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 March 31, 2019



OR



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



From
the transition period ___________ to ____________.



Commission
File Number 000-30371



DYNARESOURCE,
INC.

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



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



222
W Las Colinas Blvd., Suite 1910 North Tower, Irving, Texas 75039

(Address
of principal executive offices)



(972)
868-9066

(Issuer's
telephone number)



N/A

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



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

Yes
[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]



If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.



Yes
[ ] No [X]



As
of May 20, 2019, there were 17,722,825 shares of Common Stock of the issuer outstanding.





1







TABLE
OF CONTENTS







|                 |                                                                |     
|---------------- | -------------------------------------------------------------- | ----
|PART
    I.      | FINANCIAL
    STATEMENTS                                       |     
|                 |                                                                |     
|ITEM
    1.      | Unaudited
    Financial Statements                             | 3-6 
|                 | Notes
    to Unaudited Financial Statements                    | 7-25
|                 |                                                                |     
|ITEM
    2.      | Management's
    Discussion and Analysis and Plan of Operation | 26  
|                 |                                                                |     
|ITEM
    3.      | Quantitative
    and Qualitative Disclosure About Market Risk  | 43  
|                 |                                                                |     
|ITEM
    4.      | Controls
    and Procedures                                    | 43  
|                 |                                                                |     
|                 |                                                                |     
|PART
    II.     | OTHER
    INFORMATION                                          |     
|                 |                                                                |     
|ITEM
    1.      | Legal
    Proceedings                                          | 44  
|                 |                                                                |     
|ITEM
    2.      | Unregistered
    Sales of Securities and Use of Proceeds       | 49  
|                 |                                                                |     
|ITEM
    3.      | Default
    Upon Senior Securities                             | 49  
|                 |                                                                |     
|ITEM
    4.      | Mine
    Safety Disclosures                                    | 49  
|                 |                                                                |     
|ITEM
    5.      | Other
    Information                                          | 49  
|                 |                                                                |     
|ITEM
    6.      | Exhibits                                                       | 50  
|                 |                                                                |     
|                 |                                                                |     
|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











|                                |  | 
|------------------------------- |  | 
|DYNARESOURCE,
        INC.     
|CONSOLIDATED
    BALANCE SHEETS



|                                                                                                  |  | March 31,   |             | December 31,
|------------------------------------------------------------------------------------------------- |  | ----------- | ----------- | ------------
|                                                                                                  |  | 2019        |             | 2018        
|                                                                                                  |  | (Unaudited) |             |             
|ASSETS                                                                                            |  |             |             |             
|Current Assets                                                                                    |  |             |             |             
|Cash and Cash Equivalents                                                                         |  | $           | 1,442,263   |             
|Accounts Receivable                                                                               |  |             | 829,451     |             
|Inventories                                                                                       |  |             | 1,787,121   |             
|Foreign Tax Receivable                                                                            |  |             | 1,171,879   |             
|Other Current Assets                                                                              |  |             | 359,195     |             
|Total Current Assets                                                                              |  |             | 5,589,909   |             
|                                                                                                  |  |             |             |             
|Mining Equipment and Fixtures (Net of Accumulated                                                 |  |             |             |             
|Depreciation of $1,277,742 and $1,203,562)                                                        |  |             | 2,588,759   |             
|Mining Concessions                                                                                |  |             | 4,132,678   |             
|Operating Lease Asset                                                                             |  |             | 861,668     |             
|Investment in Affiliate                                                                           |  |             | 70,000      |             
|Other Assets                                                                                      |  |             | 97,027      |             
|                                                                                                  |  |             |             |             
|TOTAL ASSETS                                                                                      |  | $           | 13,340,041  |             
|                                                                                                  |  |             |             |             
|LIBILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                                                     |  |             |             |             
|Current Liabilities:                                                                              |  |             |             |             
|Accounts Payable                                                                                  |  | $           | 3,448,312   |             
|Accrued Expenses                                                                                  |  |             | 1,389,186   |             
|Customer Advances                                                                                 |  |             | 1,750,000   |             
|Due to Non-Controlling Interest                                                                   |  |             | 231,500     |             
|Derivative Liability                                                                              |  |             | 352,183     |             
|Current Portion of Operating Lease Liability                                                      |  |             | 63,195      |             
|Convertible Notes Payable                                                                         |  |             | 838,125     |             
|Current Portion of Long Term Debt                                                                 |  |             | 820,739     |             
|Total Current Liabilities                                                                         |  |             | 8,893,240   |             
|                                                                                                  |  |             |             |             
|Operating Lease Liability, Less Current Portion                                                   |  |             | 809,993     |             
|Long Term Debt, Less Current Portion                                                              |  |             | 1,091,791   |             
|                                                                                                  |  |             |             |             
|TOTAL LIABILITES                                                                                  |  |             | 10,795,024  |             
|                                                                                                  |  |             |             |             
|Preferred Stock, Series C, $0.0001 per value, 1,733,221 shares Authorized, issued and outstanding |  |             | 4,333,053   |             
|                                                                                                  |  |             |             |             
|STOCKHOLDERS' EQUITY (DEFICIT)                                                                    |  |             |             |             
|Preferred Stock, Series A, $0.0001 par value, 1,000 shares                                        |  |             |             |             
|authorized, issued and outstanding                                                                |  |             | 1           |             
|Common Stock, $0.01 par value, 25,000,000 shares authorized,                                      |  |             |             |             
|17,722,825 issued and 17,722,825 outstanding                                                      |  |             | 177,228     |             
|Preferred Rights                                                                                  |  |             | 40,000      |             
|Additional Paid In Capital                                                                        |  |             | 56,622,159  |             
|Treasury Stock, 778,980 shares                                                                    |  |             | (2,223,891  | )           
|Accumulated Other Comprehensive income                                                            |  |             | 1,100,434   |             
|Accumulated Deficit                                                                               |  |             | (51,851,469 | )           
|Total DynaResource Inc. Stockholders' Equity                                                      |  |             | 3,864,462   |             
|Non-Controlling Interest                                                                          |  |             | (5,652,498  | )           
|TOTAL EQUITY (DEFICIT)                                                                            |  |             | (1,788,036  | )           
|                                                                                                  |  |             |             |             
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                              |  | $           | 13,340,041  |             
|                                                                                                  |  |             |             |             



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





3











DYNARESOURCE,
INC.

CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR
THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(Unaudited)



|                                                       |  | 2019 |            | 2018
|------------------------------------------------------ |  | ---- | ---------- | ----
|REVENUE                                                |  | $    | 2,329,563  |     
|                                                       |  |      |            |     
|COSTS AND EXPENSES OF MINING OPERATIONS                |  |      |            |     
|Production Cost Applicable to Sales                    |  |      | 451,291    |     
|Mine Production Costs                                  |  |      | 1,055,940  |     
|Mine Exploration Costs                                 |  |      | 862,300    |     
|Mine Expansion Costs                                   |  |      | 3,638      |     
|Camp, Warehouse and Facilities                         |  |      | 671,774    |     
|Transportation                                         |  |      | 250,826    |     
|Property Holding Costs                                 |  |      | 105,962    |     
|General and Administrative                             |  |      | 644,677    |     
|Depreciation and Amortization                          |  |      | 74,180     |     
|Total Operating Expenses                               |  |      | 4,120,588  |     
|NET OPERATING LOSS                                     |  |      | (1,791,025 | )   
|                                                       |  |      |            |     
|OTHER INCOME (EXPENSE)                                 |  |      |            |     
|Foreign Currency Gains                                 |  |      | 139,352    |     
|Interest Expense                                       |  |      | (126,389   | )   
|Derivatives Mark-to-Market Gain                        |  |      | 622,500    |     
|Other Income                                           |  |      | 373        |     
|Total Other Income                                     |  |      | 635,836    |     
|                                                       |  |      |            |     
|NET INCOME (LOSS) BEFORE TAXES                         |  |      | (1,155,189 | )   
|PROVISION FOR INCOME TAXES                             |  |      | —          |     
|                                                       |  |      |            |     
|NET INCOME (LOSS)                                      |  | $    | (1,155,189 | )   
|                                                       |  |      |            |     
|DEEMED DIVIDEND FOR SERIES C PREFERRED                 |  |      | (43,330    | )   
|(INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST |  |      | 27,506     |     
|                                                       |  |      |            |     
|NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS  |  | $    | (1,171,013 | )   
|                                                       |  |      |            |     
|EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO              |  |      |            |     
|THE EQUITY HOLDERS OF DYNARESOURCE, INC.               |  |      |            |     
|                                                       |  |      |            |     
|Basic Earnings (Loss) Per Common Share                 |  | $    | (0.07      | )   
|Weighted Average Shares Outstanding - Basic            |  |      | 17,722,825 |     
|                                                       |  |      |            |     
|Diluted Earnings (Loss)  Per Common Share              |  | $    | (0.07      | )   
|Weighted Average Shares Outstanding - Diluted          |  |      | 17,722,825 |     
|                                                       |  |      |            |     
|OTHER COMPREHENSIVE INCOME (LOSS)                      |  |      |            |     
|Foreign Currency Translation Loss                      |  |      | (166,627   | )   
|TOTAL OTHER COMPREHENSIVE LOSS                         |  |      | (166,627   | )   
|                                                       |  |      |            |     
|TOTAL COMPREHENSIVE INCOME (LOSS)                      |  | $    | (1,321,816 | )   
|                                                       |  |      |            |     
|ATTRIBUTABLE TO:                                       |  |      |            |     
|EQUITY HOLDERS OF DYNARESOURCE, INC.                   |  | $    | (1,274,447 | )   
|NON-CONTROLLING INTEREST                               |  | $    | (47,369    | )   



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





4









|DYNARESOURCE, INC.                                                                         
|-------------------------------------------------------------------------------------------
|Consolidated Statement of Changes in Stockholders' Equity                                  
|For the Periods Ended March 31, 2019 and 2018                                              
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Balance, December 31, 2017                                                                 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Balance, March 31, 2018                                                                    
|                                                                                           
|                                                                                           
|                                                                                           
|Balance, December 31, 2018                                                                 
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Balance, March 31, 2019                                                                    
|                                                                                           
|                                                                                           
|The
    accompanying notes are an integral part of these consolidated financial statements.

















5









DYNARESOURCE,
INC.

CONSOLIDATED
STATEMENTS OF CASH FLOWS

FOR
THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(Unaudited)

|                                                      |  |      |            |     
|----------------------------------------------------- |  | ---- | ---------- | ----
|                                                      |  | 2019 |            | 2018
|CASH FLOWS FROM OPERATING ACTIVITIES                  |  |      |            |     
|Net Income (Loss)                                     |  | $    | (1,155,189 | )   
|Adjustments to reconcile net income (loss) to cash    |  |      |            |     
|provided by
    (used in) Operating     activities    |  |      |            |     
|Gain on Derivative Liabilities                        |  |      | (622,500   | )   
|Depreciation and Amortization                         |  |      | 74,180     |     
|                                                      |  |      |            |     
|Change in Operating Assets and Liabilities:           |  |      |            |     
|Accounts Receivable                                   |  |      | 245,273    |     
|Inventory                                             |  |      | (198,343   | )   
|Foreign Tax Receivable                                |  |      | (326,315   | )   
|Operating Lease Assets                                |  |      | (861,668   | )   
|Other Assets                                          |  |      | 13,123     |     
|Customer Advances                                     |  |      | —          |     
|Operating Lease Liabilities                           |  |      | 873,188    |     
|Accounts Payable                                      |  |      | 1,164,509  |     
|Accrued Liabilities                                   |  |      | 81,793     |     
|CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES |  |      | (711,949   | )   
|                                                      |  |      |            |     
|CASH FLOWS FROM INVESTING ACTIVITIES                  |  |      |            |     
|Purchase of Equipment                                 |  |      | (213,585   | )   
|CASH FLOWS USED IN INVESTING ACTIVITIES               |  |      | (213,585   | )   
|                                                      |  |      |            |     
|CASH FLOWS FROM FINANCING ACTIVITIES                  |  |      |            |     
|Payment of Promissory Notes – Related Parties         |  |      | —          |     
|Payment of Note Payable                               |  |      | (169,675   | )   
|CASH FLOWS USED IN FINANCING ACTIVITIES               |  |      | (169,675   | )   
|                                                      |  |      |            |     
|Effect of Foreign Exchange Rates                      |  |      | (148,104   | )   
|                                                      |  |      |            |     
|NET DECREASE IN CASH                                  |  |      | (1,243,313 | )   
|                                                      |  |      |            |     
|CASH AT BEGINNING OF PERIOD                           |  |      | 2,685,576  |     
|                                                      |  |      |            |     
|CASH AT END OF PERIOD                                 |  | $    | 1,442,263  |     
|                                                      |  |      |            |     
|SUPPLEMENTAL DISCLOSURES                              |  |      |            |     
|Cash Paid for Interest                                |  | $    | 127,702    |     
|Cash Paid for Income Taxes                            |  | $    | —          |     
|                                                      |  |      |            |     
|NON CASH TRANSACTIONS                                 |  |      |            |     
|Conversion of Accounts Payable to Long-Term Debt      |  | $    | 260,447    |     



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





6







DYNARESOURCE,
INC.

NOTES
TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

March
31, 2019



NOTE
1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES



Nature
of Activities, History and Organization

DynaResource,
Inc. (The “Company”, “DynaResource”, or “DynaUSA”) was organized September 28, 1937, as a
California corporation under the name of West Coast Mines, Inc.  In 1998, the Company re-domiciled to Delaware and changed
its name to DynaResource, Inc.  The Company is in the business of acquiring, investing in, and developing precious metal
properties, and the production of precious metals.

In
2000, the Company formed a wholly owned subsidiary, DynaResource de México S.A. de C.V., chartered in México (“DynaMéxico”).  This
Company was formed to acquire, invest in and develop resource properties in México. DynaMéxico owns a portfolio
of mining concessions that currently includes its interests in the San José de Gracia Project (“SJG”) in northern
Sinaloa State, México. The SJG District covers 69,121 hectares (170,802 acres) on the west side of the Sierra Madre mountain
range. The Company currently owns 80% of the outstanding capital of DynaMéxico.

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

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

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

The
Company elected to become a voluntary reporting issuer in Canada in order to avail itself of Canadian regulations regarding reporting
for mining properties and, more specifically, National Instrument 43-101 (“NI 43-101”). This regulation sets forth
standards for reporting resources in a mineral property and is a standard recognized in the mining industry.

Reclassifications

Certain
financial statement reclassifications have been made to prior period balances to reflect the current period’s presentation
format; such reclassifications had no impact on the Company’s consolidated statements of operations or consolidated statements
of cash flows and had no material impact on the Company’s consolidated balance sheets.

Significant
Accounting Policies

The
Company’s management selects accounting principles generally accepted in the United States of America and adopts methods
for their application.  The application of accounting principles requires the estimating, matching and timing of revenue
and expense. The accounting policies used conform to generally accepted accounting principles which have been consistently applied
in the preparation of these financial statements.

The
financial statements and notes are representations of the Company’s management which is responsible for their integrity
and objectivity. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing
and maintaining a system of internal accounting control and preventing and detecting fraud.  The Company's system of
internal accounting control is designed to assure, among other items that: 1) recorded transactions are valid; 2)
valid transactions are recorded; and 3) transactions are recorded in the proper period in a
timely manner to produce financial statements which present fairly the financial condition, results of operations and
cash flows of the Company for the respective periods presented.





7









Basis
of Presentation

The
Company prepares its financial statements on the accrual basis of accounting in conformity with accounting principles generally
accepted in the United States.

Principles
of Consolidation

The
financial statements include the accounts of DynaResource, Inc., as well as DynaResource de México, S.A. de C.V. (80% ownership),
DynaResource Operaciones S.A. de C.V. (100% ownership) and Mineras de DynaResource S.A. de C.V. (100% ownership). All
significant inter-company transactions have been eliminated.  All amounts are presented in U.S. Dollars unless otherwise
stated.

Non-Controlling
Interest

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

Investments
in Affiliates

The
Company owns a 20% interest in DynaResource Nevada, Inc., a Nevada Corporation (“DynaNevada”), with one operating
subsidiary in México, DynaNevada de México, S.A. de C.V. (“DynaNevada de México”), together “DynaNevada”.
The Company accounts for this investment using the cost method.

Cash
and Cash Equivalents

The
Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.  At
times, cash balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits.



Accounts
Receivable and Allowances for Doubtful Accounts

The
allowance for accounts receivable is recorded when receivables are considered to be doubtful of collection. As of March 31, 2019,
and December 31, 2018, respectively, no allowance has been made.

Foreign
Tax Receivable

Foreign
Tax Receivable is comprised of recoverable value-added taxes (“IVA”) charged by the Mexican government on goods and
services rendered.  Under certain circumstances, these taxes are recoverable by filing a tax return.  Amounts
paid for IVA are tracked and held as receivables until the funds are remitted.  The total amounts of the IVA receivable
as of March 31, 2019 and December 31, 2018 are $1,171,879 and $845,564 respectively.

Inventory

Inventories
are carried at the lower of cost or net realizable value and consist of mined tonnage, and gravity and flotation concentrates,
and gravity tailings or flotation feed material. The inventories are $1,787,121 and $1,588,778 as of March 31, 2019 and December
31, 2018, respectively.

Proven
and Probable Reserves (No Known Reserves)

The
definition of proven and probable reserves is set forth in SEC Industry Guide 7 (“Industry Guide 7”). Proven reserves
for which (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, grade and/or quality
are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced
so closely and the geological character is so well defined that size, shape, depth and mineral content of the reserves are well-established.
Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used
for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less
adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume
continuity between points of observations.

As
of March 31, 2019, none of the Company's properties contain resources that satisfy the definition of proven and probable reserves.
The Company classifies the development of its properties, including the San Jose de Gracia Property, as exploration stage projects
since no proven or probable reserves have been established under Industry Guide 7.





8







Property

Substantially
all costs, including design, engineering, construction, and installation of equipment are expensed as incurred as the Company
has not established proven and probable reserves on any of its properties. Only certain types of equipment which has alternative
uses or significant salvage value, may be capitalized without proven and probable reserves. Depreciation is computed using the
straight-line method with the exception of mining equipment. Mining equipment is depreciated using the units-of-production method
based on tonnes processed over the estimated total mine life. Office furniture, equipment and light vehicles are being depreciated
on a straight-line method over estimated economic lives ranging from 3 to 5 years. Leasehold improvements, which relate to
the Company's corporate office, are being amortized over the term of the lease of 10 years. Trailers, heavy vehicles and
other site equipment are being depreciated on a straight-line method over estimated economic lives from 5 to 15 years. Buildings
are being depreciated on straight line method over an estimated economic life of 20 years.

Design,
Construction, and Development Costs:    Mine development costs include engineering and metallurgical studies,
drilling and other related costs to delineate an ore body, the removal of overburden to initially expose an ore body at open pit
surface mines and the building of access ways, shafts, lateral access, drifts, ramps and other infrastructure at underground mines.

When
proven and probable reserves as defined by Industry Guide 7 exist, development costs are capitalized and the property is a commercially
minable property. Mine development costs incurred either to develop new ore deposits, expand the capacity of operating mines,
or to develop mine areas substantially in advance of current production would be capitalized. Costs of start-up activities and
costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations as incurred.
Costs of abandoned projects are charged to operations upon abandonment. All capitalized costs would be amortized using the units
of production method over the estimated life of the ore body based on recoverable ounces to be mined from proven and probable
reserves.

Certain
costs to design and construct mining and processing facilities may be incurred prior to establishing proven and probable reserves.
As no proven and probable reserves have been established on any of the Company's properties, design, construction and development
costs are not capitalized at any of the Company's properties, and accordingly, substantially all costs are expensed as incurred,
resulting in the Company reporting larger losses than if such expenditures had been capitalized. Additionally, the Company does
not have a corresponding depreciation or amortization of these costs going forward since these expenditures were expensed as incurred
as opposed to being capitalized. As a result of these and other differences, the Company's financial statements may not be comparable
to the financial statements of mining companies that have established reserves.

Mining
Properties Interests

Mineral
property interests include acquired interests in development and exploration stage properties, which are considered tangible assets.
The amount capitalized relating to a mineral property interest represents its fair value at the time of acquisition. When a property
does not contain mineralized material that satisfies the definition of proven and probable reserves, such as with the San Jose
de Gracia Property, capitalized costs and mineral property interests are amortized using the straight-line method once production
begins. As of March 31, 2019, the mining interests have been in the pilot production stage and therefore, no amortization has
been expensed. Mining properties consist of 33 mining concessions covering approximately 9,920 hectares at the San Jose de Gracia
property (“SJG”), the basis of which are amortized on the unit of production method based on estimated recoverable
resources.  If it is determined that the deferred costs related to a property are not recoverable over its productive life,
those costs will be written down to fair value as a charge to operations in the period in which the determination is made.  The
amounts at which mineral properties and the related costs are recorded do not necessarily reflect present or future values.

Impairment
of Assets:    The Company reviews and evaluates its long-lived assets for impairment when events or changes
in circumstances indicate that the related carrying amounts may not be recoverable. Mineral properties are monitored for impairment
based on factors such as mineral prices, government regulation and taxation, the Company's continued right to explore the area,
exploration reports, assays, technical reports, drill results and its continued plans to fund exploration programs on the property.





9







For
operating mines, recoverability is measured by comparing the undiscounted future net cash flows to the net book value. When the
net book value exceeds future net undiscounted cash flows, an impairment loss is measured and recorded based on the excess of
the net book value over fair value. Fair value for operating mines is determined using a combined approach, which uses a discounted
cash flow model for the existing operations and a market approach for the fair value assessment of exploration land claims. Future
cash flows are estimated based on quantities of recoverable mineralized material, expected gold and silver prices (considering
current and historical prices, trends and related factors), production levels, operating costs, capital requirements and reclamation
costs, all based on life-of-mine plans. The term "recoverable mineralized material" refers to the estimated amount of
gold or other commodities that will be obtained after taking into account losses during processing and treatment of mineralized
material. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows
that are largely independent of future cash flows from other asset groups. The Company's estimates of future cash flows are based
on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as
actual future quantities of recoverable minerals, gold, silver and other commodity prices, production levels and costs and capital
are each subject to significant risks and uncertainties.

The
recoverability of the book value of each property will be assessed annually for indicators of impairment such as adverse changes
to any of the following:

|● | estimated recoverable ounces
    of gold, silver or other precious minerals;                     
|- | -------------------------------------------------------------------------------------------------
|● | estimated future commodity prices;                                                               
|● | estimated expected
    future operating costs, capital expenditures and reclamation expenditures.

A
write-down to fair value will be recorded when the expected future cash flow is less than the net book value of the property or
when events or changes in the property indicate that carrying amounts are not recoverable.  This analysis will be completed
as needed, and at least annually. As of the date of this filing, no events have occurred that would require write-down of any
assets.  As of March 31, 2019 and December 31, 2018, no indications of impairment existed.

Asset
Retirement Obligation:   As the Company is not obligated to remediate the mining properties, no Asset
Retirement Obligation (“ARO”) has been established. Changes in regulations or laws, any instances of non-compliance
with laws or regulations that result in fines, or any unforeseen environmental contamination could result in a material impact
to the amounts charged to operations for reclamation and remediation. Significant judgments and estimates are made when estimating
the fair value of AROs. Expected cash flows relating to AROs could occur over long periods of time and the assessment of the extent
of environmental remediation work is highly subjective. Considering all of these factors that go into the determination of an
ARO, the fair value of the AROs can materially change over time.

Pre-Pilot
Production Costs



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



Property
Holding Costs

Holding
costs to maintain a property on a care and maintenance basis are expensed in the period they are incurred. These costs include
security and maintenance expenses, lease and claim fees and payments, and environmental monitoring and reporting costs.

Exploration
Costs

Exploration
costs are charged to operations and expenses as incurred. Exploration, development, direct field costs and administrative costs
are expensed in the period incurred.

Foreign
Currency Translation

The
functional currency for the subsidiaries of the Company is the Mexican Peso.  As a result, the financial statements
of the subsidiaries have been 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.



10







Relevant
exchange rates used in the preparation of the financial statements for the subsidiaries are as follows for the periods ended March
31, 2019 and December 31, 2018 (Mexican Pesos per one U.S. dollar):

|                                |       | Mar
    31, 2019 | Dec
    31, 2018
|------------------------------- | ----- | ---------------- | ----------------
|Exchange
    Rate at Period End | Pesos | 19.43            | 19.63           



Relevant
exchange rates used in the preparation of the income statement portion of financial statements for the subsidiaries are as follows
for the periods ended March 31, 2019 and March 31, 2018 (Mexican Pesos per one U.S. dollar):

|                                                              |       | Mar
    31, 2019 | Mar
    31, 2018
|------------------------------------------------------------- | ----- | ---------------- | ----------------
|Weighted
    Average Exchange Rate for the Three Months Ended | Pesos | 19.21            | 18.74           



The
Company recorded currency transaction gains (losses) of $139,352 and $806,514 for the three months ended March 31, 2019 and 2018,
respectively.

Income
Taxes

The
Company accounts for income taxes under ASC 740 “Income Taxes” using the liability method, recognizing
certain temporary differences between the financial reporting basis of liabilities and assets and the related income tax basis
for such liabilities and assets. This method generates either a net deferred income tax liability or asset for the Company, as
measured by the statutory tax rates in effect. The Company derives the deferred income tax charge or benefit by recording the
change in either the net deferred income tax liability or asset balance for the year. The Company records a valuation allowance
against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more
likely than not that some portion or all of the deferred income tax asset will not be realized.

Income
from the Company’s subsidiaries in México are taxed at applicable Mexican tax law.

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



Use
of Estimates

In
order to prepare financial statement in conformity with accounting principles generally accepted in the United States, management
must make estimates, judgments and assumptions that affect the amounts reported in the financial statements and determines whether
contingent assets and liabilities, if any, are disclosed in the financial statements. The ultimate resolution of issues requiring
these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the
financial statements are based.

Comprehensive
Income (Loss)

ASC
220 “Comprehensive Income” establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements.    The Company’s comprehensive income
consists of net income and other comprehensive income (loss), consisting of unrealized net gains and losses on the translation
of the assets and liabilities of its foreign operations.  For the periods ended March 31, 2019 and March 31, 2018, the Company’s
components of comprehensive income were foreign currency translation adjustments.





11







Revenue
Recognition

The
Company adopted ASC 606 “Revenue from contracts with customers” on January 1, 2018. The Company generates revenue
by selling gold and silver produce from its mining operations. The Company recognizes revenue for gold and silver concentrate
production, net of treatment and refining costs, when it satisfies the performance obligation of transferring control of the concentrate
to the customer. This is generally when the material is delivered to the customer facility for treatment and processing as the
customer has the ability to direct the use of and obtain substantially all the remaining benefits from the material and the customer
has the risk of loss.

The
amount of revenue recognized is initially recorded on a provisional basis based on the contract price and the estimated metal
quantities based on assay data. The revenue is adjusted upon final settlement of the sale. The chief risk associated with the
recognition of sales on a provisional basis is the fluctuations between the estimated quantities of precious metals base on the
initial assay and the actual recovery from treatment and processing.

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

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

Stock-Based
Compensation

The
Company accounts for stock options at fair value as prescribed in ASC 718. The Company estimates the fair value of each stock
option at the grant date by using the Black-Scholes option-pricing model and provides for expense recognition over the service
period, if any, of the stock option.

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

Fair
value of Financial Instruments

The
Company’s financial instruments consist of cash, receivables, payables and long-term debt. The carrying amount of cash,
receivable and payables approximates fair value because of the short-term nature of these items. The carrying amount of long-term
debt approximates fair value due to the relationship between the interest rate on long-term debt and the Company’s incremental
risk adjusted borrowing rate.

Per
Share Amounts

Earnings
per share are calculated in accordance with ASC 260 “Earnings per Share”.  The weighted average number
of common shares outstanding during each period is used to compute basic earnings (loss) per share.  Diluted earnings
per share are computed using the weighted average number of shares and potentially dilutive common shares outstanding.   Potentially
dilutive common shares are additional common shares assumed to be exercised.  Potentially dilutive common shares consist
of stock options and convertible preferred shares and convertible notes and are excluded from the diluted earnings per share computation
in periods where the Company has incurred a net loss, as their effect would be considered anti-dilutive.

The
Company had 2,523,689 warrants outstanding at March 31, 2019, of which 357,162 are exercisable at $2.50 and 2,166,527 are exercisable
at $2.41, which upon exercise, would result in the issuance of 2,523,689 shares of common stock. The Company also had convertible
debt instruments as of March 31, 2019 which, upon conversion at a valuation of $2.50 per share, would result in the issuance of
335,250 shares of stock.





12











|                                                                      |  | Three Months         |            | Three Months        
|--------------------------------------------------------------------- |  | -------------------- | ---------- | --------------------
|                                                                      |  | Ended March 31, 2019 |            | Ended March 31, 2018
|Net income (loss) attributable to common shareholders                 |  | $                    | (1,171,013 | )                   
|Shares:                                                               |  |                      |            |                     
|Weighted average number of common shares outstanding, Basic           |  |                      | 17,722,825 |                     
|                                                                      |  |                      |            |                     
|Diluted weighted average number of common shares outstanding, Diluted |  |                      | 17,722,825 |                     
|                                                                      |  |                      |            |                     
|Basic earnings (loss) per share                                       |  | $                    | (0.07      | )                   
|                                                                      |  |                      |            |                     
|Diluted earnings (loss) per share                                     |  | $                    | (0.07      | )                   



Related
Party Transactions

FASB
ASC 850, "Related Party Disclosures" requires companies to include in their financial statements disclosures of material
related party transactions. The Company discloses all material related party transactions. A party is considered to be related
to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under
common control with the Company. Related parties also include principal owners of the Company, its management, members of the
immediate families of principal owners of the Company and its management and other parties with which the Company may deal if
one party controls or can significantly influence the management or operating policies of the other to an extent that one of the
transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence
the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties
and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests is also a related party.”

Recently
Issued Accounting Pronouncements

Leases



In
February 2016, FASB issued ASU 2016-02— Leases (Topic 842). The update is intended to increase transparency and comparability
among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about
leasing arrangements. As such, The Company is required to adopt these provisions as of the fiscal year beginning on January 1,
2019. The Company elected the available practical expedients and adopted ASC 842 effective January 1, 2019, prospectively. The
adoption of this standard resulted in the recognition of right-to-use assets and lease liabilities of $861,668 and $873,188 with
no material impact on the results of operations and cash flows. See Note 10 for additional information regarding our leases.





NOTE
2 – INVENTORIES

The
Company commenced underground test mining and pilot milling activities (“pilot production”) in the 2nd quarter of
2014. Rehabilitation of the San Pablo Mine and refurbishing of the Pilot Mill Facility and construction of the adjacent tailings
pond continued through 2016. Inventories are carried at the lower of cost or net realizable value and consist of mined tonnage,
gravity-flotation concentrates, and gravity tailings (or, flotation feed material). Inventory balances of March 31, 2019 and December
31, 2018, respectively, were as follows:

|                         |  | 2019 |           | 2018
|------------------------ |  | ---- | --------- | ----
|Mined Tonnage Stockpiled |  | $    | 1,678,792 |     
|Mill Tonnage Stockpiled  |  |      | 108,329   |     
|Finished Material        |  |      | —         |     
|Total Inventories        |  | $    | 1,787,121 |     



13





NOTE
3 – PROPERTY

Property
consists of the following at March 31, 2019 and December 31, 2018:

|                                |  | 2019 |            | 2018
|------------------------------- |  | ---- | ---------- | ----
|                                |  |      |            |     
|Camp Buildings and Improvements |  | $    | 470,974    |     
|Machinery and equipment         |  |      | 2,132,607  |     
|Transportation equipment        |  |      | 228,526    |     
|Office equipment                |  |      | 164,113    |     
|Office furniture and fixtures   |  |      | 78,802     |     
|Construction in Progress        |  |      | 791,479    |     
|Sub-total                       |  |      | 3,866,501  |     
|Less: Accumulated depreciation  |  |      | (1,277,742 | )   
|Total Property                  |  | $    | 2,588,759  |     

The
Company purchased equipment of $213,585 and $219,300 in the three months ended March 31, 2019 and 2018, respectively.

Depreciation
has been provided over each asset’s estimated useful life.  Depreciation expense was $74,180 and $66,642 for the
three months ended March 31, 2019 and 2018, respectively.

NOTE
4 – MINING CONCESSIONS

|Mining
                                         properties consist of the following at March 31, 2019 and December 31, 2018: |  | 2019 |           | 2018
|---------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ----
|San Jose
    de Gracia (“SJG”):                                                                                              |  |      |           |     
|Total
    Mining Concessions                                                                                                 |  | $    | 4,132,678 |     



Depletion
expense was $0 and $0 for the three months ended March 31, 2019 and 2018 respectively.

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

Through
December 31, 2016, the Company loaned a total of $805,760 to DynaResource Nevada, Inc. (“DynaNevada”), a Nevada Corporation,
which owns 100% of one operating subsidiary in México, DynaNevada de México, S.A. de C.V. (“DynaNevada
de México”). The terms of the Note Receivable provided for a “Convertible Loan”, repayable at 5% interest
over a 3-year period, and convertible at the Company’s option into common stock of DynaNevada at $.25 / Share.  
DynaNevada is a related entity (affiliate), and through its subsidiary, DynaNevada de México has entered into an Option
agreement with Grupo México (IMMSA) in México, for the exploration and development of approximately 3,000 hectares
in the State of San Luis Potosi (“The Santa Gertrudis Property”). DynaNevada de México exercised the Option
with IMMSA in March 2010, so that DynaNevada de México now owns 100% of the Santa Gertrudis Property. In June 2010, DynaNevada
de México acquired an additional 6,000 hectares in the State of Sinaloa (the “San Juan Property”). As of March
31, 2019 and December 31, 2018 the loan was $70,000.

NOTE
6 – CONVERTIBLE PROMISSORY NOTES

Notes
Payable – Series I



In
April and May 2013, the Company entered into note agreements with shareholders in the principal amount of $1,495,000, of which
$340,000 was then converted to preferred shares within the same year, netting to proceeds of $1,155,000 (the “Series I Notes”).
The Series I Notes bear simple interest at twelve and a half percent (12.5%), accrued for twelve months, and with the accrued
interest to be added to the principal, and then interest will be paid by the Company, quarterly in arrears. The holders
of the Series I Notes (in aggregate) are also entitled to receive ten percent (10%) of the net profits received by the Company,
on the first fifty thousand tons processed through the mill facilities at San Jose de Gracia. Such net profits (if any) are to be
calculated after deducting “all expenses related to the production”, and after a prior deduction of thirty-three
percent (33%) from the net profits, to be deposited into a sinking fund cash reserve. To date, the Company has not produced any
net profits as calculated in accordance with the Series I Notes.





14









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



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



The
Series I Note holder retains the option, at any time prior to maturity or prepayment, to convert any unpaid principal and accrued
interest into Common Stock at $5.00 per share. If the Series I Note is converted into Common Stock, at the time of conversion,
the holder would also receive warrants, in the same number as the number of common shares received upon conversion, to purchase
additional common shares of the Company for $7.50 per share, with such warrants expiring on December 31, 2020.





Notes
Payable – Series II



In
2013 and 2014, the Company entered into additional note agreements of $199,808 and $250,000, respectively (the “Series II
Notes”) with similar terms as the Series I Notes. The Series II Notes bear simple interest at twelve and a half percent
(12.5%), accrued for twelve months, and with the accrued interest to be added to the principal, and then interest will
be paid by the Company, quarterly in arrears. The holders of the Series II Notes (in aggregate) are also entitled to receive
ten percent (10%) of the net profits received by the Company, on the second fifty thousand tons processed through the mill facilities
at San Jose de Gracia. Such net profits (if any) are to be calculated after deducting “all expenses related to the
production” l, and after a prior deduction of thirty-three percent (33%) from the net profits, to be deposited
into a sinking fund cash reserve. To date, the Company has not produced any net profits as calculated in accordance with the Series
II Notes.



The
Notes originally matured on December 31, 2015. In 2018 the Company paid off one note for $112,500. The remaining two Series II
Notes totaling $78,750 have been extended to December 30, 2019.



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



The
Note holder may, at any time prior to maturity or prepayment, convert any unpaid principal and accrued interest into common stock
of the Company at $5.00 per share. At the time of conversion, the holder would receive a warrant to purchase additional common
shares of the Company for $7.50 per share, such warrant expiring on December 31, 2020.



On
June 30, 2015, the Company entered into conversion agreements with six (6) note holders. Principal and interest in the amount
of $809,784 plus $33,120 of accrued interest (total of $842,904) was contracted to convert into 337,162 common shares. In addition,
337,162 warrants were issued which provide the option to purchase common shares at $2.50, with all warrants expiring December
31, 2017. The Company recorded $826,347 inducement expense related to these conversion transactions. On August 17, 2015, these
common shares and warrants were issued.



At
March 31, 2019 and December 31, 2018, the principal and capitalized interest balance on the remaining Series I Notes was $759,375,
and the principal and capitalized interest on the Series II Notes was $78,750, for a total Note balance of $838,125. The accrued
interest for these notes was $28,828 and $25,150 as of March 31, 2019 and December 31, 2018, respectively.



NOTE
7 – INCOME TAXES

The
Company has adopted ASC 740-10, “Income Taxes”, which requires the use of the liability method in the computation
of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset).
Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The cumulative
tax effect at the expected tax rate of 21% (blended for U.S. and México) of significant items comprising the Company’s
net deferred tax amounts as of March 31, 2019 and December 31, 2018 are as follows:





15











Deferred
Tax Asset Related to:

|                                        |  | 2019 |             | 2018
|--------------------------------------- |  | ---- | ----------- | ----
|Prior Year                              |  | $    | 13,169,883  |     
|Tax Benefit for Current Year            |  |      | 373,315     |     
|Permanent Difference Due to Rate Change |  |      | —           |     
|Total Deferred Tax Asset                |  |      | 13,543,198  |     
|Less: Valuation Allowance               |  |      | (13,543,198 | )   
|Net Deferred Tax Asset                  |  | $    | —           |     



The
income tax provision for the Company as of March 31, 2019 and 2018 differs from those computed using the blended statutory tax
rate of 21% due to the following differences:



|                                               |  | 2019 |            | 2018
|---------------------------------------------- |  | ---- | ---------- | ----
|Book Income (Loss)                             |  | $    | (1,155,189 | )   
|Tax Expense (Benefit) at Statutory Rates       |  |      | (242,590   | )   
|Other Permanent Differences                    |  |      | (130,725   | )   
|Change in Valuation Allowance                  |  |      | 373,315    |     
|Provision for (Benefit from) Income Taxes, Net |  | $    | —          |     





The
net deferred tax asset and benefit for the current year is generated primarily from the cumulative net operating loss carry-forward
which is approximately $52,900,000 at March 31, 2019 and will expire in the years 2027 through 2033.



The
realization of deferred tax benefits is contingent upon future earnings and is fully reserved at March 31, 2019.



On
December 11, 2013, the Mexican government enacted a tax reform that increased the effective tax rate applicable to the Company's
Mexican operations. The law, effective January 1, 2014, increased the future corporate income tax rate to 30%, created a
10% withholding tax on dividends paid to non-resident shareholders and created a new Extraordinary Mining duty which is equal
to 0.5% of gross revenues from the sale of gold, silver and platinum. Furthermore, the reform introduced a Special Mining Duty
of 7.5%. The Special Mining Duty is deductible for income tax purposes. The Special Mining Duty is generally applicable to earnings
before income tax, depreciation, depletion, amortization and interest. There will be no deductions related to development type
costs but exploration and prospecting costs are deductible when incurred. Certain non-deducted exploration expenditures incurred
prior to January 1, 2014 are also deductible in the calculation of the Special Mining Duty. For the periods ended March 31,
2019 and 2018, the Company had no taxes payable under the 7.5% Special Mining Duty.



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



| | United States: | 2015 to 2018 | 
| | -------------- | ------------ | 
| | México         | 2014 to 2018 | 



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



NOTE
8 – STOCKHOLDERS’ EQUITY

Authorized
Capital. The total number of shares of all classes of capital stock which the corporation shall have the authority to
issue is 45,001,000 shares, consisting of (i) twenty million and one thousand (20,001,000) shares of Preferred Stock, par value
$0.0001 per share (“Preferred Stock”), of which one thousand (1,000) shares shall be designated as Series A
Preferred Stock and (ii) twenty-five million (25,000,000) shares of Common Stock, par value $.01 per share (“Common Stock”).





16







Series
A Preferred Stock

The
Company has designated 1,000 shares of its Preferred Stock as Series A, having a par value of $0.0001 per share. Holders of the
Series A Preferred Stock have the right to elect a majority of the Board of Directors of the Company. In October 2007, the
Company issued 1,000 shares of Series A Preferred Stock to its CEO. At March 31, 2019 and December 31, 2018 there were 1,000 shares
and 1,000 shares of Series A Preferred Stock outstanding, respectively.

Series
C Senior Convertible Preferred Shares

On
June 30, 2015, the Company issued 1,600,000 Series C Senior Convertible Preferred Shares (the “Series C Preferred Shares”)
at $2.50 per share for gross proceeds of $4,000,000, as well as issuing 133,221 additional Series C Preferred Shares due to anti-dilution
provisions (with no cash remuneration). Legal fees of $45,000 were deducted from the proceeds of this transaction at closing.
These Series C Preferred Shares are convertible to common shares at $2.50 per share, through February 20, 2020. The Series C Preferred
Shares may receive a 4% per annum dividend, payable if available, and in arrears. A description of the transaction which included
the issuance of the Series C Preferred Shares is included below. The Dividend is calculated at 4.0% of $4,333,053 payable annually
on June 30. The Company paid no dividends in 2018 or 2019.

Financing
Agreement with Golden Post Rail, LLC, a Texas Limited Liability Company

On
May 6, 2015, the Company, Golden Post Rail, LLC, a Texas limited liability company (“Golden Post”), and Mr. Koy W.
(“K.D.”) Diepholz, Chairman-CEO of the Company entered into a Securities Purchase Agreement (the “SPA”).
Pursuant to the SPA, Golden Post acquired the following securities:

| | (a) | 1,600,000
    shares of Series C Senior Convertible Preferred Stock (the “Series C Preferred”) at a purchase price of $2.50
    per share ($4M USD), plus an additional 133,221 shares of Series C Preferred pursuant to anti-dilution provisions. The Series
    C Preferred is entitled to receive dividends at the per share rate of four percent (4%) per annum, ranks senior (in priority)
    to the Common Stock, the Series A Preferred Stock, and each other class or series of equity security of the Company. The Series
    C Preferred is convertible into Common Stock of the Company at the price of $2.41 per share, and is entitled to anti-dilution
    protection for (i) subsequent equity issuances by the Company and (ii) changes in the Company’s ownership of DynaResource
    de México SA de CV (“DynaMéxico”). The Series C Preferred is also entitled to preemptive rights,
    and the holder has the right to designate one person to the Company’s Board of Directors as a Class III director.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | A
    Common Stock Purchase Warrant (the “Golden Post Warrant”) for the purchase of 2,166,527 shares of the Company’s
    Common Stock, at an exercise price of $2.50 per share, and expiring June 30, 2020. The anti-dilution protections contained
    in the terms of the Series C Preferred are essentially replicated in the Golden Post Warrant.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pursuant
to the SPA, the Company executed a Registration Rights Agreement pursuant to which Golden Post may require the Company to register
the shares of Common Stock which may be issued upon the conversion of the Series C Preferred and the shares of Common Stock issuable
upon the exercise of the Warrant, including any additional shares of Common Stock issuable pursuant to anti-dilution provisions.

In
2015, due to underlying anti-dilutive provisions contained in the Series C Preferred Shares and the Golden Post Warrant, the Company
incurred derivative liabilities of $2,419,359 in connection with the Series C Preferred Shares, and $2,963,378 in connection with
the Golden Post Warrant. Additionally, the Company fully accreted the discount related to the Series C Preferred Shares and the
Golden Post Warrant in the amount of $4,637,179, which is reflected “below” the net income (loss) amount. Also in
2015, the Company reported $87,374 deemed dividend for Golden Post Rail related to its 4% dividend terms. As the Company has not
declared these dividends, it is required only as an item “below” the net income (loss) amount. The Derivative Liability
is recalculated and adjusted quarterly. At December 31, 2018 the total Derivative Liability was $974,683 which included $402,909
for the Series C Preferred Shares, and $571,774 in connection with the Golden Post Warrants. At March 31, 2019 the total Derivative
Liability was $352,183 which included $144,131 for the Series C Preferred Shares, and $208,052 in connection with the Golden Post
Warrants. The Deemed Dividend for the three months ending March 31, 2019 and March 31, 2018 was $43,330, and $43,330 respectively.





17







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

|                                                               |  | Preferred
    Series C
|-------------------------------------------------------------- |  | ----------------------
|Carrying
    Value, December 31, 2018                          |  |                       
|                                                               |  |                       
|Issuances at
    Fair Value, net of issuance costs             |  |                       
|Bifurcation of
    Derivative Liability                        |  |                       
|Relative Fair
    Value of Warrants – Preferred Stock Discount |  |                       
|Accretion
    of Preferred Stock to Redemption Value           |  |                       
|Carrying Value,
    March 31, 2019                             |  |                       

Preferred
Stock (Undesignated)

In
addition to the 1,000 shares designated as Series A Preferred Stock and the 1,733,221 shares designated as Series C Preferred
Shares, the Company is authorized to issue an additional 16,266,779 shares of Preferred Stock, having a par value of $0.0001 per
share. The Board of Directors of the Company has authority to issue the Preferred Stock from time to time in one or more series,
and with respect to each series of the Preferred Stock, to fix and state by the resolution the terms attached to the Preferred
Stock. At March 31, 2019 and December 31, 2018, there were no other shares of Preferred Stock outstanding.

Separate
Series; Increase or Decrease in Authorized Shares. The shares of each series of Preferred Stock may vary from the shares of
any other series thereof in any or all of the foregoing respects and in any other manner. The Board of Directors may increase
the number of shares of Preferred Stock designated for any existing series by a resolution adding to such series authorized and
unissued shares of Preferred Stock not designated for any other series. Unless otherwise provided in the Preferred Stock Designation,
the Board of Directors may decrease the number of shares of Preferred Stock designated for any existing series by a resolution
subtracting from such series authorized and unissued shares of Preferred Stock designated for such existing series, and the shares
so subtracted shall become authorized, unissued and undesignated shares of Preferred Stock.

Common
Stock

The
Company is authorized to issue 25,000,000 common shares at a par value of $0.01 per share. These shares have full voting rights.
At March 31, 2019 and December 31, 2018, there were 17,722,825 shares outstanding, respectively. No dividends were paid for
the periods ended March 31, 2019 and December 31, 2018.

Preferred
Rights

The
Company issued “Preferred Rights” for the rights to percentages of revenues generated from the San Jose de Gracia
Pilot Production Plant, and received $158,500 in 2003 and $626,000 in 2002. This has been reflected as “Preferred Rights”
in stockholders’ equity. As of December 31, 2004, $558,312 was repaid and as of December 31, 2005, an additional $186,188
was repaid, leaving a current balance of $40,000 and $40,000 as of March 31, 2019 and December 31, 2018, respectively.

Stock
Issuances

2018
Activity – None



2019
Activity – None.

Treasury
Stock

At
March 31, 2019 and December 31, 2018, there were 778,980 treasury shares outstanding.

Warrants

The
Company had 2,523,689 warrants outstanding at March 31, 2019 and December 31, 2018. There were no warrants issued or exercised
in the periods ending March 31, 2019 and December 31, 2018.

The
Company recorded no expense related to the issuance of these warrants since these warrants were issued in common stock for cash
sales and note conversions.





18









| |                                  | Number
        of
        Shares |  | Weighted
        Average
        Exercise
        Price |           | Weighted
                                         Average
        Remaining
        Contractual
        Life
        (Years) |  | Intrinsic
        Value
| | -------------------------------- | -------------------------------- |  | ------------------------------------------------------- | --------- | ---------------------------------------------------------------------------------------------------------------------------- |  | -----------------------
| | Balance at December 31,
    2017 |                                  |  |                                                         | 2,523,689 |                                                                                                                              |  | $                      
| | Granted                          |                                  |  |                                                         | —         |                                                                                                                              |  | $                      
| | Exercised                        |                                  |  |                                                         | —         |                                                                                                                              |  | $                      
| | Forfeited                        |                                  |  |                                                         | —         |                                                                                                                              |  | $                      
| | Balance at December 31, 2018     |                                  |  |                                                         | 2,523,689 |                                                                                                                              |  | $                      
| | Granted                          |                                  |  |                                                         | —         |                                                                                                                              |  | $                      
| | Exercised                        |                                  |  |                                                         | —         |                                                                                                                              |  | $                      
| | Forfeited                        |                                  |  |                                                         | —         |                                                                                                                              |  | $                      
| | Balance at March 31, 2019        |                                  |  |                                                         | 2,523,689 |                                                                                                                              |  | $                      
| | Exercisable at March 31, 2019    |                                  |  |                                                         | 2,523,689 |                                                                                                                              |  | $                      







NOTE
9 – RELATED PARTY TRANSACTIONS

Related
Party Transactions

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

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

Dynacap
Group Ltd.

The
Company paid $31,250 and $18,750 to Dynacap Group, Ltd. (“Dynacap”, an entity controlled by the CEO of the Company)
for consulting and other fees during the three months ended March 31, 2019 and 2018, respectively.





19









Advances
from Goldgroup Mining Inc. (“Goldgroup”) to Dyna México



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



NOTE
10 – COMMITMENTS AND CONTINGENCIES



Concession
Taxes



The
Company is required to pay taxes in México in order to maintain mining concessions owned by DynaMéxico.  Additionally,
the Company is required to incur a minimum amount of expenditures each year for all concessions held.  The minimum expenditures
are calculated based upon the land area, as well as the age of the concessions.  Amounts spent in excess of the minimum
may be carried forward indefinitely over the life of the concessions, and are adjusted annually for inflation.  Based
on management's recent business plans and Company activities at San Jose de Gracia, and considering the Company’s current
and forward plans, and considering expenditures on mining concessions since 2002-2016, the Company does not anticipate that DynaMéxico
will have any difficulties meeting the minimum annual expenditures for the concessions ($2,400 Mexican Pesos per hectare). DynaMéxico
retains sufficient carry-forward amounts to cover over 10 years of the minimum expenditure (as calculated at the 2016 minimum,
adjusted for annual inflation of 4%).



Leases



In
addition to the surface rights held by DynaMéxico pursuant to the Mining Act of México and its Regulations
(Ley Minera y su Reglamento), DynaMineras maintains access and surface rights to the SJG Project pursuant to the 20-year
Land Lease Agreement. The 20 Year Land Lease Agreement with the Santa Maria Ejido Community
surrounding San Jose de 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 on January 1st each year by DynaMineras
of $1,359,443 Pesos (approx. $72,000 USD), commencing in 2014. The Land Lease Agreement provides DynaMineras with surface
access to the core resource areas of SJG (4,399 hectares), and allows for all permitted mining and exploration activities from
the owners of the surface rights (Santa Maria Ejido community).

The
Company leases office space for its corporate headquarters in Irving, Texas. In September 2017, the Company entered into a sixty-six
month extension of the lease through 2023. As part of the agreement the Company received six months free rent as a finish out
allowance. The Company capitalized the leasehold improvement costs and amortized them over the rent abatement period as rent expense.
The Company makes tiered lease payments on the 1st of each month.

Effective
January 1, 2019, the Company adopted ASC 842, which requires recognition of a right-of-use asset and lease liability for all leases
at the commencement date based on the present value of lease payments over the lease term. Additional qualitative and quantitative
disclosures regarding the Company's leasing arrangements are also required. The Company adopted ASC 842 prospectively and elected
the package of transition practical expedients that does not require reassessment of (1) whether any existing or expired contracts
are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company has elected other available
practical expedients to not separate lease and non-lease components, which consist principally of common area maintenance charges,
for all classes of underlying assets and to exclude leases with an initial term of 12 months or less.



The
Company determines if a contract is or contains a lease at inception. As of March 31, 2019 the Company has two operating leases
- a six and one half year lease for office space with a remaining term of forty-six months and a twenty year ground lease in association
with it Mexico mining operations with a remaining term of fourteen years. Variable lease costs consist primarily of variable common
area maintenance, storage parking and utilities. The Company’s leases do not have any residual value guarantees or restrictive
covenants.



20







As
the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated
incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated
using the Company's interest rate of promissory notes.

The
Company’s components are lease cost are as follows:

Three Months Ended

|                               |  | Mach 31, 2019
|------------------------------ |  | -------------
|Operating Lease – Office Lease |  | $            
|Operating Lease – Ground Lease |  |              
|Short Term Lease Costs         |  |              
|Variable Lease Costs           |  |              
|TOTAL                          |  | $            









Weighted
average remaining lease term and weighted average discount rate are as follows:



|Weighted
    Average Remaining Lease Term (Years) – Operating Leases |  | 11.00 
|-------------------------------------------------------------------- |  | ------
|Weighted Average
    Discount Rate – Operating Leases                |  | 12.50%





Future
minimum lease obligations are as follow for the twelve months ending March 31:



|YEAR |            | 
|---- | ---------- | 
|     | 2020       | 
|     | 2021       | 
|     | 2022       | 
|     | 2023       | 
|     | 2024       | 
|     | Thereafter | 
|     | TOTAL      | 



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, 2016, DynaResource de México SA de C.V. (“DynaMéxico”), was awarded in excess of $48 M USD
(Forty-Eight Million Dollars) in damages from Goldgroup Resources, Inc. (the “Goldgroup Damages”) by virtue of a Sentencia
Definitiva (the “Definitive Sentence”) issued by the Thirty Sixth Civil Court of the Superior Court of Justice of
the Federal District of México (Tribunal Superior de Justicia del Distrito Federal), File number 1120/2014. The Definitive
Sentence included the considerations and resolutions by the Court, and additional Resolutions were also ordered in favor of DynaMéxico
(together the Goldgroup Damages and the additional Resolutions are referred to as, the “Oct. 5, 2015 Resolution”).
The October 5, 2015 Resolution is described in Part II, Item 1., Legal Proceedings.





21







Litigation

The
Company believes that no material adverse change will occur as a result of the legal actions taken, and the Company further believes
that there is little to no potential for the assessment of a material monetary judgment against the Company for legal actions
it has filed in México. Further, the Company believes there is no legal basis for which to conduct arbitration proceedings.
(See Part II, Item 1. Legal Proceedings).

NOTE
11 – DERIVATIVE LIABILITIES

Preferred
Series C Stock

As
discussed in Note 8, the Company analyzed the embedded conversion features of the Series C Preferred Stock and determined that
the stock qualified as a derivative liability and is required to be bifurcated and accounted for as such since the host and the
embedded instrument are not clearly and closely related. The Company performed a valuation of the conversion feature. In performing
the valuation, the Company applied the guidance in ASC 820, “Fair Value Measurements”, to nonfinancial assets
and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. ASC 820 defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date (exit price). To measure fair value, the Company incorporates assumptions that market participants would
use in pricing the asset or liability, and utilizes market data to the maximum extent possible.

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

The
Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation
model to determine the value of conversion feature of the Series C Preferred Stock based on the assumptions below for the three
months ended March 31, 2019 and year ended December 31, 2018:

|                           |  | March 31, 2019 |         | December 31, 2018
|-------------------------- |  | -------------- | ------- | -----------------
|Annual volatility rate     |  |                | 74      | %                
|Risk free rate             |  |                | 2.33    | %                
|Holding Period             |  |                | 5 years |                  
|Fair Value of common stock |  | $              | 1.00    |                  



The
below table represents the change in the fair value of the derivative liability (Preferred Series C Stock) during the 3 months
ending March 31, 2019 and the year ending December 31, 2018:

|Period Ended                                                           |  | March 31, 2019 |          | December 31, 2018
|---------------------------------------------------------------------- |  | -------------- | -------- | -----------------
|Fair value of derivative (Preferred Series C Stock), beginning of year |  | $              | 402,909  |                  
|Change in fair value of derivative (Preferred Series C Stock)          |  |                | (258,778 | )                
|Fair value of derivative (Preferred Series C Stock), end of period     |  | $              | 144,131  |                  

Preferred
Series C Warrants

As
discussed in Note 8, the Company analyzed the embedded conversion features of the Series C Preferred Stock and determined that
the Warrants qualified as a derivative liability and is required to be bifurcated and accounted for as such since the host and
the embedded instrument are not clearly and closely related. The Company performed a valuation of the conversion feature. In performing
the valuation, the Company applied the guidance in ASC 820, “Fair Value Measurements”, to nonfinancial assets
and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. ASC 820 defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date (exit price). To measure fair value, the Company incorporates assumptions that market participants would
use in pricing the asset or liability, and utilizes market data to the maximum extent possible.

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





22







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 for the periods ended March
31, 2019 and December 31, 2018:

|                               |  | March
    31, 2019 |         | December
    31, 2018
|------------------------------ |  | ------------------ | ------- | ---------------------
|Annual
    volatility rate     |  |                    | 74%     |                      
|Risk free rate                 |  |                    | 2.33%   |                      
|Holding Period                 |  |                    | 5 years |                      
|Fair Value of common
    stock |  | $                  | 1.00    |                      



The
below table represents the change in the fair value of the derivative liability (Preferred Series C Warrants) for the quarterly
period ending March 31, 2019 and the year ending December 31, 2018.

|Period
    Ended                                                     |  | March
    31, 2019 |          | December
    31, 2018
|-------------------------------------------------------------------- |  | ------------------ | -------- | ---------------------
|Fair
    value of derivative liability (Warrants), beginning of year |  | $                  | 571,774  |                      
|Change
    in fair value of derivative liability (Warrants)          |  |                    | (363,722 | )                    
|Fair value of derivative
    liability (Warrants), end of period     |  | $                  | 208,052  |                      

Total
(Gain) Loss on Derivative Liability (Preferred Series C Stock and Warrant)

The
below table represents the total (gain) or loss, of the derivative liability (Preferred Series C Stock and Warrants) for the quarterly
period ending March 31, 2019 and the year ending December 31, 2018.

|Period
    Ended                                                                           |  | March
    31, 2019 |          | December
    31, 2018
|------------------------------------------------------------------------------------------ |  | ------------------ | -------- | ---------------------
|Fair
    value of derivative liability (Preferred C Stock and Warrants), beginning of year |  | $                  | 974,683  |                      
|Change
    in fair value of derivative liability (Stock and Warrants)                      |  |                    | (622,500 | )                    
|Fair value of derivative
    liability (Stock and Warrants), end of period                 |  | $                  | 352,183  |                      

NOTE
12 – NON-CONTROLLING INTEREST

The
Company’s Non-Controlling Interest recorded in the consolidated financial statements relates to an interest in DynaResource
de México, S.A. de C.V. of 50% through May 13, 2013, and 20% thereafter. Changes in Non-Controlling Interest for the periods
ended March 31, 2019 and December 31, 2018, respectively were as follows:

|                                               |  | Qtr.
                                         Ended
        March
        31, 2019 |            | Year
                                         Ended
        December
        31, 2018
|---------------------------------------------- |  | ---------------------------------------------------------------------------------- | ---------- | -------------------------------------------------------------------------------------
|Beginning
    balance                          |  | $                                                                                  | (5,605,129 | )                                                                                    
|Operating
    income (loss)                    |  |                                                                                    | (27,506    | )                                                                                    
|Share
    of Other Comprehensive Income (Loss) |  |                                                                                    | (19,863    | )                                                                                    
|Ending balance                                 |  | $                                                                                  | (5,652,498 | )                                                                                    



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
    13 – FAIR VALUE OF FINANCIAL INSTRUMENTS
|-------------------------------------------------

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

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



23









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 March 31, 2019 and December 31, 2018, 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 March 31, 2019
    Using:    |  |   |         |  | Quoted
        Prices
        in
        Active
        Markets
        For
        Identical
        Assets
        (Level 1) |   |   | Significant
        Other
        Observable
        Inputs
        (Level
        2) |  |   | Significant
        Unobservable
        Inputs
        (Level
        3) | 
|------------------------------------------------------ |  | - | ------- |  | ------------------------------------------------------------------------------------------------------------------------------ | - | - | ------------------------------------------------------------------------------------- |  | - | ------------------------------------------------------------------------- | 
|                                                       |  |   |         |  |                                                                                                                                |   |   |                                                                                       |  |   |                                                                           | 
|Assets:                                                |  |   |         |  |                                                                                                                                |   |   |                                                                                       |  |   |                                                                           | 
|None                                                   |  |   | -       |  |                                                                                                                                |   | - |                                                                                       |  |   | -                                                                         | 
|Totals                                                 |  | $ | -       |  |                                                                                                                                | $ | - |                                                                                       |  | $ | -                                                                         | 
|                                                       |  |   |         |  |                                                                                                                                |   |   |                                                                                       |  |   |                                                                           | 
|Liabilities:                                           |  |   |         |  |                                                                                                                                |   |   |                                                                                       |  |   |                                                                           | 
|Derivative Liabilities                                 |  | $ | 352,183 |  |                                                                                                                                |   | - |                                                                                       |  |   | -                                                                         | 
|Totals                                                 |  | $ | 352,183 |  |                                                                                                                                | $ | - |                                                                                       |  | $ | -                                                                         | 
|Fair Value Measurement at December
    31, 2018 Using: |  |   |         |  |                                                                                                                                |   |   |                                                                                       |  |   |                                                                           | 
|Assets:                                                |  |   |         |  |                                                                                                                                |   |   |                                                                                       |  |   |                                                                           | 
|None                                                   |  |   | -       |  |                                                                                                                                |   | - |                                                                                       |  |   | -                                                                         | 
|Totals                                                 |  | $ | -       |  |                                                                                                                                | $ | - |                                                                                       |  | $ | -                                                                         | 
|                                                       |  |   |         |  |                                                                                                                                |   |   |                                                                                       |  |   |                                                                           | 
|                                                       |  |   |         |  |                                                                                                                                |   |   |                                                                                       |  |   |                                                                           | 
|Liabilities:                                           |  |   |         |  |                                                                                                                                |   |   |                                                                                       |  |   |                                                                           | 
|Derivative Liabilities                                 |  | $ | 974,683 |  |                                                                                                                                |   | - |                                                                                       |  |   | -                                                                         | 
|Totals                                                 |  | $ | 974,683 |  |                                                                                                                                | $ | - |                                                                                       |  | $ | -                                                                         | 



NOTE
14 – REVENUE CONCENTRATION

For
the three months ended March 31, 2019 one customer accounted for 100% of revenue and for the three months ended March 31, 2018,
one customer accounted for 100% of revenue.

At
March 31, 2019, one customer accounted for 100% of accounts receivable.  At December 31, 2018, one customer accounted
for 100% of accounts receivable.

NOTE
15 – NOTES PAYABLE



In
June 2017, the Company entered into financing agreements for unpaid mining concession taxes for the period July 1, 2014 to December
31, 2015 in the amount of $533,580. The Company paid an initial 20% payment in the amount of $106,716 and financed the balance
over 36 months at 18% interest.



In
February 2018 the Company entered into a financing agreement for unpaid mining concessions taxes for the year ended December 31,
2016 in the amount of $552,990. The Company paid an initial payment of $110,598 and financed the balance over 36 months at 18%.





24









In
June 2018 the Company entered into financing agreements for the unpaid mining concession taxes for the year ended December 31,
2017 and the period ending June 30, 2018 in the amount of $1,739,392. The Company paid an initial 20% payment of $347,826 and
financed the balance over 36 months at 21.84%



In
February 2019 the Company entered into a financing agreement for unpaid mining concessions taxes for the period ended December
31, 2018 in the amount of $325,559. The Company paid an initial payment of $65,112 and financed the balance over 36 months at
21.84%.



The
following is a summary of the transaction during the periods ended December 31, 2018 and March 31, 2019:



|Balance at December
    31, 2017                            |  |   | 367,311   |  
|----------------------------------------------------------- |  | - | --------- | -
|Exchange Rate
    Adjustment                                |  |   | 1,861     |  
|Property Holding
    Taxes January 1, 2016 – June 30, 2018  |  |   | 2,292,122 |  
|Initial payment
    of 20%                                  |  |   | (458,423  | )
|2018
    principal payments                                 |  |   | (399,636  | )
|Balance
    at December 31, 2018                            |  | $ | 1,803,235 |  
|Exchange Rate
    Adjustment                                |  |   | 18,524    |  
|Property Holding
    Taxes July 1, 2018 – December 31, 2018 |  |   | 325,559   |  
|Initial payment
    of 20%                                  |  |   | (65,112   | )
|2019
    principal payments                                 |  |   | (169,676  | )
|Balance
    at March 31, 2019                               |  | $ | 1,912,530 |  





|At
        March 31, 2019 future maturities of notes payable are as follows
        Year
        Ending March 31: |  |   |          
|----------------------------------------------------------------------------------------------------------------- |  | - | ---------
|2020                                                                                                              |  | $ | 820,719  
|2021                                                                                                              |  |   | 838,657  
|2022                                                                                                              |  |   | 253,154  
|Total                                                                                                             |  | $ | 1,912,530



note
16 – subsequEnt events

The
Company has evaluated events from March 31, 2019, through the date whereupon the financial statements were issued. As is described
further under Part II – Item 1. Legal Proceedings, on May 9, 2019, the United States district court for the district of
Colorado confirmed an arbitration award against DynaResource, Inc. and DynaResource de Mexico, S.A. de C.V. The district court’s
decision overruled the recommendation previously issued by the magistrate judge to sustain the DynaResource entities’ motion
to vacate the arbitration award. Each of DynaResource, Inc. and DynaResource de Mexico, S.A. de C.V. intends to exercise all of
its rights, as appropriate, including an appeal.





25









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.





26







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.





27







Structure
of Company / Operations

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

Exclusive
Operating Entity at San Jose de Gracia

Under
agreement with DynaMéxico, Mineras de DynaResource S.A. de C.V. (“DynaMineras”) has been named the exclusive
operating entity at the San Jose de Gracia Project. DynaResource owns 100% of DynaMineras.

DynaMéxico
General Powers of Attorney

The
Chairman-CEO of DynaUSA also serves as the President of DynaMéxico. The President of DynaMéxico holds broad powers
of attorney granted by the shareholders of DynaMéxico which gives the current President significant and broad authority
within DynaMéxico.

Company
Ownership and Description of Subsidiaries

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





28







Year
2006 Suspension of Test Mining and Pilot Milling Activities

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”).

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.





29







DynaMéxico
NI 43-101 Mineral Resource Estimate - Explanation of Resource Estimation--Resource estimation was done in MineSight and MicroModel
computer systems with only those composites that were inside the wireframe used in the estimate. Estimation was done using kriging
with the omni-directional variogram derived from all the data in each area for gold using the relative variogram derived from
the log variogram. High grades were restricted by capping the assays at a breakpoint based on the cumulative frequency curves.
Estimation was done using search radii of 100 x 100 x 50 m “blocks” oriented subparallel to the general strike and
dip of the vein system in each area. A sector search, corresponding to the faces of the search box with a maximum of two points
per sector was used in estimation. A density of 2.68 based on within ‘vein density’ samples was used in the resource
estimate. Within each of the four areas there are approximately 20 to 40 veins in the vein swarm. Resources were estimated by
kriging using data from all veins in the swarm. In general, gold accounts for at least 80% of the value of contained metal at
the SJG Project, so the variograms for gold were used in estimation of the four other metals.

The
veins at San Jose de Gracia have been historically mined for many years and historic mined volumes are not available. The one
exception is the approximate 42,000 tonnes of ore processed by DynaMéxico during its pilot production activities in 2003-2006.
The resource table is not adjusted for any historic mining. To validate that historic mining had not significantly reduced the
resource, CAM reviewed the database for all assays greater than 1 gram per ton gold that were next to missing values at the bottom
of drill holes. Only four assays satisfying this criterion were found, and on the basis of this review, Mr. Sandefur does not
believe that significant mining has occurred within the volumes defined by the wireframes.

Servicios
y Proyectos Mineros performed a database review
and considers that a reasonable level of verification has been completed, and that no material issues have been left unidentified
from the drilling programs undertaken.

DynaMéxico
NI 43-101 Mineral Resource Estimate and DynaMéxico NI 43-101 Technical Report - Data Verification--Mr. Ramon
Luna Espinoza (“Mr. Luna”) initially visited the San Jose de Gracia Project in November 2010, and conducted site inspections
at SJG in November 2011 and January 2012. Mr. Sandefur conducted a site inspection of the SJG Project in January 2012. While at
the Property in November 2011, Mr. Luna inspected the areas of Tres Amigos, La Prieta, Gossan Cap, San Pablo, La Union, and La
Purisima, and historic mining sites. In January 2012, Mr. Sandefur and Mr. Luna inspected the areas of Tres Amigos, San Pablo,
La Union, and La Purisima. Pictures of the areas were taken. Many of the drill pads for the drilling programs of 2007 to 2011
were clearly located and identified. Mr. Luna also inspected San José de Gracia’s core logging and storage facilities,
the geology offices, the meteorological station, the plant nursery, and the mill. Mr. Sandefur also inspected San José
de Gracia’s core logging and storage facilities.

The
Company received from DynaMéxico on February 14, 2012, a Mineral Resource Estimate according to Canadian National Instrument
43-101 for San Jose de Gracia (the “DynaMéxico NI 43-101 Mineral Resource Estimate’). The DynaMéxico
NI 43-101 Mineral Resource Estimate was prepared by Mr. Robert Sandefur, BS, MSc, P.E., a Qualified Person as defined under NI
43-101, and a senior reserve analyst for Chlumsky, Armbrust & Meyer LLC, Lakewood, CO (“CAM”). The DynaMéxico
NI 43-101 Mineral Resource Estimate concentrates on four separate main vein systems at SJG: Tres Amigos, San Pablo, La Union,
and La Purisima.

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

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

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

No
Known Reserves

The
SJG property is without known reserves. Under U.S. standards, mineralization may not be classified as a “reserve”
unless a determination has been made that the mineralization could be economically and legally produced or extracted at the time
the reserve determination is made.





30







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 March 31, 2017 is $2,125,000. The EAA is the third and latest
Amendment to the original Contract Mining Services and Mineral Production Agreement (the “Operating Agreement”), which
was previously entered into by DynaMineras with DynaMéxico in April 2005, wherein DynaMineras was named the Exclusive Operating
Entity at SJG. The Operating Agreement was previously amended in September 2006 (the “First Amendment”), and amended
again at July 15, 2011 (the “Second Amendment”). The Term of the Second Amendment is 20 years, and the EAA (Third
Amendment) provides for the continuation of the 20 Year Term from the date of the Second Amendment (July 15, 2011).

Surface
Rights Agreement

On
January 6, 2014 DynaMineras entered into a 20-year surface rights agreement with the Santa
Maria Ejido Community surrounding the San Jose de Gracia Property (the “20 Year SRA”). The 20 Year SRA covers an area
of 4,399 hectares surrounding the main mineral resource areas of SJG, and provides for annual lease payments by DynaMineras of
$1,359,443 Pesos (approx. $72,000 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.

Structure
of Company / Operations

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

Activities
under Exploitation Amendment Agreement

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

Competitive
Advantage

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



31







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.

Capital
Requirements

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

Gold

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

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

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

|Year                          | High   | Low    | Average
|----------------------------- | ------ | ------ | -------
|2009                          | $1,213 | $810   | $972   
|2010                          | $1,421 | $1,058 | $1,225 
|2011                          | $1,895 | $1,319 | $1,572 
|2012                          | $1,792 | $1,540 | $1,669 
|2013                          | $1,694 | $1,192 | $1,411 
|2014                          | $1,380 | $1,140 | $1,265 
|2015                          | $1,303 | $1,057 | $1,175 
|2016                          | $1,366 | $1,151 | $1,251 
|2017                          | $1,379 | $1,101 | $1,236 
|2018                          | $1,355 | $1,178 | $1,288 
|2019 (through April 26, 2019) | $1,344 | $1,269 | $1,301 



Source:
Kitco, Reuters and the London Bullion Market Association

On
April 26, 2019, the afternoon fixing gold price on the London Bullion Market was $1,284 per ounce and the spot market gold price
on the New York Commodity Exchange was $1,284 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.





32







Environmental
Matters

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

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 (2015)



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



Capital
Investment (2015)



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



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



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



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



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



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



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



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



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



Year
2017 Improvements and Expansion



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







| | •      | Medical facility (SJG CLINIC):                                        | $         | 107,500; | 
| | ------ | --------------------------------------------------------------------- | --------- | -------- | 
| |        |                                                                       |           |          | 
| | •      | EXPANDING CAMP, OFFICE, AND INFRASTRUCTURES:                          | $         | 145,500; | 
| |        |                                                                       |           |          | 
| | •      | eXPANDING TAILINGS POND, INSTALLING
    LINERS:                       | $         | 265,000; | 
| |        |                                                                       |           |          | 
| | •      | Improving, setting new foundation, and re-installing the Denver Mill: | $         | 257,500; | 
| |        |                                                                       |           |          | 
| | •      | Installing Mill #3:                                                   | $         | 258,000; | 
| |        |                                                                       |           |          | 
| | •      | Machinery & Equipment;                                                | $         | 200,000; | 
| |        |                                                                       |           |          | 
| | •      | Transportation:                                                       | $         | 40,000;  | 
| |        |                                                                       |           |          | 
| | Total: | $                                                                     | 1,273,500 |         













33









Year
2018 Improvements and Expansion



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





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





Year
2019 Improvements and Expansion



During
the first quarter of 2019 the Company initiated capital projects at SJG in the amount of $214,000 USD to improve and expand test
mining and pilot milling operations:





|● |  | Machinery & Equipment: | $ | 128,000; | 
|- |  | ---------------------- | - | -------- | 
|  |  |                        |   |          | 
|● |  | Installing Mill #3:    | $ | 86,000;  | 
|  |  |                        |   |          | 
|  |  | Total:                 | $ | 214,000; | 







Summary
of Test Mining and Pilot Mill Operations (2018 and 2017)

DynaMineras
reports the following estimated summary of its test mining and pilot milling operations during 2018 and 2017:



|Year | Total
        Tonnes
        Mined
        &
        Processed | Reported
        Mill
        Feed
        Grade
        (g/t Au) | Reported
        Recovery% | Gross
                           Gold
        Concentrates
        Produced
        (Au
        oz.) | Net
                           Gold
        Concentrates
        Sold
        (Au oz.)
|---- | -------------------------------------------------------------- | ----------------------------------------------------------------- | -------------------------- | ---------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------
|2018 | 52,038                                                         | 9.82                                                              | 86.1%                      | 14,147                                                                                               | 13,418                                                                                
|2017 | 35,170                                                         | 12.95                                                             | 85.0%                      | 12,636                                                                                               | 10,740                                                                                

Test
pilot operations in 2018 yielded 52,038 tonnes mined and processed from underground mining activity and pilot mill operations;
and the production of approximately 14,147 gross Oz Au (and net of dry weights, buyer’s price discount and refining and
treatment costs, approximately 13,418 Oz. Au) contained in gold-silver concentrates, and the receipt of $14,059,697 in revenues
from the sale of gold-silver concentrates.



34







Test
pilot operations in 2017 yielded 35,170 tonnes mined and processed from underground mining activity and pilot mill operations;
and the production of approximately 12,636 gross Oz Au (and net of dry weights, buyer’s price discount and refining and
treatment costs, approximately 10,740 Oz. Au) contained in gold-silver concentrates, and the receipt of $10,850,091 in revenues
from the sale of gold-silver concentrates.

Summary
of Test Mining and Pilot Mill Operations for the three months ended March 31, 2019 and 2018:

|                                      | 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.)
|------------------------------------- | -------------------------------------------------------------- | ----------------------------------------------------------------- | ----------------------------------- | ---------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------
|                                      |                                                                |                                                                   |                                     |                                                                                                      |                                                                                       
|Three Months Ended
    March 31, 2019 | 17,599                                                         | 5.17                                                              | 86.0%                               | 2,517                                                                                                | 2,366                                                                                 
|Three Months Ended
    March 31, 2018 | 11,025                                                         | 8.90                                                              | 79.9%                               | 2,525                                                                                                | 2,372                                                                                 
|                                      |                                                                |                                                                   |                                     |                                                                                                      |                                                                                       

Test
pilot operations in Q1 2019 yielded 17,599 tonnes mined and processed from underground mining activity and pilot mill operations;
and the production of approximately 2,517 gross Oz Au (and net of dry weights, buyer’s price discount and refining and treatment
costs, approximately 2,366 Oz. Au) contained in gold-silver concentrates, and the receipt of $2,329,563 in revenues from the sale
of gold-silver concentrates.

Additional
Test Mining and Mill Operations Disclosure



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



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



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



Pilot
Mill Facility – General Description and Flow Sheet;



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



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



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



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



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



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



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





35









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



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



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



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



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







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



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



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



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



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



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





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.





36







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 $2,329,563 and $2,517,766 for the three months ended March 31, 2019 and March 31, 2018 respectively.

Capital
Requirements

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

Condition
of Physical Assets and Insurance

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

Environmental
Matters

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

Results
for the Three Months Ended March 31, 2019 and 2018

In
the three months ended March 31, 2019 and 2018, the Company, through its wholly owned subsidiary DynaMineras, continued full test
mining and pilot mill operations at San Jose de Gracia.

DynaMineras
conducted test mining and milling operations in the first quarter of 2019 and 2018. During the three months ended March 31, 2019,
the test mining and pilot milling operations have yielded the underground mining and mill processing of approx. 17,599 tonnes
of mineralized material, the production of approximately 2,516 gross oz. Au (and net of weight and value adjustment) approximately
2,366 oz. Au) contained in gold-silver concentrates. DynaMineras realized the receipt of $2,329,563 in revenues from the delivery
and sale of gold-silver concentrates in the first quarter, 2019.

REVENUE.
Revenues for the three months ended March 31, 2019 and 2018 were $2,329,563 and $2,517,766, respectively. The decrease was due
to a lower yield per ton from the current years mining. The g/t yield dropped from 8.9 g/t to 5.2 g/t.

PRODUCTION
COSTS RELATED TO SALES. Production costs related to sales for the three months ended March 31, 2019 and 2018 were $451,291 and
$326,847 respectively. These are expenses directly related to the milling, packaging and shipping of gold and other precious metals
product and are comparative with the revenue figures above. Increase is due to the drop in yeild per g/t.

MINE
PRODUCTION COSTS. Mine production costs for the three months ended March 31, 2019 and 2018 were $1,055,940 and $454,861 respectively.
These costs are directly related to the extraction of mine tonnage for processing. The increase is due to the increase tonnage
mined.

MINE
EXPLORATION COSTS: Mine Explorations costs for the three months ended March 31, 2019 and 2018 were $862,300 and $827,299
respectively. These are the cost of extracting waste material to reach the materials to be extracted for
processing. The increase is due to opening of new areas of mining.

MINE
EXPANSION COSTS: Mine expansion costs for the three months ended March 31, 2019 and 2018 were $3,638 and $159,900,
respectively. The 2018 cost were higher due to the cost associated with preparing the San Jose de Gracia East Mine
for production. The Company began actively mining the San Jose de Gracia East mine in the second quarter of 2018.





37









TRANSPORTATION.
Transportation costs for the three months ended March 31, 2019 and 2018 were $250,826 and $87,668, respectively. These are the
costs of transporting the product to the customer for treatment and sale. Increase was due to increase tonnage.



CAMP,
WAREHOUSE AND SUPPORT FACILITIES. Camp, warehouse and support facility cost for the three months ended March 31, 2019 and 2018
were $671,774 and $666,409 respectively. These are the support cost of the mining facilities including housing, food, security
and warehouse operations.



PROPERTY
HOLDING COSTS. Property holding costs for the three months ended March 31, 2019 and 2018 were $105,962 and $152,387 respectively.
These costs are concessions taxes, leases on land and other direct costs of maintaining the property. The decrease in a result
of final settlement of prior year concession taxes on the Francisco Arturo property and the reduction of the concession.

GENERAL
AND ADMINISTRATIVE EXPENSES. 	General and administrative expenses for the three months ended March 31, 2019 and 2018 were
$644,677 and $594,443 respectively. The above expenses exclude depreciation and amortization amounts of $74,180 and $66,642
for the three months ended March 31, 2019 and 2018, respectively. Cost Increased by approximately 10% to support increased
mining activity.

OTHER
INCOME (EXPENSE). Other income for the three ended March 31, 2019 and 2018 was $635,836 and $2,733,825, respectively. Included
in this category in 2019 is interest expense of $(126,389), other income of $373, change in derivative liability of $622,500 and
currency transaction gain of $139,352. Included in this category in 2018 is interest expense of $(55,551), other income of $380,
change in derivative liability of $1,982,482 and currency transaction gain of $806,514.



NON-CONTROLLING
INTEREST. The non-controlling interest portion of the net loss for the three months ended March 31, 2019 and 2018 were $27,506
and $57,645, respectively.

COMPREHENSIVE
INCOME (LOSS). Comprehensive income (loss) includes the Company’s net income (loss) plus the unrealized currency translation
gain (loss) for the period. For the three months ended March 31, 2019 and 2018, the Company recorded a loss of $166,627 and $786,668,
respectively, which were made up of unrealized losses on currency translation.

Liquidity
and Capital Resources

As
of March 31, 2019, the Company had a negative working capital of $(3,303,331), comprised of current assets of $5,589,909 and current
liabilities of $8,893,240. This represents an increase of $1,519,638 in the working capital (deficit) maintained by the Company
of $(1,783,693) as of December 31, 2018, due primarily to the mark to market adjustment for our derivative liabilities.

Net
cash (used) by operations for the three months ended March 31, 2019 was $(711,949) compared with cash provided by operations of
$702,075 for the three months ended March 31, 2018.

Net
cash used in investing activities for the three months ended March 31, 2019 and 2018 was $213,585 and $219,300, respectively.

Net
cash used in financing activities for the three months ended March 31, 2019 and 2018 was $169,675 and $154,565, respectively.

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 $18M USD capital to DynaMéxico in order to acquire a total of 50% of the outstanding
shares (a shareholder interest) of DynaMéxico. From March 2011 through May 2013, Goldgroup owned 50% of the outstanding
shares of DynaMéxico, and since May 2013 to current date Goldgroup owns 20% of the outstanding shares of DynaMéxico.
The applicable portion of the earnings or loss attributable to Goldgroup is offset in this section. In the three months ended
March 31, 2019 and 2018 the loss attributable to Goldgroup was $27,506, and $57,645.





38







Off-Balance
Sheet Arrangements

As
of March 31, 2019, the Company did not have any off-balance sheet arrangements (as that phrase is defined by SEC rules applicable
to this report) which have or are reasonably likely to have a material adverse effect on our financial condition, results of operations
or liquidity.

Plan
of Operation

The
Plan of operation for the next twelve months includes DynaMineras continuing the improvement and expansion of the test mining
and pilot milling operations at SJG. The Company funds its general and administrative expenses in the US. The Company’s
operating subsidiaries, DynaMineras and DynaOperaciones, receive monthly fees for management of SJG activities and personnel.
These amounts are eliminated in consolidation. The Company believes that cash on hand, and including cash flow generated from
its current operations, is adequate to fund its ongoing general and administrative expenses through 2019. The Company plans to
seek additional debt funding during the next 12 months depending on results of its pilot operations, market conditions, and other
factors.

Capital
Expenditures

The
Company’s primary activities relate to the exploitation of the SJG property through its 100% owned operating subsidiary,
DynaMineras. DynaMineras is conducting activities at SJG under the terms of the Exploitation Amendment Agreement (the “EAA”,
or, “operating agreement”) with DynaMéxico.

Drilling
Programs

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

Mineralization
at San José de Gracia

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

No
Known Reserves

The
SJG property is without known reserves. Under U.S. standards, mineralization may not be classified as a “reserve”
unless a determination has been made that the mineralization could be economically and legally produced or extracted at the time
the reserve determination is made.

Exploitation
Amendment Agreement (“EAA”)

On
May 15, 2013, DynaMineras entered into an Exploitation Amendment Agreement (“EAA”) with DynaMéxico. The EAA
grants to DynaMineras the right to finance, explore, develop and exploit the SJG Property, in exchange for: (A) Reimbursement
of all costs associated with financing, maintenance, exploration, development and exploitation of the SJG Property, which costs
are to be charged and billed by DynaMineras to DynaMéxico; and, (B) After Item (A) above, the receipt by DynaMineras of
75% of gross receipts received by DynaMéxico from the sale of all minerals produced from SJG, to the point that DynaMineras
has received 200% of its advanced funds; and, (C) after items (A) and (B) above; the receipt by DynaMineras of 50% of all gross
receipts received by DynaMéxico from the sale of all minerals produced from SJG, and throughout the term of the EAA; and,
(D) in addition to Items (A), (B), and (C) above, DynaMineras shall receive a 2.5% NSR (“Net Smelter Royalty”) on
all minerals sold from SJG over the term of the EAA. The total Advances made by DynaMineras to DynaMéxico as of December
31, 2014 is $4,025,000. The EAA is the third and latest Amendment to the original Contract Mining Services and Mineral Production
Agreement (the “Operating Agreement”), which was previously entered into by DynaMineras with DynaMéxico in
April 2005, wherein DynaMineras was named the Exclusive Operating Entity at SJG. The Operating Agreement was previously amended
in September 2006 (the “First Amendment”), and amended again at July 15, 2011 (the “Second Amendment”).
The Term of the Second Amendment is 20 years, and the EAA (Third Amendment) provides for the continuation of the 20 Year Term
from the date of the Second Amendment (July 15, 2011).



39







Exclusive
Operating Entity at San Jose de Gracia

Under
agreement with DynaMéxico, Mineras de DynaResource S.A. de C.V. (“DynaMineras”) has been named the exclusive
operating entity at the San Jose de Gracia Project. DynaResource owns 100% of DynaMineras.

DynaMéxico
General Powers of Attorney

The
Chairman-CEO of DynaUSA also serves as the President of DynaMéxico and as the President of DynaMineras. The President of
DynaMéxico holds broad powers of attorney granted by the shareholders of DynaMéxico which gives the current President
significant and broad authority within DynaMéxico.

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

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

Capital
Advances to Subsidiaries



DynaResource
de México (“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, as of May
17, 2013, the Company owns 80% of the outstanding equity of DynaMéxico.



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



As
of March 31, 2019, and December 31, 2018 DynaMineras owed the Company $5,830,443 and $6,392,705, respectively.



As
of March 31, 2019, and December 31, 2018 DynaMéxico owed the Company $4,000,000 and $4,000,000, respectively.



As
of March 31, 2019, and December 31, 2018 DynaOperaciones owed the Company $225,000 and $225,000, respectively.



As
of March 31, 2019, and December 31, 2018 DynaMéxico owed DynaMineras $2,373,500 and $2,373,500, respectively.



As
of March 31, 2019, and December 31, 2018 DynaOperaciones owed DynaMineras $7,134,808 and $7,134,808, respectively.



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



Future
Advances to DynaMineras and DynaMéxico from the Company

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



40









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



Note
Receivable and Investments in Affiliate



DynaResource
Nevada, Inc., a Nevada Corporation (“DynaNevada”), with one operating subsidiary in México, DynaNevada de México,
S.A. de C.V. (“DynaNevada de México”) have common officers, directors and shareholders. The total amount loaned
by the Company to DynaNevada at December 31, 2010 was $805,760. The terms of the Note Receivable provided for a “Convertible
Loan,” repayable at 5% interest over a 3-year period, and convertible at the Company’s option into Common Stock of
DynaNevada at $0.25 / Share.  On December 31, 2010, the Company converted its receivable from DynaNevada into 3,223,040
Shares of DynaNevada; and as a result, the Company owns 19.92% of the outstanding share capital of DynaNevada. DynaNevada is a
related entity, and through its subsidiary in México (DynaNevada de México), (“DynaNevada de México”),
has entered into an Option agreement with Grupo México (“IMMSA”) in México, for the exploration and
development of approximately 3,000 hectares in the State of San Luis Potosi (“the Santa Gertrudis Property”). In March
2010, DynaNevada de México completed the Option with IMMSA so that it now owns 100% of Santa Gertrudis. In June 2010, DynaNevada
de México acquired an additional 6,000 Hectares in the State of Sinaloa (“the San Juan Property”). The Company
has loaned additional funds to DynaNevada since 2010 for maintenance of concessions and other nominal required fees and expenses.
The Company had $0 receivable from DynaResource Nevada, Inc. at March 31, 2019 and December 31, 2018 respectively. The Company
has investment balance in DynaResource Nevada, Inc. of $70,000 and $70,000 as of March 31, 2019 and December 31, 2018, respectively.







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



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





1.
 DynaMéxico herein states the facts:



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



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



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



2.
 DynaMéxico herein states further facts:



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



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



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





41









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



4.
On October 5, 2016, the Thirty-Sixth Civil Court of the Superior Court of Justice of the Federal District of Mexico (Tribunal
Superior de Justicia del Distrito Federal) approved a Lien (referred to by the court as an “Embargo”), in favor of
DynaMéxico, upon Stock Certificates in the name of Goldgroup Resources Inc. (“Goldgroup”). The Stock Certificates
subject to the Lien (“Embargo”) constitute Shares of DynaMéxico (“the Goldgroup DynaMéxico Shares”).



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



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

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



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



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



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



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



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



DynaMéxico’s
further clarifying statements regarding the SJG Project:



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



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



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



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



42









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



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



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



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

The
Company believes that no material adverse change will occur as a result of the actions taken, and the Company further believes
that there is little to no potential for the assessment of a material monetary judgment against the Company for legal actions
it has filed in México. For purposes of confidentiality, the Company does not provide more specific disclosure in this
Form 10-Q.





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 March 31, 2019. 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 not 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 March 31, 2019, our Chief Executive Officer and Chief Financial Officer as of
March 31, 2019, and as of the date of this Report, have concluded that as of the end of the period covered by this report, our
internal control over financial reporting was not effective. We have identified two areas which contain material weaknesses. First,
the size of the Company and inherent limitations in companies with limited accounting staff prevent the desired multiple checks
and balances prior to processing daily operations. We need more compensating controls. Though adequate processes are in place
and functioning, subsequent reviews are deemed necessary to identify unauthorized transactions. Secondly; the same inherent current
limitation on company staffing requires specialized outside accounting assistance to implement additional procedures that are
effective, and another review to the process, to ensure that all material information required to be filed in the quarterly report
on Form 10-Q has been made known to them. The material weaknesses identified will be addressed with the implementation of revised
internal control procedures to be developed and approved by the Board of Directors and the Companies external auditors. A material
weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there
is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented
or detected on a timely basis.





43







Changes
in Internal Controls over Financial Reporting

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





PART
II

ITEM
1. Legal Proceedings



Arbitration
filed by Goldgroup / DynaMéxico Complaint against Goldgroup



On
March 14, 2014, Goldgroup filed for arbitration in the United States with the American Arbitration Association ("AAA"),
citing the Earn In Agreement dated September 1, 2006 as the basis for the arbitration filing. The Company filed an answer on April
10, 2014, disputing that any issues exist which provide for arbitration.



On
December 9, 2014, DynaMéxico filed an Ordinary commercial lawsuit (Civil Claims) against Goldgroup Mining Inc., its parent
company Goldgroup Resources Inc., and the AAA, in the Thirty Sixth Civil Court in the Federal District of México, under
file 1120 number / 2014 ("the DynaMéxico Trial"). The DynaMéxico Trial seeks to terminate the U.S.-based
arbitration proceedings, as DynaMéxico believes there is no legal basis for arbitration, and to nullify the arbitration
proceedings since Goldgroup previously sought recourse in the Mexican courts. In the DynaMéxico Trial, DynaMéxico
also requests that substantial damages (in the amount of US $50 million) be awarded to DynaMéxico against Goldgroup for:



|a) | wrongfully
    using and disseminating confidential information and data belonging to DynaMéxico;
|-- | -------------------------------------------------------------------------------------------------



|b) | asserting
    that Goldgroup owns any interest in the San Jose de Gracia Project in northern Sinaloa, México, rather than accurately
    disclosing that Goldgroup owns a common shares equity interest (shareholder’s interest) in DynaMéxico;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|c) | improperly
    disclosing the percentage of common shares equity interest (shareholder’s interest) owned by Goldgroup in DynaMéxico;
|-- | ------------------------------------------------------------------------------------------------------------------------------------



|d) | improperly
    disclosing or implying that Goldgroup is the operator of the San Jose de Gracia Project;
|-- | -------------------------------------------------------------------------------------------------------



|e) | attempting
    to delay, stop, or otherwise impair the financing of, and further development of, the SJG Project;
|-- | -----------------------------------------------------------------------------------------------------------------



|f) | making
    numerous threats against DynaMéxico management and officers;
|-- | -----------------------------------------------------------------------



|g) | failing
    to properly disclose that broad powers of attorney for acting on behalf of DynaMéxico are held by an individual not
    affiliated with Goldgroup.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



On
October 5, 2016, in an appellate ruling, the Thirty Sixth Civil Court of the Superior Court of Justice of the Federal District
of México (Tribunal Superior de Justicia del Distrito Federal), file number 1120/2014 declared, among other resolutions,
that:



|(a) | The
    AAA must “cease and desist” from the arbitration proceeding;
|--- | --------------------------------------------------------------------



|(b) | The
    AAA does not have jurisdiction to hear any conflict and/or interpretation arising from the Earn In/Option Agreement, dated
    September 1, 2006; and
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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







44







$48M
Damages Award to DynaMéxico



Also
on October 5, 2015, in an appellate ruling, DynaMéxico was awarded in excess of US $48 million in damages from Goldgroup
Resources, Inc. by virtue of a Sentencia Definitiva (the “Definitive Sentence”) issued by the Thirty Sixth Civil Court
of the Superior Court of Justice of the Federal District of México (Tribunal Superior de Justicia del Distrito Federal),
File number 1120/2014. The Definitive Sentence included the considerations and resolutions by the Court, and additional Resolutions
were also ordered in favor of DynaMéxico (together the damages award and the additional Resolutions are referred to as,
the “Oct. 5, 2015 Resolution”).



A
concise translation to English of the Oct. 5, 2015 Resolution (the resolution portion of the Definitive Sentence) is set forth
below:





|FIRST: | The action and litigation
    based on commercial law filed by DynaMéxico is valid and enforceable, and where Goldgroup and the American Arbitration
    Association were found to be in default, was proper.
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|SECOND: | Goldgroup is declared
    in breach of its corporate duties, for failure to refrain from claiming direct ownership of 50% of the San José de
    Gracia Mining Project.
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|THIRD: | Goldgroup is condemned
    and ordered to pay to DynaMéxico the amount of USD $20,000,000 (Twenty Million Dollars) in damages caused by Goldgroup
    to DynaMéxico, deriving from its breach of obligations in refraining from claiming direct ownership of 50% of the San
    Jose de Gracia Mining Project; which amount should be paid within five days upon execution of this order and resolution.
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|FOURTH: | Goldgroup is condemned
    and ordered to pay to DynaMéxico the amount of USD $28,280,808.34 (Twenty Eight Million Two Hundred and Eighty Thousand
    Eight Hundred and Eight and 34/100 Dollars), for breach of its corporate duty and covenants with regards to the San Jose de
    Gracia mining project, as a result of depriving profits from DynaMéxico which DynaMéxico could have earned for
    the sale of gold produced and extracted during the years 2013 and 2014; amounts that should be paid within five days upon
    execution of this order and resolution.
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|FIFTH: | Goldgroup is condemned
    and ordered to pay losses and damages to DynaMéxico, which Goldgroup continues to cause, until full payment of the
    above-mentioned amounts has been made, which damages, and losses shall be calculated by an expert opinion in a corresponding
    legal procedure related to this litigation.
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|SIXTH: | Pursuant to Article
    1424 of the Commercial Code of México, the arbitration provision established under clause 8.16 of the Earn In/Option
    Agreement, dated as of September 1, 2006, is ineffective and impossible to execute.
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|SEVENTH: | This Court declares
    that any controversy arising from the Earn In/Option Agreement must be brought and resolved under Mexican Law and by competent
    Mexican Courts with proper jurisdiction, in recognition of the waiver and exclusion of the arbitration clause (contained in
    the Earn In/Option Agreement) by both parties.
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|EIGHT: | This Court declares
    that the American Arbitration Association must abstain from hearing arbitration procedure number 50 501 T 00226 14, or any
    other ongoing and/or future arbitration proceeding already filed or that may be filed by the co-defendant Goldgroup against
    DynaResource.
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







45









|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.



Mexico
City Court Approves Lien on Shares of DynaMéxico owned by Minority Interest Holder



On
October 5, 2016, the Thirty-Sixth Civil Court of the Superior Court of Justice of the Federal District of Mexico (Tribunal Superior
de Justicia del Distrito Federal) approved a Lien (referred to by the court as an “Embargo”), in favor of DynaMéxico,
upon Stock Certificates in the name of Goldgroup Resources Inc. (“Goldgroup”). The Stock Certificates subject to the
Lien (“Embargo”) constitute Shares of DynaMéxico (“the Goldgroup DynaMéxico Shares”).



The
Goldgroup DynaMéxico Shares were seized as a partial recovery of assets by DynaMéxico after DynaMéxico was
awarded more than $ 48 M USD (Forty-Eight Million Dollars) in damages against Goldgroup (the “Damages against Goldgroup”)
on October 05, 2015, as described in a Sentencia Definitiva (the “Definitive Sentence”) issued by the same court,
the Thirty Sixth Civil Court of the Superior Court of Justice of the Federal District of México, File number 1120/2014.
Excerpts from the Definitive Sentence appear below. In addition to the Damages against Goldgroup, the Definitive Sentence also
included additional Resolutions ordered in favor of DynaMéxico (the Damages against Goldgroup and the additional Resolutions
are together referred to as the “Oct. 5, 2015 Resolution”).





Denial
of Amparo Appeal



On
August 24, 2017 a Federal Amparo Judge (“Juzgado de Distrito”) in the State of Vera Cruz, Mexico, dismissed Goldgroup
Resources Inc’s Amparo Trial Challenge to the $48 M USD damages award previously granted in favor of DynaMéxico.
Pursuant to the dismissal ruling, the $48M USD damages award, previously granted to DynaMéxico by the Thirty-Sixth Civil
Court of the Superior Court of Justice of the Federal District of Mexico on October 5, 2015 – was effectively confirmed.





46









Arbitration
Ruling



In
direct contradiction to the October 5, 2015 Definitive Sentence issued by court in México, on August 25, 2016 the American
Arbitration Association - International Centre for Dispute Resolution, Denver office (the “AAA”) issued an Arbitration
Ruling (the “Arbitration Ruling”) in favor of Goldgroup Resources Inc. against DynaMéxico and DynaResource,
Inc. The Arbitration Ruling was the result of a proceeding in which neither DynaMéxico nor DynaResource participated, since
the Definitive Sentence issued by the court in México effectively prohibited their participation in the Arbitration proceeding
and should have prohibited Goldgroup Resources Inc. participation as well.



The
Arbitration Ruling provides the following: (i) the Earn In/Option Agreement is still in force, and consequently Goldgroup may
appoint two directors to the DynaMéxico board, and may participate in the appointment of a fifth director; (ii) the DynaMéxico
Management Committee is reinstated, and must approve all budgets and expenditures; (iii) amounts expended by DynaMéxico
that were not approved by the Management Committee are subject to repayment by DynaResource; (iv) the issuance of additional shares
by DynaMéxico (and consequent dilution of Goldgroup’s equity interest) was in violation of the Earn In/Option Agreement;
and (v) DynaResource and DynaMéxico are responsible for Goldgroup’s costs and professional fees associated with the
Arbitration Ruling.



Unlike
the vast majority of arbitration proceedings in the U.S., the Arbitration Ruling is not final. Since the Arbitration Ruling is
subject to international rules, the ruling may be vacated by U.S. courts, or simply not recognized by U.S. courts, on a number
of grounds. Accordingly, both DynaMéxico and DynaResource have timely requested relief from the United States Federal District
Court in Colorado, via the filing of a Petition for Nonrecognition of Foreign Arbitral Award and/or Motion to Vacate Arbitration
Award (the “Petition for Nonrecognition”), and a supporting brief. The Petition for Nonrecognition relies heavily
upon the Mexican court’s Definitive Sentence, key excerpts of which appear immediately below.



The
Mexican court has already ruled that “any controversy arising from the Earn In/Option Agreement must be brought and resolved
under Mexican Law and by competent Mexican Courts with proper jurisdiction.” Consequently, the monetary awards against DynaResource
– which are based upon a finding that the Earn In/Option Agreement is still in force – will not be enforceable if
the Mexican court rules that the Earn In/Option Agreement is terminated. The Company believes that the potential for the assessment
of a material monetary judgment against DynaResource is remote.



|SIXTH: | Pursuant to Article
    1424 of the Commercial Code of México, the arbitration provision established under clause 8.16 of the Earn In/Option
    Agreement, dated as of September 1, 2006, is ineffective and impossible to execute.
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|SEVENTH: | This Court declares
    that any controversy arising from the Earn In/Option Agreement must be brought and resolved under Mexican Law and by competent
    Mexican Courts with proper jurisdiction, in recognition of the waiver and exclusion of the arbitration clause (contained in
    the Earn In/Option Agreement) by both parties.
|-------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|EIGHT: | This Court declares
    that the American Arbitration Association must abstain from hearing arbitration procedure number 50 501 T 00226 14, or any
    other ongoing and/or future ongoing arbitration already filed or to be filed by the defendant Goldgroup, based on the Earn
    In/Option Agreement dated September 1, 2006.
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|NINTH: | This Court declares
    that the American Arbitration Association does not have jurisdiction to hear any conflict and/or interpretation arising from
    the Earn In/Option Agreement, dated September 1, 2006.
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|TENTH: | This Court declares,
    that the American Arbitration Association does not have jurisdiction to hear disputes arising between shareholders of DynaMéxico,
    which disputes do not arise directly and immediately from the Earn In/Option Agreement, dated September 1, 2006.
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ELEVENTH: | This Court declares,
    that the American Arbitration Association does not have jurisdiction to hear any matters where Koy Wilber Diepholz, who is
    the President of the Board of Directors of DynaMéxico, and has been personally sued in relation to the arbitration
    clause established under clause 8.16 of the Earn In/Option Agreement, dated September 1, 2006, since he signed the mentioned
    instrument in representation of the Company and not in his personal capacity.
|--------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







47







(C)
The Arbitration Ruling contains an acknowledgement by the AAA that the AAA was named as a defendant in the legal demand filed
by DynaMéxico in the Thirty Sixth Civil Court of the Superior Court of Justice of the Federal District of México
(the “DynaMéxico Legal Demand”). The Arbitration Ruling also contains a statement that the AAA was not properly
served notice of the DynaMéxico Legal Demand.



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



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



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



DynaUSA
and DynaMéxico filed Motion to Vacate Arbitration Ruling



On
November 17, 2016, DynaUSA and DynaMéxico filed a Motion to Vacate the Arbitration Ruling in United States District Court,
District of Colorado.



Recommendation
to Vacate Arbitration Ruling issued by United States Magistrate Judge



On
February 13, 2018 a Recommendation to Vacate the Arbitration Ruling was issued by a United States Magistrate Judge of the United
States District Court, District of Colorado.



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



On
February 2nd, 2014, Goldgroup Resources Inc. filed a petition with the Judge of the Tenth District Mazatlán, according
to record 08/2014, in the ordinary commercial action, against DynaResource Inc., and DynaResource de México, S.A. de CV.
(“DynaMéxico”). In the Petition, Goldgroup complains against the results of the shareholders meeting of DynaMéxico
of May 17, 2013, and petitions for the nullification of the meeting itself and for the nullification of the additional shares
of the outstanding capital of DynaMéxico issued to DynaResource, Inc. in satisfaction of debts owed to DynaResource.



DynaResource
and DynaMéxico filed a response on January 9, 2016, and the matter was. DynaMéxico will vigorously defend against
all such complaints by Goldgroup, as there exists no legal basis for the complaint by Goldgroup against the May 17, 2013 shareholders
meeting of DynaMéxico.



On
October 31, 2018, the Judge of the Tenth District declared the Expiration of the Trial, due to inactivity of Goldgroup in the
process, and the Judge decreed the Trial as a concluded and filed trial. As a result, the shareholders' meeting of May 17, 2013
remains valid.



On
November 16, 2018, Goldgroup appealed the declaration of Expiration of the Trial.



On
February 12, 2019, the Court of Appeals (Segundo Tribunal Unitario de Circuito in Mazatlán) confirmed the resolution issued
October 31, 2018 by the Judge of Tenth District and declared and confirmed the Expiration of the Trial, due to the inactivity
of Goldgroup to the process, and therefore the Court of Appeals decreed the matter as a concluded and filed trial. As a result,
the shareholders' meeting of May 17, 2013 remains valid.



Goldgroup
has filed a writ of amparo against the resolution of the Court of Appeals that confirmed the declaration of expiration of the
trial. This Amparo Trial is pending resolution.



Litigation(s)
in México – Company as Plaintiff



The
Company, and DynaMéxico have filed several legal actions in México against Goldgroup Mining Inc. and Goldgroup Resources
Inc., and certain individuals retained as agents of Goldgroup Mining Inc., or Goldgroup Resources.
The Company and DynaMéxico are plaintiffs in the actions filed in México and the outcomes are pending.





48









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.



On
May 9, 2019, the United States district court for the district of Colorado confirmed the August 2016 Arbitration award against
DynaResource, Inc. and DynaResource de Mexico, S.A. de C.V.  The district court’s decision overruled the recommendation
previously issued by the magistrate judge to sustain the DynaResource entities’ motion to vacate the arbitration award.
Each of DynaResource, Inc. and DynaResource de Mexico, S.A. de C.V. intends to exercise all of its rights, as appropriate, including
an appeal.





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

None.

ITEM
3.          Default Upon Senior Securities

None.

ITEM
4.          Mine Safety Disclosures

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

ITEM
5.          Other Information

None.





49







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.
(“KD”) Diepholz, Chairman / CEO

Date:
May 20, 2019









50