Dynaresource, Inc 10-Q for FY2022 Q1

Dynaresource, Inc. (DYNR)

10-Q 2022-05-06 For: 2022-03-31

Added on April 06, 2026

About this 10-Q

Dynaresource, Inc filed this 10-Q on May 6, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $10.49M; up 113.6% from $4.91M a year earlier
Net income: $5.06M; up 1647.5% from net income of $289.71K a year earlier
Diluted EPS: $0.27; up 2600.0% from $0.01 a year earlier

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

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☒

PART I.	FINANCIAL STATEMENTS

ITEM 1.	Unaudited Financial Statements

	Notes to Unaudited Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis and Plan of Operation	25

ITEM 3.	Quantitative and Qualitative Disclosure About Market Risk	35

ITEM 4.	Controls and Procedures	35

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	37

ITEM 2.	Unregistered Sales of Securities and Use of Proceeds	38

ITEM 3.	Default Upon Senior Securities	38

ITEM 4.	Mine Safety Disclosures	38

ITEM 5.	Other Information	38

ITEM 6.	Exhibits	39

EXHIBIT 31.1		CHIEF EXECUTIVE OFFICER CERTIFICATION

EXHIBIT 31.2		CHIEF FINANCIAL OFFICER CERTIFICATION

EXHIBIT 32.1		CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

	2022			2021
ASSETS
Current Assets
Cash and Cash Equivalents	$	15,541,509		$	15,719,238
Accounts Receivable		1,278,392			577,118
Inventories		2,617,556			2,110,203
Foreign Tax Receivable		5,224,670			4,742,180
Other Current Assets		1,003,751			667,742
Total Current Assets		25,665,878			23,816,481

Mining Equipment and Fixtures (Net of Accumulated
Depreciation of $117,237 and $116,425)		1,917			2,729
Operating Lease		624,864			648,381
Mining Concessions		4,132,678			4,132,678
Other Assets		93,919			162,174

TOTAL ASSETS	$	30,519,256		$	28,762,443

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable	$	1,270,094		$	1,275,679
Accrued Expenses		4,771,486			5,440,204
Customer Advances		7,875,000			9,250,000
Derivative Liabilities		2,960,208			3,898,914
Convertible Notes Payable – Series I & II		543,279			543,279
Installment Notes Payable		1,982,396			1,962,525
Current Portion of Operating Lease Payable		91,098			98,169
Total Current Liabilities		19,493,561			22,468,770

Operating Lease Payable, Less Current Portion		558,914			587,782

TOTAL LIABILITIES		20,052,475			23,056,552
TEMPORARY EQUITY
Series C Senior Convertible Preferred Stock, $0.0001 par value, 1,734,992 shares authorized, issued and outstanding		4,337,480			4,337,480
Series D Senior Preferred Stock, $0.0001 par value, 3,000,000 shares authorized, 760,000 shares issued and outstanding		1,520,000			1,520,000

COMMITMENTS AND CONTINGENCIES		-			-
STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred Stock, Series A, $0.0001 par value, 1,000 shares authorized, issued and outstanding		1			1
Common Stock, $0.01 par value, 40,000,000 shares authorized 18,091,293 issued and outstanding		180,913			180,913
Preferred Rights		40,000			40,000
Additional Paid In Capital		50,632,400			50,632,400
Treasury Stock, 12,180 shares		(34,773	)		(34,773	)
Accumulated Other Comprehensive income		(549,577	)		(247,665	)
Accumulated Deficit		(45,659,663	)		(50,722,465	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		4,609,301			(151,589	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	30,519,256		$	28,762,443

	2022			2021
REVENUE	$	10,492,503		$	4,912,712
COSTS AND EXPENSES OF MINING OPERATION
Production Cost Applicable to Sales		765,495			381,266
Mine Production Costs		1,227,884			806,470
Mine Exploration Costs		878,188			1,012,748
Facilities Expansion Costs		608,603			-
Exploration Drilling		487,615			-
Camp, Warehouse and Facilities		825,203			535,195
Transportation		390,640			238,564
Property Holding Costs		35,967			42,747
General and Administrative		1,026,355			514,977
Depreciation and Amortization		812			812
Total Operating Expenses		6,246,762			3,532,779
NET OPERATING INCOME		4,245,741			1,379,933

OTHER INCOME (EXPENSE)
Foreign Currency Gains (Losses)		(2,402	)		(333,735	)
Interest Expense		(119,769	)		(361,222	)
Derivatives Mark-to-Market Gain		938,706			(395,267	)
Other Income (Expense)		526			-
TOTAL OTHER INCOME (EXPENSES)		817,061			(1,090,224	)

NET INCOME BEFORE TAXES		5,062,802			289,709
PROVISION FOR INCOME TAXES		-			-

NET INCOME	$	5,062,802		$	289,709

DEEMED DIVIDEND FOR SERIES C & D PREFERRED		(58,575	)		(43,375	)

NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	5,004,227		$	246,334

EARNINGS PER SHARE ATTRIBUTABLE TO THE
EQUITY HOLDERS OF DYNARESOURCE, INC.

Basic Income Per Common Share	$	0.28		$	0.01
Weighted Average Shares Outstanding - Basic		18,091,293			17,722,825

Diluted Income Per Common Share	$	0.27		$	0.01
Weighted Average Shares Outstanding - Diluted		18,983,458			17,722,825

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign Currency Translation Gain (Loss)		(301,912	)		292,371
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)		(301,912	)		292,371

TOTAL COMPREHENSIVE INCOME	$	4,760,890		$	582,080

	Preferred A				Common				Preferred		Preferred		Paid In		Treasury		Treasury			Other Comp		Accumulated
	Shares		Amount		Shares		Amount		Rights		Amount		Capital		Shares		Amount			Income		Deficit			Totals
THREE MONTHS ENDED MARCH 31, 2021
Balance January 1, 2021		1,000	$	1		17,722,825	$	177,228		1	$	40,000	$	50,407,333		516,480	$	(1,474,486	)	$	438,092	$	(59,256,828	)	$	(9,668,660

Other Comprehensive Income																					292,371					292,371

Net Income																							289,709			289,709

Balance, March 31, 2021		1,000	$	1		17,722,825	$	177,228		1	$	40,000	$	50,407,333		516,480	$	(1,474,486	)	$	730,463	$	(58,967,119	)	$	(9,086,580

THREE MONTHS ENDED MARCH 31, 2022
Balance January 1, 2022	1,000	$	1	18,091,293	$	180,913	1	$	40,000	$	50,632,400	12,180	$	(34,773	)	$	(247,665	)	$	(50,722,465	)	$	(151,589	)

Other Comprehensive Income (Loss)																	(301,912	)					(301,912	)

Net Income																				5,062,802			5,062,802

Balance, March 31, 2022	1,000	$	1	18,091,293	$	180,913	1	$	40,000	$	50,632,400	12,180	$	(34,773	)	$	(549,577	)	$	(45,659,663	)	$	4,609,301

	2022			2021
CASH FLOWS FROM OPERATING ACTIVITES:
Net income	$	5,062,802		$	289,709
Adjustments to reconcile net income to cash used in operating activities
Change in Derivatives		(938,706	)		395,267
Depreciation and Amortization		812			812
Amortization of Loan Discount		-			137,312
Change in Operating Assets and Liabilities
Accounts Receivable		(701,274	)		(477,044	)
Inventories		(507,353	)		(655,877	)
Foreign Tax Receivable		(482,490	)		(372,404	)
Operating Lease Assets		23,517			20,904
Other Assets		(267,754	)		(84,845	)
Accounts Payable		(5,585	)		(332,949	)
Accrued Expenses		(668,718	)		362,485
Customer Advances		(1,375,000	)		3,750,000
Lease Liabilities		(35,939	)		(29,045	)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES		104,312			3,004,325

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of Notes Payable		(36,165	)		(17,291	)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		(36,165	)		(17,291	)

Effects of Foreign Exchange		(245,876	)		238,203

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(177,729	)		3,225,460
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		15,719,238			1,504,016
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	15,541,509			4,729,253

SUPPLEMENTAL DISCLOSURES
Cash Paid for Interest	$	25,162		$	140,799
Cash Paid for Income Taxes	$	-		$	-

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

	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
Net income (loss) attributable to common shareholders	$	5,004,227	$	246,334

Weighted average number of common shares outstanding, Basic		18,091,293		17,722,825

Diluted weighted average number of common shares outstanding,		18,983,458		17,722,825

Basic earnings (loss) per share	$	0.28	$	0.01

Diluted earnings (loss) per share	$	0.27	$	0.01

	2022		2021
Mined Tonnage	$	2,520,239	$	2,042,633
Gold-Silver Concentrates		97,317		67,570
Total Inventories	$	2,617,556	$	2,110,203

	2022			2021
Leasehold improvements	$	9,340		$	9,340
Office equipment		31,012			31,012
Office furniture and fixtures		78,802			78,802
Sub-total		119,154			119,154
Less: Accumulated depreciation		(117,237	)		(116,425	)
Total Property	$	1,917		$	2,729

	(a)	A convertible promissory note (the “Golden Post Note”) payable to Golden Post in the principal amount of $2,500,000, bearing interest at 10%, and maturing two years from the date of execution. One half of the principal amount of the Golden Post Note, or $1,250,000, has been fully funded in accordance with an agreed-upon draw summary and budget. The balance of the principal amount will also be funded in accordance with agreed-upon draw summaries and the budget. The Golden Post Note is convertible, at the option of Golden Post, into shares of Series D Senior Convertible Preferred Stock (the “Series D Preferred”) at a conversion price of $2.00 per share; and

	(b)	A common stock purchase warrant (the “2020 Warrant”) for the purchase of 783,976 shares of the Company’s common stock, at an exercise price of $0.01 per share, and maturing on the 10-year anniversary of the date of issuance. The 2020 Warrant contains anti-dilution provisions; and

	(a)	Convertible promissory notes (the “Remaining Notes”) in the aggregate principal amount of $1,400,000, bearing interest at 10%, and maturing two years from the date of issuance. The Remaining Notes have been fully funded. The Remaining Notes are convertible, at the option of each individual Remaining Purchaser, into shares of Series D Preferred at a conversion price of $2.00 per share; and

	(b)	Common stock purchase warrants (the “Remaining Purchasers Warrants”) for the purchase of an aggregate of 439,026 shares of the Company’s common stock, at an exercise price of $0.01 per share, and maturing on the 10-year anniversary of the date of issuance. The Remaining Purchasers Warrants contain anti-dilution provisions.

	3.	As part of the transaction contemplated by the NPA, the Company executed an Amended and Restated Registration Rights Agreement pursuant to which Golden Post may require the Company to register the shares of common stock which may be issued upon (i) the conversion of the Series C Senior Convertible Preferred Stock (“Series C Preferred”), (ii) the conversion of the Series D Preferred, and (iii) the shares of common stock issuable upon the exercise of the 2015 Warrant, the 2020 Warrant, and a compensatory warrant issued to the Lead Purchaser on May 13, 2020 (described below under the heading “Compensatory Issuances”), including any additional shares of common stock issuable pursuant to anti-dilution provisions of such securities.

	4.	Pursuant to the transaction contemplated by the NPA, the Company agreed to call a special meeting of Company stockholders, to be held not later than July 14, 2020, to solicit stockholder approval of (a) an amendment of the Company’s certificate of incorporation to increase the number of authorized shares of common stock from 25,000,000 shares to 40,000,000 shares, and (b) an amendment of the Certificate of Designations of the Series C Preferred, in order to (a) extend the maturity date of the Series C Preferred by an additional two (2) years, (ii) add an equity cap in respect of the conversion of Series C Preferred into common stock of the Company, and (iii) add certain restrictions on the ability of the Company to issue Series C Preferred. The special meeting was properly called and held on July 13, 2020, whereby Company stockholders confirmed approval for each item referenced in item 4 above

	5.	Compensatory Issuances. On May 13, 2020, one business day prior to the NPA, the Company issued to the Lead Purchaser the following: (i) a common stock purchase warrant for 2,306 shares, at an exercise price of $0.01 per share, and maturing on the 7-year anniversary of the date of issuance (the “Compensatory Warrant”); and (ii) 1,771 shares of Series C Preferred Shares. These issuances were occasioned by the Company’s obligations under the Securities Purchase Agreement dated as of May 6, 2015.

	6.	In order to accommodate the issuance of the additional 1,771 shares of Series C Preferred, on May 13, 2020 the Company filed with the Secretary of State of Delaware a Certificate of Increase of Series C Senior Convertible Preferred Stock, to increase the number of shares of preferred stock designated as Series C Preferred from 1,733,221 shares to 1,734,992 shares (“Certificate of Increase”).

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Intrinsic Value
Balance at December 31, 2021		3,429,466	$	1.30		4.40
Granted		-	$	-
Exercised		368,468	$	0.01
Forfeited		-	$	-
Balance at December 31, 2021		3,060,998	$	1.46		2.79
Granted		-	$	-				-
Exercised		-	$	-
Forfeited		-	$	-				-
Balance at March 31, 2022		3,060,998	$	1.46		2.55
Exercisable at March 31, 2022		3,060,998	$	1.46		2.55		-

	Period Ended
	March 31, 2022
Operating Lease – Office Lease	$	21,823
Operating Lease – Ground Lease		22,834
Short Term Lease Costs		4,381
Variable Lease Costs		-
TOTAL	$	49,038

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

Weighted Average Remaining Lease Term (Years) – Operating Leases		10.12
Weighted Average Discount Rate – Operating Leases		12.50	%

Estimated future minimum lease obligations are as follow for the years ending March 31:
YEAR
2022	$	164,979
2023		94,074
2024		96,896
2025		99,803
2026		102,797
Thereafter		684,885
Total	$	1,243,434
Less Imputed Interest		(593,422	)
OPERATING LEASE PAYABLE	$	650,012

	2022			2021
Annual volatility rate		102	%		147	%
Risk free rate		2.28	%		0.73	%
Remaining Term	0.25 years			0.50 years
Fair Value of common stock	$	1.90		$	1.75

The following is a summary of the transaction during the three and twelve months ended March 31, 2022 and December 31, 2021:

Balance December 31, 2020	$	2,081,435
Exchange Rate Adjustment		(57,504	)
2021 Principal Payments		(61,406	)
Balance December 31, 2021		1,962,525
Exchange Rate Adjustment		56,036
2022 Principal Payments		(36,165	)
Balance March 31, 2022	$	1,982,396

	·	The Company will deliver 100% of its produced concentrates to the buyer and provider of the RCL, through December 31, 2022; unless extended by the Company;
	·	An initial RCL was established by buyer in the amount of $3.75M USD;
	·	On May 1, 2021, the RCL increased to an amount equal to 80% of prior 3 month’s revenue;
	·	Each successive month, the RCL shall be adjusted according to the Company’s prior 3 month’s revenue;
	·	The RCL shall never be less than $3.75M USD;
	·	The RCL will be interest free for 45 days;
	·	The RCL is to be repaid through deliveries of concentrates or cash within 120 days;

(1)	$2.5M advance on February 4, 2021. Settled on March 26, 2021.
(2)	$3.75M advance on March 30, 2021. Settled on May 12, 2021
(3)	$3.75M advance on May 12, 2021. Settled on June 16, 2021.
(4)	$6.75M advance on June 18, 2021. Settled on August 5, 2021.
(5)	$8.25M advance on August 9, 2021. Settled on September 27, 2021.
(6)	$8.25M advance on September 29, 2021. Settled on November 17, 2021
(7)	$8.25M advance on November 19, 2021. Settled on December 20, 2021
(8)	$9.25M advance on December 30, 2021. Settled on February 25, 2022
(9)	$8.175M advance on February 25, 2022. Settled on March 30, 2022
(10)	$7.875M advance on March 30, 2022.

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
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 (1)	183504	26/10/1988	25/10/2038	7.0000	111.27
SAN NICOLAS	163913	14/12/1978	13/12/2028	55.5490	111.27
SAN SEBASTIAN	184473	08/11/1989	07/11/2039	40.0000	111.27
SANTA MARIA	218769	17/01/2003	16/01/2053	4.2030	31.62
SANTA ROSA	170557	13/05/1982	12/05/2032	31.4887	111.27
SANTO TOMAS	187348	13/08/1986	12/08/2036	312.0000	111.27
TRES AMIGOS 2	212142	31/08/2000	30/08/2050	54.4672	63.22
FINISTERRE 4	231166	18/01/2008	17/01/2058	2142.1302	5.08
FRANCISCO ARTURO	230494	06/09/2007	27/03/2057	3,279.56
TOTAL				9,920.00

Mill Expansion:	$	3,542,000
Tailings Pond Expansion		265,000
Machinery and Equipment		1,556,000
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
Exploration Drilling		522,000
SIG Mining Concessions		1,516,000
Surface Rights and Permitting		528,000
Debt Retirement		2,985,000
Legal Fees		3,738,000
Total	$	20,186,000

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

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

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

	DynaResource, Inc.

Date: May 6, 2022	By:	/s/ K.W. (“K.D.”) Diepholz
		K.W. (“KD”) Diepholz,
		Chairman / CEO