Dynaresource, Inc 10-K for FY2022
Dynaresource, Inc. (DYNR)
About this 10-K
Dynaresource, Inc filed this 10-K on April 17, 2023, covering the fiscal year ended December 31, 2022 (FY2022).
Headline figures
Fiscal year ended December 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $39.77M
- up 10.8% from $35.89M a year earlier
- Net income
- $6.69M
- down 21.7% from net income of $8.53M a year earlier
- Diluted EPS
- $0.29
- down 38.3% from $0.47 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the fiscal year ended:
OR
From the transition period to .
Commission File Number:
(Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization (IRS Employer Identification No.)
(Address of principal executive offices)
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock; $0.01 Par Value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (p. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (p. 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act): Yes
The aggregate market value of the voting and non-voting common equity, par value $0.01 per share, held by non-affiliates computed by reference to the price at which the common equity was last sold, as of the last business day of the registrant’s most recently completed fiscal year end, December 31, 2022, was $
There were
DOCUMENTS INCORPORATED BY REFERENCE
Listed below are documents incorporated herein by reference. None.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION | 13 | ||
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 33 | ||
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 37 | |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 37 | |
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FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to in this annual report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to in this annual report as the Exchange Act. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project” and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management’s beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this annual report. Factors that can cause or contribute to these differences include those described under the headings “Risk Factors” and “Management Discussion and Analysis and Plan of Operation.”
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statement you read in this annual report reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph. You are cautioned not to place undue reliance on forward-looking statements, which speak to 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 forward-looking statements will prove to be correct.
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PART I
ITEM 1. BUSINESS
History and Organization
The Company is a minerals investment, management, and exploration company, and currently conducting test mining and pilot milling operations through an operating subsidiary in México, with specific focus on precious and base metals in México. The Company was originally incorporated in the State of California on September 28, 1937, under the name West Coast Mines, Inc. In November 1998, the Company re-domiciled from California to Delaware and changed its name to DynaResource, Inc. (“DynaUSA”).
DynaUSA currently owns 80% of the outstanding shares of DynaMéxico, 79% owned directly and 1% hold by the current CEO on behalf of the Company compliance with Mexican law and DynaMéxico currently holds 20% of the shares of DynaMéxico as treasury shares after complete foreclosure and recovery of those share on February 20, 2020 from goldgroup Resources, Inc., a wholly owned subsidiary of Goldgroup Mining Inc. Vancouver, BC (“Goldgroup”). 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 2022, we reported the delivery and sale of 25,554 (subject to final settlements) net Oz gold-silver 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.
Exploration Stage
The Company is an exploration stage issuer as defined in Section 1300 of Regulation S-K.
General Government Regulations
México
In Mexico, we are subject to various governmental laws and regulations, including environmental regulations. Other than operating licenses for our mining and processing facilities and concessions granted under contracts with the host government, there are no third-party patents, licenses or franchises material to our business. The applicable laws and regulations applicable to us include but are not limited to:
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 renegotiation.
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.
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We believe that all of our properties are operated in compliance with all applicable governmental laws and regulations and the costs of compliance are paid for on an ongoing basis. Costs of compliance - due to the nature of our permit, we have requirements for landscape restoration which are fulfilled on an ongoing basis. We do not have an asset retirement obligation. We are working under a permit which required a Bond of approximately 120,000 pesos which was requested as a Forest Fund bond and does not require, other than the replanting of material, any reclamation work since we are mining underground.
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, 2022, the Company sold gold-silver concentrates to one purchaser pursuant to a Revolving Credit Line Facility and Commercial Offtake Agreement (the “RCL”). As a result of the RCL, the Company’s financial well-being is heavily dependent on a single purchaser.
Distribution Methods
As gold and silver can be sold through numerous gold and silver market traders worldwide, the Company is not economically dependent on a limited number of customers for the sale of its product. In 2022, we sold to one buyer that gave us the best overall terms.
Products and Raw Materials
We have no new products. Gold concentrates is the only product we produce. Additionally, we have no major suppliers of raw materials as the ore we mine is the most important raw material we use. Supplementary supplies such as fuel and chemicals are in ready supply from a number of vendors.
Competitive Business Conditions
We compete with many companies in the mining and mineral exploration and production industry, including large, established mining companies with substantial capabilities, personnel, and financial resources. There is a limited supply of desirable mineral lands available for claim-staking, lease, or acquisition in the United States, Canada, Mexico, Argentina, and other areas where we may conduct our mining or exploration activities. We may be at a competitive disadvantage in acquiring mineral properties, since we compete with these individuals and companies, many of which have significantly greater financial resources and larger technical staffs than we do. From time to time, specific properties or areas that would otherwise be attractive to us for exploration or acquisition may be unavailable due to their previous acquisition by other companies or our lack of financial resources.
Competition in the industry is not limited to the acquisition of mineral properties, but also extends to the technical expertise to find, advance, and operate such properties; the labor to operate the properties; and the capital for the purpose of funding such exploration and development. Many competitors not only explore for and mine precious and base metals but conduct refining and marketing operations on a world-wide basis. Such competition may result in our company not only being unable to acquire desired properties, but to recruit or retain qualified employees or to acquire the capital necessary to fund our operation and advance our properties. Our inability to compete with other companies for these resources could have a material adverse effect on our results of operation, financial condition and cash flows.
Human Capital Resources
As of December 31, 2022, we had 200 employees in Mexico and 5 in the United States. All our employees based in the United States work in an executive, technical or administrative position, while our employees in Mexico include management, laborers, craftsmen, mining, geologist environmental specialists, information technologists, and various other support roles. We also frequently engage independent contractors in connection with certain administrative matters and the exploration of our properties, such as drillers, geophysicists, geologists, and other specialty technical disciplines. For the United States, we also engage independent contractors for technical and professional expertise. None of our employees in México are covered by union contracts and the Company believes we have good relations with our employees.
As part of our fundamental need to attract and retain talent, we regularly evaluate our compensation, benefits and employee wellness offerings. We have determined that our compensation arrangements are competitive in the industry.
ITEM 1A. RISK FACTORS
Not applicable for smaller reporting companies.
ITEM 1B. UNRESOLVED STAFF COMMENTS
N/A
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 and our Company as being in the exploration stage. The Registrant is an exploration stage company and has started extraction without determining mineral reserves.
SAN JOSE DE GRACIA - PROPERTY DESCRIPTION
Location
The San Jose de Gracia mining project (“SJG Project”) is located on map sheet G13-A81 in the Culiacan mining district of Sinaloa State, Mexico, at Latitude 26 ̊ , 9’ N, Longitude 107 ̊, 53’ W, approximately 120 kilometers east northeast of the coastal city of Los Mochis. The property on which the SJG Project resides, straddles the border separating the Mexican States of Sinaloa and Chihuahua. The SJG Project is located in the south-western portion of the property, and is located entirely within the State of Sinaloa (see Figure 1).
The property is without known reserves. The Company is an exploration stage company and the Company has started extraction without determining mineral reserves.
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Figure 1. San Jose de Gracia, Location Map
DynaResource de Mexico S.A. de C.V. (“DynaMexico”), the Company’s 100% owned subsidiary, owns the San Jose de Gracia mineral concessions, which are comprised of 33 distinct concessions covering an aggregate of approximately 9,920 hectares. The concessions are held 100% by DynaMexico with no royalty or other interests clouding them.
By way of further reference, the property on which the SJG Project resides is located in and around the village of San Jose de Gracia, approximately 100 km northeast of Guamuchil, on the west side of Mexico. The village of San Jose de Gracia has a small airstrip and can be accessed by a small airplane, or alternatively, by a dirt mountain road. There are roads providing access to the property on which the SJG Project resides. These roads are accessible throughout the year, with the possible exception of June and July when the rainy season sometimes causes flooding and runoff to make the roads too muddy to navigate.
Local Resources and Infrastructure
Accommodations
The Village of San Jose de Gracia maintains few stores which offer only minimal goods. The camp site area maintains facilities of twelve rooms with additional lodging available in the
town which can accommodate a total of about 225 persons.
Power
A power line to the San José de Gracia Project has been installed by the Comisión Federal de Electricidad, the only authorized power producer in Mexico. The power line was installed in March 2012 from the La Estancia area of the municipality of Sinaloa de Leyva, a distance of approximately 75 kilometers.
The power line is currently 220 volts maximum capacity, which supports domestic use only, including the office and camp facilities at SJG, such as water pump, air conditioning, refrigeration, lights, internet, and fans, as well as local residential use. The SJG Project can produces its own diesel-generated power as a backup to the power grid.
Offices – Camp Facilities
DynaMexico maintains an administrative and logistics office in Guamuchil. The SJG Project sources many of its supplies from Guamuchil, from Los Mochis and from Culiacan. There is a satellite dish installed at the SJG Property, providing communications from the SJG Property to Guamuchil. At the SJG Project, DynaMexico maintains a camp staff, including geologists, field helpers, consultants, security, cooks and cleaners. Most of these employees come from outside of the local community.
Mining Concessions
The San José de Gracia Property consists of 33 contiguous mining concessions and covers an area of approximately 9,920 hectares (24,513 acres) as illustrated in Figure 2.
Current Mining Concessions - San José de Gracia
Claim Name | Claim Number | Staking date | Expiry | Hectares | Taxes / ha (pesos) |
AMPL. SAN NICOLAS | 183815 | 22/11/1988 | 21/11/2038 | 17.4234 | 111.27 |
AMPL. SANTA ROSA | 163592 | 30/10/1978 | 29/10/2028 | 25.0000 | 111.27 |
BUENA VISTA | 211087 | 31/03/2000 | 30/03/2050 | 17.9829 | 63.22 |
EL CASTILLO | 214519 | 02/10/2001 | 01/10/2051 | 100.0000 | 31.62 |
EL REAL | 212571 | 07/11/2000 | 07/11/2052 | 2038.0000 | 31.62 |
EL REAL 2 | 216301 | 30/04/2002 | 29/04/2052 | 280.1555 | 31.62 |
FINISTERRE FRACC. A | 219001 | 28/01/2003 | 27/01/2053 | 18.7856 | 31.62 |
FINISTERRE FRACC. B | 219002 | 28/01/2003 | 27/01/2053 | 174.2004 | 31.62 |
GUADALUPE | 189470 | 05/12/1990 | 04/12/2040 | 7.0000 | 111.27 |
LA GRACIA I | 215958 | 02/04/2002 | 01/04/2052 | 300.0000 | 31.62 |
LA GRACIA II | 215959 | 02/04/2002 | 01/04/2052 | 230.0000 | 31.62 |
LA LIBERTAD | 172433 | 15/12/1983 | 14/12/2033 | 97.0000 | 111.27 |
LA NUEVA AURORA | 215119 | 08/02/2002 | 07/02/2052 | 89.3021 | 31.62 |
LA NUEVA ESPERANZA | 226289 | 06/12/2005 | 05/12/2055 | 40.0000 | 7.6 |
LA UNION | 176214 | 26/08/1985 | 25/08/2035 | 4.1098 | 111.27 |
LOS TRES AMIGOS | 172216 | 27/10/1983 | 26/10/2033 | 23.0000 | 111.27 |
MINA GRANDE | 163578 | 10/10/1978 | 09/10/2028 | 6.6588 | 111.27 |
NUEVO ROSARIO | 184999 | 13/12/1989 | 12/12/2039 | 32.8781 | 111.27 |
PIEDRAS DE LUMBRE 2 | 215556 | 05/03/2002 | 04/03/2052 | 34.8493 | 31.62 |
PIEDRAS DE LUMBRE 3 | 218992 | 28/01/2003 | 27/01/2053 | 4.3098 | 31.62 |
PIEDRAS DE LUMBRE No.4 | 212349 | 29/09/2000 | 28/09/2050 | 0.2034 | 63.22 |
PIEDRAS DE LUMBRE UNO | 215555 | 05/03/2002 | 04/03/2052 | 40.2754 | 31.62 |
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SAN ANDRES | 212143 | 31/08/2000 | 30/08/2050 | 385.0990 | 63.22 |
SAN JOSÉ | 208537 | 24/11/1998 | 23/11/2048 | 27.0000 | 111.27 |
SAN MIGUEL | 183504 | 26/10/1988 | 25/10/2038 | 7.0000 | 111.27 |
SAN NICOLAS | 163913 | 14/12/1978 | 13/12/2028 | 55.5490 | 111.27 |
SAN SEBASTIAN | 184473 | 08/11/1989 | 07/11/2039 | 40.0000 | 111.27 |
SANTA MARIA | 218769 | 17/01/2003 | 16/01/2053 | 4.2030 | 31.62 |
SANTA ROSA | 170557 | 13/05/1982 | 12/05/2032 | 31.4887 | 111.27 |
SANTO TOMAS | 187348 | 13/08/1986 | 12/08/2036 | 312.0000 | 111.27 |
TRES AMIGOS 2 | 212142 | 31/08/2000 | 30/08/2050 | 54.4672 | 63.22 |
FINISTERRE 4 | 231166 | 18/01/2008 | 17/01/2058 | 2142.1302 | 5.08 |
FRANCISCO ARTURO | 230494 | 06/09/2007 | 27/03/2057 | 3,279.56 |
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TOTAL |
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| 9,920.00 |
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Title to 32 of the 33 mining concessions is registered in the sole name of DynaMexico. The one exception is the San Miguel concession. For the San Miguel concession, DynaMexico has entered into transfer agreements with the registered owners of 50% of the concession title, and DynaMexico has also entered into promise to sell and purchase agreements with registered owners of the balance of the concession title. Under Mexican law, such agreements require the consent or relinquishment of first rights of refusal from the registered owners of 100% of the concession title, in order to have legal effect and be eligible for registration before the Mines Recorders’ Office.
Under amendments to the Mining Act of Mexico that came into effect in December 2006, the classifications of Mining Exploration Concessions and Mining Exploitation Concessions were replaced by a single classification of Mining Concessions valid for a renewable term of 50 years, commencing from the initial issuance date. To be converted into Mining Concessions at the time these amendments came into effect, former mining exploration and mining exploitation concessions had to be in good standing at the time of conversion.
All of the SJG concessions were in good standing and consequently were converted to 50-year Mining Concessions in December 2006, at the time the amendments to the Mining Act came into effect.
To renew the 50-year term, Mining Concessions must be in good standing at the time an application for renewal is filed, and an application for renewal must be filed within 5 years prior to expiration of the term.
To maintain Mining Concessions in good standing, the registered owner must (a) pay bi-annual mining duties in advance, by January 31 and July 31 each year, (b) file assessment work reports by May 30 each year, for the preceding year (some exceptions apply), and (c) by January 31 each year, file statistical reports on exploration / exploitation work conducted for the preceding year.
Notice of Commencement of Production Activities and Annual Production Reports must be filed annually by January 31 each year for those concessions where mineral ore extraction is taking place. As a general provision, registered owners of Mining Concessions must follow environmental and labor laws and regulations in order to maintain their Mining Concessions in good standing.
Figure 2 – Claim location map
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Surface 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), the Company maintains access and surface rights for the SJG Project pursuant to a 20-year Land Lease Agreement. This lease agreement with the Santa Maria Ejido Community (the owners of the surface rights) is dated January 6s, 2014 and continues through 2033. The lease agreement covers an area of 4,399 hectares surrounding the main mineral resource areas of SJG and provides for annual lease payments of $1,359,443 Pesos (adjusted for inflation). The 2022 payment was $3,678,437 pesos (approx. $183,000 USD). Additionally, under the lease agreement, the Company met its obligation to construct a Medical Facility at SJG in year 2017.
The lease agreement provides the Company with surface access to the core resource areas of SJG (4,399 hectares), and allows for all permitted mining, pilot production and exploration activities.
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 DynaMéxico 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. 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. The water concession provides sufficient water for current operations, and for the anticipated future needs of the project.
Royalties, Encumbrances and Environmental Liabilities
The SJG Property is not subject to any royalties, encumbrances or environmental liabilities.
Required Permits for Exploration, Drilling and Mining
In respect of permit requirements for mineral exploration and mining in Mexico, the most relevant applicable laws, regulations and official technical norms are the Federal Mining Act (plus its regulations), the Federal Environmental Protection and Ecological Equilibrium Act (plus its regulations), the Federal Sustainable Forestry Development Act (plus its regulations), the Federal Explosives and Firearms Act, the National Waters Act and the Mexican Official Norm 120.
To carry out mineral exploration activities, holders of mining concessions in Mexico are required to file at the offices of the Federal Secretariat of the Environment and Natural Resources (“SEMARNAT”) a “Notice of Commencement of Exploration Activities” or “Preventive Exploration Notice” in accordance with the guidelines of the Mexican Official Norm 120 (“NOM- 120”).
If contemplated mineral exploration activities fall outside of the guidelines of the NOM-120 (e.g. exploration activities on rain forest areas), a “Change of Soil Use Permit Application” (“CSUP”) is required to be filed at SEMARNAT under the guidelines of the Federal Sustainable Forestry Development Act and its Regulations. To meet the requirements for issuance of a change of soil use permit, the applicant must file (together with the CSUP) a Technical Study (“Technical Justification Study”) to justify the change of soil use from forestry to mining, in order to demonstrate that biodiversity will not be compromised and that there will be no soil erosion or water quality deterioration on completion of the mineral exploration activities.
To carry out mining activities in Mexico, holders of mining concessions are required to file an “Environmental Impact Assessment Study” under the guidelines of the Federal Environmental Protection and Ecological Equilibrium Act and its Regulations, in order to evaluate the environmental impact of the contemplated mining activities.
If the use of explosives materials is required for execution of mineral exploration or mining activities, an Application for General Permit for Use, Consumption and Storage of Explosive (“GPCSE”) is required to be filed at the offices of the Secretariat of National Defense (“SEDENA”) under the guidelines of the Federal Explosives and Firearms Act. Under the Federal Mining Act, holders of mining concessions in Mexico have the right to the use of the water coming from the mining works. Certification of water rights and/or issuance of water rights concessions are required from the National Water Commission (“CONAGUA”) under the guidelines of the National Waters Act.
Fees or bonding requirements necessary to explore or mine
As a pre-requisite for issuance of a CSUP, Article 118 of the Federal Sustainable Forestry Development Act provides the posting of a bond to the Mexican Forestry Fund for remediation, restoration and reforestation of the areas impacted by the mineral exploration activities.
As a pre-requisite for approval of Preventive Exploration Notice and Environmental Impact Assessment Study, the Federal Environmental Protection and Ecological Equilibrium Act and its Regulations require the posting of a bond to guarantee remediation and rehabilitation of the areas impacted by the mining activities.
Government agencies responsible for any applicable permits
SEMARNAT is the office of the Federal Government of Mexico responsible for the review and issuance of a CSUP, the review of a Technical Justification Study and the filing of NOM-
120. The Federal Attorney’s Office for the protection of the Environment is the enforcement branch of SEMARNAT responsible for the monitoring and enforcement of environmental laws and regulations. SEDENA is the office responsible for issuance of a GPCSE. CONAGUA is the office responsible for certification of water rights and issuance of water rights concessions.
Time frame to obtain any permit or approval to explore or mine
NOM-120 is a notice to SEMARNAT only and has no prescribed processing time. Processing time for review and approval of a CSUP Application and Technical Justification Study varies depending on the workload of the SEMARNAT regional office where application is filed, but a processing time of Four (4) months is typical.
Processing time for review and approval of a Environmental Impact Assessment Study varies depending on workload of SEMARNAT regional office where application is filed, but a processing time of Six (6) months is typical. Processing time for issuance of a GPCSE by SEDENA is approximately 6 months. Processing time for issuance of a Water Rights Concession by CONAGUA is approximately 6 months.
DynaMexico Permits and Bonding Requirements
Exploration Permit: On June 28, 2010, DynaMexico filed a Preventive Exploration Notice (Preventive Exploration Notice) at the office of SEMARNAT in connection with contemplated mineral exploration activities at the La Prieta, San Pablo, La Purísima, La Unión, Tres Amigos and La Ceceña areas of the SJG Project. On July 21, 2010, SEMARNAT approved, for a term of 36 months, the execution of the mineral exploration activities at SJG set out in the Preventive Exploration Notice, as it determined that such activities fall within the framework of the NOM-120, subject to the following conditions: (a) filing and approval by SEMARNAT of a CSUP with respect to SJG (see below), and (b) posting of a bond in the amount of $134,487 Pesos to guarantee remediation and rehabilitation measures following the conclusion of the mineral exploration activities.
Change of Soil Use Permit
On August 9, 2010, DynaMexico filed at the offices of SEMARNAT a CSUP Application and Technical Justification Study to carry out certain mineral exploration activities set out in the Preventive Exploration Notice approved by SEMARNAT on July 21, 2010 (see above) at the La Prieta, San Pablo, La Purísima, La Unión, Tres Amigos and La Ceceña areas of SJG). On December 20, 2010, SEMARNAT approved the CSUP Application filed by DynaMexico with respect to SJG and authorized DynaMexico the execution of mineral exploration activities on
5.463 hectares of SJG for a term of 36 months, and it is continually renewed as required.
Water Rights Certification
On March 8, 2012 the Director of Water Administration of CONAGUA certified in writing the rights of DynaMexico to use, exploit and extract 1,000,000 m3 of water per year from the Company’s extraction infrastructure located in SJG. CONAGUA determined that DynaMexico’s water rights are not subject to any other water rights concession or any other water extraction restriction.
Bonding Requirements
Under the CSUP issued to DynaMexico on December 20, 2010, SEMARNAT imposed upon DynaMexico the obligation to post a bond in the amount of $116,911 Pesos for reforestation and remediation measures in SJG. The Bond was timely posted by DynaMexico.
Under Preventive Exploration Notice (Preventive Exploration Notice) approved by SEMARNAT on July 21, 2010, SEMARNAT imposed upon DynaMexico the obligation to post a bond in the amount of $134,487 Pesos, to guarantee remediation and rehabilitation measures following the conclusion of the mineral exploration activities. The Bond was timely posted by DynaMexico.
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| Table of Contents |
DynaMexico has sought and obtained all required environmental permits, temporary land occupation rights and consent letters from the regulatory agencies, local municipalities and the State of Sinaloa, in order to conduct its mining, production, exploration and drilling activities on the four main deposit areas at SJG. DynaMexico will be required to obtain further permits in order to conduct drilling in these four areas and the other areas, and in order to carry out future mining, milling, and production activities, and will timely obtain such permits, as and when required.
HISTORY OF SAN JOSE DE GRACIA
Production at San José de Gracia dates from the 1800’s and totals approximately one million ounces of gold mined from high-grade quartz veins. Large-scale mining in the camp began in 1870 and ended in 1910 with the onset of the Mexican Revolution. The majority of the production came from the Anglo, Rosario and La Cruz Mines on the Purisima Ridge trend, and from the La Prieta Mine on the La Prieta trend (reference Fig. 2). The remainder of the production was derived from as many as 60 smaller mines throughout the 12 square kilometer area, including the Palos Chinos, San Pablo, Tres Amigos, La Ceceña, Los Hilos, Santa Rosa, Veta Tierra, La Union, Santa Eduwiges, Mochemara and La Parilla Mines.
Table 3 – Historic gold production – San Jose de Gracia – pre 1970’s
Area | Gold Production (oz) | Gold Grade (g/t) | Mined Width (m) | ||||||||
Purisma Ridge Trend (includes the Anglo, Rosario, Jesus Maria and Laz Cruz Mines) | 471,000 | 67.0 | Unknown | ||||||||
La Prieta Trend (La Prieta Mine) | 215,000 | 28.0 | 1.5 – 3 m |
| |||||||
Other areas | 300,000 | Unknown | Unknown | ||||||||
It was not until the 1970’s when mining could resume at San José de Gracia, when the first road to SJG was opened, allowing Compaňia Rosarito to begin producing gold from the Palos Chinos, San Pablo, Tres Amigos and La Union mines.
Recent Ownership of the Property
By 1977 the underlying owners of the mining concessions and subsequent vendors to Minera Finisterre SA de CV. (“Finesterre”) succeeded in acquiring control of most of the district, and installed a 70 ton per day flotation concentrator. Finisterre subsequently acquired the property through option agreements with the underlying vendors and continued some exploration work, although most of its financial resources were expended in erecting a larger, 200 ton per day concentrator.
Golden Hemlock Explorations Ltd., a Canadian company, obtained an option to acquire majority control of Finisterre and commenced work on the property in 1997. The actual exploration and development work was performed by Perforaciónes Quest de Mexico (“PQM”), which was under contract to Finesterre, and whose efforts consisted primarily of core drilling, trenching and mapping. PQM completed a 63-hole, 6,000-meter core drilling program in 1997.
In 1998-1999, Pamicon Developments Ltd., a Canadian company, examined the results of the 1997 drilling program, including PQM’s technical work, in order to calculate possible mineral reserves, and to review the general status of the property. Results of this examination were presented in a report dated September 1999.
During the first half of 1999, DynaResource, Inc. and its agents arranged to collect samples for metallurgical testing. In June of 2000, DynaResource formed its subsidiary DynaMexico, in order to acquire and consolidate ownership of the San Jose de Gracia Project. By December 2003, DynaMexico had completed the acquisition of and consolidation of 100% of the San Jose de Gracia Project from Golden Hemlock and Finisterre -- with the sole exception of the San Miguel mining concession.
Test Mining Operations
The property is without known reserves and the test mining program is exploratory in nature and the Company has started extraction without determining mineral reserves. All mines are underground and the ore is hard rock that needs to be crushed and ground before gold concentrate can be extracted.
The Company is an exploration stage company and has a test mining facility and produces precious metal concentrates for sale to third parties.
Summary of Test Mining and Pilot Mill Operations for 2018 to 2022:
|
| Total Tonnes Mined & |
|
| Reported Mill Feed Grade (g/t |
|
| Reported Recovery |
|
| Gross Gold Concentrates Recovered |
|
| Net Gold Concentrates Sold |
| |||||
Year |
| Processed |
|
| Au) |
|
| % |
|
| (Au oz.) |
|
| (Au oz.) |
| |||||
2018 |
|
| 52,038 |
|
|
| 9.82 |
|
|
| 86.11 | % |
|
| 14,147 |
|
|
| 13,418 |
|
2019 |
|
| 66,031 |
|
|
| 5.81 |
|
|
| 86.86 | % |
| 10,646 |
|
|
| 9,713 |
| |
2020 |
|
| 44,218 |
|
|
| 5.65 |
|
|
| 87.31 | % |
|
| 7,001 |
|
|
| 5,828 |
|
2021 |
|
| 97,088 |
|
|
| 9.67 |
|
|
| 88.79 | % |
|
| 26,728 |
|
|
| 22,566 |
|
2022 |
|
| 137,740 |
|
|
| 8.18 |
|
|
| 88.05 | % |
|
| 31,905 |
|
|
| 25,554 |
|
Test pilot operations in 2022 yielded 137,740 Tonnes of material, mined and processed from underground test mining activity and pilot milling operations. These test pilot operations also yielded approximately 31,905 gross ounces of gold, and net of dry weight adjustments at the buyer’s facilities, the approximately 25,554 ounces of gold.
Infrastructure Improvements, Expansion and Increased Output (2017 To 2022)
The Registrant is an exploration stage company and the registrant has started extraction without determining mineral reserves.
As part of the Company’s test mining operations, it continues to upgrade the camp facilities and the mill. Significant improvements have been made such that the condition of the equipment is new, relatively new or in good condition. The Company has developed a total of five mills of which three are currently running which can process approximately 700 tons of mined material per day. The Companies two oldest Mills were taken offline in 2022 as the two newest ball mills were brought on line and the old mills will be refitted.
The Company continues its exploration at San Jose de Gracía, in order 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 700 tons per 24-hour operating day.
Since January 2017, the Company has expended funds to improve the mine, the mill and the facilities in order to increase the production at San Jose de Gracia.as follows:
Mill Expansion | 7,093,000 | |||
Tailings Pond Expansion | 1,464,000 | |||
Machinery and Equipment | 2,315,000 | |||
Mining Camp Expansion | 146,000 | |||
Total | 11,018,000 |
The Company is currently in the middle of exploration drilling to further define mineralization and in 2022 expended $2,484,072 for this drilling.
The Company is currently an exploration stage issuer and is reporting all costs of mine operations, improvements, and expansion as expenses in accordance with section 1300 of Regulation S-K and United States General Accepted Accounting Principal (GAAP) requirements, and therefore the above costs are not reflected as capitalized expenses (assets) on the Company’s balance sheet.
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| Table of Contents |
ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY
Topography, Physiography, and Vegetation
The topography of the San José de Gracia district is generally rugged with elevations varying from 400 meters in the valley bottoms to over 1600 meters in the higher Sierra. A network of small roads and tracks winds around areas nearer the old workings at San José de Gracia. Access to the remainder of the large property at the current stage of development is difficult without the use of horse or helicopter.
The SJG Project can be accessed by road, from either the City of Culiacan or the City of Guamuchil. Either route goes through the small town of Sinaloa de Leyva, then from Sinaloa de Leyva by gravel mountainous road to the village of San José de Gracia (population 250), which covers approximately 90 kilometers and is roughly a five hour trip.
The SJG Project can also be accessed by air. A gravel airstrip is located adjacent to the San Jose de Gracia Village. The airstrip is suitable for light aircraft and charter flights of 45 minutes duration are available from the cities of Los Mochis or Culiacan. Much of the labor for the recent mining and production activities of DynaMexico was provided by the village residents. Although the village provided approximately 75 employees to DynaMexico, it currently has limited services.
Climate and Operating Season
The climate is semi-tropical with a rainy season dominating from late June / early July through September. For some activities on the SDJ project, operations may be suspended during the rainy season.
MINERAL PROCESSING AND METALLURGICAL TESTING
Bulk Sample, Hazen Process Development Metallurgical Report
Ore and existing mill tailings samples were collected prior to DynaMexico’s acquisition and consolidation of San Jose de Gracia. The ore samples consisted of a bulk (about 500 kg) of stockpiled ore from the lower adit of the Tres Amigos mine (intercept of the Tres Amigos and Orange Tree veins). In addition, approximately 100 kg of ore as a bulk sample was taken from the surface at the Gossan Cap area. Three additional ore samples (approximately 5-15 kg each) were assembled from splits of the cores from several of the 1997 drilling program core holes to develop samples representing different ore types for testing. These included: 1) composite drill cores from Palos Chinos, 2) massive sulfide from the Tres Amigos vein and 3) disseminated, nonsurprise mineralized zones at the bottom of several Tres Amigos core holes. The logic was that major exploratory test work to define a metallurgical process would be done on the bulk sample from the adit at Tres Amigos and the other samples would have limited testing done at the selected metallurgical process conditions to verify the performance of the selected metallurgical process circuit on other types of San José mineralization. Finally, several bulk samples (50-100 kg) of existing tailings from the Rosarito mill and the old Rosarito mill were collected and used to conduct flotation, gravity, and limited leachability test work on the tailings.” Samples were shipped to the laboratory of Carbonyx Carbon Technologies in Plano, Texas where in 2000 and 2001 two separate preliminary test programs were conducted, one for the tailings, and the other for a portion of the bulk Tres Amigos ore.The Company developed a concept for the metallurgical processing to produce both gravity and flotation concentrates (rougher and cleaner). The tests confirmed a metallurgical flow sheet to be utilized at San José to recover up to 90% of the feed gold into the concentrates. The above “in-house” testing established a preliminary flowsheet for a mill circuit for processing either primary ore or for reprocessing the existing tailings. Subsequently Hazen Research Laboratories of Golden, Colorado (“Hazen”) was engaged to provide independent verification of the in-house work and carry out additional optimization test work. Lockwood Greene/ Mr. Henderson prepared and verified completion of the scope of work.
In summary, various interim reports and the final metallurgical report, the "Official Hazen Test Report, (“Hazen Report”)” provided results as follows:
| (a) | The initial gravity beneficiation/flotation test work on the Tres Amigos and Gossan Cap bulk ore samples were very encouraging with up to 80 % recovery of the feed gold into the gravity concentrates while maintaining a minimum concentrate grade of 100 g Au/t ; |
|
|
|
| (b) | The existing tailings samples (feed grades of 3 -8 g Au/t) returned similar recovery results, but had to be cleaned to produce a final concentrate with > 100 g Au/t ; |
|
|
|
| (c) | The overall gold recoveries into the gravity cleaner concentrate still were in excess of 50% of the total feed gold; |
|
|
|
| (d) | Flotation tests on primary ore samples resulted in recoveries of 85 - 90 % of the feed gold into the rougher concentrates, however, recoveries after cleaning (to get > 100 g Au/t grade) dropped to the 65-75 % range; and |
A combination circuit of a gravity pre-concentration stage with flotation on the gravity tailings indicated the potential to recover > 90% of the feed gold into the gravity concentrate, the rougher flotation and the cleaner flotation concentrates while maintaining a 100 g Au/t grade in all of the concentrates.
EXPLORATION UPDATE
DynaResource uses a multiple phase method of exploration. The initial activity consists of surface mapping and sampling to identify areas of interest. The next phase is detailed mapping and systematic sampling. Mapping and sampling of mine workings are also performed to define potential areas for future work. Geological mapping and samples have been collected in the past and sent for laboratory analysis by the Company. The prospects are then catalogued and prioritized for drilling. Since January 2022, six (6) areas have been drill-tested. They are: Tres Amigos, La Union, San Pablo, Tepehuaje, La Ceceña and Palos Chinos. In 2022, 166 holes for approximately 24,500 m of diamond drilling was completed and approximately 16,000 core samples were collected of which approximately 500 QA/QC samples were shipped for laboratory analysis.
EXPLORATION PLANS FOR 2023
The Company plans to continue its drilling program with two to six rigs on site. During this period management will make decisions based on the drill results, corporate strategies and market conditions, surface mapping, sampling and target generation. These activities will continue until any increase is approved by the Board of Directors. The Company plans to contract with a consultant to interpret the data collected for a formal Mineral Resource update in the latter part of 2023 or early 2024.
TECHNICAL DISCLOSURE
All technical disclosures and resource estimate covering the Company's mineral property was prepared under the supervision of Mr. Francisco M Carranza Sr, CPG-11933, Consulting Geologist for the Company and a "Qualified Person" within the meaning of subpart 1300 of Regulation S-K.
The following resource information at Tres Amigos and San Pablo were classified as indicated as follows: block they are within 25 m of the nearest sample point and the block was estimated by at least 2 drill holes to be considered the indicated category. The remaining blocks that were interpolated are classified as inferred, La Purisima inferred estimate is provided by DynaResource de Mexico SA de CV. However, for the purpose to elaborate for an official technical report with all the data process and verifications it is essential to validate the QA/QC protocols, field verification of drill sites, drill core, specific gravity procedures, rejects and pulps storage for re-assays if it is required.
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| Table of Contents |
The following table summarizes the estimated bulk tonnage resource at San Jose de Gracia after the drilling results in 2022:
Tres Amigos Indicated
Au Cut off g/t | Tonnes | Au g/t | Au Oz | Ag g/t | Ag Oz | Cu% | CuKg | Pb% | PbKg | Zn% | Zn Kgs. |
0.2 | 7,617,106 | 1.15 | 281,634 | 2.84 | 695,514 | 0.051 | 3,887,771 | 0.027 | 2,019,676 | 0.184 | 14,042,744 |
0.4 | 4,849,964 | 1.64 | 255,729 | 3.36 | 523,933 | 0.066 | 3,180,364 | 0.029 | 1,391,988 | 0.202 | 9,813,659 |
1 | 2,168,925 | 2.90 | 202,227 | 4.90 | 341,695 | 0.098 | 2,118,497 | 0.036 | 790,833 | 0.247 | 5,361,798 |
2 | 977,773 | 4.73 | 148,695 | 6.45 | 202,766 | 0.127 | 1,239,983 | 0.046 | 447,497 | 0.314 | 3,072,965 |
3 | 583,067 | 6.28 | 117,727 | 7.35 | 137,785 | 0.140 | 816,148 | 0.052 | 300,443 | 0.360 | 2,096,854 |
Tres Amigos Inferred
Au Cut off g/t | Tonnes | Au g/t | Au Oz | Ag g/t | Ag Oz | Cu% | CuKg | Pb% | PbKg | Zn% | Zn Kgs. |
0.2 | 2,049,678 | 1.22 | 80,398 | 3.85 | 253,714 | 0.070 | 1,443,732 | 0.027 | 560,280 | 0.207 | 4,249,372 |
0.4 | 1,241,112 | 1.83 | 73,023 | 4.76 | 189,940 | 0.095 | 1,174,340 | 0.034 | 417,336 | 0.245 | 3,042,028 |
1 | 630,208 | 3.00 | 69,786 | 6.81 | 137,984 | 0.140 | 880,118 | 0.049 | 311,329 | 0.360 | 2,265,719 |
2 | 321,043 | 4.54 | 46,862 | 8.87 | 91,555 | 0.184 | 589,470 | 0.048 | 155,115 | 0.475 | 1,526,115 |
3 | 187,049 | 6.05 | 36,384 | 10.24 | 61,582 | 0.212 | 396,220 | 0.047 | 87,254 | 0.608 | 1,137,464 |
San Pablo - La Union Indicated
| Au Cut off g/t | Tonnes | Au g/t | Au Oz | Ag g/t | Ag Oz | Cu% | CuKg | Pb% | PbKg | Zn% | Zn Kgs. |
0.2 | 9,189,220 | 1.26 | 372,261 | 3.66 | 1,081,329 | 0.050 | 4,583,494 | 0.007 | 648,024 | 0.021 | 1,906,856 |
0.4 | 5,254,179 | 1.99 | 336,167 | 4.80 | 810,856 | 0.073 | 3,834,447 | 0.009 | 457,425 | 0.024 | 1,239,934 |
1 | 2,651,248 | 3.34 | 284,705 | 6.67 | 568,557 | 0.109 | 2,882,065 | 0.013 | 332,148 | 0.032 | 842,354 |
2 | 1,478,944 | 4.86 | 231,902 | 8.78 | 417,488 | 0.136 | 2,018,478 | 0.016 | 242,695 | 0.039 | 583,784 |
3 | 936,197 | 6.26 | 188,425 | 10.69 | 321,768 | 0.160 | 1,495,949 | 0.020 | 190,928 | 0.047 | 440,696 |
San Pablo - La Union Inferred
| Au Cut off g/t | Tonnes | Au g/t | Au Oz | Ag g/t | Ag Oz | Cu% | CuKg | Pb% | PbKg | Zn% | Zn Kgs. |
0.20 | 3,225,681 | 0.92 | 95,383 | 3.16 | 327,621 | 0.037 | 1,208,482 | 0.005 | 175,455 | 0.017 | 559,966 |
0.40 | 1,515,252 | 1.65 | 80,383 | 4.27 | 208,023 | 0.058 | 880,270 | 0.007 | 108,477 | 0.021 | 317,218 |
1.00 | 680,531 | 2.91 | 63,371 | 5.67 | 124,059 | 0.084 | 569,652 | 0.009 | 60,424 | 0.026 | 178,047 |
2.00 | 349,774 | 4.37 | 49,144 | 6.72 | 75,571 | 0.105 | 366,046 | 0.011 | 38,947 | 0.032 | 111,417 |
3.00 | 227,225 | 5.40 | 39,450 | 7.92 | 57,860 | 0.115 | 261,613 | 0.013 | 29,889 | 0.037 | 84,312 |
La Purisma Inferred
| Au Cut off g/t | Tonnes | Au g/t | Au Oz | Ag g/t | Ag Oz | Cu% | CuKg | Pb% | PbKg | Zn% | Zn Kgs. |
0.20 | 1,902,000 | 3.62 | 221,063 | 4.67 | 285,578 | 0.081 | 1,540,620 | 0.017 | 323,340 | 0.064 | 1,217,280 |
0.40 | 1,900,000 | 3.62 | 221,136 | 4.81 | 293,830 | 0.084 | 1,596,000 | 0.017 | 323,000 | 0.066 | 1,254,000 |
1.00 | 1,766,712 | 3.83 | 217,324 | 4.64 | 263,732 | 0.082 | 1,448,704 | 0.017 | 300,341 | 0.062 | 1,095,361 |
2.00 | 1,119,202 | 5.30 | 188,951 | 5.63 | 202,732 | 0.103 | 1,152,778 | 0.019 | 212,648 | 0.063 | 705,097 |
3.00 | 800,824 | 6.34 | 163,239 | 5.85 | 150,726 | 0.114 | 912,939 | 0.021 | 168,173 | 0.073 | 584,602 |
The above resource estimate has been prepared using industry standard methods and software in accordance with the necessary requirements in order to calculate a reliable resource estimate. There can be no assurance that a full Technical Report commissioned under Canadian Standard NI 43-101 will reflect the same results. There can be no assurance that the Company will be able to extract the value of the resources indicated in the table above.
In addition to the recent resource estimate described above, in 2012, the Company commissioned a Technical report under Canadian standards NI-43-101 to define resource at San Jose de Gracia which can be viewed in more detail in the Technical report dated December 31, 2012 at http://dynaresource.com/2012/12/30/december-31-2012-2012-dynamexico-luna-cam-42-101-technical-report-updated/.
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| Table of Contents |
The following tables summarizes (1) the underground resource reflected in the 2012 Technical report referred to in the preceding paragraph, (2) the amount mining through December 2022, and (3) and the amount of that resource remaining at December 31, 2022:
43-101 UNDERGROUND RESOURCES 2011 | |||||||||||
| ORE | GRADE | CONTAINED | ||||||||
Au Cut off | tonnes | Au g/t | Ag g/t | Cu% | Pb% | Zn% | Au oz | Ag oz | Cu Kgs. | Pb Kgs. | Zn Kgs. |
2.00 | 6,154,000 | 5.778 | 10.697 | 0.206 | 0.031 | 0.171 | 1,143,000 | 2,117,000 | 12,675,000 | 1,929,000 | 10,510,000 |
TOTAL MINING UNTIL DECEMBER 2022 | |||||||||||
Total Mining | 511,750 | 9.287 | 3.628 | 0.059 | 0.060 | 0.364 | 152,802 | 59,700 | 299,485 | 307,333 | 1,862,021 |
The above resource estimate has been prepared using industry standard methods and software in accordance with the necessary requirements in order to calculate a reliable resource estimate. There can be no assurance that a full Technical Report commissioned under Canadian Standard NI 43-101 will reflect the same results. There can be no assurance that the Company will be able to extract the value of the resources indicated in the table(s) above.
ITEM 3. LEGAL PROCEEDINGS
2014 Arbitration Proceeding filed by Goldgroup Resources Inc.
On March 14, 2014, Goldgroup Resources, Inc., (“Goldgroup”), a former joint venture partner of the Registrant, 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.
DynaResource de Mexico SA de CV Legal Update and Disclosure:
On March 3, 2023, Goldgroup Resources Inc. (“Goldgroup”) filed a formal notice with the México Federal Legal Authorities, which confirmed Goldgroup’s complete withdrawal of all legal claims in Mexico and under Mexican law against DynaResource de México SA de CV.
Goldgroup’s complete legal withdrawal is the result and culmination of 7 years of legal actions undertaken in Mexico by DynaMéxico. Accordingly, all matters before the courts in México with respect to DynaMéxico and Goldgroup Resources Inc. are fully resolved and are no longer subject to appeal.
Consequence of the México legal rulings and the Goldgroup legal withdrawal:
1. | The $48,280,808.34 USD damages award (dated October 05, 2015) in favor of DynaMéxico and against Goldgroup Resources Inc., confirmed by Mexican courts in 2019, is final, conclusive, and enforceable under Mexican law. Goldgroup Resources’ challenges to that award have been fully denied and the damages award is final. |
|
|
2. | Goldgroup’s challenges to DynaMéxico’s share ownership have also been fully denied and consequently, under Mexican law, Goldgroup owns no shares in DynaMexico. |
Mercuria Energy Trading S.A vs Mineras de DynaResource S.A. de C.V.
In 2020, Mercuria Energy Trading, S.A. (“Mercuria”) initiated an arbitration proceeding against Mineras de Dynaresource, S.A. de C.V. (“Mineras”), arising out of the earlier-terminated supply agreement between the parties. In January 2022, The arbitration panel awarded Mercuria the sum of US$1,822,674, plus interest at 2% over the quarterly compounded USD 3- month LIBOR rate, from February 2020 forward. In August 2022, the panel also assessed costs of the arbitration proceeding against Mineras, in the aggregate amount of £ 376,232.75. DynaResource has accrued $1,000,000 for the arbitration award and related costs.
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 award to Mercuria, the assessment of any costs, and any supplemental award.
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.
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| Table of Contents |
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is traded on the OTC Markets under the symbol "DYNR". The following table sets forth, for the periods indicated, the high and low bid quotations which reflect inter-dealer prices, without retail mark-up or mark-down and without commissions; and may not reflect actual transactions. All amounts are denominated in U.S. dollars.
Year ended December 31, 2022 |
| Low |
|
| High |
| ||
First Quarter |
|
| 1.23 |
|
|
| 1.90 |
|
Second Quarter |
|
| 1.50 |
|
|
| 2.00 |
|
Third Quarter |
|
| 1.29 |
|
|
| 2.39 |
|
Fourth Quarter |
|
| 2.06 |
|
|
| 2.46 |
|
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 |
|
As of December 31, 2022, there were outstanding 22,246,654 shares of our common stock, which were held by approximately 434 shareholders of record. The number of shareholders of record does not include shareholders that hold their shares in street name or with a broker.
Dividend Policy
No cash dividends on the Company’s 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.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable for smaller reporting companies.
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.
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”), of which 79% are held directly and 1% are held by the current CEO on behalf of DynaResoure, Inc., in compliance with Mexican law, and DynaMéxico currently holds 20% of its shares recovered from Goldgroup Resources Inc. as treasury shares. 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 2022)
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 700 tons per 24-hour operating day. (Note the Summary of Test Mining and Pilot Mill Operations for 2018 to 2022 below).
Since January 2017, the Company has expended over $29.5 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 |
| $ | 7,093,000 |
|
Tailings Pond Expansion |
|
| 1,464,000 |
|
Machinery and Equipment |
|
| 2,315,000 |
|
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 |
|
| 2,014,000 |
|
Exploration and Developmental Drilling |
|
| 2,484,000 |
|
Surface Rights and Permitting |
|
| 793,000 |
|
Debt Retirement |
|
| 3,528,000 |
|
Legal Fees |
|
| 4,279,000 |
|
Total |
| $ | 29,504,000 |
|
| 13 |
| Table of Contents |
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 $11 million USD which is available to offset future taxable earnings.
Results for the Years Ended December 31, 2022 and 2021
Summary of Test Mining and Pilot Mill Operations for 2018 to 2022:
Year |
| Total Tonnes Processed |
|
| Reported Mill Feed Grade (g/t Au) |
|
| Reported Recovery % |
|
| Gross Gold Concentrates Produced (Au oz.) |
|
| Net Gold Concentrates Sold(Au oz.) |
| |||||
2018 |
|
| 52,038 |
|
|
| 9.82 |
|
|
| 86.11 | % |
|
| 14,147 |
|
|
| 13,418 |
|
2019 |
|
| 66,031 |
|
|
| 5.81 |
|
|
| 86.86 | % |
|
| 10,646 |
|
|
| 9,713 |
|
2020 |
|
| 44,218 |
|
|
| 5.65 |
|
|
| 87.31 | % |
|
| 7,001 |
|
|
| 5,828 |
|
2021 |
|
| 97,088 |
|
|
| 9.67 |
|
|
| 88.79 | % |
|
| 26,728 |
|
|
| 22,566 |
|
2022 |
|
| 137,740 |
|
|
| 8.18 |
|
|
| 88.05 | % |
|
| 31,905 |
|
|
| 25,554 |
|
DynaMexico continued to increase its test underground mining activity and pilot milling operations in 2022 and increased output from 300 to 700 tons per 24-hour operating /day during the 4th quarter.
Test pilot operations in 2022 yielded 137,740 Tons mined and processed from underground test mining activity and pilot milling operations; and the production of approximately 31,905 gross Oz Au, and net of dry weight adjustments at the buyer’s facilities, the production of approximately 25,554 Oz Au. The Company reports net revenue of $39,757,460 net of buyer’s price discount and refining and treatment costs.
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.
DynaMexico expects to continue its test underground mining activity and pilot milling operations in 2023; and projects the output of 700 tons per 24-hour operating day from the mine and mill in 2023.
REVENUE: Revenues for the years ended December 31, 2022, and 2021 were $39,767,460 and $35,886,046, respectively. The increase was the result of the increase in tonnage mined and processed as a result of expansion of the Tres Amigos mine in 2022 and the increase in milling capacity to 700 tons per day in the fourth quarter of 2022. The increase in tonnage resulted in a slight drop in yield from 9.67 g/t Au in 2021 to 8.18 g/t Au in 2022. Volume processed however increased from 266 tons per 24hr day in 2021 to 377 tons per day in 2022. During 2022 Volume increased from 308 tons per day in the 1st quarter to 493 tons per day in the 4th quarter. The Company anticipates running an average of 600 to 700 tons per day in 2023.
PRODUCTION COSTS RELATED TO SALES: Production costs related to sales for the years ended December 31, 2022, and 2021 were $4,413,649 and $2,909,401, respectively. These are expenses directly related to the milling, packaging and shipping of gold and other precious metals product. This represents an increase in the cost per ounce recovered of milling from
$109 per OZ to $138 per OZ. The increase was largely due to cost of bringing the new ball mills online and is expected to drop in 2023.
MINE PRODUCTION COSTS: Mine production costs for the years ended December 31, 2022, and 2021 were $6,500,974 and $3,965,467 respectively. These costs were directly related to the extraction of mine tonnage to be processed at the mill. The increase was a result of the increase in tonnage mined. Cost per ton rose from $45.57 per ton in 2021 to $47.98 per ton in 2022.
MINE EXPLORATION COSTS: Mine exploration costs for the years ended December 31, 2022, and 2021 were $5,707,832 and $5,198,057, 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 volume. However, the percentage of waste tonnage dropped from 49.2% of total tonnage mined in 2021 to 45.6% in 2022.
FACILITIES EXPANSION COSTS: Facilities expansion costs for the years ended December 31, 2022, and 2021 were $6,058,588 and $1,478,725, respectively. These were the costs associated with the expansion of the mining facilities. Primary costs in 2022 were the purchase and installation of the two new ball mills and the construction of a new tailings pond. 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.
EXPLORATION DRILLING: Exploration drilling expenses for the years ended December 31, 2022 and 2021 were $2,484,072 and $0, respectively. The Company began a new drilling program in 2022 to update its National Instrument 43-101 reserve report.
TRANSPORTATION: Transportation costs for the years ended December 31, 2022, and 2021 were $2,261,681 and $1,330,414, respectively. These were the costs of transporting the product to the customer for treatment and sale. The increase was a result with the overall increase in production and sales and the general increase in fuel and trucking costs.
CAMP, WAREHOUSE AND FACILITIES: Camp, warehouse and facility cost for the years ended December 31, 2022, and 2021 were $4,403,660 and $2,913,832, 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, 2022, and 2021 were $149,571 and $127,731, 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, 2022, and 2021 were $4,134,902 and $3,738,250 respectively. These were the costs of operating the Company not directly associated with the mine operations including management, accounting, and legal expenses.
STOCK COMPENSATION EXPENSE: Stock compensation expense for the years ended December 31, 2022 and 2021 was $881,250 and $1,005,223, respectively.
OTHER INCOME (EXPENSE): Other income (expense) for the years ended December 31, 2022, and 2021 was $1,336,841 and $(4,622,364), respectively. Included in this category in 2022 was interest expense of $(450,324), change in derivative liability of $1,726,497, currency transaction gain of $58,426, and other income of $2,242. 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, an arbitration award payment of $(1,111,111) and other income of $1,072. The decrease in derivative liability is the result of two of the derivatives expiring due to the maturity of the underlying securities. See Item See Legal Proceedings for discussion of the arbitration award payment.
| 14 |
| Table of Contents |
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, 2022, and 2021 consisted of unrealized currency gains (losses) of $359,743 and $(685,757), respectively. The current year change is due to the variances in the peso exchange rates throughout the two years.
Liquidity and Capital Resources
As of December 31, 2022, the Company had working capital of $11,789,578, comprised of current assets of $33,123,955 and current liabilities of $21,334,377. This represented an increase of$10,661,867 from the working capital maintained by the Company of $1,347,711 as of December 31, 2021. The primary reason for the increase is the cash, inventory and receivables from the Company’s operating profit and from funds raised by the issuance of common stock.
Net cash provided by (used in) operations for the year ended December 31, 2022 was $(1,781,225) compared to $17,516,205 in the year ended December 31, 2021. The decrease is largely due to the drop in net income and the increase in exploration activities and an increase in working capital.
Net cash provided by (used) in investing activities for the years ended December 31, 2022, and 2021 was $0 and $0, respectively. In 2022 and 2021, expenditures necessary for the expansion of mining operations totaling $6,058,588 and $1,478,725 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, 2022, was $4,778,958 compared to $(2,557,721) for the year ended December 31, 2021. The 2022 funds are the result of the issuance of common stock due to the exercise of stock warrants. The 2021 usage was for the retirement of Series D debt.
Off-Balance Sheet Arrangements
As of December 31, 2022, 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 seven years, the Company has gradually increased its output to approximately 300 tons per 24-hour operating day from the mines and processing plant. In 2023, the Company projects to complete its next phase of expansion to reach the output of approximately 700 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 2023.
Capital Expenditures
The Company’s primary activities relate to the test mining and pilot milling operations of the SJG property through its Mexican subsidiaries.
Exploration Stage
The Company is an exploration stage issuer has started extraction without determining mineral reserves.
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 into 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not required for smaller reporting companies.
| 15 |
| Table of Contents |
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, 2022 and 2021. The consolidated financial statements as of December 31, 2022 and 2021 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: | 17 | |
18 | ||
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) | 19 | |
Consolidated Statement of Changes in Stockholders’ (Deficit) | 20 | |
21 | ||
22 |
| 16 |
| Table of Contents |
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, 2022 and 2021, 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, 2022 and 2021, 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 D 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, 2022, the derivative liabilities were $2,172,417. 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 is: 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.
We have served as the Company's auditor since 2020.
April 17, 2023
| 17 |
| Table of Contents |
DYNARESOURCE, INC. CONSOLIDATED BALANCE SHEETS | ||||||||
DECEMBER 31, 2022 and 2021 | ||||||||
|
|
|
|
| ||||
|
| 2022 |
|
| 2021 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ |
|
| $ |
| ||
Accounts receivable |
|
|
|
|
|
| ||
Inventories |
|
|
|
|
|
| ||
Foreign tax receivable |
|
|
|
|
|
| ||
Other current assets |
|
|
|
|
|
| ||
Total current assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Property and equipment (net of accumulated depreciation of $ |
|
|
|
|
|
| ||
Right-of-use assets, net |
|
|
|
|
|
| ||
Mining concessions |
|
|
|
|
|
| ||
Deferred tax asset |
|
|
|
|
|
| ||
Other assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ |
|
| $ |
| ||
Accrued expenses |
|
|
|
|
|
| ||
Customer advances |
|
|
|
|
|
| ||
Derivative liabilities |
|
|
|
|
|
| ||
Convertible notes payable |
|
|
|
|
|
| ||
Current portion of operating lease payable |
|
|
|
|
|
| ||
Installment notes payable |
|
|
|
|
|
| ||
Total current liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Operating lease payable, less current portion |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
|
| ||
TEMPORARY EQUITY |
|
|
|
|
|
|
|
|
Series C Senior Convertible Preferred Stock, $ |
|
|
|
|
|
| ||
Series D Senior Convertible Preferred Stock, $ |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
| ||
Preferred Stock, Series A, $ |
|
|
|
|
|
| ||
Common Stock, $ |
|
|
|
|
|
| ||
Preferred rights |
|
|
|
|
|
| ||
Additional paid-in-capital |
|
|
|
|
|
| ||
Treasury stock, |
|
| ( | ) |
|
| ( | ) |
Accumulated other comprehensive income |
|
|
|
|
| ( | ) | |
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
| ( | ) | |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| 18 |
| Table of Contents |
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 | ||||||||
| ||||||||
|
| 2022 |
|
| 2021 |
| ||
REVENUE COSTS AND EXPENSES OF MINING OPERATION |
| $ |
|
| $ |
| ||
Production cost applicable to sales |
|
|
|
|
|
| ||
Mine production costs |
|
|
|
|
|
| ||
Mine exploration costs |
|
|
|
|
|
| ||
Facilities expansion costs |
|
|
|
|
|
| ||
Exploration Drilling |
|
|
|
|
|
| ||
Camp, warehouse and facilities |
|
|
|
|
|
| ||
Transportation |
|
|
|
|
|
| ||
Property holding costs |
|
|
|
|
|
| ||
Stock Compensation Expense |
|
|
|
|
|
| ||
General and administrative |
|
|
|
|
|
| ||
Depreciation and amortization |
|
|
|
|
|
| ||
TOTAL OPERATING EXPENSES |
|
|
|
|
|
| ||
NET OPERATING INCOME |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
Foreign currency gains (loss) |
|
|
|
|
|
| ||
Interest expense |
|
| ( | ) |
|
| ( | ) |
Derivatives mark-to-market gain (loss) |
|
|
|
|
| ( | ) | |
Arbitration award expense |
|
|
|
|
| ( | ) | |
Other income (expense) |
|
|
|
|
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TOTAL OTHER INCOME (EXPENSE) |
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| ( | ) | |
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NET INCOME BEFORE TAXES |
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PROVISION FOR INCOME TAXES (BENEFIT) |
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| ( | ) |
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| |
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NET INCOME |
| $ |
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| $ |
| ||
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DEEMED DIVIDEND FOR SERIES C & D PREFERRED |
|
| ( | ) |
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| ( | ) |
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NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS |
| $ |
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| $ |
| ||
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EARNINGS PER SHARE ATTRIBUTABLE TO THE |
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EQUITY HOLDERS OF DYNARESOURCE, INC. |
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Basic Income per common share |
| $ |
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| $ |
| ||
Weighted average shares outstanding – Basic |
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Diluted Income per common share |
| $ |
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| $ |
| ||
Weighted average shares outstanding – Diluted |
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OTHER COMPREHENSIVE INCOME (LOSS) |
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Unrealized foreign currency translation gain (loss) |
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| ( | ) | |
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) |
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| ( | ) | |
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TOTAL COMPREHENSIVE INCOME |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| 19 |
| Table of Contents |
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2022 AND 2021
|
| Preferred A |
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| Common |
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| Preferred |
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| Preferred |
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| Paid In |
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| Treasury |
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| Treasury |
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| Other Comp |
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| Accumulated |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Rights |
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| Amount |
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| Capital |
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| Shares |
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| Amount |
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| Income |
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| Deficit |
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| Totals |
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| ||||||||||||
| Balance January 1, 2021 |
|
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| $ |
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| $ |
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| $ |
|
| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ | ( | ) | |||||||||
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| Treasury Stock Issued for Services |
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| ( | ) |
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| ( | ) |
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| Stock Warrants Exercised |
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| Other Comprehensive Income |
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| ( | ) |
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| ( | ) |
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| Net Income (Loss) |
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| Balance, December 31, 2021 |
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) | ||||||||
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| Stock Issued for Services |
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| Stock Warrants Exercised |
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| Other Comprehensive Income |
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| Net Income (Loss) |
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| Balance, December 31, 2022 |
|
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| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| $ | ( | ) |
| $ |
| ||||||||||
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The accompanying notes are an integral part of these consolidated financial statements. | ||||||||||||||||||||||||||||||||||||||||||||||||
| 20 |
| Table of Contents |
DYNARESOURCE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 | ||||||||
| ||||||||
|
| 2022 |
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| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITES: |
|
|
|
|
|
| ||
Net Income |
| $ |
|
| $ |
| ||
Adjustments to reconcile net income to cash used in operating activities |
|
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Derivatives mark-to-market (gain) loss |
|
| ( | ) |
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| |
Depreciation and amortization |
|
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| ||
Right-of-use assets, amortization |
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| ||
Amortization of loan discount |
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| ||
Stock issued for services |
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| ||
Deferred tax asset |
|
| ( | ) |
|
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| |
Change in operating assets and liabilities |
|
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Accounts receivable |
|
| ( | ) |
|
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| |
Inventories |
|
| ( | ) |
|
| ( | ) |
Foreign tax receivable |
|
| ( | ) |
|
| ( | ) |
Appeal bond |
|
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| ||
Other assets |
|
| ( | ) |
|
| ( | ) |
Accounts payable |
|
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| ( | ) | |
Accrued expenses |
|
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| ||
Customer advances |
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Operating lease liabilities |
|
| ( | ) |
|
| ( | ) |
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES |
|
| ( | ) |
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| |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from exercise of stock warrants |
|
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| ||
Payments of convertible notes |
|
| ( | ) |
|
| ( | ) |
Payments of long-term debt |
|
| ( | ) |
|
| ( | ) |
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES |
|
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| ( | ) | |
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Effects of foreign currency exchange |
|
|
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| ( | ) | |
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
|
|
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| ||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
|
|
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|
| ||
CASH AND CASH EQUIVILANTS AT END OF PERIOD |
| $ |
|
| $ |
| ||
|
|
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SUPPLEMENTAL DISCLOSURES |
|
|
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|
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Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these consolidated financial statements.
| 21 |
| Table of Contents |
DYNARESOURCE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
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, 79% directly and 1% held by the current CEO on behalf of the Company, in compliance with Mexican law. 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”). In 2020 the Company moved its registered employees from DynaOperaciones to DynaMexico in compliance with changes in Mexican employment law. 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.
Reclassifications and Adjustments
Certain financial statement reclassifications have been made to prior period balances to reflect the current period’s presentation format, such reclassifications had no impact on the Company’s consolidated statements of income or consolidated statements of cash flows and had no material impact on the Company’s consolidated balance sheets.
Significant Accounting Policies
The 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., DynaResource Operaciones S.A. de C.V. and Mineras de DynaResource S.A. de C.V. All significant inter-company transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated.
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, 2022, the Company had $
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, 2022, and 2021, respectively, no allowance has been made. During the year ended December 31, 2021 the Company recorded a $
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 $
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, 2022 and December 31, 2021 were
$
Exploration Stage
According to Section 1300 of Regulation S-K, the Registrant is an exploration stage issuer with an exploration stage property since it does not have proven and probable reserves as defined in Section 1300 and does not have a preliminary or final feasibility study.
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
| 22 |
| Table of Contents |
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.
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 proven and probable reserves are extracted. As of December 31, 2022, 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 will be amotized once proven and probable reserves are extracted 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, 2022, and 2021, 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, 2022 and 2021 (Mexican Pesos per one U.S. dollar):
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| Dec 31, 2022 |
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| Dec 31, 2021 |
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Current exchange rate | Pesos |
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Weighted average exchange rate for the period ended | Pesos |
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The Company recorded currency transaction gains (losses) of $
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.
Uncertain Tax Position
The Company is subject to income taxes in the U.S. and other foreign jurisdictions, with respect to which some of the outcome is uncertain. The evaluation of the Company’s uncertain tax positions involves significant judgment in the interpretation and application of GAAP and complex domestic and international tax laws. We establish reserves to remove some or all of the tax benefit of any of our tax positions at the time we determine that it becomes uncertain based upon one of the following conditions: (1) the tax position is not "more likely than not" to be sustained, (2) the tax position is "more likely than not" to be sustained, but for a lesser amount, or (3) the tax position is "more likely than not" to be sustained, but not in the financial period in which the tax position was originally taken. For purposes of evaluating whether or not a tax position is uncertain, (1) we presume the tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information; (2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings and case law and their applicability to the facts and circumstances of the tax position; and (3) each tax position is evaluated without consideration of the possibility of offset or aggregation with other tax positions taken. Although management believes the Company’s reserves are reasonable, no assurance can be given that the final outcome of these uncertainties will not be different from that which is reflected in the Company’s reserves. A number of years may elapse before a particular uncertain tax position is audited and finally resolved or when a tax assessment is raised. The number of years subject to tax assessments varies depending on the tax jurisdiction. Any tax benefit that is or has been reserved because of a failure to meet the "more likely than not" recognition threshold would be recognized in income tax expense in the first interim period when the uncertainty disappears under any one of the following conditions: (1) the tax position is "more likely than not" to be sustained, (2) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation, or (3) the statute of limitations for the tax position has expired. Refer to Note 6.
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 mineral concentrate 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.
| 23 |
| Table of Contents |
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, 2022, there are $
During the years ended December 31, 2022, and December 31, 2021, there was $
As of and for the year ended December 31, 2022, and December 31, 2021, 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 installment notes payable. The carrying amount of cash, accounts receivable and accounts payable approximates fair value because of the short-term nature of these items. The carrying amount of installment notes payable debt approximates fair value due to the relationship between the interest rate on installment notes payable 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 warrants outstanding to purchase
The Company’s Series C Preferred Stock including outstanding dividends is convertible into
The Company had warrants outstanding (the 2015 Warrant) to purchase
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| Years ended December 31 |
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| 2022 |
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| 2021 |
| ||
Net income (loss) attributable to common shareholders |
| $ |
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| $ |
| ||
Shares: |
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Weighted average number of common shares outstanding, Basic |
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Weighted average number of common shares outstanding, Diluted |
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Basic income (loss) per share |
| $ |
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| $ |
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Diluted income (loss) per share |
| $ |
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| $ |
| ||
Diluted Earnings Per Share is calculated as follows:
|
| Dec 31, |
| |
|
| 2022 |
| |
Net income attributable to common shareholders |
| $ |
| |
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Deemed Dividends of Series C Preferred Stock |
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| |
Deemed Dividends of Series D Preferred Stock |
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Adjusted Diluted Earnings |
| $ |
| |
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Weighted average number of share outstanding - Basic |
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| |
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Series C Preferred Stock Common Stock Equivalent |
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Series D Preferred Stock Common Stock Equivalent |
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Weighted average number of share outstanding - Diluted |
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Diluted Earnings Per Share |
| $ |
| |
At December 31, 2022,
At December 31, 2021,
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, 2022 and 2021, respectively, were as follows:
|
| 2022 |
|
| 2021 |
| ||
Mined Tonnage |
| $ |
|
| $ |
| ||
Gold-Silver Concentrates |
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| ||
Total Inventories |
| $ |
|
| $ |
| ||
NOTE 3 – PROPERTY
Property consists of the following at December 31, 2022 and 2021: |
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| 2022 |
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| 2021 |
| ||
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Leasehold improvements |
| $ |
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| $ |
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Office equipment |
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Office furniture and fixtures |
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Sub-total |
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| ||
Less: Accumulated depreciation |
|
| ( | ) |
|
| ( | ) |
Total Property |
| $ |
|
| $ |
| ||
| 24 |
| Table of Contents |
Depreciation and amortization has been provided over each asset’s estimated useful life. Depreciation and amortization expense was $
NOTE 4 – MINING CONCESSIONS
Mining properties consist of the San Jose de Gracía (“SJG”) concessions. Mining Concessions were $
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 $
The Series I Note holders retained 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 $
The Notes originally matured on
On July 1, 2022 the remaining Series I Notes were paid off in full in cash. None of the notes were converted into common stock and no stock warrants were issued.
Notes Payable – Series II
In 2013 and 2014, the Company entered into additional note agreements of $
The Notes originally matured on
On July 1, 2022 the remaining Series II Notes were paid off in full in cash. None of the notes were converted into common stock and no stock warrants were issued.
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.
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.
|
| December 31, |
|
| December 31, |
| ||
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| 2022 |
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| 2021 |
| ||
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Federal Net Operating Loss Carryforwards |
| $ |
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| $ |
| ||
Foreign Net Operating Loss Carryforwards |
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Other |
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Total Deferred Tax Asset |
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| ||
Less Valuation Allowance |
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|
| ( | ) | |
Net Deferred Tax Asset |
| $ |
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| $ |
| ||
The Company's pre-tax income (loss) by jurisdiction was as follows for the years ending December 31, 2022 and December 31, 2021
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
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| 2021 |
| ||
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Domestic |
| $ |
|
| $ | ( | ) | |
Foreign |
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Total |
| $ |
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| $ |
| ||
25 |
The provision for income taxes for continuing operations for the year ended December 31, 2022 and December 31, 2021 consist of the following
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
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| 2021 |
| ||
Current income taxes |
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Federal |
| $ |
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| $ |
| ||
State |
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Foreign |
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Total current income taxes |
| $ |
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| $ |
| ||
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Deferred income taxes |
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Federal |
| $ | ( | ) |
| $ |
| |
State |
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| ||
Foreign |
|
| ( | ) |
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| |
Total deferred income taxes |
| $ | ( | ) |
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| |
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Total income tax expense (benefit) |
| $ | ( | ) |
| $ |
| |
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, 2022 includes state minimum taxes, permanent differences, and deferred tax assets for which a full valuation allowance has been released. A corresponding tax benefit is included for the year ended December 31, 2022 to reflect the release in the valuation allowance.
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Tax Expense at statutory federal rate of 21% |
| $ |
|
| $ |
| ||
Permanent Differences |
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Foreign Rate Differential |
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GILTI NOL Impact |
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GILTI NOL Adjustment – Previously Offset by Valuation Allowance |
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Change in Valuation Allowance |
|
| ( | ) |
| $ | ( | ) |
Other |
|
|
|
| $ | ( | ) | |
Income tax expense (benefit) |
| $ | ( | ) |
| $ |
| |
The net deferred tax asset and benefit for the current year is generated primarily from cumulative net operating loss carryforward, which totals approximately $
|
| December 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
United States Expiring 2029 to 2037 |
| $ |
|
| $ |
| ||
United States Indefinite Limited to 80% |
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| ||
Foreign NOLs |
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|
| $ |
|
| $ |
| ||
At December 31, 2022, our carryforwards available to offset US federal future taxable income consisted of net operating loss (“NOL”) carryforwards of approximately $
During the year ended December 31, 2022, the valuation allowance was released. The Company believes a full valuation allowance against the net deferred tax asset is no longer warranted based on the positive evidence in recent years. Such positive evidence includes no longer being in a three-year cumulative losses, the rising prices in gold, utilization of current year tax attributes, and projected taxable income in the future.
Our practice is to recognize interest and penalties related to income taxes in income tax expense in continuing operations, as incurred. We did not have any uncertain tax benefits or interest and penalties related to uncertain tax benefits as of December 31, 2022.
The Company is subject to income taxes in the US federal jurisdiction as well as Mexico. The Company is no longer subject to US federal, state and local tax examinations by tax authorities for years prior to fiscal year 2021. The Company began utilizing its NOL in 2021. The statute of limitations began when the Company filed its 2021 US Federal Tax Return. 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.
The Company has not provided U.S. income taxes and foreign withholding taxes, on its cumulative earnings for certain non-U.S. subsidiaries, because such earnings are intended to be indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability for temporary differences related to investments in these non-U.S. subsidiaries that are essentially permanent in duration is not practicable.
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
Series A Preferred Stock
The Company has designated
| 26 |
| Table of Contents |
Series C Senior Convertible Preferred Stock
At December 31, 2022 and December 31, 2021, there were
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.
The 2015 Warrant -
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. The Golden Post Note was 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 $ |
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|
|
| (b) | A common stock purchase warrant (the “2020 Warrant”) for the purchase of |
| · | The Remaining Purchasers acquired the following securities: |
| (a) | Convertible promissory notes (the “Remaining Notes”) in the aggregate principal amount of $ |
|
|
|
| (b) | Common stock purchase warrants (the “Remaining Purchasers Warrants”) for the purchase of an aggregate of |
Retirement of Series D Convertible Debt
On October 7, 2021, the Company paid $
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 $
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 $
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, 2022 and December 31, 2021, there were
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 2015 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 2015 Warrant 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 $
Preferred Stock (Undesignated)
In addition to the 1,000 shares designated as Series A Preferred Stock, the
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
| 27 |
| Table of Contents |
Preferred Rights
In 2003, the Company issued “Preferred Rights” for the rights to percentages of revenues generated from the San Jose de Gracía Pilot Production Plant and received $
Stock Issuances
On June 28, 2022, the Company issued
On December 28, 2022, the Compensation Committee approved performance based common stock awards to employees, directors and consultants of the Issuer for performance based compensation. The
On October 18, 2021, five warrant holders exercised a total of
Treasury Stock
During the year ending December 31, 2022, there were no treasury stock transactions.
During the year ending December 31, 2021,
Warrants
2022 Activity
On June 28, 2022, one warrant holder exercised
At December 31, 2022, the Company had a total of
2021 Activity
On October 18, 2021, five warrant holders exercised a total of
At December 2021, the Company had a total of
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| Weighted |
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| Weighted |
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| Average |
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| ||||
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| Average |
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| Remaining |
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| ||||
|
| Number |
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| Exercise |
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| Contractual |
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| Intrinsic |
| ||||
|
| of Shares |
|
| Price per share |
|
| Life (Years) |
|
| Value |
| ||||
Balance at December 31, 2020 |
|
|
|
| $ |
|
|
|
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|
|
| ||||
Exercise of 2020 warrants |
|
| ( | ) |
| $ |
|
|
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| |
Balance at December 31, 2021 |
|
|
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| $ |
|
|
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| |||
Exercise of the 2015 warrant |
|
| ( | ) |
| $ |
|
|
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|
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|
| |
Forfeiture of the 2015 warrant |
|
| ( | ) |
| $ |
|
|
|
|
|
|
|
| ||
Balance at December 31, 2022 |
|
|
|
| $ |
|
|
|
|
|
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|
| |||
Exercisable at December 31, 2022 |
|
|
|
| $ |
|
|
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|
| ||||
| 28 |
| Table of Contents |
NOTE 8 – STOCK BASED COMPENSATION
On December 28, 2022, the Company issued
NOTE 9 – RELATED PARTY TRANSACTIONS
Restricted Stock Awards
The Compensation Committee approved stock awards to employees, directors and consultants of the Company for performance based compensation. The stock awards approved were issued to each of the individuals/entities and vested 25% immediately and the remainder vest 25% each year on December 31 for the next three years, subject to resignation or termination provisions. The awards totaled
Dynacap Group Ltd.
The Company paid $
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.
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Legal Update
2014 Arbitration Proceeding filed by Goldgroup Resources Inc.
On March 14, 2014, Goldgroup Resources, Inc. ("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 $
DynaResource de Mexico SA de CV Legal Update & Disclosure:
On March 3, 2023, Goldgroup Resources Inc. (“Goldgroup”) filed a formal notice with the México Federal Legal Authorities, which confirmed Goldgroup’s complete withdrawal of all legal claims in Mexico and under Mexican law against DynaResource de México SA de CV.
Goldgroup’s complete legal withdrawal is the result and culmination of 7 years of legal actions undertaken in Mexico by DynaMéxico. Accordingly, all matters before the courts in México with respect to DynaMéxico and Goldgroup Resources Inc. are fully resolved and are no longer subject to appeal.
Consequence of the México legal ruling and the Goldgroup legal withdrawal:
1. The $48,280,808.34 USD damages award (dated October 05, 2015) in favor of DynaMéxico and against Goldgroup Resources Inc., confirmed by Mexican courts in 2019, is final, conclusive, and enforceable under Mexican law. Goldgroup Resources’ challenges to that award have been fully denied and the damages award is final.
2. Goldgroup’s challenges to DynaMéxico’s share ownership have also been fully denied and consequently, under Mexican law, Goldgroup owns no shares in DynaMéxico.
Mercuria Energy Trading S.A vs Mineras de DynaResource S.A. de C.V.
In 2020,
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 award to Mercuria, the assessment of any costs, and any supplemental award.
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,
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
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, 2022, the Company has two operating leases - a six- and one-half year lease for office space with a remaining term of one month and a twenty-year ground lease in association with its México mining operations with a remaining term of eleven 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: |
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| Year Ended December 31, 2022 |
| |
Operating Lease – Office Lease |
| $ |
| |
Operating Lease – Ground Lease |
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| |
Short Term Lease Costs |
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| |
Variable Lease Costs |
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TOTAL |
| $ |
| |
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Weighted average remaining lease term and weighted average discount rate are as follows: |
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Weighted Average Remaining Lease Term (Years) – Operating Leases |
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| |
Weighted Average Discount Rate – Operating Leases |
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| % | |
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Estimated future minimum lease obligations are as follow for the years ending December 31: |
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YEAR |
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2023 |
| $ |
| |
2024 |
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| |
2025 |
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| |
2026 |
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| |
2027 |
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| |
Thereafter |
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| |
Total |
| $ |
| |
Less Imputed Interest |
|
| ( | ) |
OPERATING LEASE LIABILITY |
| $ |
| |
| 29 |
| Table of Contents |
NOTE 11 - DERIVATIVE LIABILITIES
Series C Preferred Stock
As discussed in Note 7, the Company analyzed the embedded conversion features of the Series C Preferred Stock and determined that the conversion feature qualified as embedded 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 (see “Note 12”) and used an equity simulation model to determine the value of conversion feature of the Series C Preferred Stock based on the assumptions below:
|
| 2022 |
|
| 2021 |
| ||
Annual volatility rate |
|
| % |
|
| % | ||
Risk free rate |
|
| % |
|
| % | ||
Remaining Term |
|
|
|
| ||||
Fair Value of common stock |
| $ |
|
| $ |
| ||
For the years ended December 31, 2022 and December 31, 2021, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.
The below table represents the change in the fair value of the derivative liability during the nine and twelve months ended December 31, 2022 and December 31, 2021.
2015 Warrant
As discussed in Note 7, the Company analyzed the embedded conversion features of the Series C Preferred Stock and determined that the 2015 Warrant (issued at the same time as the Series C Preferred Stock) qualified as a derivative liability and is required to be accounted for as such. The Company performed a valuation applying 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 (see note 12) and used an equity simulation model to determine the value of the 2015 Warrant based on the assumptions below:
|
| 2022 |
|
| 2021 |
| ||
Annual volatility rate |
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| % |
|
| % | ||
Risk free rate |
|
| % |
|
| % | ||
Remaining Term |
|
|
|
| ||||
Fair Value of common stock |
| $ |
|
| $ |
| ||
For the years ended December 31, 2022, and December 31, 2021, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.
The below table represents the change in the fair value of the derivative liability during the periods ended December 31, 2022, and December 31, 2021.
Period Ended |
| 2022 |
|
| 2021 |
| ||
Fair value of derivative (warrant), beginning of period |
| $ |
|
| $ |
| ||
Change in fair value of derivative |
|
| ( | ) |
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|
| |
Fair value of derivative on the date of issuance |
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| ||
Fair value of derivative (warrant), end of period |
| $ |
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| $ |
| ||
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The 2015 Warrant was exercised on June 28, 2022.
Warrants issued with the Notes convertible into Series D Preferred |
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As discussed in Note 7, the Company analyzed the conversion features of the promissory notes convertible into Series D Preferred and determined that the 2020 warrants and remaining purchaser warrants issued with such notes qualified as a derivative liability. The fair value was required to be allocated among the notes, the notes’ conversion features, and the 2020 warrants and remaining purchaser warrants, and then remeasured at each reporting date. The Company performed a valuation of the conversion feature of the 2020 warrants and remaining purchaser warrants. 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.
| 30 |
| Table of Contents |
The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 (see “Note 11”) and used an equity simulation model to determine the value of conversion feature of the Warrants issued with the notes convertible into Series D Preferred based on the assumptions below:
|
| 2022 |
|
| 2021 |
| ||
Annual volatility rate |
|
| % |
|
| % | ||
Risk free rate |
|
| % |
|
| % | ||
Remaining Term |
|
|
|
| ||||
Fair Value of common stock |
| $ |
|
| $ |
| ||
For the years ended December 31, 2022 and December 31, 2021, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.
The below table represents the change in the fair value of the derivative liability during the twelve months ended December 31, 2022 and December 31, 2021.
Period Ended |
| 2022 |
|
| 2021 |
| ||
Fair value of derivative (warrants), beginning of period |
| $ |
|
| $ |
| ||
Exercise of warrants |
|
|
|
|
| ( | ) | |
Change in fair value of derivative |
|
|
|
|
|
| ||
Fair value of derivative (warrants), end of period |
| $ |
|
| $ |
| ||
Period Ended |
| 2022 |
|
| 2021 |
| ||
Fair value of derivative (stock), beginning of period |
| $ |
|
| $ |
| ||
Change in fair value of derivative |
|
| ( | ) |
|
|
| |
Fair value of derivative on the date of issuance |
|
|
|
|
|
| ||
Fair value of derivative (stock), end of period |
| $ |
|
| $ |
| ||
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, 2022, and December 31, 2021, 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.
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| Quoted Prices in Active Markets |
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| For |
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| Significant |
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| Identical |
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| Significant Other |
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| Unobservable |
| ||||
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| Assets |
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| Observable Inputs |
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| Inputs |
| ||||
Fair Value Measurement at December 31, 2022: |
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| (Level 1) |
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| (Level 2) |
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| (Level 3) |
| |||||
Liabilities: |
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Derivative Liabilities |
| $ |
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| $ |
| ||||
Totals |
| $ |
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| $ |
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| $ |
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| $ |
| ||||
Fair Value Measurement at December 31, 2021: |
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Liabilities: |
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Derivative Liabilities |
| $ |
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| $ |
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Totals |
| $ |
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| $ |
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| $ |
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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 the years ended December 31, 2022 and 2021, one and three customers accounted for
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 $
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 $
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, 2022, $
In October 2019, the Company entered into a financing agreement for unpaid mining concession taxes on the San Jose de Gracia core mining concessions in the amount of $
The following is a summary of the transaction during the years ended December 31, 2022, and December 31, 2021:
|
|
|
| |
Balance December 31, 2020 |
| $ |
| |
Exchange Rate Adjustment |
|
| ( | ) |
2021 Principal Payments |
|
| ( | ) |
Balance December 31, 2021 |
|
|
| |
Exchange Rate Adjustment |
|
|
| |
2022 Principal Payments |
|
| ( | ) |
Balance December 31, 2022 |
| $ |
| |
| 31 |
| Table of Contents |
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. The RCL was assigned from Mineras to DynaMexico in March 2022 and in December 2022 it was extended for one year. Under the terms of the RCL:
| · | The Company will deliver |
| · | An initial RCL was established by buyer in the amount of $ |
| · | At May 1, 2021, the RCL increased to an amount equal to |
| · | 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 $ |
| · | The RCL will be interest free for |
| · | The RCL is to be repaid through deliveries of Concentrates or Cash within |
Deposits under Revolving Credit Line Facility
Under the terms of the RCL, Mineras de DynaResource received the following advances from the buyer:
(1) | $ |
(2) | $ |
(3) | $ |
(4) | $ |
(5) | $ |
(6) | $ |
(7) | $ |
(8) | $ |
(9) | $ |
(10) | $ |
(11) | $ |
(12) | $ |
(13) | $ |
(14) | $ |
(15) | $ |
(16) | $ |
NOTE 16 – SUBSEQUENT EVENTS
On January 31, 2023, the Company entered in a 52 month extension on its office lease where the Company is headquartered in Irving, Texas. The term of the new lease commences on or about
The Company has evaluated events from December 31, 2022, through the date whereupon the consolidated financial statements were issued, and has described below the events subsequent to the end of the period.
| 32 |
| Table of Contents |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure on Controls and Procedures.
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2022. 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, 2022. Based on its evaluation, our management concluded that, as of December 31, 2022, 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.
ITEM 9B. OTHER INFORMATION
None.
| 33 |
| Table of Contents |
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Company has a code of business conduct and ethics that applies to all employees, officers and directors. The code of business conduct and ethics is available on our website at www.dynaresource.com and we will post any amendments to, or waivers from, the code of ethics on that website.
The following table lists the names and ages of the executive officers, directors and key consultants of the Company. The directors will continue to serve until the next annual shareholders meeting, or until their successors are elected and qualified. All 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 | 65 | 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 |
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Dr. Jose Vargas Lugo | 62 | Director of Operations - México, President - México | August 2011 |
Enrique Dunant Y5 de Mayo #963 |
| Director | August 2013 |
Fracc, Los Parques |
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Guamuchil, Sin CP 81460 |
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John C. Wasserman | 83 | Independent Director | December, 2014 |
222 W. Las Colinas Blvd. |
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Suite 1910 North Tower |
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Irving, Texas 75039 |
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Dale G. Petrini | 68 | Independent Director | December 2016 |
222 W. Las Colinas Blvd |
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Suite 1901 North Tower |
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Irving, TX. 75039 |
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Philip K. Rose | 34 | Independent Director | July 2015 |
222 W. Las Colinas Blvd. |
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Suite 1910 North Tower |
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Irving, TX. 75039 |
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Bradford J. Saulter | 63 | Vice President – Investor Relations | May 1998 |
7618 Straits Lane |
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Rowlett, Texas 75088 |
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Rene L.F. Mladosich | 59 | General Manager at San Jose de Gracía | October 2019 |
Sierra Grande #134 |
| Director | July 2022 |
Fraccionamiento Lomas de |
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Mazatlán, Sinaloa 82110 |
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Praxedis Martinez | 75 | Senior Consultant – Plant Operations | July 2017 |
Sierra Grande #134 |
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Fraccionamiento Lomas de Mazatlán, Sinaloa 82110 |
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Praxedis Martinez |
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| 34 |
| Table of Contents |
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, CFO, and Treasurer for more than the past 20 years. 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 who graduated 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 more than 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.
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 a 2011 graduate of Texas Christian University in Fort Worth, Texas and is a Partner at Cross Tie Capital, Ltd, a Texas family investment office. Mr. Rose’s focus is primarily on alternative assets. Through this role, Mr. Rose serves in various operating roles of Cross Tie’s portfolio companies, including COO of Horton World Solutions, a thermoplastic composites manufacturing company, and Managing Partner of KMO Burger, LLC, a quick-serve restaurant holding company. He is also responsible for investment origination, asset management and disposition oversight of Cross Tie’s holdings. Mr. Rose has extensive experience in private investments, in a variety of asset classes and a broad array of investment structures. He is also a member of the firm’s investment committee. Mr. Rose is the appointee to the Board of Directors by Golden Post, LLC., the holder of the Series C convertible preferred shares.
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, which during this time, in society with Mr. José Luis Martínez, exploited 6 different mines located in Zacatecas, Durango, and Coahuila States. In one of them, his company 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 the company’s 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.
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| Table of Contents |
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, Mr. Martinez 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).
Involvement in Certain Legal Proceedings
To the knowledge of the Company, none of the events specified in Regulation S-K, Item 401(f), has occurred during the past 10 years that are material to an evaluation of the ability or integrity of any director, executive officer, or person nominated to become a director or executive officer of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The following officers received the following compensation for the years ended December 31, 2022, and 2021. These officers(*) do not have employment contracts with the Company.
Name and principal position |
| Year |
| Salary |
|
| Bonus |
|
| Stock Awards |
|
| All Other Compensation |
|
Total compensation |
|
| Market Value of Shares Not Vested |
| |||||
K.W. (“K.D.”) Diepholz, |
| 2022 |
| $ | 426,000 |
|
| $ | 53,250 |
|
| $ | 411,250 |
|
| None |
| $ | 889,500 |
|
| $ | 1,281,000 |
|
CEO/President |
| 2021 |
| $ | 254,167 |
|
| $ | 224,375 |
|
| $ | 792,000 |
|
| None |
| $ | 1,270,542 |
|
| None |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Jose Vargas Lugo; EVP., |
| 2022 |
| $ | 92,027 |
|
| $ | 44,008 |
|
| $ | 58,750 |
|
| None |
| $ | 194,785 |
|
| $ | 183,000 |
|
President of México Operation |
| 2021 |
| $ | 87,558 |
|
| None |
|
| None |
|
| None |
| $ | 87,558 |
|
| None |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rene L.F. Mladosich; |
| 2022 |
| $ | 141,251 |
|
| $ | 100,310 |
|
| $ | 132,188 |
|
| None |
| $ | 373,749 |
|
| $ | 411,750 |
|
GM of San Jose de Gracía Project |
| 2021 |
| $ | 118,302 |
|
| None |
|
| $ | 99,000 |
|
| None |
| $ | 217,302 |
|
| None |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradford J. Saulter |
| 2022 |
| $ | 90,000 |
|
| $ | 3,750 |
|
| $ | 22,031 |
|
| None |
| $ | 115,781 |
|
| $ | 68,625 |
|
VP., Investor Relations |
| 2021 |
| $ | 90,000 |
|
| None |
|
| None |
|
| None |
| $ | 90,000 |
|
| None |
| |||
The Compensation Committee approved stock awards to employees, directors and consultants of the Issuer for performance based compensation. The stock awards approved were issued to each of the individuals/entities and vested 25% immediately and the remainder vest 25% each years on December 31 for the next three years, subject to resignation or termination provisions. None of the officers have employment agreements with the Company.
The following directors received the following compensation for the years ended December 31, 2022, and 2021.
Name of Director |
| Year |
| Salary |
| Bonus |
| Stock Awards |
|
| All Other Compensation * |
|
| Total compensation |
|
| Market Value of Shares Not Vested |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Dale Petrini |
| 2022 |
| None |
| None |
| $ | 44,063 |
|
| $ | 25,000 |
|
| $ | 25,000 |
|
| $ | 109,688 |
|
Director |
| 2021 |
| None |
| None |
| None |
|
| None |
|
| None |
|
| None |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John C. Wasserman |
| 2022 |
| None |
| None |
| $ | 44,063 |
|
| $ | 25,000 |
|
| $ | 25,000 |
|
| $ | 109,688 |
|
Director |
| 2021 |
| None |
| None |
| None |
|
| None |
|
| None |
|
| None |
| ||||
* Payments made for services
Stock Issued to Officers and Directors
The Compensation Committee approved stock awards to employees, directors and consultants of the Issuer for performance based compensation. The stock awards approved were issued to each of the individuals/entities and vested 25% immediately and the remainder vest 25% each year on December 31 for the next three years, subject to resignation or termination provisions. The awards totaled 1,500,00 shares of which 475,000 were awarded to officers and/or directors.
Officers and directors received the following stock as compensation during the year ended December 31, 2022:
Koy W (“K.D.”) Diephotz
| 700,000 shares of Common Stock
|
Rene L.F. Mladosich
| 225,000 shares of Common Stock
|
Dr. Jose Vargas Lugo | 100,000 shares of Common Stock |
|
|
John Wasserman | 75,000 shares of Common Stock |
|
|
Dale Petrini | 75,000 shares of Common Stock |
The Compensation Committee approved stock awards to employees, directors and consultants of the Issuer for performance based compensation. The stock awards approved were issued to each of the individuals/entities and vested 25% immediately and the remainder vest 25% each year on December 31 for the next three years, subject to resignation or termination provisions.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors is comprised of three independent directors: Dale Petrini, John C. Wasserman, and Phillip Rose. None of the Compensation Committee members has ever been an officer or employee of the Company or had any relationship requiring disclosure under any paragraph of Reg. S-K, Item 404.
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| Table of Contents |
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, 2022. The following table sets forth the information based on 22,246,654 (1) common shares issued and outstanding as of December 31, 2022.
COMMON STOCK |
| Beneficial Owner |
| Address |
| Common Shares (1) (2) |
| Percent Ownership |
|
|
|
|
|
|
|
|
|
Common Stock |
| K.W. (“K.D.”) Diepholz |
| 222 W. Las Colinas Blvd. |
|
|
|
|
|
| Chairman / CEO |
| Suite 1910 North Tower |
|
|
|
|
|
|
|
| Irving, Texas 75039 |
| 2,965,100 |
| 13.33% |
|
|
|
|
|
|
|
|
|
Common Stock |
| Gareth Nichol |
| Denver, Colorado |
| 2,646,922 |
| 11.90% |
|
|
|
|
|
|
|
|
|
Common Stock |
| Dr. Jose Vargas Lugo |
| Plutarco Elías Calles 47 |
|
|
|
|
|
| EVP, Director |
| Guamúchil Sin. Mex. 81450 |
| 374,508 |
| 1.68% |
|
|
|
|
|
|
|
|
|
Common Stock |
| Rene L.F. Mladosich |
| Hermosillo, Sonora México |
|
|
|
|
|
| EVP; Director |
|
|
| 275,000 |
| 1.24% |
|
|
|
|
|
|
|
|
|
Common Stock |
| Bradford J. Saulter |
| 222 W. Las Colinas Blvd. |
|
|
|
|
|
| VP., Investor Relations |
| Suite 1910 North Tower |
|
|
|
|
|
|
|
| Irving, Texas 75039 |
| 161,939 |
| 0.73% |
|
|
|
|
|
|
|
|
|
Common Stock |
| John C. Wasserman |
| Waterville, Ohio 43566 |
|
|
|
|
|
| Director; |
|
|
| 279,317 |
| 1.26% |
|
|
|
|
|
|
|
|
|
Common Stock |
| Dale G. Petrini |
| Houston, Texas 77027 |
|
|
|
|
|
| Director |
|
|
| 262,689 |
| 1.18% |
|
|
|
|
|
|
|
|
|
Common Stock |
| Matt Rose |
| Westlake, Texas |
| 2,908,740 | (3) | 13.07% |
|
|
|
|
|
|
|
|
|
** |
| Philip A. Rose (4) |
| Westlake, Texas |
|
|
|
|
|
| Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All Officers, Directors and Beneficial owners as a Group holders) |
|
|
| 9,874,215 |
| 44.39% |
(1) | Does Not Include (i) 1,734,992 shares of common stock issuable upon the conversion of 1,734,992 shares of Series C Convertible Preferred Stock, which are currently convertible. |
(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, 2022:
None.
Equity Compensation Plan Information.
The only equity compensation plans the Company has in effect are certain stock awards that the Compensation Committee approved for employees, directors, and consultants of the Issuer as performance-based compensation.
The Compensation Committee approved stock awards to employees, directors and consultants of the Issuer for performance based compensation. The stock awards approved were issued to each of the individuals/entities and vested 25% immediately and the remainder vest 25% each year on December 31 for the next three years, subject to resignation or termination provisions. A summary of the restricted stock awards follows:
Plan Category | Number of Securities to be Issued Upon exercise of options, warrants or rights | Weighted Average exercise Price of outstanding options, warrants or rights | Number of securities remaining available for future issuance under equity compensation plans |
Equity compensation not approved by security holders |
1,500,000 |
N/A |
1,125,000 |
Total | 1,500,000 | N/A | 1,125,000 |
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% |
PREFERRED SHARES (SERIES D)
Preferred Series | Beneficial Owner | Address | Preferred Shares | Percent Ownership |
Series “D” | Dale Petrini. | 29 Bash Pl Houston, TX 77027 | 50,000 | 6.58% |
Series “D” | Gareth Nichol | 5 Greenridge Rd Village Co 80111 | 500,000 | 65.79% |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Dynacap Group Ltd.
The Company paid $184,583 and $285,999 to Dynacap Group, Ltd. an entity formerly controlled by the CEO of the Company, for consulting and other fees during the years ended December 31, 2022 and 2021, respectively.
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| Table of Contents |
Director Independence.
The Board of Directors has determined that Dale Petrini, Phillip Rose, and John Wasserman are independent directors under the definition adopted by NASDAQ in its listing rules.
The Company is not aware of any other material relationships or related transactions between the Company and any officers, directors or holders of more than five percent of any class of outstanding securities of the issuer.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
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 2022 and 2021 was $130,748 and $222,202, respectively.
(2) Audit Related Fees None.
(3) Tax Fees None.
(4) All Other Fees None.
(5) Audit Committee Policies and Procedures
The Company’s compensation committee serves as the 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.
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| Table of Contents |
PART IV
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.
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
3.1.14 |
| Certificate of Increase (incorporated by reference from the Current Report of Form 8-K filed with the SEC on July 2, 2015, Exhibit 3.31. File No. 000-30371) | ||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
| ||||
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| Table of Contents |
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| ||||
| ||||
| ||||
10.9 |
| Note Purchase Agreement (incorporated by reference from the Current Report of Form 8-K filed with the SEC on July 2, 2015, Exhibit 10.1. File No. 000-30371) | ||
| ||||
| ||||
23.1 | Consent of Armanino LLP, Independent Registered Public Accounting Firm | |||
101 | The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 are filed herewith, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Audited Consolidated Statements of Operations and Other Comprehensive (Loss) for the years ended December 31, 2021, 2020 and 2019, (ii) the Audited Consolidated Balance Sheets as of December 31, 2021 and 2020, (iii) the Audited Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2021, 2020 and 2019, (iv) the Audited Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019, and (v) the Notes to the Audited Consolidated Financial Statements | |||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||
* Filed herewith.
ITEM 16. 10K SUMMARY
Not Applicable.
| 40 |
| Table of Contents |
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
DynaResource, Inc. | |||
| Date: April 17, 2023 | By: | s/ K.W. (“K.D.”) Diepholz | |
|
| K.W. (“KD”) Diepholz, | |
Chairman / CEO | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. The signature for each undersigned Registrant shall be deemed to relate only to matters having reference to such Registrant and any subsidiaries thereof.
/s/ K.D. Diepholz |
| /s/ Rene LF Mladosich |
|
K. D. Diepholz, Chairman |
| Rene LF Mladosich |
|
|
|
|
|
/s/ Dr. Jose Vargas Lugo |
| /s/ Dale G. Petrini |
|
Dr. Jose Vargas Lugo |
| Dale G. Petrini |
|
|
|
|
|
/s/ John C. Wasserman |
| /s/ Phillip Rose |
|
John C. Wasserman |
| Phillip Rose |
|
|
|
|
|
April 17, 2023 |
|
|
|
Dated |
|
|
|
| 41 |
EXHIBIT 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, K.W. (“K.D.”) Diepholz, certify that:
| 1. | I have reviewed this report on Form 10-K of DYNARESOURCE, INC.; |
|
|
|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
|
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
|
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
|
| b) | Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
|
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
|
|
|
|
|
| d) | Disclosed in this report any change to the registrant's internal controls over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of a report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal controls over financial reporting; and, |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
|
| a) | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and, |
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|
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| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
| Date: April 17, 2023 |
|
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|
|
| /s/ K.W. (“K.D.”) Diepholz |
|
|
K.D. Diepholz;
Chairman and Chief Executive Officer
EXHIBIT 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, K.W. (“K.D.”) Diepholz, certify that:
| 1. | I have reviewed this report on Form 10-K of DYNARESOURCE, INC.; |
|
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15(e) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
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| d) | Disclosed in this report any change to the registrant's internal controls over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of a report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal controls over financial reporting; and, |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
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| a) | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and, |
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| b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: April 17, 2023
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| /s/ K.W. (“K.D.”) Diepholz |
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K.D. Diepholz;
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Report of DynaResource, Inc. on Form 10-K for the period ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
| /s/ K.W. (“K.D.”) DIEPHOLZ |
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| K.W. (“K.D.”) Diepholz |
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| Chairman of the Board of Directors |
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| Dated: April 17, 2023 |
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| /s/ K.W. (“K.D.”) DIEPHOLZ |
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| K.W. (“K.D.”) Diepholz |
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| Chief Executive Officer (Principal Executive Officer) |
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| Dated: April 17, 2023 |
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| /s/ K.W. (“K.D.”) DIEPHOLZ |
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| K.W. (“K.D.”) Diepholz |
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| Acting Chief Financial Officer (Principal Financial and Accounting Officer) |
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| Dated: April 17, 2023 |
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This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.