the Company had not produced any net profits. Consequently, the fair value of the net profits interest on the date of the Series
I Note was deemed to be zero. Further, no payments of net profits have been made under the terms of the Series I Notes. The Series
I Notes originally matured on December 31, 2015. In April, 2015, the Series I Notes were extended to December 31, 2016.

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, 2015.

In 2013, the Company offered an inducement
to all Series I Note holders to convert their Series I Notes and accrued interest into Series B Preferred Stock (“Series
B”), $5/Share, which Series B was convertible into common stock on a 2 for 1 basis (i.e., $2.50 stock). This conversion into
Series B created $197,771 in inducement expense, with an offset to additional paid in capital. In 2013, $340,000 principal and
$22,734 of capitalized accrued interest of the Series I Notes were converted into Preferred Stock, Series B and 72,546 shares were
issued. At June 30, 2014, these 72,546 Series B shares were converted into 145,092 common shares.

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 to extend
the maturity date of the Series I Notes to December 31, 2016.

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, and generated from the bulk sampling material (if any, on the second fifty thousand tonnes) processed
through the existing, or improved mill facilities at San Jose de Gracia. Such net profits (if any) are to be calculated after
deducting all expenses related to the processing of the bulk sample material, and after a prior deduction of thirty-three
percent (33%) from the profits, to be deposited in a sinking fund cash reserve. This net profit percentage (if any) would be
paid quarterly in arrears based on the profits generated (if any) for the prior quarter. At the time of the Series II notes,
there were no proven or probable reserves and the Company had not produced any net profits. Consequently, the fair value of the
net profits interest on the date of the Series II Notes was deemed to be zero. Further, no payments of net profits have been made
under the terms of the Series II Notes. The Series II Notes mature on December 31, 2016.

The Company has the right to prepay the
Series II Notes with a ten percent (10%) penalty.

Each Series II 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, 2016.

In April, 2015, the Company received
allonges (note extensions) from all Series II Note holders to ensure that all Series II Notes were in good standing and confirmed
the maturity of the Series II Notes to be December 31, 2016.

On June 30, 2015, the Company entered
into conversion agreements with six (6) Series II Note holders. Principal and interest in the amount of $809,784 plus $33,120 of
accrued interest (total of $842,904) was contracted to convert into 337,162 common shares. In addition, 337,162 warrants are to
be 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.

The Company evaluated the application
of ASC 470-50 and ASC 470-60 and determined that the Series II Notes were not substantially different. As a result, it was concluded
that the revised terms constituted a debt modification rather than a debt extinguishment.





8






At September 30, 2016, the principal
and capitalized interest balance on the remaining Series I Notes was $765,000 and the principal and capitalized interest on the
Series II Notes was $191,250, for a total Note balance of $956,250. The accrued interest for these notes were $29,883 and $29,883
as of September 30, 2016 and December 31, 2015, respectively.

NOTE 5 – STOCKHOLDERS’
EQUITY

Stock Issuances

During the nine months ended September
30, 2016 the Company paid Dividends of $160,000 to the holder of Series C Convertible Preferred Stock. The Dividend is calculated
at 4.0% of $4,000,000 payable annually on June 30.

During the nine months ended September
30, 2016, no common shares or other equity instruments were issued.

Options
/ Warrants

During the year ended December 31, 2015
and the quarter ending September 30, 2016, no warrants were issued or exercised.



|                                      |   | Number ofShares |           | WeightedAverageExercise Price |   | Weighted AverageRemaining ContractualLife (Years)
|------------------------------------- | - | --------------- | --------- | ----------------------------- | - | -------------------------------------------------
|​                                     | ​ | ​               | ​         | ​                             | ​ | ​                                                
|                                      |   |                 |           |                               |   |                                                  
|Balance at December 31, 2014          |   |                 | 1,259,650 |                               | $ | 5.80                                             
|Granted                               |   |                 | 3,892,689 |                               | $ | 6.25                                             
|Exercised                             |   |                 | -         |                               | $ |                                                  
|Forfeited                             |   |                 | (991,150) |                               | $ | 4.69                                             
|​                                     | ​ | ​               | ​         | ​                             | ​ | ​                                                
|Balance at December 31, 2015          |   |                 | 4,161,189 |                               | $ | 5.80                                             
|Granted                               |   |                 | -         |                               | $ | -                                                
|Exercised                             |   |                 | -         |                               | $ | -                                                
|Forfeited                             |   |                 | (18,000)  |                               | $ | 5.00                                             
|​                                     | ​ | ​               | ​         | ​                             | ​ | ​                                                
|Balance at September 30, 2016         |   |                 | 4,143,189 |                               | $ | 5.80                                             
|​                                     | ​ | ​               | ​         | ​                             | ​ | ​                                                
|​                                     | ​ | ​               | ​         | ​                             | ​ | ​                                                
|​                                     | ​ | ​               | ​         | ​                             | ​ | ​                                                
|Exercisable
    at September 30, 2016 |   |                 | 4,143,189 |                               |   | 5.80                                             
|​                                     | ​ | ​               | ​         | ​                             | ​ | ​                                                
|​                                     | ​ | ​               | ​         | ​                             | ​ | ​                                                
|​                                     | ​ | ​               | ​         | ​                             | ​ | ​                                                





NOTE
6 – RELATED PARTY TRANSACTIONS

Dynacap Group Ltd.

The Company paid $91,000 to Dynacap Group,
Ltd. (an entity controlled by an officer of the Company) for consulting and other fees during the nine months ended September 30,
2016.

Repayment of Advances from Former
Officer

On July 29, 2106, the Company paid a
former Company Officer and Director the amount of $100,000 as final and total repayment of $150,000 advance made in 2015.

Advances from Non-Controlling Interest
Holder

The Non-Controlling interest holder
has advanced a total of $ 231,500 which remained outstanding at September 30, 2016, $120,000 was advanced in 2013 and an additional
$111,500 was advanced in 2014.

NOTE 7 – 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
business plans, the Company does not anticipate that DynaMéxico will have any issues in meeting the minimum annual expenditures
for the concessions, and DynaMéxico retains sufficient carry-forward amounts to cover over 20 years of the minimum expenditure
(as calculated at the 2012 minimum, adjusted for annual inflation of 4%).





9






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.
$104,250 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).

In September 2008, the Company entered
into a 37-month lease agreement for its corporate office.  In August, 2011, 2012, 2013, 2014, and 2015 the Company entered
into a one-year extension of the lease through August 31, 2016. The Company paid rent expense of $51,663 and $45,496 related to
this lease for the nine months ended September 30, 2016 and 2015, respectively.

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.

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 below;
See Litigation below, and see Part II, Item 1., Legal Proceedings.

Litigation

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. (See Part
II, Item 1. Legal Proceedings.)

NOTE 8 – 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 20%.
Changes in Non-Controlling Interest for the nine months ended September 30, 2016 and 2015, respectively were as follows:

|                                    |  | September 30, 2016 |            | September 30, 2015
|----------------------------------- |  | ------------------ | ---------- | ------------------
|                                    |  |                    |            |                   
|Beginning balance                   |  | $                  | (6,461,950 | )                 
|Operating income (loss)             |  |                    | (150,151   | )                 
|Share of other comprehensive (loss) |  |                    | (117,133   | )                 
|Ending balance                      |  | $                  | (6,729,234 | )                 
|                                    |  |                    |            |                   

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. However,
this amount is only reflected in the income statement.

NOTE 9 – SUBSEQUENT EVENTS

Revenues from Previous Delivery and
Sale of Gold Concentrates (Third Quarter 2016)

In October 2016, the Company, through
its wholly owned subsidiary DynaMineras, reported the receipt of a total of $518,609 as payment for the sale of gold concentrates
produced in September and delivered for sale on September 30, 2016. This amount was recorded as accounts receivable at September
30, 2016.

Gold Concentrate Deliveries for Sale
(2016)

On October 12-13, DynaMineras reported
the delivery for sale of 500 gross oz. gold concentrates (exact weights in gold and silver concentrates to be determined at final
settlement).

On October 30-31, DynaMineras reported
the delivery for sale of 550 gross oz. gold concentrates (exact weights in gold and silver concentrates to be determined at final
settlement).



10






|NOTE 10 – FAIR VALUE OF FINANCIAL INSTRUMENTS
|---------------------------------------------

The ASC guidance for fair value measurements
and disclosure establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level
1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair
value hierarchy are described below:

Level 1 Inputs – Quoted
prices for identical instruments in active markets.

Level 2 Inputs – Quoted
prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active;
and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs – Instruments
with primarily unobservable value drivers.

As of September 30, 2016, and December
31, 2015, 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 September 30,
2016 Using:

|                                                   |   | September 30, 2016 |   | Quoted Prices in ActiveMarketsFor Identical Assets(Level 1) |   | Significant OtherObservableInputs(Level 2) |   | SignificantUnobservableInputs(Level 3) | 
|-------------------------------------------------- | - | ------------------ | - | ----------------------------------------------------------- | - | ------------------------------------------ | - | -------------------------------------- | 
|                                                   |   |                    |   |                                                             |   |                                            |   |                                        | 
|Assets:                                            |   |                    |   |                                                             |   |                                            |   |                                        | 
|None                                               |   | -                  |   | -                                                           |   | -                                          |   | -                                      | 
|Totals                                             | $ | -                  | $ | -                                                           | $ | -                                          | $ | -                                      | 
|                                                   |   |                    |   |                                                             |   |                                            |   |                                        | 
|Liabilities:                                       |   |                    |   |                                                             |   |                                            |   |                                        | 
|Derivative Liabilities                             | $ | 5,382,737          |   | -                                                           |   | -                                          |   | 5,382,737                              | 
|Totals                                             | $ | 5,382,737          | $ | -                                                           | $ | -                                          | $ | 5,382,737                              | 
|Fair Value Measurement at December 31, 2015 Using: |   |                    |   |                                                             |   |                                            |   |                                        | 
|Assets:                                            |   |                    |   |                                                             |   |                                            |   |                                        | 
|None                                               |   | -                  |   | -                                                           |   | -                                          |   | -                                      | 
|Totals                                             | $ | -                  | $ | -                                                           | $ | -                                          | $ | -                                      | 
|                                                   |   |                    |   |                                                             |   |                                            |   |                                        | 
|                                                   |   |                    |   |                                                             |   |                                            |   |                                        | 
|Liabilities:                                       |   |                    |   |                                                             |   |                                            |   |                                        | 
|Derivative Liabilities                             | $ | 5,382,737          |   | -                                                           |   | -                                          |   | 5,382,737                              | 
|Totals                                             | $ | 5,382,737          | $ | -                                                           | $ | -                                          | $ | 5,382,737                              | 
|                                                   |   |                    |   |                                                             |   |                                            |   |                                        | 
|                                                   |   |                    |   |                                                             |   |                                            |   |                                        | 



NOTE 11 – DERIVATIVE LIABILITIES

Preferred Series C Stock

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:

|Annual volatility rate     |  |   | 134     | %
|-------------------------- |  | - | ------- | -
|Risk free rate             |  |   | 1.76    | %
|Holding Period             |  |   | 5 years |  
|Fair Value of common stock |  | $ | 1.64    |  





11






For the period ended September 30, 2016,
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.

It was determined that the estimated valuation
of the stock price at June 30, 2016 of $1.50 changed to $1.64 as of September 30, 2016. The adjustment for the three-month period
ending September 30, 2016 was $(204,279). The net change for the nine-period ending September 30, 2016 was $0.

The below table represents the change
in the fair value of the derivative liability during the nine months ended September 30, 2016 and year ended December 31, 2015:

|Period Ended                                        |  | 2016 |           | 2015
|--------------------------------------------------- |  | ---- | --------- | ----
|Fair value of derivative (stock), beginning of year |  | $    | 2,419,359 |     
|Gain on change in fair value of derivative          |  |      | -         |     
|Fair value of derivative on the date of issuance    |  |      | --        |     
|Fair value of derivative, September 30, 2016        |  | $    | 2,419,359 |     

Preferred Series C Warrants

The Company analyzed the embedded conversion
features of the Series C Preferred Stock and determined that the Warrants qualified as a derivative liability and is required to
be bifurcated and accounted for as such since the host and the embedded instrument are not clearly and closely related. The Company
performed a valuation of the conversion feature. In performing the valuation, the Company applied the guidance in ASC 820, “Fair
Value Measurements”,to nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring
basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (exit price). To measure fair value, the Company incorporates assumptions
that market participants would use in pricing the asset or liability, and utilizes market data to the maximum extent possible.

In instances where the determination
of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value
hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair
value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement
in its entirety requires judgment and considers factors specific to the asset or liability.

The Company considered the inputs in
this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation model to determine the value
of conversion feature of the Warrants based on the assumptions below:

|Annual volatility rate     |  |   | 134     | %
|-------------------------- |  | - | ------- | -
|Risk free rate             |  |   | 1.76    | %
|Holding Period             |  |   | 5 years |  
|Fair Value of common stock |  | $ | 1.64    |  

For the year ended December 31, 2015,
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 nine months ended September 30, 2016 and the year ended December 31, 2015:

|Period Ended                                               |  | 2016 |           | 2015
|---------------------------------------------------------- |  | ---- | --------- | ----
|Fair value of derivative (warrants), beginning of the year |  | $    | 2,963,378 |     
|Gain on change in fair value of derivative                 |  |      | –         |     
|Fair value of derivative on the date of issuance           |  |      | --        |     
|Fair value of derivative, September 30, 2016               |  | $    | 2,963,378 |     
|NOTE 12 – FOREIGN CURENCY 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 re-measured
from Mexican Pesos into U.S. dollars using (i) current exchange rates for monetary asset and liability accounts, (ii) historical
exchange rates for nonmonetary asset and liability accounts, (iii) historical exchange rates for revenues and expenses associated
with nonmonetary assets and liabilities and (iv) the weighted average exchange rate of the reporting period for all other revenues
and expenses.  In addition, foreign currency translation gains and losses are reported as a separate component of stockholders’
equity (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.



12






Relevant exchange rates used in the preparation
of the financial statements for the subsidiaries are as follows for the periods ended September 30, 2016 and September 30, 2015
(Mexican Pesos per one U.S. dollar):

|                                                    |  |  |       | 
|--------------------------------------------------- |  |  | ----- | 
|                                                    |  |  |       | 
|                                                    |  |  |       | 
|Current exchange rate                               |  |  | Pesos | 
|                                                    |  |  |       | 
|Weighted average exchange rate for the period ended |  |  | Pesos | 
|                                                    |  |  |       | 





13






The Company recorded currency transaction
losses of $(460,885) for the three-month period ended September 30, 2016 and $(1,359,680) September 30, 2015. The Company recorded
currency transaction losses of $(1,603,758) for the nine-month period ended September 30, 2016 and $(2,204,363) September 30, 2015.

Item
2.	          Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q includes
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to in this
annual report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to in this
annual report as the Exchange Act. Forward-looking statements are not statements of historical fact but rather reflect our current
expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “predict,” “project”
and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on
our management’s beliefs and assumptions, using information currently available to us. These forward-looking statements are
subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in
this annual report. Factors that can cause or contribute to these differences include those described under the heading “Management
Discussion and Analysis and Plan of Operation.”

If one or more of these or other risks
or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what
we projected. Any forward-looking statement you read in this annual report reflects our current views with respect to future events
and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth
strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on
our behalf are expressly qualified in their entirety by this paragraph. You are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date of this annual report. The Company expressly disclaims any obligation to release publicly
any updates or revisions to these forward-looking statements to reflect any change in its views or expectations. The Company can
give no assurances that such forward-looking statements will prove to be correct.

CAUTIONARY NOTE TO UNITED STATES INVESTORS—INFORMATION
CONCERNING PREPARATION OF RESOURCE AND RESERVE ESTIMATES

The Company is an “OTC Reporting
Issuer” as that term is defined in BC Multilateral Instrument 51-105, Issuers Quoted in the U.S. Over-the-Counter Markets,
promulgated by the British Columbia Securities Commission.

In Canada, an issuer is required to provide
technical information with respect to mineralization, including reserves and resources, if any, on its mineral exploration properties
in accordance with Canadian requirements, which differ significantly from the requirements of the United States Securities and
Exchange Commission (the “SEC”) applicable to registration statements and reports filed by United States companies
pursuant to the Securities Act or the Exchange Act. As such, certain disclosures of mineralization under Canadian standards may
not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements
of the SEC and not subject to Canadian securities legislation.

While these terms are recognized and
required by Canadian securities legislation (under National Instrument 43-101 (“NI 43-101”), entitled Standards
of Disclosure for Mineral Projects), the SEC does not recognize these terms. Investors in the United States are cautioned not
to assume that any part or all, of the mineral deposits in these categories, will ever be converted to reserves. In addition, inferred
mineral resources have a great amount of uncertainty as to their existence and economic and legal feasibility. It cannot be assumed
that all or any part of a measured mineral resource, indicated mineral resource or inferred mineral resource will ever be upgraded
to a higher category. Under Canadian securities legislation, estimates of inferred mineral resources may not form the basis of
feasibility or pre-feasibility studies, although they may form, in certain circumstances, the basis of a “preliminary economic
assessment” as that term is defined in NI 43-101. U.S. investors are cautioned not to assume that any part or all, of any
reported measured, indicated, or inferred mineral resource estimates referred to in the DynaMéxico NI 43-101 Technical Report
and DynaMéxico 43-101 Mineral Resource Estimate (compiled for DynaResource de Mexico SA de CV), are economically or legally
mineable.

Under U.S. standards, as set forth
in SEC Industry Guide 7, mineralization may not be classified as a “reserve” unless a determination has been made that
the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The SJG
Property as described in this Annual Report on Form 10-K is without known reserves. Mineral resources which are not classified
as mineral reserves do not have “demonstrated economic viability.” The quantity of resources and the quality (grade)
of resources reported as “Indicated” and “Inferred” mineral resources in the DynaMéxico 43-101 Mineral
Resource Estimate compiled for DynaResource de Mexico SA de CV, under Canadian National Instrument 43-101 and filed by the Company
with SEDAR, are not disclosed in this Form 10-Q. There has been insufficient exploration to define any mineral reserves
on the SJG Property, and it is not certain if further exploration will result in the definition of mineral reserves.



14






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).

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.



15






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

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”).





16






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 andDynaMéxicoNI 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.

TheDynaMéxicoNI 43-101 MineralResourceEstimatepreparedbyMr.RobertSandefurfortheDynaMéxicoNI 43-101 TechnicalReportincludedIndicatedResourcesatTresAmigos
and San Pablo.The“DynaMéxico NI 43-101 Mineral ResourceEstimatealsoincludedanInferredResourceforthefourveinsystems.
Tablesummariesof Indicated and Inferred Resources are contained intheDynaMéxico
NI 43-101 MineralResourceEstimate. TheDynaMéxico NI 43-101 Mineral Resource
Estimate has been filed, along with theDynaMéxicoNI 43-101 Technical Report,
on SEDAR; but isnot 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.





17






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 September 30, 2016 is $2,107,500. 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 withthe
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. $85,000 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.

Test Underground Mining and Pilot Mill Operations (2014)

Operational Permits for the rehabilitation
of the San Pablo Mine and for the refurbishment of the Pilot Mill Facility including the installation of the Tailings Pond area
adjacent to the pilot mill facility were obtained in fall, 2013, leading to the rehabilitation of the San Pablo Mine and the refurbishing
of the Pilot Mill Facility in 2014. Pilot Production Operations, including test underground mining activity commenced in October
2014, with approximately 1,676 Oz. Gold being delivered for sale during the startup testing phase.

|Period | Total Tons
        Mined & Processed
        (Gravity Only)
(tonnes) | Reported Mill Feed Grade
        (g/t Au) | Reported Recovery | Gross Gold Concentrates Produced
        (Au oz.) | Net Gold Concentrates Sold
        (Au oz.)
|------ | -------------------------------------------------------------------- | ----------------------------------------- | ----------------- | ------------------------------------------------- | -------------------------------------------
|2014   | 5,156                                                                | 12.45                                     | ~45%              | 929                                               | 830                                        
|       |                                                                      |                                           |                   |                                                   |                                            
|Period | Total Tons
        Mined and Processed
        (Gravity + Flotation) | Reported Mill Feed Grade
        (g/t Au) | Reported Recovery | Gross Gold Concentrates Produced
        (Au oz.) | Net Gold Concentrates Sold
        (Au oz.)
|2014   | 3,694                                                                | 7.86                                      | ~80%              | 747                                               | 608                                        
|       |                                                                      |                                           |                   |                                                   |                                            



18




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 pilot mill 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. As a result, the Company projected that mining and milling
volumes would approach 100 tons/day of mineralized material, in January, 2016.

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);

Summary of Test Mining and Pilot Mill
Operations

DynaMineras reports the following summary
of its test mining and pilot milling operations during 2015:

|Period | 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                                  | 8.3                                       | 78%                                 | 1,495                                             | 1,308                                      

Test Underground Mining and Pilot
Mill Operations (First Quarter 2016)

At March, 31 2016, DynaMineras reports
the following summary of its test mining and pilot milling operations conducted in the first quarter, 2016:



19








|Period                                                                               | 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.)
|------------------------------------------------------------------------------------ | ----------------------------------------------- | --------------------------------------------- | --------------------------------------------------- | --------------------------------------------------------- | ---------------------------------------------------
|January, 2016
        February, 2016
        March, 2016
        First Quarter, 2016 | 2,521
        2,985
        3,085
        8,591 | 11.3
        16.6
        11.45
        13.20 | 80.0 %
        76.5 %
        78.0 %
        78.6 % | 740
        1,225
        900
        2,865               | 2,311                                              

Test Underground Mining and Pilot
Mill Operations (Second Quarter 2016)

At June 30, 2016, DynaMineras reports
the following summary of its test mining and pilot milling operations conducted in the second quarter, 2016:

|Period                                                                        | 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.)
|----------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------------- | --------------------------------------------------- | --------------------------------------------------------- | ---------------------------------------------------
|April, 2016
        May, 2016
        June, 2016
        Second Quarter, 2016 | 1,546
        3,371
        4,290
        9,207 | 12.93
        14.81
        15.16
        14.66 | 85.0 %
        77.9 %
        76.5 %
        78.4 % | 500
        1,250
        1,600
        3,400             | 2,710                                              



Test Underground Mining and Pilot
Mill Operations (Third Quarter 2016)

At September 30, 2016, DynaMineras reports
the following summary of its test mining and pilot milling operations conducted in the third quarter, 2016:

|July, 2016
        August, 2016
        September, 2016
        Third Quarter, 2016 | 4,600
        4,460
        3,745
        12,805 | 12.75
        11.76
        11.14
        11.93 | 76.9 %
        78.3 %
        78.0 %
        77.7 % | 1,385
        1,240
        1,100
        3,725 | 2,364
|----------------------------------------------------------------------------------- | ------------------------------------------------ | ----------------------------------------------- | --------------------------------------------------- | ----------------------------------------------- | -----

DynaMineras expects to continue its test underground mining
activity and pilot milling operations in third quarter 2016; and projects the increased output from 150 tons/day to 200 tons/day
from the mine and mill in the fourth quarter, 2016.

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.





20






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 $8,192,230 and $140,548 for the
nine months ended September 30, 2016 and 2015.

Capital Requirements

The mining industry in general requires
significant capital in order to advance a property from the exploration phase, to development, and 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.

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 2015, 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 fifteen years on
the London Bullion Market ($/ounce):

|Year                         |  | High |       |  | Low |   |       | Average | 
|---------------------------- |  | ---- | ----- |  | --- | - | ----- | ------- | 
|2002                         |  | $    | 349   |  |     | $ | 278   |         | 
|2003                         |  | $    | 416   |  |     | $ | 320   |         | 
|2004                         |  | $    | 454   |  |     | $ | 375   |         | 
|2005                         |  | $    | 536   |  |     | $ | 411   |         | 
|2006                         |  | $    | 725   |  |     | $ | 525   |         | 
|2007                         |  | $    | 841   |  |     | $ | 608   |         | 
|2008                         |  | $    | 1,011 |  |     | $ | 713   |         | 
|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 (through Nov. 15, 2016) |  | $    | 1,370 |  |     | $ | 1,072 |         | 



Source: Kitco, Reuters and the London Bullion Market Association

On November 15, 2016, the afternoon fixing gold prices were
(a) on the London Bullion Market - $1,227 per ounce; and (b) on the New York Commodity Exchange - $1,228 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 in a way
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.



21






Results for the Three and Nine Months Ended September 30,
2016 and September 30, 2015

In the nine months ended September
30, 2015, the Company was focused on planning, budgeting, and implementing the proceeds from the Golden Post financing into capital
improvements and expansion of the test mining and pilot mill operations at SJG.

In the three months ended September
30, 2015, the Company was focused on planning and preparing for the injection of capital pursuant to the capital investment plans,
and completing the financings in order to improve its test mining and milling operations.

In the nine months ended September
30, 2016, the Company, through its wholly owned subsidiary DynaMineras, established consistent and profitable test mining and pilot
milling operations at SJG.

In the three months ended September
30, 2016 the Company, through its wholly owned subsidiary DynaMineras, increased the volume of mined tonnage and the amount of
mineralized material processed through the pilot mill facility; and as a result, the amount of gold and silver concentrates produced
and delivered for sale increased.

During the nine months ending September
30, 2015, the Company was involved in limited test mining and pilot mill operations.

During the nine months ended September
30, 2016, the test mining and pilot milling operations yielded the processing of approx. 30,603 tonnes of mineralized material,
the production of approximately 9,990 gross oz. au of gold-silver concentrates, and the receipt of $8,192,230 in revenues for the
period from the production and sale of gold-silver gravity and flotation concentrates.

REVENUE. Revenues for the three months
ended September 30, 2016 and 2015 were $3,027,305 and $0, respectively. Revenues for the nine months ended September 30, 2016
and 2015 were $8,192,230 and $140,548 respectively. The Company established consistent test mining and pilot milling operations
in January 2016.

PRODUCTION COSTS RELATED TO SALES. Production
costs related to sales for the three months ended September 30, 2016 and 2015 were $443,703 and $0, respectively. Production costs
related to sales for the nine months ended September 30, 2016 and 2015 were $1,308,858 and $45,000, respectively. These are expenses
directly related to the milling, packaging and shipping of gold-silver concentrate products and are comparative with the revenue
figures above. The increase in both periods is a result of consistent test mining and milling operations.

MINE OPERATING COSTS. Mine operating
costs for the three months ended September 30, 2016 and 2015 were $747,403 and $0, respectively. Mine operating costs for the nine
months ended September 30, 2016 and 2015 were $2,030,093 and $78,452 respectively. These costs are directly related to the mining
and extraction of mined tonnage to be processed at the pilot mill facility.

REFINING AND TREATMENT COSTS. Refining
and Treatment costs are expenses related to separating the gold and silver from the sand and gravel materials and purifying for
sale. Refining and Treatment costs for the three months ended September 30, 2016 and 2015 were $313,670 and $0, respectively. Refining
and Treatment costs for the nine months ended September 30, 2016 and 2015 were $1,006,330 and $16,548 respectively.

PRE-PILOT PRODUCTION EXPENSES. Pre-Pilot
Production Expenses for the three months ended September 30, 2016 and 2015 were $0 and $662,420 respectively. Pre-Pilot Production
Expenses for the nine months ended September 30, 2016 and 2015 were $0 and $1,462,981 respectively. The decrease in expense in
2016 was due to the Company’s establishing consistent test mining and pilot mill operations in the current nine- month period,
and therefore the Company was no longer in a pre-pilot production phase.

PROPERTY HOLDING COSTS. Property holding
costs for the three months ended September 30, 2016 and 2015 were $110,978 and $178,564, respectively.  Property holding costs
for the nine months ended September 30, 2016 and 2015 were $244,062 and $414,881, respectively. These costs are concessions taxes,
leases on land and other direct costs of maintaining the property.

OTHER OPERATING EXPENSES. General and
Administrative Expenses for the three months ended September 30, 2016 and 2015 were $653,429 and $565,420, respectively. General
and Administrative Expenses for the nine months ended September 30, 2016 and 2015 were $1,666,029 and $1,286,064, respectively.
In three months ending September 30, 2015, expenses related to issuance of share based compensation was $791,400 with the nine-month
total ending September 30, 2015was $1,277,535. The depreciation and amortization amounts for the three months ending September
30, 2016 and 2015 were $29,495 and $35,443, respectively while the depreciation and amortization of $77,626 and $53,253 was expensed
for the nine months ended September 30, 2016 and 2015, respectively.

OTHER INCOME (EXPENSE). Other income
or (loss) for the three months ended September 30, 2016 and 2015 was $(694,862) and $(1,628,314) respectively. The losses in the
2016 period were comprised of $(460,885) in currency exchange losses and $(29,883) in interest expense, $(204,279) in Derivatives
Adjustment Market to Market Gain (Loss) and $185 of other income. The losses in the 2015 period were comprised of $(1,359,680)
in currency exchange losses, $(35,759) in interest expense, $60,515 in Derivatives Adjustment Market to Market Gain (Loss), and
$(293,822) in Inducement Costs related to the conversion of Series C Preferred Stock and $423 of Other Income. Other income or
(loss) for the nine months ended September 30, 2016 and 2015 was $(1,692,862) and $(2,633,018), respectively. Currency exchange
gain or (loss) was $(1,603,758) and $(2,204,363), Derivatives Adjustment Market to Market Gain (Loss) accounted for $(204,279)
and $60,515 for the nine months ended September 30, 2016 and 2015, respectively. The primary reason for these fluctuations is a
change in valuation of the Mexican Peso.



22






NON-CONTROLLING INTEREST. The Cumulative
Dividend for Series C Preferred Stock to redemption was $(40,000) and $(43,687) for the three-month period ending September 30,
2016 and 2015 respectively, and $(120,000) and $(43,687) for the nine-month period ending September 30, 2016 and 2015 respectively.
The non-controlling interest portion of the net income for the three months ended September 30, 2016 and 2015 was $2,294 and $262,976,
respectively. The non-controlling interest portion of the net loss for the nine months ended September 30, 2016 and 2015 was $150,151
and $380,045, respectively.

COMPREHENSIVE INCOME (LOSS). Comprehensive
income (loss) includes the Company’s net income (loss) plus the unrealized currency exchange gain (loss) for the period.
For the three months ended September 30, 2016 and 2015, the Company recorded a Net Income (Loss) of $33,765 and $(3,861,561), respectively.
The same period amounts in 2016 were comprised of unrealized losses on currency exchange of $(1,083,766) and in the 2015 period
the losses were comprised of $(1,435,514) from unrealized currency exchange. For the nine months ended September 30, 2016 and 2015,
the Company’s Net Income (Loss) were $166,370 and $(7,127,184), respectively. The nine- month total unrealized currency exchange
losses recorded for 2016 and 2015 respectively of $(1,813,703) and $(2,506,860). The Total Comprehensive Income (Loss) for the
nine months ending September 30, 2016 and 2015 respectively were $(1,647,333) and $(14,271,222).

Liquidity and Capital Resources

As of September 30, 2016, the Company
had a negative working capital of $(3,266,093), comprised of current assets of $4,639,726 and current liabilities of $7,905,819.
The Derivative Liability represents $5,382,737 of the Current Liabilities at September 30, 2016. This represents an increase of
$1,744,024 from the working capital (deficit) maintained by the Company of $(5,010,117) as of December 31, 2015, due primarily
to the profitable results of test mining and pilot milling operations in the nine-month period ending September 30, 2016.

Net cash (used) in operations for
the nine months ended September 30, 2016 was $(1,021,244) compared with $(5,925,643) for the nine months ended September 30, 2015.
Again, this was due primarily to the profitable results of test mining and pilot milling operations at San Jose de Gracia.

Net cash provided by (used) in investing
activities for the nine months ended September 30, 2016 and 2015 was $(127,997) and $(466,049), respectively.

Net cash provided (used) by financing
activities for the nine months ended September 30, 2016 and 2015 was $(310,000) and $6,994,250, respectively. The primary components
for the current year are the repayment of $150,000 of Advance from Related Party, and $160,000 paid in Dividends. The 2015 elements
were provided by Advances from Related Party for $325,000, Proceeds from Promissory Notes for $500,000, proceeds from Sale of Common
Stock of $2,917,750, proceeds from the sale of Preferred Series C Stock, $3,455,000, and Payment of Note payable for $(203,500).

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. For the nine months ended September 30, 2016 and 2015, the portion of the comprehensive
net loss attributable to Goldgroup was $(1,530,200) and $(205,229), respectively.

Off-Balance
Sheet Arrangements

As of September 30, 2016, 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 the Company, through its wholly owned subsidiary DynaMineras, continuing its test mining and pilot milling
operations at SJG, and continuing expansion plans in order to increase the volume of material mined and processed with a resulting
increase projected in the amount of gold concentrates produced and sold. The Company funds its general and administrative expenses
from revenues from production at SJG. 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 revenues from pilot production activities is adequate to fund its ongoing general and administrative expenses through
2016. The Company may seek additional financing for increased operations in the event the Board of Directors determines it is in
the best interest of the Company.



23






Capital Expenditures

The Company’s primary activities
relate to the test mining and pilot mill operations at 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. The Company utilized financing proceeds to advance funds to DynaMineras
in order that DynaMineras could: (a) finalize its underground mining plan; (b) make improvements to the pilot mill facility; (c)
acquire mining and transportation equipment; (d) engage a contract miner; and, (e) add integral management and personnel; among
other things. As a result, the Company realized the commencement of contract mining at San Pablo in the fourth quarter 2015, and
a full re-start of pilot mill operations at January 1, 2016.

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.

Capital Advances to Subsidiaries

DynaResource de México S.A.
de C.V. (“DynaMéxico”)

Equity Ownership of DynaMéxico

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, the Company currently owns 80% of the outstanding
equity of DynaMéxico.

Amounts Owed to DynaUSA and
DynaMineras

As of September 30, 2016, DynaUSA
had advanced $6,107,000 USD to DynaMineras and DynaMineras had advanced $2,107,500 USD to DynaMéxico. In addition, at September
30, 2016, DynaMineras had advanced $ 3,050,000 USD to DynaOperaciones, which amount has yet to be charged to DynaMéxico
under the terms of the EAA.

On September 5, 2014, DynaUSA issued
1,333,333 shares of its common stock to DynaMineras in exchange for the $4,000,000 receivable from DynaMéxico.

As a result, the balances owed
to DynaUSA and DynaMineras by DynaMéxico as of September 30, 2016 are as following;

| | · | DynaMéxico owes $2,107,500 USD to DynaMineras;
| | - | ----------------------------------------------

| | · | DynaMéxico will be charged an additional $3,050,000 by DynaOperaciones
(amount at September 30, 2016); which amount will be owed by DynaMéxico to DynaOperaciones; and,
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | DynaMéxico owes $4,000,000 USD to DynaUSA;
| | - | ------------------------------------------

As of 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.

DynaResource Operaciones (“DynaOperaciones”)

The Company loaned DynaOperaciones $225,000
in 2012, which amount remains payable to the Company as of September 30, 2016.

Mineras de DynaResource (“DynaMineras”)

At September, 30, 2016, DynaMineras owes
$6,700,000 to DynaUSA, as described above.

Elimination upon Consolidation

All receivables and payables among all
subsidiary companies have been eliminated upon consolidation.

Future Advances to DynaMineras and
DynaMéxico from DynaUSA

DynaUSA 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 DynaUSA Company.



24






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 at September 30, 2016 as Due to Non-Controlling Interest.

Note Receivable – 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 currently has
a receivable from DynaResource Nevada, Inc. of $141,686 and an investment balance of $70,000 as of September 30, 2016.

ITEM 3.	          QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK

Not applicable.

Item 4.	          Controls
and Procedures

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation
of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of September 30, 2016. This evaluation was accomplished under the supervision and with the participation of our
chief executive officer / principal executive officer, and chief financial officer / principal financial officer who concluded
that the Company’s disclosure controls and procedures are effective to ensure that all material information required to be
filed in the quarterly report on Form 10-Q has been made known to them.

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
by 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.

Based upon an evaluation conducted for
the period ended September 30, 2016, our Chief Executive Officer and Chief Financial Officer as of September 30, 2016, and as of
the date of this Report, have concluded that as of the end of the period covered by this report, we have identified no material
weakness in our internal controls.

Corporate expenditures are processed
and paid by officers of the Company.

Changes in Internal Controls over Financial Reporting

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





25






PART II

ITEM 1. 	Legal
Proceedings

Litigation(s) in México –
Company is Plaintiff

The Company, and DynaMéxico have
filed several legal actions in México against Goldgroup Mining Inc., Goldgroup Resources Inc., certain individuals employed
or previously employed by Minop, S.A. de C.V. (a Company operating in México and associated with Goldgroup Mining Inc.),
and certain individuals retained as agents of Goldgroup Mining Inc. The Company and DynaMéxico are plaintiffs in the actions
filed in México and the outcomes are pending.

Arbitration filed by Goldgroup

On March 14, 2014, Goldgroup filed for
arbitration, citing the Earn In Agreement dated September 1, 2006. The Company filed an answer on April 10, 2014 disputing that
any issues exist which provide for arbitration.

On December 9, 2014, DynaMéxico
filed a legal complaint against Goldgroup and the American Arbitration Association (“AAA”), which seeks to terminate
the arbitration proceedings. (See “DynaMéxico filed complaint against Goldgroup” below).

Ruling against Arbitration by
The Thirty Sixth Civil Court of the Superior Court of Justice of the Federal District of México

On October 5, 2015, the Thirty
Sixth Civil Court of the Superior Court of Justice of the Federal District of México (Tribunal Superior de Justicia del
Distrito Federal), File number 1120/2014 declared, among other resolutions, that:

| | (a) | The 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-defendants Goldgroup against DynaResource;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | 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; and,
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | 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.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See $48 M USD in Damages Awarded
to DynaMéxico in México Litigation, below.

Ruling Issued August 24, 2016 by the
American Arbitration Association

| | 1. | The American Arbitration Association - International Centre for Dispute Resolution (the “AAA”)
issued an Arbitration Ruling dated August 24, 2016 (the “Arbitration Ruling”) involving Goldgroup Resources Inc., DynaResource
de Mexico SA de CV. (“DynaMéxico”), and DynaResource, Inc.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | In issuing the Arbitration Ruling, the arbitration panel ignored the October 5, 2015 Court Order.
| | -- | -------------------------------------------------------------------------------------------------

| | 3. | Excerpts from the October 5, 2015 Court Order addressing the role of the American Arbitration Association
(“AAA”) are set forth immediately below:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------



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.



26






| | 4. | 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | DynaMéxico obeyed the October 5, 2015 Court Order, and did not attend the Arbitration hearing.
| | -- | ----------------------------------------------------------------------------------------------

| | 6. | DynaMéxico will pursue all legal remedies in order to obtain a full dismissal of the Arbitration
Ruling.
| | -- | --------------------------------------------------------------------------------------------------------

| | 7. | The October 15, 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.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

DynaResource Motion to Vacate Ruling
Issued by the American Arbitration Association

DynaResource, Inc. and DynaMéxico
plan to file a motion to vacate the Arbitration Ruling, in the United States District Court, District Court of Colorado.

Complaint filed by Goldgroup against
the May 17, 2013 Shareholders Meeting of DynaMéxico

On February 2, 2014, Goldgroup Resources
Inc. filed a petition with the judge, tenth district Mazatlán, according to record 08/2014, in the ordinary commercial action,
against DynaResource Inc. and DynaResource de México, S.A. de CV. Goldgroup complains against the results of the shareholders
meeting 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.

DynaResource, Inc. and DynaMéxico
expect to vigorously defend all such complaints by Goldgroup, as there exists no legal basis for the complaint against the May
17, 2013 shareholders meeting of DynaMéxico.

DynaMéxico filed Complaint
against Goldgroup

On December 9, 2014 DynaMéxico
filed an Ordinary commercial lawsuit (Civil Claims), against Goldgroup Mining Inc., Goldgroup Resources Inc. ("Goldgroup",
a shareholder of DynaMéxico); and, against the American Arbitration Association ("AAA"); based at 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 arbitration proceedings as DynaMéxico believes there is no legal basis
for arbitration, and the DynaMéxico Trial requests substantial damages are awarded DynaMéxico from and 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 (“SJG Project”), 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.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------

DynaMéxico believes the filing
of the DynaMéxico Trial to be necessary in order to protect the property and interests of DynaMéxico, and in order
to seek fair retribution and substantial damage amounts caused by Goldgroup against DynaMéxico and the SJG Project.

$48 M USD in 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”).



27








The Oct. 5, 2015 Resolution affects DynaResource,
Inc., which currently holds 80% of the outstanding share capital of DynaMéxico. A concise translation to English of the
Oct. 5, 2015 Resolution issued in Spanish (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.

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.

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. For purposes
of confidentiality, the Company does not provide more specific disclosure in this Form 10-Q.



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DynaMéxico Statements of Fact

In recent years, Goldgroup has continuously
and consistently misrepresented its interest, ownership, and position related to DynaMéxico and the SJG Project. DynaMéxico
does herein state and represent the following:

| | 1. | 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;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Goldgroup currently owns 20% of the outstanding share capital of DynaMéxico;
| | -- | ----------------------------------------------------------------------------

| | 3. | Goldgroup does not currently own 50% of the outstanding share capital of DynaMéxico as Goldgroup
has recently stated in numerous public disclosures and public filings;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | Goldgroup’s 20% ownership of DynaMéxico was ordered to be maintained and represented
as such (the “status quo”) by a Mexican Judge overseeing certain claims by Goldgroup;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5. | 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;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. | 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;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 7. | Consistently and continuously since March 2011, Goldgroup has sought and threatened to stop, delay,
or otherwise impair 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-Q.

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

The Company reports the following sales
of equity securities during the quarterly period ending September 30, 2016:

None.

ITEM 3. 	          Default
Upon Senior Securities

None.

ITEM 4. 	          Mine
Safety Disclosures

As the Company has no mines located in the United States or
any of its territories, the disclosure required by this Item is not applicable.

ITEM 5. 	          Other
Information

None.

ITEM 6. 	          Exhibits

Exhibit Number; Name of Exhibit

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



SIGNATURES

In accordance with the requirements of
the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.

DynaResource, Inc.

By /s/ K.W. (“K.D.”) Diepholz



K.W. (“K.D.”) Diepholz, Chairman / CEO

Date: November 16, 2016



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