EDGAR 10-K Filing

Company CIK: 1111741
Filing Year: 2022
Filename: 1111741_10-K_2022_0001654954-22-003737.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
History and Organization
The Company is a minerals investment, management, and exploration company, and currently conducting test mining and pilot milling operations through an operating subsidiary in México, with specific focus on precious and base metals in México. The Company was originally incorporated in the State of California on September 28, 1937, under the name West Coast Mines, Inc. In November 1998, the Company re-domiciled from California to Delaware and changed its name to DynaResource, Inc. (“DynaUSA”).
DynaUSA currently owns 80% of the outstanding shares of DynaMéxico, and DynaMéxico currently holds 20% of the outstanding shares of DynaMéxico as treasury stock. DynaMéxico owns 100% of the mining concessions, equipment, camp and related facilities which comprise the San Jose de Gracía Property (“SJG”), in northern Sinaloa State, México. We also own 100% of Mineras de DynaResource S.A. de C.V. (“DynaMineras”). The Company also has another wholly owned subsidiary, DynaResource Operaciones, S.A. de C.V. (“DynaOperaciones”). The Company currently conducts test mining and pilot milling operations, and other exploration activities in México.
Segment Information
Our only current operating segment is gold mining and milling operation.
Products
The end use product produced at our test mining and pilot milling operations at SJG is in the form of gold-silver concentrates. Gold-silver concentrates, or simply concentrate, is raw precious metals materials that has been crushed and ground finely to a sand-like product where gangue (waste) and non-precious metals are removed or reduced, thus concentrating the precious metals component. Concentrates processed and produced from San Jose de Gracía are shipped to third-party smelters, refineries or third parties for further processing or re-sale.
During 2021, we reported the delivery and sale of 22,566 (subject to final settlements) net Oz gold contained in concentrates. All gold-silver concentrate originated from the San Jose de Gracía Property in México.
Gold-silver concentrates are sold at a small discount to the prevailing spot market price, based on the price per ounce of gold and silver quoted at the London PM fix, with the actual net precious metals prices received depending on the sales contract. Concentrates are priced by individual concentrate lots of 36 to 72 tons, or as a series of lots under contract, whereby the final selling price and gold-silver quantities are subject to final adjustments at the time of final purchase settlement.
Gold and Silver Pilot Processing Methods
Gold and silver are extracted from mined mineralized material, by crushing, grinding, milling, and further by simple gravity and flotation recoveries. The mineralized material is extracted by underground mining methods. The processing plant at the San José de Gracía mine is composed of conventional crushing and grinding circuits, and with gravity and flotation recovery methods. The gravity and flotation concentrates are dewatered and shipped to purchasers in semi-truck trailers.
Gold and Silver Reserves / No Known Reserves
The Company currently has no mineral “reserves” as defined by SEC Industry Guide 7 promulgated by the SEC.
General Government Regulations
México
Mining in México is subject to numerous federal, state and local laws, regulations and ordinances governing mineral rights, operations and environmental protection.
Mineral Concession Rights. Exploration and exploitation of minerals in México may be carried out through Mexican companies incorporated under Mexican law by means of obtaining mining concessions. Mining concessions are granted by the Mexican government for a period of fifty years from the date of their recording in the Public Registry of Mining and are renewable for a further period of fifty years upon application within five years prior to the expiration of such concession in accordance with the Mining Law and its regulations. Mining concessions are subject to annual work requirements and payment of annual surface taxes which are assessed and levied on a semi-annual basis. Such concessions may be transferred or assigned by their holders, but such transfers or assignments must be registered with the Public Registry of Mining in order to be valid against third parties. The holder of a concession must pay semi-annual duties in January and July of each year on a per hectare basis and in accordance with the amounts provided by the Federal Fees Law. During the month of May of each year, the concessionaire must file with the General Bureau of Mines, the work assessment reports made on each concession or group of concessions for the preceding calendar year. The regulations of the Mining Law provide tables containing the minimum investment amounts that must be made on a concession. This amount is updated annually in accordance with the changes in the Consumer Price Index.
Surface Rights. In México, while mineral rights are administered by the federal government through federally issued mining concessions, Ejidos (communal owners of land recognized by the federal laws in México) control surface access rights to the land. An Ejido may sell or lease lands directly to a private entity. While the Company has agreements or is in the process of negotiating agreements with the Ejido that impact all of its projects in México, some of these agreements may be subject to renegotiations.
Environmental Law. The Environmental Law in México, called the "General Law of Ecological Balance and Protection to the Environment" ("General Law"), provides for general environmental policies, with specific requirements for certain activities such as exploration set forth in regulations called "Mexican official norms". Responsibility for enforcement of the General Law, the regulations and the Mexican official norms is with the Ministry of Environment and Natural Resources, which regulate all environmental matters with the assistance of Procuraduria Federal de Protección al Ambiente (known as "PROFEPA").
2020 Forestry Law. The 2020 Forestry Law provides for general policies for the use and protection of the surface, and for plants, soil and trees. The regulation of the Forestry Law is with the Ministry of Environment and Natural Resources, with the assistance of PROFEPA.
Residues Law. The Residues Law, also known as Norm 141, provides for general policies for the deposit and storage of residue and waste. The regulation of the Residues Law is with the Ministry Of Environment and Natural Resources, with the assistance of PROFEPA.
The primary laws and regulations used by the State of Sinaloa, where our San Jose de Gracía property is located, in order to govern environmental protection for mining and exploration are: The General Law, the 2020 Forestry Law, Residues Law, as well as their specific regulations on air, water and residues, and the Mexican official norms (known as "NOM-120"). In order to comply with the environmental regulations, a concessionaire must obtain a series of permits during the exploitation and exploration stage. The time required to obtain the required permits is dependent on a few factors including the type of vegetation and trees impacted by proposed activities.
Mining Permits. The Secretariat of Environmental and Natural Resources, the Mexican Government environmental authority ("SEMARNAT"), is responsible for issuing environmental permits associated with mining. Three main permits required before construction can begin are: Environmental Impact Statement (known in México as Manifesto Impacto Ambiental) ("MIA"), Land Use Change (known in México as Estudio Justificativo Para Cambio Uso Sueldo) ("ETJ"), and Risk Analysis (known in México as Analisis de Riesgo) ("RA"). A construction permit is required from the local municipality and an archaeological release letter must be obtained from the National Institute of Anthropology and History (known as "INAH"). An explosives permit is required from the ministry of defense before construction can begin. The Environmental Impact Statement is required to be prepared by a third-party contractor and submitted to SEMARNAT and must include a detailed analysis of climate, air quality, water, soil, vegetation, wildlife, cultural resources and socio-economic impacts. The Risk Analysis study (which is included into the Environmental Impact Statement and submitted as one complete document) identifies potential environmental releases of hazardous substances and evaluates the risks in order to establish methods to prevent, respond to, and control environmental emergencies. The Land Use Change requires that an evaluation be made of the existing conditions of the land, including a plant and wildlife study, an evaluation of the current and proposed use of the land, impacts to naturally occurring resources, and an evaluation of reclamation/re-vegetation plans.
Customers
The Company sells its concentrates to the buyer who offers the best terms based upon price, treatment costs, refining costs, and other terms of payment. During the year ended December 31, 2021, the Company sold gold-silver concentrates to three purchasers.
Employees
As of December 31, 2021, we had 186 employees, including 181 employees based in México, and 5 in the United States. Consultants are retained from time to time. Employees based in México and the United States include laborers, engineers, geologists, information technologists, office administrators, managers and executives. None of our employees in México are covered by union contracts and the Company believes we have good relations with our employees.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Not applicable for smaller reporting companies.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
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 January 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.
We classify our mineral property as an "Exploration Property". We do not suggest that we have proven or probable reserves at our property as defined by the SEC. Under U.S. standards, as set forth in SEC Industry Guide 7, mineralization may not be classified as a “reserve” unless a determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The SJG Property as described in this Annual Report on Form 10-K is without known reserves. Mineral resources which are not classified as mineral reserves do not have “demonstrated economic viability.” The quantity of resources and the quality (grade) of resources reported as “Indicated” and “Inferred” mineral resources in the mineral resource estimate compiled for DynaMéxico, under and filed by the Company on SEDAR, are not disclosed in this Form 10K. There has been insufficient exploration to define any mineral reserves on the SJG Property, and it is not certain if further exploration will result in the definition of mineral reserves.
San Jose de Gracia Mineral Property
San Jose de Gracía Property (“SJG”) is a high-grade mineralized system which reports historical production of 1,000,000 Oz. gold (“Au”), from a series of underground workings and is located in the state of Sinaloa, México. The Company is focused on the exploration and future exploitation of this vein-hosted, near surface, and over 400 meters down dip gold potential, that occurs within fault breccia veins; and has been traced on surface and underground over a 15 Sq. kilometer area.
DynaMéxico owns 100% of the mineral concessions at the SJG Property, and all mineral concessions are contiguous. The SJG Property is comprised of 33 concessions covering approximately 9,920 hectares (24,513 acres).
Current Mining Concessions - San José de Gracía
Claim Name
Claim Number
Staking date
Expiry
Hectares
Taxes / ha (pesos)
AMPL. SAN NICOLAS
22/11/1988
21/11/2038
17.4234
111.27
AMPL. SANTA ROSA
30/10/1978
29/10/2028
25.0000
111.27
BUENA VISTA
31/03/2000
30/03/2050
17.9829
63.22
EL CASTILLO
02/10/2001
01/10/2051
100.0000
31.62
EL REAL
07/11/2000
07/11/2052
2038.0000
31.62
EL REAL 2
30/04/2002
29/04/2052
280.1555
31.62
FINISTERRE FRACC. A
28/01/2003
27/01/2053
18.7856
31.62
FINISTERRE FRACC. B
28/01/2003
27/01/2053
174.2004
31.62
GUADALUPE
05/12/1990
04/12/2040
7.0000
111.27
LA GRACIA I
02/04/2002
01/04/2052
300.0000
31.62
LA GRACIA II
02/04/2002
01/04/2052
230.0000
31.62
LA LIBERTAD
15/12/1983
14/12/2033
97.0000
111.27
LA NUEVA AURORA
08/02/2002
07/02/2052
89.3021
31.62
LA NUEVA ESPERANZA
06/12/2005
05/12/2055
40.0000
7.6
LA UNION
26/08/1985
25/08/2035
4.1098
111.27
LOS TRES AMIGOS
27/10/1983
26/10/2033
23.0000
111.27
MINA GRANDE
10/10/1978
09/10/2028
6.6588
111.27
NUEVO ROSARIO
13/12/1989
12/12/2039
32.8781
111.27
PIEDRAS DE LUMBRE 2
05/03/2002
04/03/2052
34.8493
31.62
PIEDRAS DE LUMBRE 3
28/01/2003
27/01/2053
4.3098
31.62
PIEDRAS DE LUMBRE No.4
29/09/2000
28/09/2050
0.2034
63.22
PIEDRAS DE LUMBRE UNO
05/03/2002
04/03/2052
40.2754
31.62
SAN ANDRES
31/08/2000
30/08/2050
385.0990
63.22
SAN JOSÉ
24/11/1998
23/11/2048
27.0000
111.27
SAN MIGUEL (1)
26/10/1988
25/10/2038
7.0000
111.27
SAN NICOLAS
14/12/1978
13/12/2028
55.5490
111.27
SAN SEBASTIAN
08/11/1989
07/11/2039
40.0000
111.27
SANTA MARIA
17/01/2003
16/01/2053
4.2030
31.62
SANTA ROSA
13/05/1982
12/05/2032
31.4887
111.27
SANTO TOMAS
13/08/1986
12/08/2036
312.0000
111.27
TRES AMIGOS 2
31/08/2000
30/08/2050
54.4672
63.22
FINISTERRE 4
18/01/2008
17/01/2058
2142.1302
5.08
FRANCISCO ARTURO
06/09/2007
27/03/2057
3,279.56
TOTAL
9,920.00
Surface Lease Rights
In addition to the surface rights held by DynaMéxico pursuant to the Mining Act of México and its Regulations (Ley Minera y su Reglamento), DynaMineras maintains access and surface rights to the SJG Project pursuant to the 20-year Land Lease Agreement (above). The 20 Year Land Lease Agreement with the Santa Maria Ejido Community surrounding San Jose de Gracía is dated January 6, 2014 and continues through 2033. It covers an area of 4,399 hectares surrounding the main mineral resource areas of SJG and provides for annual lease payments by DynaMineras of $1,359,443 Pesos adjusted for inflation based on the Mexico minimum wage, commencing in 2014. The 2021 payment was $3,015,112 pesos (approx. $149,000 USD). Additionally, under the description of the 20 Year Land Lease, DynaMineras constructed a Medical Facility at SJG in year 2017.
The Land Lease Agreement provides DynaMineras with surface access to the core resource areas of SJG (4,399 hectares), and allows for all permitted mining, pilot production and exploration activities from the owners of the surface rights (Santa Maria Ejido community).
The Company expects DynaMineras will be successful in expanding the size and scope of the resources at SJG through continued drilling and development programs at San Pablo, Tres Amigos, La Ceceña, Palos Chinos, San Pablo East, La Purisima, and La Prieta. The Company expects extensions to mineralization in all directions and down dip from the main target areas.
Mineral Reserves / No Known Reserves
Under U.S. standards, as set forth in SEC Industry Guide 7, mineralization may not be classified as a “reserve” unless a determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The SJG property is without known reserves. Mineral resources which are not classified as mineral reserves do not have “demonstrated economic viability.” The quantity of resources and the quality (grade) of resources reported as “Indicated” and “Inferred” mineral resources in the mineral resource estimate compiled for DynaMéxico is not disclosed in this Form 10-K. There has been insufficient exploration to define any mineral reserves on the property, and it is not certain if further exploration will result in the definition of mineral reserves.
Technical Report and Resource Estimate According to Canadian National Instrument 43-101 (2012)
In 2012, DynaMéxico commissioned Servicios y Proyectos Mineros (“SPM”) for the production of Technical Report 43-101 (“43-101”) at San Jose de Gracía. Additionally, DynaMéxico commissioned Mr. Robert Sandefur, a senior reserve analyst for Chlumsky, Armbrust & Meyer LLC, Lakewood, CO (“CAM”) to produce a mineral resource estimate for the 4 main vein systems at the property.
Parameters Used to Estimate the Mineral Resource Estimate--The data base for the San Jose de Gracía Project consists of 372 drill holes of which 361 are diamond drill holes (“DDH”) and the remaining 11 were reverse circulation holes “(RC”), with a total drilling of 75,878 meters. The NI 43-101 Mineral Resource Estimate, prepared in 2012, concentrates on four main mineralized vein systems at SJG: Tres Amigos, San Pablo, La Union, and La Purisima. Of the 372 drill holes, 368 were drilled to test these four main vein systems and the remaining four holes tested the Argillic Zone. Technical personnel of Minop S.A. de C.V. (“Minop”), a subsidiary (or affiliate) of Goldgroup Mining Inc., built three dimensional solids to constrain estimation to the interpreted veins in each swarm. The 172 holes most recently drilled (2009-2011), were allocated as follows: Tres Amigos (64 holes), San Pablo (49 holes), La Union (24 holes), La Purisima (32 holes) and Argillic Zone (3 holes). The data base also includes rock and chip sampling, regional stream sediment sampling, and IP Surveys.
Density--A total of 5,540 pieces of core were measured for specific gravity using the weight in air vs. weight in water method. This represents an additional 3,897 measurements taken in the 2009-11 drill seasons with density measurements taken from all mineral zones. Dried samples were coated with paraffin wax before being measured. The results tabulated have been sorted by lithology and mineralized veins. The average specific gravity of 5,051 wall rock samples was 2.59 while the average specific gravity for 489 samples of vein material is 2.68. CAM and Servicios y Proyectos Mineros have reviewed the procedures and results and opine that the results are suitable for use in mineral resource estimation.
Mineral Resource Estimate - Construction of Wireframes--Mineral Resources were estimated by Mr. Sandefur within wireframes constructed by technical personnel of Minop. Minop was contracted by Mineras de DynaResource S.A. de C.V. (“DynaMineras”).
Mineral Resource Estimate - Explanation of Resource Estimation--Resource estimation was done in MineSight and MicroModel computer systems with only those composites that were inside the wireframe used in the estimate. Estimation was done using kriging with the omni-directional variogram derived from all the data in each area for gold using the relative variogram derived from the log variogram. High grades were restricted by capping the assays at a breakpoint based on the cumulative frequency curves. Estimation was done using search radii of 100 x 100 x 50 m “blocks” oriented subparallel to the general strike and dip of the vein system in each area. A sector search, corresponding to the faces of the search box with a maximum of two points per sector was used in estimation. A density of 2.68 based on within ‘vein density’ samples was used in the resource estimate. Within each of the four areas there are approximately 20 to 40 veins in the vein swarm. Resources were estimated by kriging using data from all veins in the swarm. In general, gold accounts for at least 80% of the value of contained metal at the project, so the variograms for gold were used in estimation of the four other metals.
The veins at San Jose de Gracía have been historically mined for many years and historic mined volumes are not available. The one exception is the approximate 42,000 tonnes of ore processed by DynaMéxico during its pilot production activities in 2003-2006. The resource table is not adjusted for any historic mining. To validate that historic mining had not significantly reduced the resource, CAM reviewed the database for all assays greater than 1 gram per ton gold that were next to missing values at the bottom of drill holes. Only four assays satisfying this criterion were found, and on the basis of this review, Mr. Sandefur does not believe that significant mining has occurred within the volumes defined by the wireframes.
Servicios y Proyectos Mineros performed a database review and considers that a reasonable level of verification has been completed, and that no material issues have been left unidentified from the drilling programs undertaken.
Mineral Resource Estimate and 43-101 Technical Report - Data Verification--Mr. Ramon Luna Espinoza (“Mr. Luna”) initially visited the San Jose de Gracía Project in November 2010 and conducted site inspections at SJG in November 2011 and January 2012. Mr. Sandefur conducted a site inspection of the SJG Project in January 2012. While at the Property in November 2011, Mr. Luna inspected the areas of Tres Amigos, La Prieta, Gossan Cap, San Pablo, La Union, and La Purisima, and historic mining sites. In January 2012, Mr. Sandefur and Mr. Luna inspected the areas of Tres Amigos, San Pablo, La Union, and La Purisima. Pictures of the areas were taken. Many of the drill pads for the drilling programs of 2007 to 2011 were clearly located and identified. Mr. Luna also inspected at San José de Gracía, the core logging and storage facilities, the geology offices, the meteorological station, the plant nursery, and the mill. Mr. Sandefur also inspected the core logging and storage facilities.
The Company received from DynaMéxico on February 14, 2012, a National Instrument 43-101 Mineral Resource Estimate for San Jose de Gracía. The NI 43-101 Resource Estimate was prepared by Mr. Robert Sandefur, BS, MSc, P.E., a Qualified Person as defined under NI 43-101, and a senior reserve analyst for Chlumsky, Armbrust & Meyer LLC, Lakewood, CO (“CAM”). The Resource Estimate concentrates on four separate main vein systems at SJG: Tres Amigos, San Pablo, La Union, and La Purisima.
The mineral resource estimates prepared by Mr. Robert Sandefur for this Technical Report included Indicated Resources at Tres Amigos and San Pablo. Table summaries of Indicated and Inferred Resources are contained in the 2012 DynaMéxico-CAM Mineral Resource Estimate. The Resource Estimate has been filed, along with the Technical Report on SEDAR; but is not disclosed in this Form 10-K.
Water Concession
The Company has secured the Water Rights Concession for the area surrounding SJG. The Director of Water Administration of the National Water Commission of México (CONAGUA) formally certified in writing the rights of DynaResource de México, S.A. de C.V. to legally “use”, exploit and extract 1,000,000 cubic meters of water per year from the DynaMéxico extraction infrastructure located within the perimeter of the mining concessions comprising the San Jose de Gracía Mining Property in Sinaloa State, México. CONAGUA determined that the DynaMéxico water rights are not subject to any water rights concession or any other water extraction restriction. Water extracted by DynaMéxico will be subject to applicable levies imposed by the Mexican tax authorities in accordance with current Mexican tax laws.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
2014 Arbitration Proceeding filed by Goldgroup Resources Inc.
On March 14, 2014, Goldgroup filed for arbitration in the United States with the American Arbitration Association (“AAA”), seeking monetary and nonmonetary relief, and citing the Earn In/Option Agreement as the basis for its filing. On August 25, 2016, the AAA issued a ruling in favor of Goldgroup against the Company and DynaMéxico (the “Arbitration Award”). On May 9, 2019, the United States District Court for the District of Colorado (the “Colorado U.S. District Court”) confirmed the Arbitration Award.
On May 20, 2021, the Company and DynaMéxico agreed to release the $1.111 million bond that had been posted, and paid an additional $4,054 in interest, in full satisfaction of the monetary portion of the Arbitration Award. Since that time, the Company has fully performed the non-monetary portion of the Arbitration Award, which included the election of a Goldgroup designee to the board of DynaMéxico, yet Goldgroup continues to challenge the Company’s actions before the Colorado U.S. District Court.
2014 Court filing by DynaMéxico, in Mexico
On December 9, 2014, DynaMéxico filed a commercial lawsuit against Goldgroup, its parent company Goldgroup Mining Inc., and the AAA, in the Thirty Sixth Civil Court in the Federal District of México (the “Trial Court”), under file 1120 number / 2014 (the “DynaMéxico Trial”). In the DynaMéxico Trial, DynaMéxico sought to terminate the U.S.-based arbitration proceedings, and requested that substantial damages (in the amount of US $50 million) be awarded to DynaMéxico against Goldgroup. On October 5, 2015, the Trial Court awarded DynaMéxico damages in excess of US $48 million.
Goldgroup has appealed the $48 million damages award on multiple occasions, yet the award stands and has been affirmed by a variety of Mexican courts, including the highest court in the land. Even in the face of multiple rejections of its arguments before Mexican courts, Goldgroup continues to raise baseless and unfounded objections to the award.
On October 5, 2016, the Trial Court (the same court which made the $48 million damages award) approved a grant to DynaMéxico of a lien (referred to by the court as an “Embargo”) upon the shares of DynaMéxico held by Goldgroup in certificate form. On February 20, 2020, a México City court issued a final judgment, effectively foreclosing on all shares of DynaMéxico formerly held by Goldgroup, and awarding those shares to DynaMéxico. Those shares are now legally owned, and physically held, by DynaMéxico. Consequently, Goldgroup currently owns no shares of DynaMéxico under Mexican law, which requires physical possession of shares to evidence ownership.
The award to DynaMéxico of the shares formerly owned by Goldgroup, does not satisfy the $48 million damages award in favor of DynaMéxico.
2020 Petition for Recognition of the $48M Damages Award
On December 5, 2020, the Company and DynaMéxico filed an Original Petition for Recognition of the $48 million damages award in favor of DynaMéxico, in US. District Court in Dallas County, Texas (the “Texas U.S. District Court”), under principles of international comity. On May 12, 2021, The Texas U.S. District Court issued a ruling stating the Court was not obligated to recognize the $48 million damages award in the United States. On May 14, 2021, the Company and DynaMéxico filed a Notice of Appeal of that ruling.

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ITEM 4. MINE SAFETY DISCLOSURE
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.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is traded on the OTC Markets under the symbol "DYNR". The following table sets forth, for the periods indicated, the high and low bid quotations which reflect inter-dealer prices, without retail mark-up or mark-down and without commissions; and may not reflect actual transactions. All amounts are denominated in U.S. dollars.
Year ended December 31, 2021
Low
High
First Quarter
0.57
1.00
Second Quarter
0.63
0.99
Third Quarter
0.77
2.45
Fourth Quarter
1.35
2.00
Year ended December 31, 2020
Low
High
First Quarter
0.38
0.78
Second Quarter
0.47
0.58
Third Quarter
0.53
1.10
Fourth Quarter
0.70
1.00
As of March 15, 2022, there were outstanding 18,091,293 shares of our common stock, which were held by approximately 439 shareholders of record. This figure does not include shareholders that hold their shares in street name or with a broker.
Dividend Policy
No cash dividends on the Company common stock have been declared or paid since the Company's inception. Payment of future dividends, if any, will be at the discretion of our Board of Directors after considering various factors, including the terms of any credit arrangements, our financial condition, operating results, current and anticipated cash needs and plans for growth. Our initial earnings, if any, will likely be retained to finance our growth. At the present time, we are not party to any agreement that would limit our ability to pay dividends.
During the fiscal years ended December 31, 2021 and 2020, no securities of the Company were authorized for issuance under equity compensation plans.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
Not applicable for smaller reporting companies.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to in this annual report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to in this annual report as the Exchange Act. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project” and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management’s beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this annual report. Factors that can cause or contribute to these differences include those described under the heading “Management Discussion and Analysis and Plan of Operation.”
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 México 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 México SA de CV, under Canadian National Instrument 43-101 and filed by the Company with SEDAR, are not disclosed in this Form 10-K. There has been insufficient exploration to define any mineral reserves on the SJG Property, and it is not certain if further exploration will result in the definition of mineral reserves.
Company
The Company is a minerals investment, management, and exploration company, and currently conducting test mining and pilot milling operations through an operating subsidiary in México, with specific focus on precious and base metals in México. The Company was incorporated in the State of California on September 28, 1937, under the name West Coast Mines, Inc. In November 1998, the Company re-domiciled from California to Delaware and changed its name to DynaResource, Inc. (“DynaUSA”).
We currently conduct operations in México through our operating subsidiaries. We currently own 80% of the outstanding shares of DynaResource de México, S.A. de C.V. (“DynaMéxico”), and DynaMéxico currently holds 20% of its outstanding shares recovered from Goldgroup Resources Inc. DynaMéxico owns 100% of mining concessions, equipment, camp and related facilities which comprise the San Jose de Gracía Property, in northern Sinaloa State, México. We also own 100% of Mineras de DynaResource S.A. de C.V. (“DynaMineras”), the exclusive operator of the San José de Gracía Project, under contract with DynaMéxico. DynaOperaciones is the exclusive management company for registered employees.
Project Improvements, Expansion and Increased Output (2017 To 2021)
The Company continues its business plan of operations at San Jose de Gracía, which is to improve, increase and expand test mining and pilot milling operations and generally, to increase production of gold ounces. Since January 2015 startup of the test mining and milling activities, the Company has increased daily output from an initial 75 tons per 24-hour operating day, to a current 300 tons per 24-hour operating day, and during first quarter 2021 the Company expects to achieve production output of 500 tons per 24-hour operating day. (Note the Summary of Test Mining and Pilot Mill Operations for 2018 to 2021 below).
Since January 2017, the Company has expended over $18.5 million USD in non-operating costs, generally classified as project improvements and expansion costs which have been expensed in the company’s consolidated financial statements. These funds have been provided primarily from cash flows from operations. An itemized list of these non-operating costs is described below:
Mill Expansion
$ 3,108,000
Tailings Pond Expansion
265,000
Machinery and Equipment
1,416,000
Mining Camp Expansion
146,000
Medical Facility
126,000
Mine Development - San Pablo
2,748,000
Mine Expansion - San Pablo East
915,000
Mine Expansion - Tres Amigos
1,599,000
SIG Mining Concessions
1,401,000
Exploration and Developmental Drilling
35,000
Surface Rights and Permitting
528,000
Debt Retirement
2,985,000
Legal Fees
3,381,000
Total
$ 18,653,000
The Company is currently reporting all costs of mine operations, improvements, and expansion as expenses in accordance with United States General Accepted Accounting Principal (GAAP) requirements. The result of expensing all costs is that the Company has accumulated a net loss carry forward from México operations of $12.5 million USD which is available to offset future taxable earnings.
Results for the Years Ended December 31, 2021 and 2020
Summary of Test Mining and Pilot Mill Operations for 2021, 2020, 2019 and 2018:
Year
Total Tons
Mined & Processed
Reported Mill Feed Grade
(g/t Au)
Reported Recovery
%
Gross Gold Concentrates Produced
(Au oz.)
Net Gold Concentrates Sold
(Au oz.)
52,038
9.82
86.11 %
14,147
13,418
66,031
5.81
86.86 %
10,646
9,713
44,218
5.65
87.31 %
7,001
5,828
97,088
9.67
88.79 %
26,728
22,566
DynaMineras continued to increase its test underground mining activity and pilot milling operations in 2021 and increased output from 200 to 300 tons per 24-hour operating /day from the mine and mill during. With the opening of an additional ball mill in the first quarter of 2022 the Company projects an increase in capacity to 500 tons per day.
Test pilot operations in 2021 yielded 97,088 Tons mined and processed from underground test mining activity and pilot milling operations; and the production of approximately 26,728 gross Oz Au, and net of dry weight adjustments at the buyer’s facilities, the production of approximately 22,566 Oz Au. The Company reports net revenue of $35,886,046 net of buyer’s price discount and refining and treatment costs.
Test pilot operations in 2020 yielded 44,218 Tons mined and processed from underground test mining activity and pilot milling operations; and the production of approximately 7,001 gross Oz Au, and net of dry weight adjustments at the buyer’s facilities, the production of approximately 5,828 Oz Au. The Company reports net revenue of $9,048,831 net of buyer’s price discount and refining and treatment costs.
DynaMineras expects to continue its test underground mining activity and pilot milling operations in 2022; and projects the output of 500 tons per 24-hour operating day from the mine and mill in 2022.
REVENUE. Revenues for the years ended December 31, 2021, and 2020 were $35,886,046 and $9,048,831, respectively. The increase was the result of the opening of the Tres Amigos mine in 2020 which yielded a higher grade of ore and the increase in plant processing capacity to 300 tons a day. The ore feed grade increase from 5.65 g/t in 2020 to 9.67 g/t in 2021. This combined with higher gold prices resulted in a 297% increase in revenue on a 120% increase in tonnage processed.
PRODUCTION COSTS RELATED TO SALES. Production costs related to sales for the years ended December 31, 2021, and 2020 were $2,909,401 and $1,166,135, respectively. These are expenses directly related to the milling, packaging and shipping of gold and other precious metals product. This represents a decrease in the cost per ounce recovered of milling from $167 per OZ to $109 per OZ.
MINE PRODUCTION COSTS. Mine production costs for the years ended December 31, 2021, and 2020 were 3,965,467 and $2,370,972 respectively. These costs were directly related to the extraction of mine tonnage to be processed at the mill. The increase was a result in the increase in tonnage mine. However, the cost per ton dropped from $66.84 per ton in 2020 to $45.57 as result of the increased volume in tonnage.
MINE EXPLORATION COSTS. Mine exploration costs for the years ended December 31, 2021, and 2020 were $5,198,057 and $1,610,747, respectively. These were the costs of extracting waste material to reach the materials to be extracted for processing. The increase was a result of the increase in activity as well as the increase in waste tonnage.
MINE EXPANSION COSTS: Mine expansion costs for the years ended December 31, 2021, and 2020 were $1,478,725 and $909,190, respectively. These were the costs associated with the expansion of the mining facilities and the cost associated with preparing the Tres Amigos for production. The 2021 largely consisted of the new ball mill. These are cost which would normally have been treated as capital expenditures under U.S. GAAP but the Company is required to expense because of the lack of proven and probable reserves.
TRANSPORTATION. Transportation costs for the years ended December 31, 2021, and 2020 were $1,330,414 and $528,423, respectively. These were the costs of transporting the product to the customer for treatment and sale. The increase is consistent with the overall increase in production and sales.
CAMP, WAREHOUSE AND SUPPORT FACILITIES. Camp, warehouse and support facility cost for the years ended December 31, 2021, and 2020 were $2,913,832 and $2,036,610, respectively. These were the support costs of the mining facilities including housing, food, security and warehouse operations. The increase was a result of the increase in personnel from the increase in operations.
PROPERTY HOLDING COSTS. Property holding costs for the years ended December 31, 2021, and 2020 were $127,731 and $137,377, respectively. These costs were concessions taxes, leases on land and other direct costs of maintaining the property. The current costs consist only of core concessions and the reduced area of the Francisco Arturo concession.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the years ended December 31, 2021, and 2020 were $4,773,473 and $2,966,073 respectively. These were the costs of operating the Company not directly associated with the mine operations including management, accounting, and legal expenses. The increase is reflective of an overall increase in activity, an increase in compensation expense including $1,005,223 value of stock issued for services and a $381,871 bad debt write off.
OTHER INCOME (EXPENSE). Other income for the years ended December 31, 2021, and 2020 was $(4,622,364) and $(2,685,878), respectively. Included in this category in 2021 was interest expense of $(1,573,125), change in derivative liability of $(2,186,912), currency transaction gain of $247,712, and an arbitration award payment of $(1,111,111). Included in this category in 2020 was interest expense of $(1,133,360), change in derivative of $(1,186,964), currency transaction loss of $(361,127), and other expense of $(4,427). The increase in derivative liability is the result of the increase in the Company’s stock price on the Company’s black scholes calculation of the liability for stock warrants and convertible debt. See Item Three Legal Proceedings for discussion of the arbitration award.
NON-CONTROLLING INTEREST. The non-controlling interest portion of the net loss for the years ended December 31, 2021, and 2020 was $0 and $61,589, respectively. This represented the non-controlling interest share of Dyna México’s loss. The 2020 allocation included only the non-controlling interest’s share of the net loss for January and February as the non-controlling interest was eliminated at the end of February 2020.
OTHER COMPREHENSIVE INCOME (LOSS). Comprehensive income (loss) includes the Company’s net income (loss) plus the unrealized currency translation gain (loss) for the period. The Company’s other comprehensive loss for the years ended December 31, 2021, and 2020 consisted of unrealized currency gains (losses) of $(685,757) and $100,582, respectively. The YTD change is due to the variances in the peso exchange rates throughout the two years.
Liquidity and Capital Resources
As of December 31, 2021, the Company had working capital of $1,347,711, comprised of current assets of $23,816,481 and current liabilities of $22,468,770. This represented a increase of $7,126,703 from the working capital maintained by the Company of $(5,778,992) as of December 31, 2020. The primary reason for the increase is the increase in cash balance generated from the Company’s operations.
Net cash provided by (used in) operations for the year ended December 31, 2021, was $17,516,205 compared to $(2,421,108) in the year ended December 31, 2020. The increase is the result of the Company’s increased operating profits and proceeds from its customer advance.
Net cash provided by (used) in investing activities for the years ended December 31, 2021, and 2020 was $0 and $0, respectively. In 2021 and 2020 expenditures necessary for the expansion of mining operations totaling $1,478,725 and $909,190, respectively which would normally have been included in this category were expensed due to the company’s lack of proven and probable reserves.
Net cash provided by (used in) financing activities for the year ended December 31, 2021, was $(2,557,721) compared to $3,594,323 for the year ended December 31, 2020. The 2020 funds represent the net proceeds from the Series D financing. The 2021 expenditure is the partial repayment of that financing.
Off-Balance Sheet Arrangements
As of December 31, 2021, we did not have any off-balance sheet arrangements, which have or are reasonably likely to have a material adverse effect on our financial condition, results of operations or liquidity.
Plan of Operation
The Plan of operation for the next twelve months includes the Company continuing the improvement and expansion of the test mining and pilot milling operations at SJG. The Company commenced its testing activities in fall 2015 at the rate of approximately 100 tons per 24-hour operating day from the mine and approximately the same output from the processing plant. Over the past five years, the Company has gradually increased its output to approximately 300 tons per 24-hour operating day from the mines and processing plant. In 2022, the Company projects to complete its next phase of expansion to reach the output of approximately 500 tons per 24-hour operating day from the mine and the processing plant.
The Company funds its general and administrative expenses in the U.S. from its Mexican operations. 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 2022.
Capital Expenditures
The Company’s primary activities relate to the test mining and pilot milling operations of the SJG property through its Mexican subsidiaries.
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). The agreement was terminated in October 2021 and all operations consolidated in Dyna Mexico.
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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated into and forming an integral part of this Form 10-K are the audited consolidated financial statements for the Company for the years ended December 31, 2021 and 2020. The consolidated financial statements as of December 31, 2021 and 2020 of the Company included in this Form 10-K have been audited by Armanino LLP, an independent registered public accounting firm, as set forth in their report.
Consolidated Financial Statements included in the Form 10-K:
Report of Independent Registered Public Accounting Firm PCAOB ID: 32
Consolidated Balance Sheets
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
Consolidated Statement of Changes in Stockholders’ (Deficit)
Consolidated Statements of Cash Flows for the Years
Notes to the Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
DynaResource, Inc.
Irving, Texas
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of DynaResource, Inc. (the "Company") and subsidiaries as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Derivative Liabilities
As described in Note 10 to the consolidated financial statements, the derivative liabilities represent the embedded conversion features of the Series C Preferred Stock, Preferred Series C Warrants, and Series D Notes Kicker Warrants. The Company has classified the derivative liabilities as Level 3 liabilities and the fair value of the liabilities are evaluated each reporting period. As of December 31, 2021, the derivative liabilities were $3,898,914. The derivative liabilities include both quantitative and qualitative components. The calculation of the fair value of the derivative liabilities used a Black-Scholes pricing model. Key components of the fair value calculation included: the annual volatility rate, the risk-free rate, the remaining term, and the fair value of the underlying common stock.
The principal considerations for our determination that performing procedures relating to the fair value of the derivative liabilities is a critical audit matter are: there was significant judgment and estimation used by management in determining the fair value of the derivative liabilities, which led to an increased level of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence obtained relating to the derivative liabilities, including the qualitative component.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included documenting the control environment in which judgements were made. These procedures also included, testing the reasonableness of the assumptions management used in the Black-Scholes pricing model, recalculating the change in fair value, and performing a stress-test on the assumptions.
ArmaninoLLP
Dallas, Texas
We have served as the Company's auditor since 2020.
March 24, 2022
DYNARESOURCE, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2021 and 2020
ASSETS
Current assets
Cash and cash equivalents
$ 15,719,238
$ 1,504,016
Accounts receivable
577,118
840,743
Inventories
2,110,203
603,967
Foreign tax receivable
4,742,180
2,179,914
Appeal bond
-
1,111,111
Other current assets
667,742
578,661
Total current assets
23,816,481
6,818,412
Property and equipment (net of accumulated
depreciation of $116,425 and $113,176)
2,729
5,978
Right-of-use assets
648,381
735,220
Mining concessions
4,132,678
4,132,678
Other assets
162,174
165,380
TOTAL ASSETS
$ 28,762,443
$ 11,857,668
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable
$ 1,275,679
$ 2,274,011
Accrued expenses
5,440,204
3,385,093
Customer advances
9,250,000
2,500,000
Derivative liabilities
3,898,914
2,371,560
Current portion of convertible notes payable
543,279
-
Current portion of operating lease payable
98,169
82,733
Current portion of long-term debt
1,962,525
1,984,007
Total current liabilities
22,468,770
12,597,404
Convertible notes payable - Series D (net of amortized discount of $0 and $755,214)
-
3,264,786
Convertible notes payable - Series I & II, less current portion
-
543,279
Operating lease payable, less current portion
587,782
685,951
Long term debt, less current portion
-
97,428
TOTAL LIABILITES
23,056,652
17,188,848
TEMPORARY EQUITY
Series C Senior Convertible Preferred Stock, $0.0001 par value, 1,734,992 shares authorized, issued and outstanding
4,337,480
4,337,480
Series D Senior Convertible Preferred Stock, $0.0001 par value, 3,000,000 shares authorized, 760,000 and 0 shares issued and outstanding
1,520,000
-
COMMITMENTS AND CONTINGENCIES
-
-
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, Series A, $0.0001 par value, 1,000 shares
authorized, issued and outstanding
Common Stock, $0.01 par value, 40,000,000 and 40,000,000 shares authorized
18,091,293 and 17,722,825 issued and outstanding
180,913
177,228
Preferred rights
40,000
40,000
Additional paid-in-capital
50,632,400
50,407,333
Treasury stock, 12,180 and 516,480 shares
(34,773 )
(1,474,486 )
Accumulated other comprehensive income
(247,665 )
438,092
Accumulated deficit
(50,722,465 )
(59,256,828 )
TOTAL STOCKHOLDERS’ DEFICIT
(151,589 )
(9,668,660 )
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
$ 28,762,443
$ 11,857,668
The accompanying notes are an integral part of these consolidated financial statements.
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
REVENUE
$ 35,886,046
$ 9,048,831
COSTS AND EXPENSES OF MINING OPERATION
Production cost applicable to sales
2,909,401
1,166,135
Mine production costs
3,965,467
2,370,972
Mine exploration costs
5,198,057
1,610,747
Mine expansion costs
1,478,725
909,190
Camp, warehouse and facilities
2,913,832
2,036,610
Transportation
1,330,414
528,423
Property holding costs
127,731
137,377
General and administrative
4,773,473
2,966,073
Depreciation and amortization
3,249
3,249
TOTAL OPERATING EXPENSES
22,700,349
11,728,776
NET OPERATING INCOME (LOSS)
13,185,697
(2,679,945 )
OTHER INCOME (EXPENSE)
Foreign currency gains (loss)
247,712
(361,127 )
Interest expense
(1,573,125 )
(1,133,360 )
Derivatives mark-to-market gain (loss)
(2,186,912 )
(1,186,964 )
Arbitration award expense
(1,111,111 )
-
Other income (expense)
1,072
(4,427 )
TOTAL OTHER INCOME (EXPENSE)
(4,622,364 )
(2,685,878 )
NET INCOME (LOSS) BEFORE TAXES
8,563,333
(5,365,823 )
PROVISION FOR INCOME TAXES
28,970
-
NET INCOME (LOSS)
$ 8,534,363
$ (5,365,823 )
DEEMED DIVIDEND FOR SERIES C & D PREFERRED
(188,699 )
(173,499 )
LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
-
61,589
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
$ 8,345,664
$ (5,477,733 )
EARNINGS PER SHARE ATTRIBUTABLE TO THE
EQUITY HOLDERS OF DYNARESOURCE, INC.
Basic and Diluted Income (loss) per common share
$ 0.47
$ (0.31 )
Weighted average shares outstanding - Basic and Diluted
17,797,528
17,722,825
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation gain (loss)
(685,757 )
100,582
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
(685,757 )
100,582
TOTAL COMPREHENSIVE INCOME (LOSS)
$ 7,848,606
$ (5,265,241 )
ATTRIBUTABLE TO:
EQUITY HOLDERS OF DYNARESOURCE, INC.
$ 7,848,606
$ (5,191,983 )
NON-CONTROLLING INTEREST
$ -
$ (73,258 )
The accompanying notes are an integral part of these consolidated financial statements.
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 2021 AND 2020
Preferred A
Common
Preferred
Preferred
Paid In
Treasury
Treasury
Other Comp
Accumulated
Non Controlling
Shares
Amount
Shares
Amount
Rights
Amount
Capital
Shares
Amount
Income
Deficit
Interests
Totals
Balance January 1, 2020
1,000
$ 1
17,722,825
$ 177,228
$ 40,000
$ 56,622,159
778,980
$ (2,223,891 )
$ 325,841
$ (53,952,594 )
$ (5,723,663 )
$ (4,734,919 )
Treasury Stock Issued for Services
(649,405 )
(262,500 )
749,405
100,000
Other Comprehensive Income
112,251
(11,669 )
100,582
Net Income (Loss)
(5,304,234 )
(61,589 )
(5,365,823 )
Elimination of Non-Controlling Interest
(5,565,421 )
5,796,921
231,500
Balance, December 31, 2020
1,000
$ 1
17,722,825
$ 177,228
$ 40,000
$ 50,407,333
516,480
$ (1,474,486 )
$ 438,092
$ (59,256,828 )
$ -
$ (9,668,660 )
Treasury Stock Issued for Services
(434,490 )
(504,300 )
1,439,713
1,005,223
Stock Warrants Exercised
368,468
3,685
659,557
663,242
Other Comprehensive Income
(685,757 )
(685,757 )
Net Income (Loss)
8,534,363
8,534,363
Balance, December 31, 2021
$ 1
18,091,293
$ 180,913
$ 40,000
$ 50,632,400
12,180
$ (34,773 )
$ (247,665 )
$ (50,722,465 )
$ -
$ (151,589 )
The accompanying notes are an integral part of these consolidated financial statements.
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020
CASH FLOWS FROM OPERATING ACTIVITES:
Net Income (Loss)
$ 8,534,363
$ (5,365,823 )
Adjustments to reconcile net income (loss) to cash used in operating activities
Change in derivatives
2,186,912
1,186,964
Depreciation and amortization
3,249
3,249
Amortization of loan discount
755,214
343,279
Stock issued for services
1,005,223
100,000
Non-dilution stock issuance
-
4,427
Change in operating assets and liabilities
Accounts receivable
263,625
262,462
Inventories
(1,506,236 )
(80,878 )
Foreign tax receivable
(2,562,266 )
(882,527 )
Appeal bond
1,111,111
(1,111,111 )
Right-of-use assets
86,839
77,641
Other assets
(85,875 )
(237,849 )
Accounts payable
(998,332 )
214,582
Accrued expenses
2,055,111
1,633,622
Customer advances
6,750,000
1,500,000
Operating lease liabilities
(82,733 )
(69,146 )
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
17,516,205
(2,421,108 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock warrants
3,685
-
Proceeds from borrowing
-
4,020,000
Payments of convertible notes
(2,500,000 )
(359,033 )
Payments of long-term debt
(61,406 )
(66,644 )
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
(2,557,721 )
3,594,323
Effects of foreign currency exchange
(743,262 )
(23,771 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVILANTS
14,215,222
1,149,444
CASH AND CASH EQUIVILANTS AT BEGINNING OF PERIOD
1,504,016
354,572
CASH AND CASH EQUIVILANTS AT END OF PERIOD
$ 15,719,238
$ 1,504,016
SUPPLEMENTAL DISCLOSURES
Cash paid for interest
$ 583,144
$ 206,642
Cash paid for income taxes
$ -
$ -
NON-CASH TRANSACTION
Accrued interest rolled into notes payable
$ -
$ 23,933
The accompanying notes are an integral part of these consolidated financial statements.
DYNARESOURCE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities, History and Organization
DynaResource, Inc. (The “Company”, “DynaResource”, or “DynaUSA”) was organized September 28, 1937, as a California corporation under the name of West Coast Mines, Inc. In 1998, the Company re-domiciled to Delaware and changed its name to DynaResource, Inc. The Company is in the business of acquiring, investing in, and developing precious metal properties, and the production of precious metals.
In 2000, the Company formed a wholly owned subsidiary, DynaResource de México S.A. de C.V., chartered in México (“DynaMéxico”). This Company was formed to acquire, invest in and develop resource properties in México. DynaMéxico owns a portfolio of mining concessions that currently includes its interests in the San José de Gracía Project (“SJG”) in northern Sinaloa State, México. The SJG District covers 9,920 hectares (24,513 acres) on the west side of the Sierra Madre mountain range. DynaUSA currently owns 80% of the outstanding capital of DynaMéxico. DynaMéxico currently holds 20% of the Shares of DynaMéxico as treasury shares, after complete foreclosure and recovery of those shares on February 20, 2020 from Goldgroup Resources Inc., a wholly owned subsidiary of Goldgroup Mining Inc. Vancouver, BC (“Goldgroup”).
In 2005, the Company formed DynaResource Operaciones de San Jose De Gracía S.A. de C.V. (“DynaOperaciones”) as an operating subsidiary to manage registered employees, and acquired effective control of Mineras de DynaResource, S.A. de C.V. (formerly Minera Finesterre S.A. de C.V., “DynaMineras”). The Company owns 100% of DynaMineras and 100% of DynaOperaciones.
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.
Significant Accounting Policies
The consolidated 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 consolidated financial statements which present fairly the consolidated financial condition, results of operations and cash flows of the Company for the respective periods presented.
Basis of Presentation
The Company prepares its consolidated financial statements on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States.
Use of Estimates
In order to prepare consolidated financial statements in conformity with accounting principles generally accepted in the United States, management must make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and determines whether contingent assets and liabilities, if any, are disclosed in the consolidated financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from the resolution currently anticipated by management and on which the consolidated financial statements are based.
Principles of Consolidation
The consolidated financial statements include the accounts of DynaResource, Inc., as well as DynaResource de México, S.A. de C.V. (100% ownership), DynaResource Operaciones S.A. de C.V. (100% ownership) and Mineras de DynaResource S.A. de C.V. (100% ownership). All significant inter-company transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated.
Non-Controlling Interest
The Company’s subsidiary, DynaResource de México S.A. de C.V, was 20% owned by Goldgroup Resources, Inc. until February 20, 2020 when the Company recovered the shares as partial satisfaction of a legal judgement. See Note 11 for further details.
The Company accounted for this outside interest as a “non-controlling interest” through February 2020. A 20% share of operating income (loss) and comprehensive income (loss) was allocated to the non-controlling interest through the date of the recovery of the shares.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. At times, cash balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. As of December 31, 2021, the Company had $15,266,823 of deposits in U.S. Banks in excess of the FDIC limit. The Company does not believe it is at a risk of loss.
Accounts Receivable and Allowances for Doubtful Accounts
The allowance for accounts receivable is recorded when receivables are considered to be doubtful of collection. As of December 31, 2021, and 2020, respectively, no allowance has been made. During the year the Company recorded a $381,871 bad debt write off of receivables from a former customer of the Company. At, December 31, 2021 management believes all current receivables are fully collectable.
Inventories
Inventories are carried at the lower of cost or net realizable value and consist of mined tonnage, gravity and flotation concentrates, and gravity tailings or flotation feed material. The inventories were $2,110,203 and $603,967 as of December 31, 2021 and December 31, 2020, respectively.
Foreign Tax Receivable
Foreign Tax Receivable is comprised of recoverable value-added taxes (“IVA”) charged by the Mexican government on goods and services rendered to the company in Mexico and paid by the company. Under certain circumstances, these taxes are recoverable by filing a tax return and application for reimbursement. IVA amounts charged to and paid by the company are recorded and carried as receivables until the funds are collected by the company. The total amounts of the IVA receivable as of December 31, 2021 and December 31, 2020 were $4,742,180 and $2,179,914, respectively.
Proven and Probable Reserves (No Known Reserves)
The definition of proven and probable reserves is set forth in SEC Industry Guide 7 (“Industry Guide 7”). Proven reserves for which (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, grade and/or quality are computed from the results of detailed sampling and (2) the sites for inspection, sampling and measurement are spaced so closely and the geological character is so well defined that size, shape, depth and mineral content of the reserves are well-established. Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observations.
As of December 31, 2021, 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 Gracía Property, as exploration stage projects since no proven or probable reserves have been established under Industry Guide 7.
Technical Report and Resource Estimate According to Canadian National Instrument 43-101 (2012)
In 2012, DynaMéxico commissioned Servicios y Proyectos Mineros (“SPM”) for the production of Technical Report 43-101 (“43-101”) at San Jose de Gracía. Additionally, DynaMéxico commissioned Mr. Robert Sandefur, a senior reserve analyst for Chlumsky, Armbrust & Meyer LLC, Lakewood, CO (“CAM”) to produce a mineral resource estimate for the 4 main vein systems at the property. The Company plans to update this report in 2022.
Property and Equipment
Substantially all mine development costs, including design, engineering, mine construction, and installation of equipment are expensed as incurred as the Company has not established proven and probable reserves on any of its properties. Only certain types of mining equipment which has alternative uses or significant salvage value, may be capitalized without proven and probable reserves. Depreciation is computed using the straight-line method. Office furniture and equipment are being depreciated on a straight-line method over estimated economic lives ranging from 3 to 5 years. Leasehold improvements, which relate to the Company's corporate office, are being amortized over the term of the lease of 10 years.
Design, Construction, and Development Costs: Mine development costs include engineering and metallurgical studies, drilling and other related costs to delineate an ore body, the removal of overburden to initially expose an ore body at open pit surface mines and the building of access ways, shafts, lateral access, drifts, ramps and other infrastructure at underground mines.
When proven and probable reserves as defined by Industry Guide 7 exist, development costs are capitalized, and the property is a commercially minable property. Mine development costs incurred either to develop new ore deposits, expand the capacity of operating mines, or to develop mine areas substantially in advance of current production would be capitalized. Costs of start-up activities and costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations as incurred. Costs of abandoned projects are charged to operations upon abandonment. All capitalized costs would be amortized using the units of production method over the estimated life of the ore body based on recoverable ounces to be mined from proven and probable reserves.
Certain costs to design and construct mining and processing facilities may be incurred prior to establishing proven and probable reserves. As no proven and probable reserves have been established on any of the Company's properties, design, construction and development costs are not capitalized at any of the Company's properties, and accordingly, substantially all costs are expensed as incurred, resulting in the Company reporting larger operating expenses 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 consolidated financial statements may not be comparable to the consolidated financial statements of mining companies that have established reserves as defined in Industry Guide 7.
Mineral Properties Interests
Mineral property interests include acquired interests in development and exploration stage properties, which are considered tangible assets. The amount capitalized relating to a mineral property interest represents its fair value at the time of acquisition. When a property does not contain mineralized material that satisfies the definition of proven and probable reserves, such as with the San Jose de Gracía Property, capitalized costs and mineral property interests are amortized using the straight-line method once production begins. As of December 31, 2021, the mining interests have been in the pilot production stage and therefore, no amortization has been expensed. Mining properties consist of 33 mining concessions covering approximately 9,920 hectares at the San Jose de Gracía property (“SJG”), the basis of which are amortized on the unit of production method based on estimated recoverable resources. If it is determined that the deferred costs related to a property are not recoverable over its productive life, those costs will be written down to fair value as a charge to operations in the period in which the determination is made. The amounts at which mineral properties and the related costs are recorded do not necessarily reflect present or future values.
Impairment of Assets: The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Mineral properties are monitored for impairment based on factors such as mineral prices, government regulation and taxation, the Company's continued right to explore the area, exploration reports, assays, technical reports, drill results and its continued plans to fund exploration programs on the property.
For operating mines, recoverability is measured by comparing the undiscounted future net cash flows to the net book value. When the net book value exceeds future net undiscounted cash flows, an impairment loss is measured and recorded based on the excess of the net book value over fair value. Fair value for operating mines is determined using a combined approach, which uses a discounted cash flow model for the existing operations and a market approach for the fair value assessment of exploration land claims. Future cash flows are estimated based on quantities of recoverable mineralized material, expected gold and silver prices (considering current and historical prices, trends and related factors), production levels, operating costs, capital requirements and reclamation costs, all based on life-of-mine plans. The term "recoverable mineralized material" refers to the estimated amount of gold or other commodities that will be obtained after considering losses during processing and treatment of mineralized material. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company's estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold, silver and other commodity prices, production levels and costs and capital are each subject to significant risks and uncertainties.
The recoverability of the book value of each property is 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 is completed as needed, and at least annually. As of the date of this filing, no events have occurred that would require write-down of any assets. As of December 31, 2021, and 2020, no indications of impairment existed.
Asset Retirement Obligation
As the Company is not obligated to remediate the mining properties, no Asset Retirement Obligation (“ARO”) has been established. Changes in regulations or laws, any instances of non-compliance with laws or regulations that result in fines, or any unforeseen environmental contamination could result in a material impact to the amounts charged to operations for reclamation and remediation.
Transactions in and Translations of Foreign Currency
The functional currency for the subsidiaries of the Company is the Mexican Peso. As a result, the financial statements of the subsidiaries have been translated from Mexican Pesos into U.S. dollars using (i) year-end exchange rates for balance sheet accounts, and (ii) the weighted average exchange rate of the reporting period for all income statement accounts. Foreign currency translation gains and losses are reported as a separate component of stockholders’ equity and comprehensive income (loss).
The financial statements of the subsidiaries should not be construed as representations that Mexican Pesos have been, could have been or may in the future be converted into U.S. dollars at such rates or any other rates.
Relevant exchange rates used in the preparation of the financial statements for the subsidiaries are as follows for the years ended December 31, 2021 and 2020 (Mexican Pesos per one U.S. dollar):
Dec 31, 2021
Dec 31, 2020
Current exchange rate
Pesos
20.48
19.91
Weighted average exchange rate for the period ended
Pesos
20.29
21.47
The Company recorded currency transaction gains (losses) of $247,712 for the year ended December 31, 2021 and $(361,127) for the year ended December 31, 2020.
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 in accordance with applicable Mexican tax law.
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 consolidated financial statements. The Company’s comprehensive income consists of net income and other comprehensive income (loss), consisting of unrealized net gains and losses on the translation of the assets and liabilities of its foreign operations.
Revenue Recognition
The Company accounts for revenue recognition under ASC 606 “Revenue from contracts with customers”. The Company generates revenue by selling gold and silver produce from its mining operations. The Company recognizes revenue for gold and silver concentrate production, net of treatment and refining costs, when it satisfies the performance obligation of transferring control of the concentrate to the customer. This is generally when the material is delivered to the customer facility for treatment and processing as the customer has the ability to direct the use of and obtain substantially all the remaining benefits from the material and the customer has the risk of loss.
The amount of revenue recognized is initially recorded on a provisional basis based on the contract price and the estimated metal quantities based on assay data. The revenue is adjusted upon final settlement of the sale. The chief risk associated with the recognition of sales on a provisional basis is the fluctuations between the estimated quantities of precious metals based on the initial assay and the actual recovery from treatment and processing.
As of December 31, 2021, there are $9,250,000 in customer advances for payments received during the period for contracts expected to be settled in 2022.
During the years ended December 31, 2021, and December 31, 2020, there was $1,500,000 and $0 of revenue recognized during the period from customer deposit liabilities (deferred contract revenue) from prior periods, and $0 of customer deposits refunded to the customer due to order cancellation.
As of and for the year ended December 31, 2021, and December 31, 2020, there are no deferred contract costs or commissions.
We have elected to account for shipping and handling costs as fulfillment costs after the customer obtains control of the concentrate.
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.
Earnings Per Share
Earnings per share are calculated in accordance with ASC 260 “Earnings per Share”. The weighted average number of common shares outstanding during each period is used to compute basic earnings (loss) per share. Diluted earnings per share are computed using the weighted average number of shares and potentially dilutive common shares outstanding. Potentially dilutive common shares are additional common shares assumed to be exercised. Potentially dilutive common shares consist of stock warrants, convertible preferred shares and convertible notes and are excluded from the diluted earnings per share computation in periods where the Company has incurred a net loss, as their effect would be considered anti-dilutive.
The Company had 3,060,998 warrants outstanding at December 31, 2021 which upon exercise, would result in the issuance of 3,060,998 shares of common stock. Of these warrants 2,168,833 were exercisable at $2.05 per share and 892,165 were exercisable at $.01 per share. The Company also had convertible debt instruments as of December 31, 2021 which, upon conversion at $2.50 per share, would result in the issuance of 217,312 shares of common stock.
The Company had 3,429,466 warrants outstanding at December 31, 2020 which upon exercise, would result in the issuance of 3,429,466 shares of common stock. Of these warrants 2,168,833 were exercisable at $2.05 per share and 1,260,633 were exercisable at $.01 per share. The Company also had convertible debt instruments as of December 31, 2020 which, upon conversion at valuations from $2.00 to $2.50 per share, would result in the issuance of 2,227,312 shares of common stock.
Years ended December 31
Net income (loss) attributable to common shareholders
$ 8,345,664
$ (5,477,733 )
Shares:
Weighted average number of common shares outstanding, Basic
17,797,528
17,722,825
Weighted average number of common shares outstanding, Diluted
17,797,528
17,722,825
Basic income (loss) per share
$ 0.47
$ (0.31 )
Diluted income (loss) per share
$ 0.47
$ (0.31 )
At December 31, 2021, 2,168,833 shares of potentially dilutive common stock related to outstanding stock warrants and 217,312 shares of potentially dilutive common stock related to convertible debt were excluded from the diluted earnings per share calculation, using the treasury stock method, because the exercise and conversion prices exceeded the average stock price and therefore their effect would be anti-dilutive. In addition, at December 31, 2021, 892,165 of potentially dilutive common stock related to outstanding stock were excluded from the diluted earnings per share calculation as the net income impact of the converted shares would cause earnings per share to increase, therefore their effect would be antidilutive.
At December 31, 2020, potentially dilutive common shares related to stock warrants and convertible debt were excluded from the diluted earnings per share computation because the Company incurred a net loss and therefore their effect would be anti-dilutive.
Related Party Transactions
FASB ASC 850 "Related Party Disclosures" requires companies to include in their consolidated financial statements disclosures of material related party transactions. The Company discloses all material related party transactions. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
NOTE 2 - INVENTORIES
Inventories are carried at the lower of cost or fair value and consist of mined tonnage, gravity-flotation concentrates, and gravity tailings (or, flotation feed material). Inventory balances at December 31, 2021 and 2020, respectively, were as follows:
Mined Tonnage
$ 2,042,633
$ 555,608
Gold-Silver Concentrates
67,570
48,359
Total Inventories
$ 2,110,203
$ 603,967
NOTE 3 - PROPERTY
Property consists of the following at December 31, 2021 and 2020:
Leasehold improvements
$ 9,340
$ 9,340
Office equipment
31,012
31,012
Office furniture and fixtures
78,802
78,802
Sub-total
119,154
119,154
Less: Accumulated depreciation
(116,425 )
(113,176 )
Total Property
$ 2,729
$ 5,978
Depreciation and amortization has been provided over each asset’s estimated useful life. Depreciation and amortization expense was $3,249 and $3,249 for the years ended December 31, 2021 and 2020 respectively.
NOTE 4 - MINING CONCESSIONS
Mining properties consist of the San Jose de Gracía (“SJG”) concessions. Mining Concessions were $4,132,678 and $4,132,678 at December 31, 2021 and December 31, 2020, respectively.
There was no depletion expense for the years ended December 31, 2021 and 2020.
NOTE 5 - 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 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 Notes originally matured on December 31, 2015. As of December 31, 2018, seven of the Series I Notes totaling $646,875 had subsequently been extended to December 30, 2019. On December 31, 2019, the Company entered into agreements to extend seven outstanding notes totaling $646,875 plus accrued interest totaling $34,277 for new total notes of $681,152 until December 31, 2020.
On March 31, 2020, the Company entered into agreements to extend the seven outstanding notes totaling $681,152 plus accrued interest totaling $21,286 for a new total of $702,438 until June 30, 2022. At December 31, 2020 one note for $246,533 was paid off leaving six Series I Notes remaining outstanding with a total balance of $455,905.
At December 31, 2021, six Series I Notes remained outstanding with a total balance of $455,905. The Company has the right to prepay the Series I Notes with a ten percent (10%) penalty.
The Series I Note holders retain the option, at any time prior to maturity or prepayment, to convert any unpaid principal and accrued interest into Common Stock at $2.50 per share. If the Series I Note is converted into Common Stock, at the time of conversion, the holder would also receive warrants, in the same number as the number of common shares received upon conversion, to purchase additional common shares of the Company for $7.50 per share, with such warrants expiring one year from their conversion date.
Notes Payable - Series II
In 2013 and 2014, the Company entered into additional note agreements of $199,808 and $250,000, respectively (the “Series II Notes”) with similar terms as the Series I Notes. The Series II Notes bear simple interest at twelve and a half percent (12.5%), accrued for twelve months, and with the accrued interest to be added to the principal, and then interest will be paid by the Company, quarterly in arrears
The Notes originally matured on December 31, 2015. On December 31, 2019 the Company entered into agreements to extend the two notes totaling $78,750 plus accrued interest of $5,977 for total new notes of $84,726 to December 31, 2020. One note for $112,500 was not extended and was past due as of December 31, 2019. At December 31, 2019 three Series II notes remained outstanding for $197,226.
On March 31, 2020, the Company entered into agreements to extend the two notes totaling $84,726 plus accrued interest of $2,648 for total new notes of $87,374 to June 30, 2022. One note for $112,500 was not extended and was paid off in May 2020. At December 31, 2020, two Series II notes remained outstanding for $87,374.
At December 31, 2021, two Series II notes remained outstanding with a balance of $87,374. The Company has the right to prepay the Series II Notes with a ten percent (10%) penalty.
The Note holder may, at any time prior to maturity or prepayment, convert any unpaid principal and accrued interest into common stock of the Company at $2.50 per share. At the time of conversion, the holder would receive a warrant to purchase additional common shares of the Company for $7.50 per share, such warrant expiring one year from their conversion date.
NOTE 6 - INCOME TAXES
FASB ASC 740-10, Income Taxes, mandates the asset and liability approach to determine the income tax provision or benefit. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.
Income tax receivables and liabilities and deferred tax assets and liabilities are recognized based on the amounts that more likely than not will be sustained upon ultimate settlement with taxing authorities.
Developing our provision for income taxes and analysis of uncertain tax positions requires significant judgment and knowledge of federal and state income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets.
We assess the realization of our deferred tax assets to determine whether an income tax valuation allowance is required. Based on all available evidence, both positive and negative, and the weight of that evidence to the extent such evidence can be objectively verified, we determine whether it is more likely than not that all or a portion of the deferred tax assets will be realized. The main factors that we consider include:
·
Cumulative profits/losses in recent years, adjusted for certain nonrecurring items;
·
Income/losses expected in future years;
·
Unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels;
·
The availability, or lack thereof, of taxable income in prior carryback periods that would limit realization of tax benefits; and
·
The carryforward period associated with the deferred tax assets and liabilities.
We consider many factors when evaluating our uncertain tax positions, and such judgments are subject to periodic review. Tax benefits associated with uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (1) the more likely than not recognition threshold is satisfied; (2) the position is ultimately settled through negotiation or litigation; or (3) the statute of limitations for the taxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the more likely than not recognition threshold is no longer satisfied.
The Company's pre-tax income (loss) by jurisdiction was as follows for the years ending December 31, 2021 and December 31, 2020:
Year ended December 31,
Year ended December 31,
Domestic
$ (10,064,644 )
$ (3,955,124 )
Foreign
18,627,977
(1,410,699 )
Total
$ 8,563,333
$ (5,365,823 )
The provision for income taxes for continuing operations for the year ended December 31, 2021 and 2020 consist of the following:
Year ended
December 31,
Year ended
December 31,
Current income taxes
Federal
$ -
$ -
State
-
-
Foreign
28,970
-
Total current income taxes
28,970
-
Deferred income taxes
Federal
-
-
State
-
-
Foreign
-
-
Total deferred income taxes
-
-
Total income tax expense (benefit)
$ 28,970
$ -
A reconciliation between the amount of reported income tax expense (benefit) and the amount computed by multiplying income from continuing operations before income taxes by the statutory federal income tax rate is shown below. Income tax expense for the year ended December 31, 2021 includes state minimum taxes, permanent differences, and deferred tax assets for which a full valuation allowance has been placed. A corresponding tax expense is included for the year ended December 31, 2021 to reflect the decrease in the valuation allowance.
Year ended December 31,
Year ended December 31,
Tax Expense at statutory federal rate of 21%
$ 1,798,300
$ (1,126,823 )
State income taxes, net of federal income tax benefit
Permanent Differences
501,707
342,351
Foreign Rate Differential
1,103,990
(126,963 )
Change in Valuation Allowance
(1,144,539 )
953,120
Other
(2,230,488 )
(41,685 )
Income tax expense (benefit)
$ 28,970
$ -
Deferred income taxes reflect the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. The following table discloses those significant components of our deferred tax assets and liabilities, including any valuation allowance:
Long-term deferred tax assets:
Federal Net Operating Loss Carryforwards
$ 12,327,599
$ 13,473,000
State Net Operating Loss Carryforwards
Other
Total deferred tax assets before valuation allowance
12,328,461
13,473,000
Deferred tax liabilities:
Total deferred tax liabilities
-
-
Valuation Allowance
(12,328,461 )
(13,473,000 )
Net deferred tax assets and liabilities
$ -
$ -
During the year ended December 31, 2021, the valuation allowance decreased by $1.2 million. The Company believes a full valuation allowance against the net deferred tax asset is appropriate based on the negative evidence against future taxable income. The Company is currently in a three-year cumulative loss and does not believe there is evidence to suggest future taxable income to realize its deferred tax assets. The Company will continue to evaluate the realiziability of its deferred tax assets in future years.
We account for uncertain tax positions in accordance with ASC 740-10-25, which prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The following table summarized the total changes in unrecognized tax benefits in continuing operations during the years ended December 31, 2021 and 2020. Such amounts include unrecognized tax benefits that have impacted deferred tax assets and liabilities as of December 31, 2021 and 2020.
Balance - beginning of year
$ -
$ -
Gross increases - tax positions in prior period
-
-
Gross decreases - tax positions in prior period
-
-
Gross increases - tax positions in current period
-
-
Settlement
-
-
Lapse of Statute of limitations
-
-
Uncertain Tax Benefit - end of year
$ -
$ -
The total amount of unrecognized tax benefits as of December 31, 2021 was $0, of which none, if recognized, would affect our effective tax rate and income tax benefit from continuing operations.
Our practice is to recognize interest and penalties related to income tax matters in income tax expense in our consolidated statements of operations. We did not have any interest or penalties on unrecognized tax benefits accrued at December 31, 2021.
The Company is subject to income taxes in the US federal jurisdiction and various state jurisdictions and Mexico. With few exceptions, the Company is no longer subject to US federal, state and local tax examinations by tax authorities for years prior to fiscal year 2017. The Company is no longer subject to Mexican tax examinations for years prior to fiscal year 2017. The Company is currently not under audit by any tax authority.
At December 31, 2021, our carryforwards available to offset future taxable income consisted of (1) federal net operating loss (“NOL”) carryforwards of approximately $19.1 million pre-tax, $16.4 million of which expires in 2029 to 2037 and $2.7 million of which has no expiration date, (2) foreign net operating losses of $12.5 million. Our ability to utilize NOL carryforwards to reduce future taxable income may be limited under Section 382 of the Internal Revenue Code if certain ownership changes in our company occur during a rolling three-year period. These ownership changes include purchases of common stock under share repurchase programs, the offering of stock by us, the purchase or sale of our stock by 5% shareholders, as defined in the Treasury regulations, or the issuance or exercise of rights to acquire our stock. If such ownership changes by 5% shareholders result in aggregate increases that exceed 50 percentage points during the three-year period, then Section 382 imposes an annual limitation on the amount of our taxable income that may be offset by the NOL carryforwards or tax credit carryforwards at the time of ownership change.
U.S. earnings (loss) from continuing operations
$ 8,563,333
$ -
U.S. federal income tax expense (benefit)
State income tax expense (benefit)
Foreign income tax expense (benefit)
28,970
-
Total tax expense (benefit) from continuing operations
28,970
-
Federal Deferred Incoome Taxes
State Deferred Income Taxes
Foreign income tax expense (benefit)
Total Deferred Income taxes from continuing operations
-
-
Total Provision for income taxes
$ 28,970
$ -
NOTE 7 - STOCKHOLDERS’ EQUITY
Authorized Capital. The total number of shares of all classes of capital stock which the corporation shall have the authority to issue is 60,001,000 shares, consisting of (i) twenty million and one thousand (20,001,000) shares of Preferred Stock, par value $0.0001 per share (“Preferred Stock”), of which one thousand (1,000) shares shall be designated as Series A Preferred Stock, 1,734,992 are designated as Series C Preferred Stock, and 3,000,000 shares are designated as Series D Preferred Stock and (ii) forty million (40,000,000) shares of Common Stock, par value $0.01 per share (“Common Stock”). As of December 31, 2021, 15,265,008 of Preferred stock remain undesignated.
Series A Preferred Stock
The Company has designated 1,000 shares of its Preferred Stock as Series A, having a par value of $0.0001 per share. Holders of the Series A Preferred Stock have the right to elect a majority of the Board of Directors of the Company. The Company issued 1,000 shares of Series A Preferred Stock to its CEO. At December 31, 2021 and December 31, 2020, there were 1,000 shares of Series A Preferred Stock outstanding.
Series C Senior Convertible Preferred Stock
At December 31, 2021 and December 31, 2020 there were 1,734,992 and 1,734,992 Series C Preferred shares outstanding, respectively. These Series C Preferred Shares are convertible to common shares at $2.50 per share, through June 30, 2022 and include anti-dilution protection. The Series C Preferred Shares may receive a 4% per annum dividend, payable if available, and in arrears. The Dividend is calculated at 4.0% of $4,337,480 payable annually on June 30. At December 31, 2021 dividends for the years 2017 to 2021 totaling $866,940 were in arrears.
Due to the nature of this transaction as mandatorily redeemable by the Company at the election of the Series C preferred stock shareholder at maturity, the Series C Senior Convertible Preferred Shares are classified as “temporary equity” on the balance sheet.
Preferred
Series C
Carrying Value, December 31, 2019
$ 4,333,053
Issuances at Fair Value, Net of Issuance Costs
-
Bifurcation of Derivative Liability
-
Relative Fair Value of Warrants - Preferred Stock Discount
4,427
Accretion of Preferred Stock to Redemption Value
-
Carrying Value, December 31, 2020
4,337,480
Bifurcation of Derivative Liability
-
Issuances at Fair Value, Net of Issuance Costs
-
Relative Fair Value of Warrants - Preferred Stock Discount
-
Accretion of Preferred Stock to Redemption Value
-
Carrying Value, December 31, 2021
$ 4,337,480
Series D Senior Convertible Preferred Stock
Financing Agreement with Golden Post Rail, LLC, a Texas Limited Liability Company, and with Shareholders of DynaResource, Inc.
On May 14, 2020, the Company closed an additional financing agreement with Golden Post, and with certain individual shareholders of DynaUSA (“DynaUSA Shareholders”), and related agreements. A summary of the transactions and related agreements are set forth below:
1.
Pursuant to the May 14, 2020 Note Purchase Agreement (the “NPA”) among the Company, Golden Post Rail, LLC (the “Lead Purchaser”), and the other parties listed on Exhibit A of the NFP (the “Remaining Purchasers”):
•
Golden Post acquired the following securities:
(a)
A convertible promissory note (the “Golden Post Note”) payable to Golden Post in the principal amount of $2,500,000, bearing interest at 10%, and maturing two years from the date of execution. One half of the principal amount of the Golden Post Note, or $1,250,000, has been fully funded in accordance with an agreed-upon draw summary and budget. The balance of the principal amount will also be funded in accordance with agreed-upon draw summaries and the budget. The Golden Post Note is convertible, at the option of Golden Post, into shares of Series D Senior Convertible Preferred Stock (the “Series D Preferred”) at a conversion price of $2.00 per share; and
(b)
A common stock purchase warrant (the “2020 Warrant”) for the purchase of 783,976 shares of the Company’s common stock, at an exercise price of $0.01 per share, and maturing on the 10-year anniversary of the date of issuance. The 2020 Warrant contains anti-dilution provisions; and
•
The Remaining Purchasers acquired the following securities:
(a)
Convertible promissory notes (the “Remaining Notes”) in the aggregate principal amount of $1,400,000, bearing interest at 10%, and maturing two years from the date of issuance. The Remaining Notes have been fully funded. The Remaining Notes are convertible, at the option of each individual Remaining Purchaser, into shares of Series D Preferred at a conversion price of $2.00 per share; and
(b)
Common stock purchase warrants (the “Remaining Purchasers Warrants”) for the purchase of an aggregate of 439,026 shares of the Company’s common stock, at an exercise price of $0.01 per share, and maturing on the 10-year anniversary of the date of issuance. The Remaining Purchasers Warrants contain anti-dilution provisions.
2.
Also pursuant to the NPA, the Company and the Lead Purchaser have agreed to amend the common stock purchase warrant dated June 30, 2015 (the “2015 Warrant”), issued to the Lead Purchaser in connection with that certain Securities Purchase Agreement dated as of May 6, 2015. The 2015 Warrant contemplates the purchase, upon exercise, of 2,166,527 shares (subject to adjustment) of the Company’s common stock and matured June 30, 2020 (the “Termination Date”). The amendment to the 2015 Warrant provides that, following the expiration of the 2015 Warrant pursuant to its terms, the Company will issue to the Lead Purchaser a new warrant (the “New Warrant”), substantially in the same form of the 2015 Warrant, for the number of shares of the Company’s common stock that went unexercised on the Termination Date, if any. The New Warrant has a maturity date of June 30, 2022.
3.
As part of the transaction contemplated by the NPA, the Company executed an Amended and Restated Registration Rights Agreement pursuant to which Golden Post may require the Company to register the shares of common stock which may be issued upon (i) the conversion of the Series C Senior Convertible Preferred Stock (“Series C Preferred”), (ii) the conversion of the Series D Preferred, and (iii) the shares of common stock issuable upon the exercise of the 2015 Warrant, the 2020 Warrant, and a compensatory warrant issued to the Lead Purchaser on May 13, 2020 (described below under the heading “Compensatory Issuances”), including any additional shares of common stock issuable pursuant to anti-dilution provisions of such securities.
4.
Pursuant to the transaction contemplated by the NPA, the Company agreed to call a special meeting of Company stockholders, to be held not later than July 14, 2020, to solicit stockholder approval of (a) an amendment of the Company’s certificate of incorporation to increase the number of authorized shares of common stock from 25,000,000 shares to 40,000,000 shares, and (b) an amendment of the Certificate of Designations of the Series C Preferred, in order to (a) extend the maturity date of the Series C Preferred by an additional two (2) years, (ii) add an equity cap in respect of the conversion of Series C Preferred into common stock of the Company, and (iii) add certain restrictions on the ability of the Company to issue Series C Preferred. The special meeting was properly called and held on July 13, 2020, whereby Company stockholders confirmed approval for each item referenced in item 4 above.
5.
Compensatory Issuances. On May 13, 2020, one business day prior to the NPA, the Company issued to the Lead Purchaser the following: (i) a common stock purchase warrant for 2,306 shares, at an exercise price of $0.01 per share, and maturing on the 7-year anniversary of the date of issuance (the “Compensatory Warrant”); and (ii) 1,771 shares of Series C Preferred Shares. These issuances were occasioned by the Company’s obligations under the Securities Purchase Agreement dated as of May 6, 2015.
6.
In order to accommodate the issuance of the additional 1,771 shares of Series C Preferred, on May 13, 2020 the Company filed with the Secretary of State of Delaware a Certificate of Increase of Series C Senior Convertible Preferred Stock, to increase the number of shares of preferred stock designated as Series C Preferred from 1,733,221 shares to 1,734,992 shares (“Certificate of Increase”).
7.
Also, on May 13, 2020, the Company filed with the Secretary of State of Delaware a Certificate of Designations of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions thereof of Series D Senior Convertible Preferred Stock, contemplating the authorization of 3,000,000 shares of Series D Preferred (“Certificate of Designation”).
On October 11, 2021 the Company filed an amended designation of Series D Preferred Stock with the State of Delaware which removed the anti-dilution provisions of the original designation.
Retirement of Series D Convertible Debt
On October 7, 2021, the Company paid $2,500,000 to repurchase one note that was convertible into Series D Preferred Stock.
The remaining ten noteholders of notes convertible into Series D Preferred Stock elected to convert their notes totaling $1,520,000 into Series D Preferred stock at $2.00 per share. On October 18, 2021 the Company issued 760,000 shares of Series D Preferred Stock for these notes.
In addition the redemption of the Series D notes trigged an acceleration of the amortization of the original loan discount booked at the issuance of the Series D notes (see discussion below) and being amortized over the 24 month life of the notes of $287,508 in October 2021.
As part of the transaction all Series D noteholders agreed to waive the non-dilution rights contained in the original note and an amendment of the Series D Preferred Stock designation was filed with the State of Delaware.
At December 31, 2021 and December 31, 2020, there were 760,000 and 0 Series D Preferred shares outstanding, respectively. These Series D Preferred Shares are convertible to common shares at $2.00 per share, through October 18, 2026. The Series D Preferred Shares may receive a 4% per annum dividend, payable if available, and in arrears. The Dividend is calculated at 4.0% of $1,520,000 payable annually on October 18. At December 31, 2021, no dividends were in arrears.
Due to the nature of this transaction as mandatorily redeemable by the Company at the election of the Series D preferred stock holder at maturity, the Series D preferred shares are classified as “temporary equity” on the balance sheet.
Due to underlying anti-dilutive provisions contained in the Series C Preferred Stock and the Golden Post Warrant, the Company incurred derivative liabilities. On May 14, 2020 in connection with the Series D Convertible Note financing, the expiration date for the Series C Preferred Stock and the Golden Post warrants were extended to June 30, 2022. In addition, a new derivative liability was incurred due to the issuance of warrants for kicker shares. At December 31, 2021, the total derivative liability was $3,898,914 which included $1,019,431 for the Series C Preferred Stock, and $1,320,380 in connection with the Golden Post Warrants and $1,559,103 in connection with the Series D Convertible Note Kicker Warrants. At December 31, 2020, the total derivative liability was $2,371,560 which included $601,313 for the Series C Preferred Stock, and $817,613 in connection with the Golden Post Warrants and $952,634 in connection with the Series D Convertible Note Kicker Warrants. The deemed dividend for the years ending December 31, 2021, and December 31, 2020 were $188,699 and $173,490, respectively. As the Company has not declared these dividends, it is required only as an item “below” the net income (loss) amount on the accompanying consolidated statements of income (loss).
A discount of $1,098,492 was recorded on the Series D financing as a result of the valuation the total liabilities including the derivatives . The discount was amortized over the two year life of the loan on a straight line basis.
Preferred Stock (Undesignated)
In addition to the 1,000 shares designated as Series A Preferred Stock, the 1,734,992 shares designated as Series C Preferred Shares and 3,000,000 shares designated as Series D Preferred Stock, the Company is authorized to issue an additional 15,265,008 shares of Preferred Stock, having a par value of $0.0001 per share. The Board of Directors of the Company has authority to issue the Preferred Stock from time to time in one or more series, and with respect to each series of the Preferred Stock, to fix and state by the resolution the terms attached to the Preferred Stock. At December 31, 2021 and December 31, 2020, there were no other shares of Preferred Stock outstanding.
Separate Series; Increase or Decrease in Authorized Shares. The shares of each series of Preferred Stock may vary from the shares of any other series thereof in any or all of the foregoing respects and in any other manner. The Board of Directors may increase the number of shares of Preferred Stock designated for any existing series by a resolution adding to such series authorized and unissued shares of Preferred Stock not designated for any other series. Unless otherwise provided in the Preferred Stock Designation, the Board of Directors may decrease the number of shares of Preferred Stock designated for any existing series by a resolution subtracting from such series authorized and unissued shares of Preferred Stock designated for such existing series, and the shares so subtracted shall become authorized, unissued and undesignated shares of Preferred Stock.
Common Stock
The Company is authorized to issue 40,000,000 common shares at a par value of $0.01 per share. These shares have full voting rights. At December 31, 2021 and December 31, 2020, there were 18,091,293 and 17,722,825 shares outstanding, respectively. No dividends were paid for the years ended December 31, 2021 and 2020, respectively.
Preferred Rights
The Company issued “Preferred Rights” for the rights to percentages of revenues generated from the San Jose de Gracía Pilot Production Plant and received $784,500 for these rights. This has been reflected as “Preferred Rights” in stockholders’ equity. As of December 31, 2021, $744,500 had been repaid, leaving a current balance of $40,000 and $40,000 as of December 31, 2021 and 2020, respectively
Stock Issuances
On October 18, 2021, the Company issued 368,468 shares of common stock upon the exercise of 368,468 warrants by five warrant holders for $.01 a share.
There were no issuances of common stock during the year ending December 31, 2020.
Treasury Stock
During the year ending December 31, 2021, 504,300 treasury shares were transferred for services provided to the Company. At December 31, 2021, 12,180 treasury shares remained outstanding.
During the year ending December 31, 2020, 262,500 treasury shares were transferred for services provided to the Company. At December 31, 2020, 516,480 treasury shares remained outstanding.
Warrants
2021 Activity
On October 18, 2021, five warrant holders exercised a total of 368,468 warrant to purchase 368,468 shares of common stock for $.01 a share.
At December 2021, the Company had a total of 3,060,998 warrants outstanding.
2020 Activity
On May 13, 2020 the Company issued 2,306 warrants to purchase shares of common stock with an exercise price of $2.05 per share related to anti-dilution provisions of the Series C preferred stock. These warrants expire on June 30, 2022.
On May 14, 2020, the Company issued 1,260,633 warrants to purchase shares of common stock with an exercise price of $.01 per share as kicker shares as part of the Series D note agreements. These warrants expire on May 14, 2030.
On June 30, 2020, as part of the Series D note agreement the Company issued 2,166,527 warrants to purchase shares of common stock with an exercise price of $2.05 per share to replace the 2,166,527 warrants previously outstanding which expired on that date. These warrants expire on June 30, 2022.
At December 2020, the Company had a total of 3,429,466 warrants outstanding.
The Company recorded no expense related to the issuance of these warrants since these warrants were issued in common stock for cash sales and note conversions.
Number
of Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (Years)
Intrinsic
Value
Balance at December 31, 2019
2,166,527
$ 2.45
0.51
Granted
3,429,466
$ 1.30
4.33
-
Exercised
-
$ -
Forfeited
2,166,527
$ -
-
Balance at December 31, 2020
3,429,466
$ 1.30
4.33
Granted
-
$ -
-
Exercised
368,468
$ 0.01
Forfeited
-
$ -
-
Balance at December 31, 2021
3,060,998
$ 1.46
2.79
Exercisable at December 31, 2021
3,060,998
$ 1.46
2.79
-
NOTE 8 - RELATED PARTY TRANSACTIONS
Related Party Transactions
Dynacap Group Ltd.
The Company paid $285,999 and $114,250 to Dynacap Group, Ltd. (“Dynacap”, an entity controlled by the CEO of the Company) for consulting and other servoces during the years ended December 31, 2021 and 2020, respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Concession Taxes
The Company is required to pay taxes in México in order to maintain mining concessions owned by DynaMéxico. Additionally, the Company is required to incur a minimum amount of expenditures each year for all concessions held. The minimum expenditures are calculated based upon the land area, as well as the age of the concessions. Amounts spent in excess of the minimum may be carried forward indefinitely over the life of the concessions and are adjusted annually for inflation. Based on Management’s recent business activities and current and forward plans and considering expenditures on mining concessions from 2002-2017 and continuing expenditures in current and forward activities, the Company does not anticipate that DynaMéxico will have any difficulties meeting the minimum annual expenditures for the concessions ($388 - $2,400 Mexican Pesos per hectare). DynaMéxico retains sufficient carry-forward amounts to cover over 10 years of the minimum expenditure (as calculated at the 2017 minimum, adjusted for annual inflation of 4%).
Leases
In addition to the surface rights held by DynaMéxico pursuant to the Mining Act of México and its Regulations (Ley Minera y su Reglamento), DynaMineras maintains access and surface rights to the SJG Project pursuant to the 20-year Land Lease Agreement. The 20 Year Land Lease Agreement with the Santa Maria Ejido Community surrounding San Jose de Gracía was dated January 6, 2014 and continues through January 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 adjusted for inflation based on the Mexico minimum wage increase commencing in 2014. Rent was $3,015,112 Pesos (approx. $149,000 USD) for the year ended December 31, 2021. 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 January 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 December 31, 2021, the Company has two operating leases - a six- and one-half year lease for office space with a remaining term of twenty-four months and a twenty-year ground lease in association with its México mining operations with a remaining term of thirteen years. Variable lease costs consist primarily of variable common area maintenance, storage parking and utilities. The Company’s leases do not have any residual value guarantees or restrictive covenants.
As the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated using the Company's interest rate of promissory notes.
The Company’s components of lease cost are as follows:
Year Ended
December 31, 2021
Operating Lease - Office Lease
$ 86,237
Operating Lease - Ground Lease
148,636
Short Term Lease Costs
12,471
Variable Lease Costs
-
TOTAL
$ 247,344
Weighted average remaining lease term and weighted average discount rate are as follows:
Weighted Average Remaining Lease Term (Years) - Operating Leases
11.00 %
Weighted Average Discount Rate - Operating Leases
12.50 %
Estimated future minimum lease obligations are as follow for the years ending December 31:
YEAR
$ 179,377
101,499
96,896
99,803
102,797
Thereafter
684,884
Total
$ 1,265,256
Less Imputed Interest
(579,305 )
OPERATING LEASE LIABILITY
$ 685,951
NOTE 10 - DERIVATIVE LIABILITIES
Preferred Series C Stock
As discussed in Note 7, the Company analyzed the embedded conversion features of the Series C Preferred Stock and determined that the stock qualified as a derivative liability and is required to be bifurcated and accounted for as such since the host and the embedded instrument are not clearly and closely related. The Company performed a valuation of the conversion feature. In performing the valuation, the Company applied the guidance in ASC 820, “Fair Value Measurements”, to nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). To measure fair value, the Company incorporates assumptions that market participants would use in pricing the asset or liability and utilizes market data to the maximum extent possible.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation model to determine the value of conversion feature of the Series C Preferred Stock based on the assumptions below:
Annual volatility rate
147 %
156 %
Risk free rate
0.73 %
0.13 %
Remaining Term
0.50 years
1.50 years
Fair Value of common stock
$ 1.75
$ 0.78
For the years ended December 31, 2021, and December 31, 2020, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.
The table below represents the change in the fair value of the derivative liability during the years ended December 31, 2021, and December 31, 2020.
Period Ended
Fair value of derivative (stock), beginning of period
$ 601,313
$ 37,038
Change in fair value of derivative
418,118
276,547
Fair value of derivative on the date of issuance
-
287,728
Fair value of derivative (stock), end of period
$ 1,019,431
$ 601,313
Preferred Series C Warrants
As discussed in Note 7, the Company analyzed the embedded conversion features of the Series C Preferred Stock and determined that the Warrants qualified as a derivative liability and is required to be bifurcated and accounted for as such since the host and the embedded instrument are not clearly and closely related. The Company performed a valuation of the conversion feature. In performing the valuation, the Company applied the guidance in ASC 820, “Fair Value Measurements”, to nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). To measure fair value, the Company incorporates assumptions that market participants would use in pricing the asset or liability and utilizes market data to the maximum extent possible.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation model to determine the value of conversion feature of the Warrants based on the assumptions below:
Annual volatility rate
147 %
156 %
Risk free rate
0.73 %
0.13 %
Remaining Term
0.50 years
1.5 years
Fair Value of common stock
$ 1.75
$ 0.78
For the years ended December 31, 2021, and December 31, 2020, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.
The table below represents the change in the fair value of the derivative liability during years ended December 31, 2021, and December 31, 2020.
Period Ended
Fair value of derivative (warrants), beginning of period
$ 817,613
$ 49,066
Change in fair value of derivative
502,767
367,781
Fair value of derivative on the date of issuance
-
400,766
Fair value of derivative(warrants), end of period
$ 1,320,380
$ 817,613
Series D Notes Kicker Warrants
As discussed in Note 7, the Company analyzed the conversion features of the Series D Notes and determined that the Warrants qualified as a derivative liability. The fair value was required to be allocated among the notes, conversion features, and the warrants, and then remeasured at each reporting date. The Company performed a valuation of the conversion feature. In performing the valuation, the Company applied the guidance in ASC 820, “Fair Value Measurements”, to nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). To measure fair value, the Company incorporates assumptions that market participants would use in pricing the asset or liability and utilizes market data to the maximum extent possible.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation model to determine the value of conversion feature of the Series D Warrants based on the assumptions below:
Annual volatility rate
147 %
156 %
Risk free rate
0.73 %
0.13 %
Remaining Term
8.37 years
9.37 yrs
Fair Value of common stock
$ 1.75
$ 0.78
For the years ended December 31, 2021, and December 31, 2020, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.
The table below represents the change in the fair value of the derivative liability during the years ended December 30, 2021, and December 31, 2020.
Period Ended
Fair value of derivative (warrants), beginning of period
$ 952,634
$ -
Fair value of derivative on the date of issuance
-
409,998
Exercise of warrants
(659,558 )
-
Change in fair value of derivative
1,266,027
542,636
Fair value of derivative(warrants), end of period
$ 1,559,103
$ 952,634
NOTE 11 - NON-CONTROLLING INTEREST
The Company’s Non-Controlling Interest recorded in the consolidated financial statements relates to an interest in DynaResource de México, S.A. de C.V. of 50% through May 13, 2013, and 20% until February 24, 2020 when the minority interest was eliminated. Changes in Non-Controlling Interest for the year ended December 31, 2020.
Beginning balance
$ (5,723,663 )
Operating income (loss)
(61,589 )
Share of Other Comprehensive Income (loss)
(11,669 )
Elimination of Non-Controlling Interest
5,796,921
Ending balance
$ -
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The ASC guidance for fair value measurements and disclosure establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 Inputs - Quoted prices for identical instruments in active markets.
Level 2 Inputs - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs - Instruments with primarily unobservable value drivers.
As of December 31, 2021, and December 31, 2020, the Company’s financial assets were measured at fair value using Level 3 inputs, with the exception of cash, which was valued using Level 1 inputs. A description of the valuation of the Level 3 inputs is discussed in Note 10.
Fair Value Measurement at December 31, 2021 Using:
Quoted
Prices in Active
Markets
For
Identical
Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Liabilities:
Derivative Liabilities
$ 3,898,914
-
-
$ 3,898,914
Totals
$ 3,898,914
$ -
$ -
$ 3,898,914
Fair Value Measurement at December 31, 2020 Using:
Liabilities:
Derivative Liabilities
$ 2,371,560
-
-
$ 2,371,560
Totals
$ 2,371,560
$ -
$ -
$ 2,371,560
NOTE 13 - REVENUE CONCENTRATION
The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:
For each of the years ended December 31, 2021 and 2020, three and three customers accounted for 100% of revenue, respectively.
At December 31, 2021 and 2020, one and four customers accounted for 100% of accounts receivable, respectively.
NOTE 14 - NOTES PAYABLE
In June 2018, the Company entered into financing agreements for the unpaid mining concession taxes on the Francisco Arturo mining concession for the year ended December 31, 2017 and the period ending June 30, 2018 in the amount of $1,739,392. The Company paid an initial 20% payment of $347,826 and financed the balance over 36 months at 22%
In February 2019, the Company entered into a financing agreement for unpaid mining concession taxes on the Francisco Arturo mining concession for the year ended December 31, 2018 in the amount of $335,350. The Company paid an initial 20% payment of $67,070 and financed the balance over 36 months at an interest rate of 22%.
In June 2018, the Company applied for a reduction of the Francisco Arturo mining concession, from 69,121 hectares to 3,280 hectares. On July 31, 2018, the application for reduction was approved and the Company paid an initial amount of 985,116 MNP (Pesos), for the second semester 2018 mining concessions taxes on the reduced Francisco Arturo mining concession. The Company continues to accrue an amount of $22,500 (USD) per semester on the reduced Francisco Arturo mining concession.
As of June 2019, the Company ceased making monthly payments on the above noted Francisco Arturo concession notes and has petitioned the Hacienda for a reduction in the liability equal to the reduction in the Francisco Arturo concession above. For financial reporting purposes the Company continues to carry all notes at unpaid principal amount and accrues interest on a monthly basis. At December 31, 2021, $1,061,243 of accrued interest on the notes was included in accrued liabilities on the consolidated balance sheet.
In October 2019, the Company entered into a financing agreement for unpaid mining concession taxes on the core mining concessions in the amount of $299,474. The Company paid an initial 20% payment of $59,895 and financed the balance over 36 months at an interest rate of 22%.
The following is a summary of the transaction during the years ended December 30, 2021, and December 31, 2020:
Balance December 31, 2019
$ 2,272,431
Exchange Rate Adjustment
(124,352 )
2020 Principal Payments
(66,644 )
Balance December 31, 2020
2,081,435
Exchange Rate Adjustment
(57,504 )
2021 Principal Payments
(61,406 )
Balance December 31, 2021
$ 1,962,525
NOTE 15 - REVOLVING CREDIT LINE FACILITY
On February 4, 2021 Mineras de DynaResource SA de CV (“Seller”) entered into a Revolving Credit Line Facility and Commercial Offtake Agreement (the “RCL”), with a commercial buyer. Under the terms of the RCL:
•
The Company will deliver 100% of its produced concentrates to the buyer and provider of the RCL, through December 31, 2022; unless extended by the Company;
•
An initial RCL was established by buyer in the amount of $3.75M USD;
•
At May 1, 2021, the RCL increased to an amount equal to 80% of prior 3 month’s revenue;
•
Each successive month, the RCL shall be adjusted according to the company’s prior 3 month’s revenue;
•
The RCL shall never be less than $3.75M USD;
•
The RCL will be interest free for 45 days;
•
The RCL is to be repaid through deliveries of Concentrates or Cash within 120 days;
The RCL is included under Customer Advances on the consolidate balance sheet
Deposits under Revolving Credit Line Facility
Under the terms of the RCL, Mineras de DynaResource received the following advances from the buyer:
(1)
$2.5M advance on February 4, 2021. Settled on March 26, 2021.
(2)
$3.75M advance on March 30, 2021. Settled on May 12, 2021.
(3)
$3.75M advance on May 12, 2021. Settled on June 16, 2021.
(4)
$6.75M advance on June 18, 2021. Settled on August 5, 2021.
(5)
$8.25M advance on August 9, 2021. Settled on September 27, 2021
(6)
$8.25M advance on September 29, 2021. Settled on November 17, 2021
(7)
$8.25M advance on November 19, 2021. Settled on December 30, 2021
(8)
$9.25 M advance on December 30, 2021
NOTE 16 - SUBSEQUENT EVENTS
The Company has evaluated events from December 31, 2021, through the date whereupon the consolidated financial statements were issued, and has described below the events subsequent to the end of the period.
London Court of International Arbitration
On January 27, 2022, DynaResource, Inc. (the “Company”) received word from its counsel that the London Court of International Arbitration issued a First Final Partial Award (the “Partial Award”), in favor of Mercuria Energy Trading S.A., a Swiss company (“Mercuria”) and against Mineras de DynaResource S.A. de C.V. (“Mineras”), a subsidiary of the Company which is chartered in Mexico and whose offices are also located in Mexico.
The Partial Award requires that Mineras pay Mercuria the sum of $1,676,014 for an undersupply of metal concentrate production between October 2019 and December 2020. The Partial Award also requires that Mineras pay Mercuria the sum of $146,659 in connection with a net overpayment by Mercuria for metal concentrates.
The arbitration panel retained jurisdiction to address any outstanding fees and expenses.
The Company notes the following: since Mineras is a company of Mexican nationality, under Mexican law Mineras has the right to legally oppose the recognition and enforcement of the Partial Award and any supplemental award.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure on Controls and Procedures.
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2021. This evaluation was accomplished under the supervision and with the participation of our chief executive officer / principal executive officer and our financial consultant who concluded that our disclosure controls and procedures are not effective to ensure that all material information required to be filed in the annual report on Form 10-K has been made known to them. The evaluation did not include a 404A assessment. For purposes of this section, the term disclosure controls and procedures mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act (15 U.S.C. 78a et seg.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure, controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the "Act") is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes, in accordance with generally accepted accounting principles in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 Internal Control-Integrated Framework) at December 31, 2021. Based on its evaluation, our management concluded that, as of December 31, 2021, our internal controls over financial reporting were effective.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.
Changes in Internal Controls over Financial Reporting
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Company has a code of business conduct and ethics that applies to all employees, officers and directors. The code of business conduct and ethics is available on our website at www.dynaresource.com and we will post any amendments to, or waivers from, the code of ethics on that website.
The following table lists the names and ages of the executive officers, directors and key consultants of the Company. The directors will continue to serve until the next annual shareholders meeting, or until their successors are elected and qualified. All Directors have been elected to serve through 2022. All officers serve at the discretion of the President, Chairman of the Board of Directors, and members of the Board of Directors.
Name
Age
Position
Held Since
K. W. (“K.D.”) Diepholz
Chairman of The Board
May 1995
222 W. Las Colinas Blvd
CEO/President; CFO;
May 1997
Suite 1910 N. Tower
Treasurer;
May 1997
Irving, Texas 75039
Dr. Jose Vargas Lugo
Director of Operations - México, President - México
August 2011
Enrique Dunant Y5 de Mayo #963
Director;
August 2013
Fracc, Los Parques
Guamuchil, Sin CP 81460
Pedro Ignacio Teran Cruz
Executive Vice President, Director of Exploration and Resource Development;
2008-2013;
Sierra Grande #134
Board Member
Fraccionamiento Lomas de Mazatlán,
Mazatlán, Sinaloa 82110
John C. Wasserman
Independent Director
March 2016 - Oct. 2020
222 W. Las Colinas Blvd.
December, 2014
Suite 1910 North Tower
Irving, Texas 75039
Dale G. Petrini
Independent Director
December 2016
222 W. Las Colinas Blvd
Suite 1901 North Tower
Irving, TX. 75039
Philip K. Rose
Independent Director
July 2015
222 W. Las Colinas Blvd.
Suite 1910 North Tower
Irving, TX. 75039
Bradford J. Saulter
Vice President - Investor Relations
May 1998
7618 Straits Lane
Rowlett, Texas 75088
Rene L.F. Mladosich
General Manager at San Jose de Gracía
October 2019
Sierra Grande #134
Fraccionamiento Lomas de
Mazatlán, Sinaloa 82110
Praxedis Martinez
Senior Consultant - Plant Operations
July 2017
Sierra Grande #134
Fraccionamiento Lomas de Mazatlán, Sinaloa 82110
Praxedis Martinez
K.W. (“K.D.”) Diepholz. Mr. Diepholz has been involved in the resource sectors, primarily as an investor/entrepreneur, since 1980. He founded KWD Properties Corp. an Oil and Gas exploration and production company in 1983 and served as an executive manager to this Oil and Gas concern, and as a General partner to several limited partnerships. Mr. Diepholz has served in a variety of capacities with DynaResource, Inc. from 1994 to the present, and has served as Chairman of the Board, President, CEO and Treasurer since 1995. Mr. Diepholz has special skills in the areas of negotiation, business development, project planning and management, corporate financing, acquisition analysis, investment program interpretation and structuring, and executive management. Mr. Diepholz has been instrumental to the Company in the negotiations of the following: the acquisition of 24.9% Net Profits Interest in the San José de Gracía in 1995; the acquisition of an additional 25% interest in San José de Gracía in 1998; the acquisition and consolidation of 100% of the rights to the San José de Gracía from prior owners, culminating in March 2000; the acquisition and consolidation of several outstanding Concessions at the San José de Gracía from previous Mexican owners during 2000-2003; the direction and management of the test mining and pilot mill operations at San José de Gracía during 2003-2006; the negotiation of the Stock Purchase/Earn In Agreement in 2006; the negotiation of the surface rights agreement with the Santa Maria Ejido in 2013; the negotiation of the financing agreement with Golden Post Rail, LLC, and the general financing of, and the general management of the Company since inception. In addition to his roles with the Company, Mr. Diepholz serves as Chairman and CEO of DynaResource Nevada, Inc., an affiliated company, and as President of DynaNevada de México, a wholly owned subsidiary of DynaResource Nevada Inc. Mr. Diepholz is also the current President of the following subsidiaries of the Company in México: DynaResource de México, Mineras de DynaResource, and DynaResource Operaciones.
Rene L.F. Mladosich. Mr. Mladosich brings over 30 years of direct experience in the mining industry in Mexico to DynaResource. He has worked for Companies such as: Campania Mineras de Cananea, Campania Minera Hecla (Hecla Mining), Campania Minera Pangea (now owed by McEwen Mining), Campania Minera Dolores (Minefinders), Minera Alamos de Sonora, and Campania Minera Pena de Bernal (Starcore International Mines). Mr. Mladosich has also provided consulting services to companies such as Minefinders, Pan American Silver and Scorpio.
Mr. Mladosich is a proven and successful manager in Mexico with experience in the following areas: general management, underground and open pit operations, process plant recovery and optimization, construction, exploration, logistics, permitting, environmental, and plant and pit design.
Mr. Mladosich holds a B.S. degree from the University of Sonora, where he was awarded First of the Class 6 times; and Mr. Mladosich studied 1 year of metallurgy in the Master’s Degree work program at the University. Mr. Mladosich speaks fluent Spanish and English and has studied French under the French Embassy Program in Mexico.
Mr. Mladosich was named General Manager at SJG in January 2016 - June 2017, and again in October 2019.
Dr. Jose Vargas Lugo. Dr. Vargas is a licensed physician with graduate from the Universidad Nacional Autonoma de México (UNAM) and is a 4th year law student at Universidad Autonoma de Sinaloa (UAS). Dr. Vargas commenced his involvement with the mining business with Minera Industrial Peñoles as a Medical Assistant to the Mining Services Division of Peñoles in Fresnillo, Zacatecas. Since 1993, Dr. Vargas has been a supplier of industrial goods and services in and around the municipalities of Sinaloa de Leyva and Mocorito Sinaloa. Dr. Vargas has worked with companies such as Compañia Minera El Rosarito, which was conducting operations at San Jose de Gracía during the period 1993 - 1995. Dr. Vargas later provided services and supplies to Mineras Finesterre at San Jose de Gracía, and to Minera Pangea, which was owned by Queenstake Resources, then Nevada Pacific, and now US. Gold. Dr. Vargas began working with DynaResource de México in spring 2000; as it commenced activities to acquire and consolidate the San Jose de Gracía District. Over the past + 10 Years, Dr. Vargas has proven to be an integral part of the Company’s activities at San Jose de Gracía and in Sinaloa State; involved in all facets of the Company’s business. Dr. Vargas has proven instrumental in the areas of public relations, community relations, governmental affairs, environmental matters, and overall management of the company’s business activities in México.
Pedro Ignacio Teran Cruz. Mr. Teran is a graduate Geologist from the Universidad de Sonora, México. He has over 28 years’ experience in mineral exploration, mine development is a successful and respected Geological Consultant in México and is credited with defining significant resources at several projects. From 1986 to 1992, he was Project Geologist for Minera Real de Angeles, SA de CV (Frisco/Placer Dome Inc, now Alamos Gold), in which under his participation, explored and discovered the "Mulatos Gold Deposit" Sonora, México, and later as a Project Manager, the "San Felipe Gold Project" BC, México, both now in production. From 1992 to 1996, Mr. Teran worked as a Mine Geologist with Hecla Mining Co and explored and advanced into production the open pit "La Choya Gold Mine". From 1996 to 1999, Mr. Teran worked as Geology Superintendent for Compañia Minera Lluvia de Oro (Santa Cruz Gold, Now NWM Mining Corp.) and at the open pit "Lluvia de Oro Gold Mine", Sonora, México. From 1999 to 2001, Mr. Teran worked as a Consultant Geology performing due diligences for Tara Gold Resources in several projects located in la Sierra Madre Occidental. From 2001 to 2005, he worked as Manager of Geology Department for the Compañia Minera Pangea SA de CV (Queenstake Resources, Nevada Pacific and now McEwen Mining), in the "El Magistral Gold Mine" Sinaloa, México. Under his direction of exploration, the reserves were increased substantially and formed part of the team to put the project in production. During 2005 and part of 2006, Mr. Teran worked as Data Manager for Linear Gold Corp. in the "Ixhuatan Project" Chiapas, México. He built the computer block model and Resources Estimation. From 2006 to 2008, he worked as Project Manager for Pediment Exploration Ltd., now Argonaut Gold Inc. in the "San Antonio Gold Project" located in BCS, México.
Since 2008, Mr. Teran began working as a Consultant Geologist with DynaResource, Inc. in the "San Jose de Gracía Gold Project" located in Sinaloa, México, an advanced exploration project.
John C. Wasserman. Mr. Wasserman is a Partner with Wasserman, Bryan, Landry & Honold, LLP Law firm, Perrysburg Ohio. He is a stockholder of the Company and brings the following credentials to the Board of Directors:
University of Detroit (PHB); Ohio State University, Law School (JD) - Graduate work in business administration; University of Toledo - Undergraduate and Graduate work in business administration; Admitted to practice before Ohio Supreme Court, U.S. Supreme Court, U.S. District Court for Northern District of Ohio, Sixth Circuit U.S. Court of Appeals; Member, Ohio State, Lucas County, Ohio (past President) and Toledo, Ohio Bar Associations; Board Member, Corporate and Board Secretary, Blue Water Satellite, Inc.; Board Member, TechTol of Toledo, Inc.; Member and current chair of the City of Waterville, Ohio Planning Commission; Member of the ten year Plan Committee of Waterville, Ohio; Member, Past Board Member, Secretary Treasurer and President of Toledo, Ohio Rotary; Past Assistant District Governor, Area 4 of District 6600 of Rotary International; Member of Timberlake Investments, LLC, an investment LLC; Board Member, Victory Center of Toledo, Ohio; Member, Succession Committee, DynaResource, Inc.; Member/Managing Partner/Member, numerous LLCs/Partnerships for real estate developments and investments.
Mr. Wasserman has been employed with the Ohio Attorney General office, as Special Counsel; and with Ohio Bureau of Unemployment, as Hearing Officer; and as a Former Acting Judge, Maumee, Ohio, Municipal Court; Past Toledo, Ohio Exchange Club Member (President). Mr. Wasserman was selected one of Jaycees Top Ten Young men of Toledo, Ohio; was Co Author - Management Considerations of a Business Entity in the Environment of Chapter XI Reorganization Proceedings Under the New Federal Bankruptcy Code Effective October 1, 1979 published in Midwest Business Administration Association; was an Expert witness in real estate mandamus case: Lucas County Common Pleas Court, State ex rel Ad Hoc Committee of Waterville Citizens for Initiative and Referendum Petitions, Etc., Realtor vs. City of Waterville and Dale Knepper, Clerk of Council, City of Waterville, Respondents, Case No. CI-2013-1137.
Dale G. Petrini. Mr. Petrini brings over 40 years of extensive international project and manufacturing experience to the Board of DynaResource, Inc. During his 40+ years with The Dow Chemical Company, Houston, Texas, Mr. Petrini was the engineering sponsor, advisor and led the project development for several international mega projects totally over $50 billion USD. In his latest role for Dow, he was responsible for the project development of mega project growth opportunities in Latin America.
Previously, Mr. Petrini was responsible for Global Construction Management and Global Capital Procurement for Dow with offices and personnel located throughout the world. In addition, he was the Plant Manager for several production units and led the respective business management teams.
Mr. Petrini earned his civil engineering degree from The University of Michigan and is a registered licensed professional engineer. He holds dual citizenship in the US and EU.
Philip K. Rose. Mr. Rose is the appointee to the Board of Directors by Golden Post, LLC., the holder of the Series C convertible preferred shares. Mr. Rose is a 2011 graduate of Texas Christian University in Fort Worth, Texas.
Key Employees and Consultants
Praxedis Martinez (Senior Engineer - Advisor)
College: UNIVERSIDAD DE GUANAJUATO, Guanajuato, Gto. 1964-1969. Degree: Mine Engineer and metallurgist.
Graduate School: Escuela de Graduados en Administración INSTITUTO TECNOLÓGICO Y DE ESTUDIOS SUPERIORES DE MONTERREY, México, D.F. 1978-1980
Degree: MBA.
Company CÍA Minera La Campana, S.A. DE C.V., Reforma Mine. Group: Peñoles; Engineering Department Assistant; Dec. 1969- Feb. 1970; Shift Foreman, March 1969- Dec. 1971; Supervision of mine exploration and development works such as tunnels, crosscuts and raise shafts; Stope preparation works, Stope exploitation; Mercurio Mexicano, SA. De C.V., Tiro General mine Superintendent, January 1972- Dec. 1972, Responsible for the operation of Tiro General Mine;
Servicios Industriales Peñoles, Briquetting plant Construction and other construction works inside the lead smelter of Met - Mex Peñoles in Torreon, Resident engineer, January 1973- December 1973; Responsible for supervising several contractor’s works.
Praxedis Martinez Ramos Company, Mining and ore sales, ore concentration and concentrates sales. Mine plant equipment fabrication. Metallurgical consulting and laboratory testing. Mineral Perlite expansion, January 1974 - July 1993, during this time, in society with Mr. José Luis Martínez, we exploited 6 different mines located in Zacatecas, Durango, and Coahuila States, in one of them we operated a flotation plant. In some of these mines the ore was sold as extracted to the Met-Mex Peñoles Smelter in Torreón; from some other mines the ore would be concentrated in custom flotation plants and the concentrates then sold to the Smelter; and in other cases, the ore was concentrated in our own plant, a small shop for Mine Plant Equipment was started and operated, a Mineral Perlite expansion furnace was set up, and continued working until Dec. 2003.
Desarrollos Mineros del Centro, SA. De CV., Luismin, Metallurgical Research Manager, August 1993 - January 1998, Responsible for the Research Area, which included the following laboratories: Assay, Water analysis, Metallurgical, Pilot Plant, Biotechnology, Tests were done in Flotation, Bottle roll cyanidation, Column Cyanidation Acid leach, Filtration, Thickening, Gold diagnostic leach, Mass balance, Work index (Wi) determination, Equipment calculation, Statistical analysis of plant operation, Ore Bio-oxidation, Ore Bioleaching. The Biotechnology testing was done in cooperation with Little Bear and McClelland Labs. And with Dr. Corale Bryerley as consultant.
Praxedis Martinez Ramon, Mineral Perlite expansion, Metallurgical consulting, February 1998 - December 2004, during this period I continued to operate the Perlite expansion furnace. Also, metallurgical consulting to several miners and mining Companies including Minas de San Luis;
Servicios Administrativos Luismin, SA de CV., Metallurgical troubleshooting in the Goldcorp Mexico plants, New projects metallurgical research design and supervision, January 2005 - June 2008, Part of the Technical Services Direction team, reporting to the Metallurgical manager;
SGS, Durango Laboratory, Planning and supervising test work for the different clients’ projects in Mexico, July 2008 - June 2013, together with the heads of the different section of the lab, examining the samples of ore that needed testing different of routine work;
La Salle University (ULSA), in the Laguna region, teaching in the mining and construction career, August 2013 to date;
Praxedis Martinez Ramos, Private mining and metallurgical consulting, July 2013 to date, Consulting to Mineras de DynaResource SA de CV., since May 2017 to date, mainly in the plant expansion project at San Jose de Gracía.
Bradford J. Saulter (VP. - Shareholder Relations). Attended University of Texas, Austin, Texas; Marketing Department of Metagram, Inc., a Dallas National Marketing Company; Regional Manager for Lugar, Lynch, & Associates, A Dallas Financial Services Company, Involved in Sales & Marketing of Various Investment Products; Independent Marketing Consultant; Series 22 & 63 Securities License; Vice President / Marketing - Dynacap Group Ltd. (1992 - Present); Director: Farm Partners, Inc. (1992 - Present), Vice President - Investor Relations - DynaResource, Inc., Dallas, Texas (1995 to present).
To the knowledge of the Company, no present or former director, executive officer, or person nominated to become a director or executive of the Company, or consultants to the Company, has ever:
1.
Filed a bankruptcy petition by or against any business of which such person was a general partner or executive officer whether at the time of the bankruptcy or with two years prior to that time;
2.
Had any conviction in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
Been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and
4.
Been found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed suspended or vacated.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The following officers received the following compensation for the years ended December 31, 2021, and 2020. These officers(*) do not have employment contracts with the Company.
Name and principal position
Year
Salary
Bonus
Stock
Awards
Option
Awards
Non-equity
incentive plan compensation
Nonqualified deferred compensation
All other
compensation
*
K.W. (“K.D.”) Diepholz,
$ 254,167
$ 224,375
$ 792,000
None
None
None
None
CEO/President
$ 250,000
None
None
None
None
None
None
Dr. Jose Vargas Lugo; EVP.,
$ 42,783
None
None
None
None
None
None
President of México Operation
$ 75,707
None
None
None
None
None
None
Rene L.F. Mladosich;
$ 118,302
None
$ 99,000
None
None
None
None
GM of San Jose de Gracía Project
$ 101,890
None
None
None
None
None
None
Pedro Ignacio Teran Cruz,
$ 51,055
None
None
None
None
None
None
Dir. of Exp. and Dev.
$ 52,073
None
None
None
None
None
None
Bradford J. Saulter
$ 90,000
None
None
None
None
None
None
VP., Investor Relations
$ 90,000
None
None
None
None
None
None
Option Awards
Stock Awards
Name and principal position
Number of Securities Underlying Unexercised options (#) exercisable
Number of Securities Underlying Unexercised options (#) un-exercisable
Equity incentive plan awards
Option exercise price
Option expiration date
Number of share awards that have not vested
K.W. (“K.D.”) Diepholz
None
None
None
N/A
N/A
None
CEO/President
Dr. Jose Vargas Lugo
None
None
None
N/A
N/A
None
President of México Operations
Rene L.F. Mladosich
None
None
None
N/A
N/A
None
GM of San Jose de Gracía Project (2016-2017; 2019)
Pedro Ignacio Teran Cruz; Dir. of Expl.
None
None
None
N/A
N/A
None
Bradford J. Saulter
None
None
None
N/A
N/A
None
John C. Wasserman
None
None
None
N/A
N/A
None

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth the amount and nature of beneficial ownership of each of the executive officers and directors of the Company and each person known to be a beneficial owner of more than five percent of the issued and outstanding shares of common stock of the Company as of December 31, 2021. The following table sets forth the information based on 18,091,293 (1) common shares issued and outstanding (1) as of December 31, 2021.
COMMON STOCK
Beneficial Owner
Address
Common Shares
Percent Ownership
Common Stock
K.W. (“K.D.”) Diepholz
Chairman / CEO
222 W. Las Colinas Blvd.
Suite 1910 North Tower
Irving, Texas 75039
2,265,100
12.52 %
Common Stock
Gareth Nichol
Denver, Colorado
2,646,922
14.63 %
Common Stock
Dr. Jose Vargas Lugo
EVP, Director
Plutarco Elías Calles 47
Guamúchil Sin. Mex. 81450
274,508
1.52 %
Common Stock
Pedro I. Teran Cruz
EVP; Director
Hermosillo, Sonora México
37,500
0.21 %
Common Stock
Bradford J. Saulter
VP., Investor Relations
222 W. Las Colinas Blvd.
Suite 1910 North Tower
Irving, Texas 75039
124,439
0.69 %
Common Stock
John C. Wasserman
Director;
Waterville, Ohio 43566
134,389
0.74 %
Common Stock
Dale G. Petrini
Director
Houston, Texas 77027
187,689
1.04 %
**
Philip A. Rose (2)
Director
Westlake, Texas
All Officers, Directors and Beneficial owners as a Group (10 holders)
5,670,547
31.34 %
(1)
Does Not Include (i) 1,734,992 shares of common stock issuable upon the conversion of 1,737,992 shares of Series C Convertible Preferred Stock, which are currently convertible, and (ii) 2,168,833 shares of common stock issuable upon the exercise of a warrant, which is exercisable, and subsequent conversion into common shares.
(2)
Does not include 760,000 shares of common stock issuable upon the conversion of 760,000 share of Series D Convertible Preferred Stock, which is currently convertible.
(3)
Does not include 892,165 shares of common stock issuable upon the exercise of a cashless warrant which is exercisable.
(4)
Mr. Rose is a Director of the Company, elected by the holder of the Series C Preferred Shares.
No officer or director holds options which are either (a) vested or (b) will vest within 60 days.
OPTIONS/WARRANTS
The officers and directors and those 5% beneficial owners held the following options/warrants as of December 31, 2021:
None.
PREFERRED SHARES (SERIES A)
Preferred Series
Beneficial Owner
Address
Preferred Shares
Percent Ownership
Series “A”
K.W. (“K.D.”)
Diepholz, CEO
1303 Regency Court
Southlake, Texas76092
1,000
100.0%
PREFERRED SHARES (SERIES C)
Preferred Series
Beneficial Owner
Address
Preferred Shares
Percent Ownership
Series “C”
Golden Post Rail LLC.
1110 Post Oak Place
Westlake, Texas 76262
1,734,992
100.0%

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Dynacap Group Ltd.
The Company paid $285,999 and $114,250 to Dynacap Group, Ltd. (“Dynacap”, an entity controlled by the CEO of the Company) for consulting and other fees during the years ended December 31, 2021 and 2020, respectively. Dynacap retained two subcontractors who provided accounting, administrative and executive support services to the Company during recent years.
Cash Advances by Management
None
Stock Issued to Management
Officers and directors received the follow stock as compensation during the year ended December 31, 2021
Koy W (“K.D.”) Diephotz
400,000 shares of Common Stock
Rene L.F. Mladosich
50,000 shares of Common Stock
The Company is not aware of any other material relationships or related transactions between the Company and any officers, directors or holders of more than five percent of any class of outstanding securities of the issuer.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Our independent registered public accounting firm is Armanino LLP, San Ramon, CA, Auditor Firm ID: 32
(1) Audit Fees
The aggregate fees billed for professional services rendered by our auditors, for the audit of the registrant's annual consolidated financial statements and review of the consolidated financial statements included in the registrant's Form 10-K and Form 10-Q(s) or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements, for fiscal years 2021 and 2020 was $222,202 and $230,359, respectively.
(2) Audit Related Fees
None.
(3) Tax Fees
None.
(4) All Other Fees
None.
(5) Audit Committee Policies and Procedures
The Company does not have an audit committee.
(6) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's consolidated financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
Not applicable.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits listed in the accompanying exhibit index are filed (except as otherwise indicated) as part of this report.
No.
Description
31.1 *
Certification of the Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 *
Certification of the Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 *
Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
________________
* Filed herewith.