UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934(Mark One)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: ended December 31 2021, 2023
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
OR
☐ TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934
From the transition period ___________ to ____________.
Commission File Number: Number 000-30371
DYNARESOURCE, INC.
(Exact name of registrantRegistrant as specified in its charter)
Charter)
Delaware 94-1589426
(State or other jurisdiction of incorporation or organization (IRS Employer Identification No.)
Delaware | 94-1589426 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
222 W. Las Colinas Blvd., Suite 1910 North Tower Irving, TX | 75039 |
(Address of principal executive offices) | (Zip Code) |
222 W Las Colinas Blvd., Suite 1910 North Tower, Irving, Texas 75039
(Address of principal executive offices)
Registrant’s telephone number, including area code: (972) 972) 868-9066
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
None |
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
Common Stock; $0.01 Par Value
(Title of Class)
Indicate by check mark if the registrantRegistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☒
Indicate by check mark if the registrantRegistrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrantRegistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: days. Yes☒ No ☐
Indicate by check mark whether the registrantRegistrant 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 registrantRegistrant was required to submit and post such files). Yes☒ No ☐
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”,filer,” “smaller reporting company”company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
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| Accelerated filer | ☐ | ||||
Non-accelerated |
| ☒ | Smaller reporting company | ☒ | ||||
Emerging growth company |
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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)13(a) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined byin Rule 12b-2 of the Exchange Act): Yes . Yes ☐ No no ☒
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, 2021,2023, was $21,736,306$26,616,189 based on the closing price of $1.75$2.02 per share as reported on the OTCQB.OTCQX. For purposes of this computation, all officers, directors, subsidiaries, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed an admission that such officers, directors or 10% beneficial owners are, in fact, affiliates of the registrant.
There were 18,091,29323,371,708 shares outstanding of each of the registrant’s classes of common stock (only 1 class) as of the latest practicable date (March(April 15, 2022).2024)
DOCUMENTS INCORPORATED BY REFERENCE
Listed below are documents incorporated herein by reference. None.
None.
ITEM 1. | 4 | |||
ITEM 1A. | 7 | |||
ITEM 1B. | 7 | |||
ITEM 1C. | 7 | |||
ITEM 2. | 7 | |||
ITEM 3. | 20 | |||
ITEM 4. | 21 | |||
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF |
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
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ITEM 9A. | 60 | |||
ITEM 9B. | 60 | |||
ITEM 9C. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 61 | ||
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
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ITEM 15. |
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EXHIBIT INDEX | ||||
Exhibit 31.1 | ||||
Exhibit 31.2 | ||||
Exhibit 32.1 |
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K includescontains numerous 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(the “Exchange Act”) relating to in this annual report asour mining business, including resource estimates, exploration efforts, results and expenditures, development initiatives at the Exchange Act. Forward-lookingSan Jose de Gracia Project, estimated production and capacity, costs, capital expenditures, expenses, recoveries, gold prices, sufficiency of assets, ability to discharge liabilities, liquidity management, financing needs, environmental compliance expenditures, environmental, social and governance (“ESG”) and human capital management initiatives, risk management strategies, including capital resources and use, cash flow maximization, mine life and other strategic initiatives. Such forward-looking statements are not statementsidentified by the use 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,“believes,” “believe,“intends,” “estimate,“expects,” “expect,“hopes,” “intend,“may,” “predict,“should,” “project”“plan,” “projected,” “contemplates,” “anticipates” or similar words and similar expressionsinvolve known and unknown risks, uncertainties and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Forward-looking information in this report includes, but is not limited to, statements regarding the beliefs, plans, expectations or intentions of management, as they relateof the date of this presentation, regarding: (i) DynaResource, Inc.’s (the “Company”) ability to us or our management. When we makedevelop its exploration assets via operational cash flow from gold concentrate production; and (ii) the Company’s plans and expectations regarding its proposed 2024 exploration program for its San Jose de Gracia Project. Although the Company believes that the expectations reflected in the forward-looking statements, weinformation are basing them on our management’s beliefsreasonable, there can be no assurance that these expectations and assumptions using information currently availablewill prove to us. Thesebe correct. Such forward-looking statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements including, without limitation, risks related to: (1) fluctuations in commodity pricing, specifically gold and assumptions, including butsilver; (2) the Company’s ability to retain or engage qualified employees or contractors necessary to conduct mill operations at its San Jose de Gracia Facility; (3) a decreased demand for gold, silver and other minerals; (4) unexpected difficulties with the milling and the extraction of minerals from the Company’s projects; (5) unexpected interruptions and problems encountered in the operation of the San Jose de Gracia Facility; (6) factors that delay or cause difficulties in timing of shipments of concentrates by the Company; (7) potential negative financial impact from regulatory investigations, claims, lawsuits and other legal proceedings and challenges; (8) the possibility that the Company may not limitedhave sufficient capital to operate its San Jose de Gracia Facility or facilitate the further exploration of San Jose de Gracia; (9) inflationary pressures; (10) continued access to financing sources; (11) government orders that may require temporary suspension of operations or effects on our suppliers (12) the effects of environmental and other governmental regulations and government shut-downs; (13) the risks uncertaintiesinherent in the ownership or operation of or investment in mining properties or businesses in foreign countries; and assumptions discussed in this annual report. Factors(14) our ability to raise additional financing necessary to conduct our business, make payments or refinance our debt and (15) other factors beyond the Company’s control.
There is a significant risk 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 assumptionssuch forward-looking statements will not prove to be incorrect,accurate. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. Given the current state of the global financial markets, global commodity markets, especially the recent volatility in gold and silver prices and current economic conditions, any forward-looking statements or projections may be impacted significantly. Consequently, there is no representation by the Company that 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.achieved will be the same as those forecast. You are cautioned not to place undue reliance on these forward-looking statements. No forward-looking statement is a guarantee of future results. The Company disclaims any intention or obligation to update or revise any forward-looking statements, which speak to the datewhether as a result of this annual report. The Company expressly disclaims any obligation to release publicly any updatesnew information, future events 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.otherwise, except as required by law.
CAUTIONARY NOTE TO UNITED STATES INVESTORS—INFORMATION CONCERNING PREPARATIONREGARDING DISCLOSURE OF RESOURCE AND RESERVE ESTIMATESMINERAL PROPERTIES
Mineral Reserves and Resources
The Company is an “OTC Reporting Issuer” as that term is defined in BC Multilateral Instrument 51-105, Issuers Quoted in the U.S. Over-the-Counter Markets promulgated by the British Columbia Securities Commission. In Canada, an issuer is required to provide technical information with respect to mineralization, including reserves and resources, if any, on its mineral exploration properties in accordance with Canadian requirements, which differ significantly from the requirements of the United States Securities and Exchange Commission (the “SEC”) applicable to registration statements and reports filed by United States companies pursuant to the Securities Act or the Exchange Act. As such, certain disclosures of mineralization under Canadian standards may not be comparable to similar information made public by United States companiesWe are subject to the reporting and disclosure requirements of the SECExchange Act, and not subjectas a result we report our mineral resources according to Canadian securities legislation.
While these terms are recognized and required by Canadian securities legislation (under National Instrument 43-101Item 1300 of Regulation S-K (“NI 43-101”S-K 1300”), entitled Standards of Disclosure for Mineral Projects),as issued by the SEC.
In our public filings in the U.S. and in certain other announcements not filed with the SEC, does not recognize these terms. Investors in the United States are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted to reserves. In addition,we disclose indicated and inferred mineral resources, each as defined in S-K 1300. We do not have a great amountproven and probable mineral reserves as defined in S-K 1300. The estimation of measured mineral resources and indicated mineral resources involve greater uncertainty as to their existence and economic feasibility than the estimation of proven and legal feasibility. Itprobable mineral reserves, and therefore investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be converted into S-K 1300 compliant reserves. The estimation of inferred mineral resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources, and therefore it cannot be assumed that all or any part of a measured mineral resource, indicated mineral resource or inferred mineral resourceresources will ever be upgraded to a higher category. Under Canadian securities legislation, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, although they may form, in certain circumstances, the basis of a “preliminary economic assessment” as that term is defined in NI 43-101. U.S.Therefore, investors are cautioned not to assume that all or any part or all of any reported measured, indicated, or inferred mineral resource estimates referred to in the NI 43-101 resources exist, or that they can be mined legally or economically.
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Technical Report Summaries and Mineral Resource Estimate (compiled for DynaResource de México SA de CV) are economically or legally mineable.Qualified Persons
Under U.S. standards, as set forth in SEC Industry Guide 7, mineralization may not be classified as a “reserve” unless a determination has been made that the mineralization could be economicallyThe scientific and legally produced or extracted at the time the reserve determination is made. The SJG Property as described in this Annual Report on Form 10-K is without known reserves. Mineral resources which are not classified astechnical information concerning our mineral reserves have not “demonstrated economic viability.” The quantity of resources and the quality (grade) of resources reported as “Indicated” and “Inferred” mineral resources in the mineral resource estimate compiled for DynaResource de México SA de CV, under the NI 43-101 Mineral Resource Estimate filed by the Company on SEDAR, are not disclosedprojects in this Form 10-K. SEDAR is Canada’s System have been reviewed and approved by “qualified persons” under S-K 1300. For a description of the key assumptions, parameters and methods used to estimate mineral resources included in this Form 10-K, as well as data verification procedures and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, sociopolitical, marketing or other relevant factors, please review the Technical Report Summaries for Electronic Document Analysiseach of the Company’s material properties which are included as exhibits to, and Retrieval, the mandatory document filing and retrieval system for Canadian public companies. There has been insufficient exploration to define any mineral reserves on the SJG Property, and it is not certain if further exploration will result in the definition of mineral reserves.incorporated by reference into, this Report.
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 operationsactivities 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”). Our common stock is traded on the OTCQX, the top tier of the OTC Markets Group under the symbol “DYNR”.
DynaUSA currently owns 80%100% of the outstanding shares of DynaMéDynaResource de México, and DynaMéxico currently holds 20% of the outstanding shares of DynaMéxico as treasury stock. DynaMéxicoS.A. de C.V. which owns 100% of the mining concessions, equipment, camp and related facilities which comprise the San Jose de Gracía PropertyGracia mining project. We have one wholly owned subsidiary in the USA, DynaMexico US Holding LLC (“SJG”US Holding”) and three in Mexico, DynaResource de Mexico S.A. de C.V. (“DynaMexico”), 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, and DynaResource Operaciones, S.A. de C.V. (“DynaOperaciones”) in Mexico, collectively referred to as “the Company”. Although we consider the three Mexican subsidiaries to be wholly owned, each has issued one qualifying share to a second shareholder as required under Mexican law, with such qualifying shares held by either US Holding or DynaUSA’s Chief Executive Officer. The Company currently conducts test mining and pilot milling operations, and other exploration activities of the San Jose de Gracía Property (“SJG”), in northern Sinaloa State, México.
Product
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.concentrate. Gold-silver concentrates,concentrate, 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. ConcentratesConcentrate processed and produced from San Jose de Gracía are shippedis transported to a third-party smelters, refineries or third parties for further processing or re-sale.processing.
During 2021,2023, we reported the delivery and sale of 22,56624,829 net ounces (Oz) gold (subject to final settlements) net Oz gold contained in concentrates.concentrate. All gold-silvergold concentrate originated from the San Jose de Gracía Property in México.
Gold-silver Gold 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 gold fix, with the actual net precious metals prices received depending on the sales contract. Concentrates are priced by individualthe assay of the gold content in the concentrate lots of 36 to 72 tons, or as a series of lots under contract, wherebydeliveries and the final selling price and gold-silvergold quantities are subject to final adjustments at the time of final purchase settlement. In the first three quarters of 2023, the final adjustments decreased initial reported delivered ounces by approximately 15%. Since and including the fourth quarter of 2023, there have been no material adjustments to the reported delivered ounces.
Metals Prices
The results of the Company are substantially dependent upon the market prices of gold and silver, which fluctuate widely. In the past, the Company has not entered into derivative contracts to protect the selling price for certain anticipated gold and silver production and to manage risks associated with foreign currencies.
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 site is composed of conventional crushing and grinding circuits, and with gravity and flotation recovery methods. The gravity and flotation concentrates are partially dewatered and shippedtransported to purchasers in semi-truck trailers.armored and secured semi-trailer trucks.
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Commodities
We purchase materials and supplies from third parties to conduct our business, including electricity, fuel, chemical reagents, explosives, steel and concrete. Prices for these commodities are volatile and can fluctuate due to conditions that are difficult to predict, including inflation, currency fluctuations, global competition for resources, consumer or industrial demand and other factors. For most of these commodities, we have existing alternate sources of supply or alternate sources of supply are readily available. We continuously monitor supply and cost trends for these items.
Gold and Silver Reserves / No Known ReservesExploration Stage
The Company currently has no mineral “reserves”is an exploration stage issuer as defined by SEC Industry Guide 7 promulgated by the SEC.in Section 1300 of Regulation S-K.
Segment Information
The Company operates in one segment: test mining and milling gold-silver concentrate for sale from its location in Mexico.
General Government Regulations
México
Mining in México isIn Mexico, we are subject to numerous federal, statevarious governmental laws and localregulations, 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 and ordinances governing mineral rights, operations and environmental protection.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. MiningThe Company’s mining concessions arewere 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. Miningregulations at their issuance. These 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.year with the General Bureau of Mines. 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(communal owners of land recognized by the federal laws in México) control surface access rights to the land. An Ejidomay sell or lease lands directly to a private entity. While the Company has agreements or is in the process of negotiating agreements with the Ejidothat impact all of its projects in México, some of these agreements may be subject to renegotiations.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 we operate in compliance with all applicable governmental laws and regulations and the costs of compliance are paid for on an ongoing basis. Due to the nature of our permit, we have requirements for landscape restoration which are fulfilled on an ongoing basis. We are working under a permit which required a Forest Fund bond of approximately 134,487 pesos and does not require, other than the replanting of like vegetation material, any reclamation work since we are mining underground. We maintain a greenhouse of approximately 20,000 trees that are used in the replanting of vegetation material.
Customers
Customers
The Company sells its concentrates to the buyer who offers the best terms based upon price, treatment costs, refining costs, and other terms of payment. During the year ended December 31, 2021,2023 and 2022, the Company sold gold-silver concentrates to three purchasers.one purchaser pursuant to an Advance Credit Line Facility (“ACL”) and a Revolving Credit Line Facility (the “RCL”) in accordance with the Commercial Offtake Agreement. As gold-silver concentrate can be sold through numerous gold and silver market traders worldwide, and the price paid to the Company under the ACL/RCL varies based on market conditions, the Company is effectively not economically dependent on a limited number of customers for the sale of its product.
Products and Raw Materials
EmployeesGold-silver concentrate 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 organic solutions 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 entities, 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, 2021,2023, we had 186approximately 200 employees including 181 employees based in México,Mexico and 56 in the United States. Consultants are retained from time to time. EmployeesAll our employees based in México and the United States work in an executive, technical or administrative position, while our employees in Mexico include management, laborers, engineers, geologists,craftsmen, mining, geologist environmental specialists, information technologists, office administrators, managersaccountants and executives.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, reward 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.
Responsibility
The San Jose de Gracia community is home to DynaMéxico activities. We’ve devoted significant capital and resources to ensuring our project is a good neighbor to SJG and the surrounding villages. We strive for best-in-class safety and environmental policies through an approach of responsible production, including the sole use of biodegradable and organic solvents and a focus on best safety practices.
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DynaResource has constructed and donated a hospital to the SJG community and contributed funds for repairs and upgrades to the local church and school, and provided education and business training to adults, creating new opportunities for current residents. Additionally, we’ve funded and constructed roads within the community and improved a road from Sinaloa de Leyva to SJG, a distance of over 60 kilometers.
Available Information
We make available links on our website (http://www.dynaresource.com) to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Proxy Statements, as well as Forms 3, 4 and 5 with respect to our common stock, including any amendments to any of the foregoing, as soon as reasonably practicable after such reports are electronically filed with the U.S. Securities and Exchange Commission (“SEC”). These filings are also available at http://www.sec.gov.
Copies of our Code of Business Conduct and Ethics, applicable to the executive officers, are also available on our website. Information contained on our website is not a part of this report.
ITEM 1A.RISK FACTORS
Not applicable for smaller reporting companies.
ITEM 1B.UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
The Company has adopted processes designed to assess, identify, and manage material risks from cybersecurity threats that are integrated into the Company’s overall risk management system. The Company’s cybersecurity risk management processes are managed by Tuearis Cyber (“Tuearis”) an outside contractor with significant experience and expertise in designing and implementing cybersecurity programs for corporate entities such as the Company.
During the year ended December 31, 2023, the Company did not experience any risks from cybersecurity threats that materially affected or were reasonably likely to materially affect the Company’s business strategy, results of operations, or financial condition.
The Company’s Board of Directors, through its Audit Committee (the “Committee”), working closely with the Company’s corporate governance consultant, provides oversight of risks from cybersecurity threats by monitoring incident-based reports from Tuearis as to the existence and severity of such risks. When risks are identified, the Committee works with the Company’s corporate governance consultant to develop appropriate responses, based on the recommendations of Tuearis. The Company does not have an employee with specific expertise in cybersecurity risk management but relies on Tuearis to provide that expertise. All material cybersecurity risks, incidents, and responses are reported to the Committee as a routine matter.
ITEM 2.PROPERTIES
Corporate Headquarters
The Company leases office space for its corporate headquarters in Las Colinas, Irving, Texas. In September 2017,February 2023, the Company entered into a sixty-six-month52-month extension of the original lease through January 2023.from September 2017 and added additional office space. As part of the agreement the new lease term commenced and the Company received sixfour months free rent as aupon completion of the finish out allowance.of the expansion space. The expansion was complete and the Company capitalizedoccupied the leasehold improvement costs and amortized them over the rent abatement period as rent expense.office space effective August 1, 2023. The Company makes tiered lease payments on the 1stfirst of each month.
Administrative and Logistics Offices
We classify our mineral property as an "Exploration Property". We do not suggest that we have proven or probable reserves at our property as defined by the SEC. Under U.S. standards, as set forthDynaMexico maintains administrative and logistics offices in SEC Industry Guide 7, mineralization may not be classified as a “reserve” unless a determination has been made that the mineralization could be economicallyGuamuchil and legally produced or extracted at the time the reserve determination is made. The SJG Property as described in this Annual Report on Form 10-K is without known reserves. Mineral resourcesMatazalan, Mexico, both of which are not classified as mineral reserves do not have “demonstrated economic viability.” under month-to-month payment terms.
Mining Project Location
The quantity of resources and the quality (grade) of resources reported as “Indicated” and “Inferred” mineral resources in the mineral resource estimate compiled for DynaMéxico, under and filed by the Company on SEDAR, are not disclosed in this Form 10K. There has been insufficient exploration to define any mineral reserves on the SJG Property, and it is not certain if further exploration will result in the definition of mineral reserves.
San Jose de Gracia Mineral Property
San Jose de Gracía Propertymining project (“SJG”SJG Project”) is a high-grade mineralized systemlocated 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 reports historical productionthe SJG Project resides, straddles the border separating the Mexican States of 1,000,000 Oz. gold (“Au”), from a seriesSinaloa and
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Chihuahua. The SJG Project is located in the statesouth-western portion of the property, and is located entirely within the State of Sinaloa, México.as shown in the maps below.
DynaMexico owns the San Jose de Gracia mineral concessions, which are comprised of 33 distinct concessions covering an aggregate of approximately 9,920 hectares. The Companyconcessions are held 100% by DynaMexico and there are no royalty or other interests.
The property on which the SJG Project resides is focusedlocated in and around the village of San Jose de Gracia, approximately 100 km northeast of Guamuchil, on the explorationwest side of Mexico. The village of San Jose de Gracia has a small airstrip and future exploitationcan 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. which are accessible throughout the year, with the possible exception of this vein-hosted, near surface,June and over 400 meters down dip gold potential, that occurs within fault breccia veins;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 a few stores which offer essential goods and services. The camp site area, which is closer to the mining activities, maintains facilities of twelve rooms with additional lodging available in the village which can accommodate a total of about 225 persons.
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Power
A power line to the San José de Gracia Project has been traced on surface and underground over a 15 Sq. kilometer area.
DynaMéxico owns 100%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 mineral concessionsmunicipality 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 produces its own diesel-generated power as a backup to the power grid.
Offices – Camp Facilities
The SJG Project sources many of its supplies from nearby towns, Guamuchil, Los Mochis and Culiacan. There is a satellite dish installed at the SJG Project providing communications from the SJG Project. At the SJG Project, DynaMexico maintains a camp staff, including geologists, field helpers, consultants, security, cooks and cleaners. Most of these employees come from the local community.
Mining Concessions
The San José de Gracia Property and all mineralconsists of the following 33 contiguous mining concessions are contiguous. The SJG Property is comprisedwhich covers an area of 33 concessions covering approximately 9,920 hectares (24,513 acres).:
Current Mining Concessions - San José de GracíaGracia
Claim Name | Claim Number | Staking date | Expiry | Hectares | Taxes / ha (pesos) |
| Claim Number |
| Staking date |
| Expiry |
| Hectares |
|
| |
AMPL. SAN NICOLAS | 183815 | 22/11/1988 | 21/11/2038 | 17.4234 | 111.27 |
| 183815 |
| 22/11/1988 |
| 21/11/2038 |
|
| 17.4234 |
|
|
AMPL. SANTA ROSA | 163592 | 30/10/1978 | 29/10/2028 | 25.0000 | 111.27 |
| 163592 |
| 30/10/1978 |
| 29/10/2028 |
|
| 25.0000 |
|
|
BUENA VISTA | 211087 | 31/03/2000 | 30/03/2050 | 17.9829 | 63.22 |
| 211087 |
| 31/03/2000 |
| 30/03/2050 |
|
| 17.9829 |
|
|
EL CASTILLO | 214519 | 02/10/2001 | 01/10/2051 | 100.0000 | 31.62 |
| 214519 |
| 02/10/2001 |
| 01/10/2051 |
|
| 100.0000 |
|
|
EL REAL | 212571 | 07/11/2000 | 07/11/2052 | 2038.0000 | 31.62 |
| 212571 |
| 07/11/2000 |
| 07/11/2052 |
|
| 2038.0000 |
|
|
EL REAL 2 | 216301 | 30/04/2002 | 29/04/2052 | 280.1555 | 31.62 |
| 216301 |
| 30/04/2002 |
| 29/04/2052 |
|
| 280.1555 |
|
|
FINISTERRE FRACC. A | 219001 | 28/01/2003 | 27/01/2053 | 18.7856 | 31.62 |
| 219001 |
| 28/01/2003 |
| 27/01/2053 |
|
| 18.7856 |
|
|
FINISTERRE FRACC. B | 219002 | 28/01/2003 | 27/01/2053 | 174.2004 | 31.62 |
| 219002 |
| 28/01/2003 |
| 27/01/2053 |
|
| 174.2004 |
|
|
GUADALUPE | 189470 | 05/12/1990 | 04/12/2040 | 7.0000 | 111.27 |
| 189470 |
| 05/12/1990 |
| 04/12/2040 |
|
| 7.0000 |
|
|
LA GRACIA I | 215958 | 02/04/2002 | 01/04/2052 | 300.0000 | 31.62 |
| 215958 |
| 02/04/2002 |
| 01/04/2052 |
|
| 300.0000 |
|
|
LA GRACIA II | 215959 | 02/04/2002 | 01/04/2052 | 230.0000 | 31.62 |
| 215959 |
| 02/04/2002 |
| 01/04/2052 |
|
| 230.0000 |
|
|
LA LIBERTAD |
| 172433 |
| 15/12/1983 |
| 14/12/2033 |
|
| 97.0000 |
|
| |||||
LA NUEVA AURORA |
| 215119 |
| 08/02/2002 |
| 07/02/2052 |
|
| 89.3021 |
|
| |||||
LA NUEVA ESPERANZA |
| 226289 |
| 06/12/2005 |
| 05/12/2055 |
|
| 40.0000 |
|
| |||||
LA UNION |
| 176214 |
| 26/08/1985 |
| 25/08/2035 |
|
| 4.1098 |
|
| |||||
LOS TRES AMIGOS |
| 172216 |
| 27/10/1983 |
| 26/10/2033 |
|
| 23.0000 |
|
| |||||
MINA GRANDE |
| 163578 |
| 10/10/1978 |
| 09/10/2028 |
|
| 6.6588 |
|
| |||||
NUEVO ROSARIO |
| 184999 |
| 13/12/1989 |
| 12/12/2039 |
|
| 32.8781 |
|
| |||||
PIEDRAS DE LUMBRE 2 |
| 215556 |
| 05/03/2002 |
| 04/03/2052 |
|
| 34.8493 |
|
| |||||
PIEDRAS DE LUMBRE 3 |
| 218992 |
| 28/01/2003 |
| 27/01/2053 |
|
| 4.3098 |
|
| |||||
PIEDRAS DE LUMBRE No.4 |
| 212349 |
| 29/09/2000 |
| 28/09/2050 |
|
| 0.2034 |
|
| |||||
PIEDRAS DE LUMBRE UNO |
| 215555 |
| 05/03/2002 |
| 04/03/2052 |
|
| 40.2754 |
|
| |||||
SAN ANDRES |
| 212143 |
| 31/08/2000 |
| 30/08/2050 |
|
| 385.0990 |
|
| |||||
SAN JOSÉ |
| 208537 |
| 24/11/1998 |
| 23/11/2048 |
|
| 27.0000 |
|
| |||||
SAN MIGUEL |
| 183504 |
| 26/10/1988 |
| 25/10/2038 |
|
| 7.0000 |
|
| |||||
SAN NICOLAS |
| 163913 |
| 14/12/1978 |
| 13/12/2028 |
|
| 55.5490 |
|
| |||||
SAN SEBASTIAN |
| 184473 |
| 08/11/1989 |
| 07/11/2039 |
|
| 40.0000 |
|
| |||||
SANTA MARIA |
| 218769 |
| 17/01/2003 |
| 16/01/2053 |
|
| 4.2030 |
|
| |||||
SANTA ROSA |
| 170557 |
| 13/05/1982 |
| 12/05/2032 |
|
| 31.4887 |
|
| |||||
SANTO TOMAS |
| 187348 |
| 13/08/1986 |
| 12/08/2036 |
|
| 312.0000 |
|
| |||||
TRES AMIGOS 2 |
| 212142 |
| 31/08/2000 |
| 30/08/2050 |
|
| 54.4672 |
|
| |||||
FINISTERRE 4 |
| 231166 |
| 18/01/2008 |
| 17/01/2058 |
|
| 2,142.1302 |
|
| |||||
FRANCISCO ARTURO |
| 230494 |
| 06/09/2007 |
| 27/03/2057 |
|
| 3,279.5600 |
|
| |||||
TOTAL |
|
|
|
|
|
|
|
| 9,920.0000 |
|
|
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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 |
|
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. The Company believes it is in good standing regarding all above noted obligations.
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.
The following claim location map shows the location of each of the concessions and the legend presents various areas of mining and drilling.
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Surface Lease Rights
In addition to the surface rights held by DynaMéxico pursuant to the Mining Actof México and its Regulations (Ley Minera y su Reglamento), DynaMinerasthe Company maintains access and surface rights tofor the SJG Project pursuant to thea 20-year Land Lease Agreement (above). The 20 Year Land Lease AgreementAgreement. This lease agreement with the Santa Maria Ejido Community surrounding San Jose de Gracía(the owners of the surface rights) is dated January 6, 2014 and continues through 2033. ItThe lease agreement covers an area of 4,399 hectares surrounding the main mineral resource areas of SJG and provides for annual lease payments by DynaMineras of $1,359,443 Pesos adjusted(adjusted for inflation based on the Mexico minimum wage, commencing in 2014.inflation). The 20212023 payment was $3,015,112$4,414,124 pesos (approx. $149,000$249,000 USD). Additionally, under
The lease agreement provides the description of the 20 Year Land Lease, DynaMineras constructed a Medical Facility at SJG in year 2017.
The Land Lease Agreement provides DynaMinerasCompany with surface access to the core resource areas of SJG (4,399 hectares), and allows for all permitted mining, pilot production and exploration activities from the owners of the surface rights (Santa Maria Ejido community).activities.
The Company expects DynaMineras will be successful in expanding the size and scope of the resources at SJG through continued drilling and development programs at San Pablo, Tres Amigos, La Ceceña, Palos Chinos, San Pablo East, La Purisima, and La Prieta. The Company expects extensions to mineralization in all directions and down dip from the main target areas.
Mineral Reserves / No Known Reserves
Under U.S. standards, as set forth in SEC Industry Guide 7, mineralization may not be classified as a “reserve” unless a determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The SJG property is without known reserves. Mineral resources which are not classified as mineral reserves do not have “demonstrated economic viability.” The quantity of resources and the quality (grade) of resources reported as “Indicated” and “Inferred” mineral resources in the mineral resource estimate compiled for DynaMéxico is not disclosed in this Form 10-K. There has been insufficient exploration to define any mineral reserves on the property, and it is not certain if further exploration will result in the definition of mineral reserves.
Technical Report and Resource Estimate According to Canadian National Instrument 43-101 (2012)
In 2012, DynaMéxico commissioned Servicios y Proyectos Mineros (“SPM”) for the production of Technical Report 43-101 (“43-101”) at San Jose de Gracía. Additionally, DynaMéxico commissioned Mr. Robert Sandefur, a senior reserve analyst for Chlumsky, Armbrust & Meyer LLC, Lakewood, CO (“CAM”) to produce a mineral resource estimate for the 4 main vein systems at the property.
Parameters Used to Estimate the Mineral Resource Estimate--The data base for the San Jose de Gracía Project consists of 372 drill holes of which 361 are diamond drill holes (“DDH”) and the remaining 11 were reverse circulation holes “(RC”), with a total drilling of 75,878 meters. The NI 43-101 Mineral Resource Estimate, prepared in 2012, concentrates on four main mineralized vein systems at SJG: Tres Amigos, San Pablo, La Union, and La Purisima. Of the 372 drill holes, 368 were drilled to test these four main vein systems and the remaining four holes tested the Argillic Zone. Technical personnel of Minop S.A. de C.V. (“Minop”), a subsidiary (or affiliate) of Goldgroup Mining Inc., built three dimensional solids to constrain estimation to the interpreted veins in each swarm. The 172 holes most recently drilled (2009-2011), were allocated as follows: Tres Amigos (64 holes), San Pablo (49 holes), La Union (24 holes), La Purisima (32 holes) and Argillic Zone (3 holes). The data base also includes rock and chip sampling, regional stream sediment sampling, and IP Surveys.
Density--A total of 5,540 pieces of core were measured for specific gravity using the weight in air vs. weight in water method. This represents an additional 3,897 measurements taken in the 2009-11 drill seasons with density measurements taken from all mineral zones. Dried samples were coated with paraffin wax before being measured. The results tabulated have been sorted by lithology and mineralized veins. The average specific gravity of 5,051 wall rock samples was 2.59 while the average specific gravity for 489 samples of vein material is 2.68. CAM and Servicios y Proyectos Mineros have reviewed the procedures and results and opine that the results are suitable for use in mineral resource estimation.
Mineral Resource Estimate - Construction of Wireframes--Mineral Resources were estimated by Mr. Sandefur within wireframes constructed by technical personnel of Minop. Minop was contracted by Mineras de DynaResource S.A. de C.V. (“DynaMineras”).
Mineral Resource Estimate - Explanation of Resource Estimation--Resource estimation was done in MineSight and MicroModel computer systems with only those composites that were inside the wireframe used in the estimate. Estimation was done using kriging with the omni-directional variogram derived from all the data in each area for gold using the relative variogram derived from the log variogram. High grades were restricted by capping the assays at a breakpoint based on the cumulative frequency curves. Estimation was done using search radii of 100 x 100 x 50 m “blocks” oriented subparallel to the general strike and dip of the vein system in each area. A sector search, corresponding to the faces of the search box with a maximum of two points per sector was used in estimation. A density of 2.68 based on within ‘vein density’ samples was used in the resource estimate. Within each of the four areas there are approximately 20 to 40 veins in the vein swarm. Resources were estimated by kriging using data from all veins in the swarm. In general, gold accounts for at least 80% of the value of contained metal at the project, so the variograms for gold were used in estimation of the four other metals.
The veins at San Jose de Gracía have been historically mined for many years and historic mined volumes are not available. The one exception is the approximate 42,000 tonnes of ore processed by DynaMéxico during its pilot production activities in 2003-2006. The resource table is not adjusted for any historic mining. To validate that historic mining had not significantly reduced the resource, CAM reviewed the database for all assays greater than 1 gram per ton gold that were next to missing values at the bottom of drill holes. Only four assays satisfying this criterion were found, and on the basis of this review, Mr. Sandefur does not believe that significant mining has occurred within the volumes defined by the wireframes.
Servicios y Proyectos Mineros performed a database review and considers that a reasonable level of verification has been completed, and that no material issues have been left unidentified from the drilling programs undertaken.
Mineral Resource Estimate and 43-101 Technical Report - Data Verification--Mr. Ramon Luna Espinoza (“Mr. Luna”) initially visited the San Jose de Gracía Project in November 2010 and conducted site inspections at SJG in November 2011 and January 2012. Mr. Sandefur conducted a site inspection of the SJG Project in January 2012. While at the Property in November 2011, Mr. Luna inspected the areas of Tres Amigos, La Prieta, Gossan Cap, San Pablo, La Union, and La Purisima, and historic mining sites. In January 2012, Mr. Sandefur and Mr. Luna inspected the areas of Tres Amigos, San Pablo, La Union, and La Purisima. Pictures of the areas were taken. Many of the drill pads for the drilling programs of 2007 to 2011 were clearly located and identified. Mr. Luna also inspected at San José de Gracía, the core logging and storage facilities, the geology offices, the meteorological station, the plant nursery, and the mill. Mr. Sandefur also inspected the core logging and storage facilities.
The Company received from DynaMéxico on February 14, 2012, a National Instrument 43-101 Mineral Resource Estimate for San Jose de Gracía. The NI 43-101 Resource Estimate was prepared by Mr. Robert Sandefur, BS, MSc, P.E., a Qualified Person as defined under NI 43-101, and a senior reserve analyst for Chlumsky, Armbrust & Meyer LLC, Lakewood, CO (“CAM”). The Resource Estimate concentrates on four separate main vein systems at SJG: Tres Amigos, San Pablo, La Union, and La Purisima.
The mineral resource estimates prepared by Mr. Robert Sandefur for this Technical Report included Indicated Resources at Tres Amigos and San Pablo. Table summaries of Indicated and Inferred Resources are contained in the 2012 DynaMéxico-CAM Mineral Resource Estimate. The Resource Estimate has been filed, along with the Technical Report on SEDAR; but is not disclosed in this Form 10-K.
Water Concession
The Company has secured the Water Rights Concession for the area surrounding SJG. The Director of Water Administration of the National Water Commission of México (CONAGUA) formally certified in writing the rights of DynaResource de MéDynaMéxico S.A. de C.V. to legally “use”, exploit and extract 1,000,000 cubic meters of water per year from the DynaMéxico extraction infrastructure located within the perimeter of the mining concessions comprising the San Jose de Gracía Mining Property in Sinaloa State, México.concessions. CONAGUA determined that the DynaMéxico water rights are not subject to any water rights
11
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. The Company recycles water from the tailings pond back through the test milling circuit, then back to the tailings pond.
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.
12
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 months is typical.
Processing time for review and approval of an Environmental Impact Assessment Study varies depending on workload of SEMARNAT regional office where application is filed, but a processing time of six months is typical. Processing time for issuance of a GPCSE by SEDENA is approximately six months. Processing time for issuance of a Water Rights Concession by CONAGUA is approximately six 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 cubic meters 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 Company maintains a greenhouse of 20,000 trees which are used in the reforestation efforts as necessary.
Under Preventive Exploration Notice (Preventive Exploration Notice) approved by SEMARNAT on July 21, 2010, SEMARNAT imposed upon and DynaMexico complied, 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. As required by US Generally Accepted Accounting Principles (“US GAAP”) the Company also has an asset retirement obligation recorded as of December 31, 2023 for the net present value of the cost to dismantle and dispose the plant and remove the tailings pond.
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
13
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, La Mochomera and La Parilla Mines.
This table presents the historic reported gold production for San Jose de Gracia prior to 1970:
Area |
| Gold |
|
| Gold |
|
| Mined | ||
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 Company has not determined mineral reserves and the test mining program is exploratory in nature. The Company has started extraction in identified areas after analysis of the results from the drilling program that was recommenced in 2021. All mines are underground and the ore is hard rock that needs to be blasted, removed from the mine and taken to the test mill to be crushed and ground before gold concentrate can be extracted.
Summary of Test Mining and Pilot Mill Operations for 2018 to 2023:
|
| Estimated Total Tonnes |
|
| Estimated Reported |
|
| Estimated Reported |
|
| Estimated Gross Gold |
|
| Estimated Net Gold |
| |||||
Year |
| Processed |
|
| (g/t 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 |
|
2023 |
|
| 198,518 |
|
|
| 5.58 |
|
|
| 76.50 | % |
|
| 27,252 |
|
|
| 24,829 |
|
14
Test pilot operations in 2023 yielded 198,518 tonnes of material, mined and processed from underground test mining activity and pilot milling operations. These test pilot operations also yielded approximately a reported 27,252 gross ounces of gold, and net of dry weight adjustments at the buyer’s facilities of approximately a reported 24,829 ounces of gold.
Infrastructure Improvements, Expansion and Increased Output (2017 To 2023)
As part of the Company’s test mining activities, the Company continues to upgrade the facilities and the pilot mill. Significant improvements have been made such that the condition of the equipment is new, relatively new or in good condition. The Company has three ball mills of which the two largest are currently running 800 tons per 24-hour day at the end of 2023. The third is currently being used as a regrind mill.
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 capacity of 800 tons per 24-hour operating day at the end of 2023.
Since January 2017, the Company has expended approximately $28.3 million USD in non-recurring costs, generally classified as project improvements and expansion costs which have been expensed in the Company’s financial statements. These funds have been provided primarily from cash flows from operations.
Of the approximately $28.3 million in non-recurring costs, the Company has spent the following on facilities expansion:
Mill Expansion |
| $ | 7,893,000 |
|
Tailings Pond Expansion |
|
| 1,464,000 |
|
Machinery and Equipment |
|
| 3,165,000 |
|
Mining Camp Expansion |
|
| 272,000 |
|
Total |
| $ | 12,794,000 |
|
The Company has spent the following amounts on mine development:
Mine Development - San Pablo |
| $ | 4,968,000 |
|
Mine Expansion - San Pablo East |
|
| 915,000 |
|
Mine Expansion - Tres Amigos |
|
| 1,599,000 |
|
Exploration Drilling |
|
| 5,000,000 |
|
SJG Mining Concessions |
|
| 2,014,000 |
|
Surface Rights and Permitting |
|
| 1,042,000 |
|
Total |
| $ | 15,538,000 |
|
The Company is currently reporting all costs of test mining operations, project improvements, and project expansion as expenses in accordance with the United States Securities & Exchange Commission requirements for an exploration stage company. The result of expensing all costs is that the Company has accumulated a net loss carry-forward from México operations of $22.0 million USD which is available to offset future taxable earnings.
The Company is performing exploration drilling to further define mineralization and in 2023 and 2022 expended $2,514,544 and $2,484,072, respectively, 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 US GAAP requirements, and therefore the above costs are not reflected as capitalized assets on the Company’s balance sheet.
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.
15
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 750), 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 mining and production activities of DynaMexico is provided by the local community of SJG.
Climate and Operating Season
The climate is semi-tropical with a rainy season dominating June and July. For some activities on the SJG 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 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
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
16
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 2021, seven areas have been drill-tested. They are: Tres Amigos, La Union, San Pablo, Tepehuaje, La Ceceña, Palos Chinos and La Mochomera. Since 2021, 241 holes for approximately 53,285 meters of diamond drilling has been completed and approximately 33,566 core samples were collected of which approximately 1,175 quality assurance/quality control (“QA/QC”) samples were shipped for laboratory analysis and verification.
Exploration and Drilling Protocol
The Company’s internal controls are designed to provide reasonable assurance that information and processes utilized in assessing its exploration results and resource estimates are reasonable and in line with industry best practices. These internal controls include QA/QC in the collection, analysis, verification, storage, reporting and use of drillhole, assay, metallurgical and other technical and scientific information, including the following internal control protocols in place for exploration data:
Mineral Resource Estimation
DynaResource has the following internal control protocols in place for mineral resource estimation:
Development of our mineral resource estimates use tools and processes such as mine design, scheduling and geostatistical tools that conform to industry best practices and are regularly reviewed and reconciled by internal and external parties. There are internal and external audit processes for mineral resource estimation.
Mineral resources are estimates that contain inherent risk and depend upon geologic interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable.
17
EXPLORATION PLANS FOR 2024
The Company plans to continue its exploration drilling program with two to six rigs on site. Management and geologists will make decisions based on capital available, the drill results, corporate strategies and market conditions, surface mapping, sampling and target generation. The Company has contracted with a "Qualified Person" within the meaning of subpart 1300 of Regulation S-K and Canadian Standard NI 43-101 to interpret the data collected for a formal Mineral Resource update in 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 is a summary and results of the data validation process of the 2023 and 2024 drilling campaigns, as well as an estimation of the resource potential, in the exploration area named La Mochomera, at the San Jose de Gracia Project of Dyna Resources Company.
Database
The drilling campaign consists of 100 drill holes with description, sampling, and dumped in an excel file, Dyna Resources delivered this information of drill cores, these files have information of geological description, sampling intervals, type of control sample (standard/blank), considering that this is the main source of more original data for the validation.
Bureau Veritas Laboratory provided us with access to the original certificates for both the 2023 and 2024 campaigns, the sum of these certificates is a total of 102 certificates, with Au, Ag, and ICP analysis.
Only 58 drill holes out of the 100 holes in the database are considered in the modeling of the area's resource potential. These generate continuities in geological and grade continuities. The orientation of the bodies are very similar to the other areas of the San Jose de Gracia district, bodies of mineralized veins, with variable thicknesses, with a general strike of 36° Az, and general strike of -30° of inclination to the NW.
La Mochomera has 11 zones of mineralization "veins" parallel, in a train of extension of little more than 400 meters, not all the veins present the same dimensions, but nevertheless it is possible to observe the orientations and similar inclinations.
Mineral Resource Estimate for the Mochomera area 2024.
Resource estimation was done in MineSight software using kriging with the omni-directional variogram used in the district due to similarity and prior knowledge of previous estimates.
To each of the structures was assigned a code, this code in turn was assigned to the blocks and composites belonging to these domains, so that the interpolation is controlled by domains and to control the interpolation Resources were estimated by kriging using data from 2024 and 2023 data. La Mochomera Resources was not classified.
Capping used was similar to the previous estimation, no variability was observed at the breakpoint of the probability plot.
Au Cut off g/t |
| Tonnes |
|
| Volume |
|
| Au ppm |
|
| Ag ppm |
|
| Cu pct |
|
| Pb pct |
|
| Zn pct |
|
| AuOz |
|
| AgOz |
|
| CuKg |
|
| Pb Kg |
| Zn Kg |
| |||||||||||||
0.2 |
|
| 4,150,533 |
|
|
| 1,660,213 |
|
|
| 1.11 |
|
|
| 2.51 |
|
|
| 0.04 |
|
|
| 0.01 |
|
|
| 0.02 |
|
|
| 148,138 |
|
|
| 334,979 |
|
|
| 2,019,676 |
|
|
| 415,053 |
|
| 830,107 |
| |
0.4 |
|
| 2,309,195 |
|
|
| 923,678 |
|
|
| 1.78 |
|
|
| 3.47 |
|
|
| 0.06 |
|
|
| 0.01 |
|
|
| 0.03 |
|
|
| 132,166 |
|
|
| 257,650 |
|
|
| 1,391,988 |
|
|
| 230,919 |
|
| 692,758 |
| |
1 |
|
| 1,093,769 |
|
|
| 437,507 |
|
|
| 3.07 |
|
|
| 4.55 |
|
|
| 0.08 |
|
|
| 0.02 |
|
|
| 0.04 |
|
|
| 107,970 |
|
|
| 160,021 |
|
|
| 790,833 |
|
|
| 218,754 |
|
| 437,507 |
| |
2 |
|
| 576,958 |
|
|
| 230,783 |
|
|
| 4.55 |
|
|
| 5.66 |
|
|
| 0.10 |
|
|
| 0.02 |
|
|
| 0.05 |
|
|
| 84,410 |
|
|
| 105,003 |
|
|
| 576,958 |
|
|
| 115,392 |
|
| 288,479 |
| |
3 |
|
| 354,950 |
|
|
| 141,980 |
|
|
| 5.86 |
|
|
| 6.19 |
|
|
| 0.12 |
|
|
| 0.02 |
|
|
| 0.05 |
|
|
| 66,881 |
|
|
| 70,648 |
|
|
| 425,940 |
|
|
| 70,990 |
|
| 177,475 |
|
Resource Estimate as of December 31, 2022
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
18
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.
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 |
|
19
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 there is no overlap of the underground and bulk tonnage resources. There can be no assurance that a full Technical Report commissioned under Canadian Standard NI 43-101 will reflect the same results as those reported above. 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 https://dynaresource.com/wp-content/uploads/2023/12/2012-dynamexico-sjg-43-101-technical-report-revised-for-tsx-final-123112-1.pdf. The Company expects to update this report in 2024.
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. The total mining until December 2022 is approximate and subject to the results when an updated full technical report is commissioned. In 2023, an additional 198,516 tons with a reported grade of 5.58 containing 27,252 oz of gold was reported. There can be no assurance that there is no overlap of the underground and bulk tonnage resources. 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 filedFiled 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”AAA”), seeking monetary and nonmonetary relief and citing theunder an Earn In/Option Agreement as the basis for its filing.Agreement. On August 25, 2016, the AAA issued a ruling in favor of Goldgroup against the Company and DynaMéxico (the “Arbitration Award”“Arbitration Award”). On May 9, 2019, the United States District Court for the District of Colorado (the “Colorado“Colorado U.S. District Court”Court”) confirmed the Arbitration Award.
On May 20, 2021, theThe 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 offulfilled its obligations under the Arbitration Award which included the election of a Goldgroup designeeprior to the boardbeginning of DynaMéxico, yet Goldgroup continues to challenge the Company’s actions before2023. On March 5, 2024, the Colorado U.S. District Court.Court issued an Order denying requests for additional relief by both the Company and Goldgroup and stating that the case is closed.
DynaResource de Mexico SA de CV Legal Update and Disclosure:
2014 Court filing by DynaMéOn 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
On December 9, 2014, DynaMéxico filed a commercial lawsuit against Goldgroup, its parent company Goldgroup Mining Inc., and the AAA, in the Thirty Sixth Civil Court in the Federal District of México (the “Trial Court”), under file 1120 number / 2014 (the “DynaMéxico Trial”). In the DynaMéxico Trial, DynaMéxico sought to terminate the U.S.-based arbitration proceedings, and requested that substantial damages (in the amount of US $50 million) be awarded to DynaMéxico against Goldgroup. On October 5, 2015, the Trial Court awarded DynaMéxico damages in excess of US $48 million.
Goldgroup has appealed the $48 million damages award on multiple occasions, yet the award stands and has been affirmed by a variety of Mexican courts, including the highest court in the land. Even in the face of multiple rejections of its arguments before Mexican courts, Goldgroup continues to raise baseless and unfounded objections to the award.
On October 5, 2016, the Trial Court (the same court which made the $48 million damages award) approved a grant to DynaMéxico of a lien (referred to by the court as an “Embargo”) upon the shares of DynaMéxico held by Goldgroup in certificate form. On February 20, 2020, a México City court issued a final judgment, effectively foreclosing on all shares of DynaMéxico formerly held by Goldgroup, and awarding those shares to DynaMéxico. Those shares are now legally owned, and physically held, by DynaMéxico. Consequently, Goldgroup currently owns no shares of DynaMéxico under Mexican law which requires physical possessionagainst DynaResource de México SA de CV.
Goldgroup’s complete legal withdrawal is the result and culmination of shares to evidence ownership.
The award7 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 shares formerly owned byMéxico legal rulings and the Goldgroup does not satisfy the $48 millionlegal withdrawal:
2020 Petition for Recognition of the $48M Damages Award
On December 5, 2020, the Company and DynaMéxico filed an Original Petition for Recognition of the $48 million damages award(dated October 05, 2015) in favor of DynaMéxico and against Goldgroup Resources Inc., confirmed by Mexican courts in US. District Court in Dallas County, Texas (the “Texas U.S. District Court”),2019, is final, conclusive, and enforceable under principles of international comity. On May 12, 2021, The Texas U.S. District Court issued a ruling statingMexican law. Goldgroup Resources’ challenges to that award have been fully denied and the Court was not obligated to recognize the $48 million damages award is final.
20
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 three- month LIBOR rate, from February 2020 forward. In August 2022, the panel also assessed costs of the arbitration proceeding against Mineras, in the United States. On May 14, 2021,aggregate amount of £ 376,232.75. DynaResource has accrued $1,000,000 for the Companyarbitration award and DynaMéxico filed a Notice of Appeal of that ruling.
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.
21
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 OTCQX, the top tier of 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;commissions; and may not reflect actual transactions. All amounts are denominated in U.S. dollars.
Year ended December 31, 2021 |
| Low |
|
| High |
| ||||||||||
Year Ended December 31, 2023 |
| Low |
|
| High |
| ||||||||||
First Quarter |
| 0.57 |
| 1.00 |
|
|
| 2.10 |
|
|
| 2.50 |
| |||
Second Quarter |
| 0.63 |
| 0.99 |
|
|
| 1.80 |
|
|
| 2.30 |
| |||
Third Quarter |
| 0.77 |
| 2.45 |
|
|
| 1.90 |
|
|
| 3.00 |
| |||
Fourth Quarter |
| 1.35 |
| 2.00 |
|
|
| 1.96 |
|
|
| 2.61 |
| |||
|
|
|
|
|
| |||||||||||
Year ended December 31, 2020 |
| Low |
|
| High |
| ||||||||||
Year Ended December 31, 2022 |
| Low |
|
| High |
| ||||||||||
First Quarter |
| 0.38 |
| 0.78 |
|
|
| 1.23 |
|
|
| 1.90 |
| |||
Second Quarter |
| 0.47 |
| 0.58 |
|
|
| 1.50 |
|
|
| 2.00 |
| |||
Third Quarter |
| 0.53 |
| 1.10 |
|
|
| 1.29 |
|
|
| 2.39 |
| |||
Fourth Quarter |
| 0.70 |
| 1.00 |
|
|
| 2.06 |
|
|
| 2.46 |
|
As of March 15, 2022,December 31, 2023, there were outstanding 18,091,29323,371,708 shares of our common stock outstanding, which were held by approximately 439424 shareholders of record. This figureThe 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 CompanyCompany’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.
During the fiscal years ended December 31, 2021 and 2020, no securities of the Company were authorized for issuance under equity compensation plans.
ITEM 6.SELECTED FINANCIAL DATA
Not applicable for smaller reporting companies.
22
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to in this annual report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to in this annual report as the Exchange Act. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project” and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management’s beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this annual report. Factors that can cause or contribute to these differences include those described under the heading “Management Discussion and Analysis and Plan of Operation.”
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statement you read in this annual report reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this annual report. The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any change in its views or expectations. The Company can give no assurances that such forward-looking statements will prove to be correct.
CAUTIONARY NOTE TO UNITED STATES INVESTORS—INFORMATION CONCERNING PREPARATION OF RESOURCE AND RESERVE ESTIMATES
The Company is an “OTC Reporting Issuer” as that term is defined in BC Multilateral Instrument 51-105, Issuers Quoted in the U.S. Over-the-Counter Markets promulgated by the British Columbia Securities Commission.
In Canada, an issuer is required to provide technical information with respect to mineralization, including reserves and resources, if any, on its mineral exploration properties in accordance with Canadian requirements, which differ significantly from the requirements of the United States Securities and Exchange Commission (the “SEC”) applicable to registration statements and reports filed by United States companies pursuant to the Securities Act or the Exchange Act. As such, certain disclosures of mineralization under Canadian standards may not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements of the SEC and not subject to Canadian securities legislation.
While these terms are recognized and required by Canadian securities legislation (under National Instrument 43-101 (“NI 43-101”), entitled Standards of Disclosure for Mineral Projects), the SEC does not recognize these terms. Investors in the United States are cautioned not to assume that any part or all, of the mineral deposits in these categories, will ever be converted to reserves. In addition, inferred mineral resources have a great amount of uncertainty as to their existence and economic and legal feasibility. It cannot be assumed that all or any part of a measured mineral resource, indicated mineral resource or inferred mineral resource will ever be upgraded to a higher category. Under Canadian securities legislation, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, although they may form, in certain circumstances, the basis of a “preliminary economic assessment” as that term is defined in NI 43-101. U.S. investors are cautioned not to assume that any part or all, of any reported measured, indicated, or inferred mineral resource estimates referred to in the DynaMéxico NI 43-101 Technical Report and DynaMéxico 43-101 Mineral Resource Estimate (compiled for DynaResource de México SA de CV), are economically or legally mineable.
Under U.S. standards, as set forth in SEC Industry Guide 7, mineralization may not be classified as a “reserve” unless a determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The SJG Property as described in this Annual Report on Form 10-K is without known reserves. Mineral resources which are not classified as mineral reserves do not have “demonstrated economic viability.” The quantity of resources and the quality (grade) of resources reported as “Indicated” and “Inferred” mineral resources in the DynaMéxico 43-101 Mineral Resource Estimate compiled for DynaResource de México SA de CV, under Canadian National Instrument 43-101 and filed by the Company with SEDAR, are not disclosed in this Form 10-K. There has been insufficient exploration to define any mineral reserves on the SJG Property, and it is not certain if further exploration will result in the definition of mineral reserves.
Company
The Company is a minerals investment, management, and exploration company, and currently conducting test mining and pilot milling operations through an operating subsidiary in México, with a specific focus on precious and base metalsthe prolific San Jose de Gracia high-grade gold project 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 operationsactivities in México through our operating subsidiaries.subsidiary DynaResource de México SA de CV. (“DynaMéxico”). We currently own 80%100% of the outstanding shares of DynaResource de México, S.A. de C.V. (“DynaMéxico”), and DynaMéxico, currently holds 20% of its outstanding shares recovered from Goldgroup Resources Inc.and DynaMéxico owns 100% of mining concessions, equipment, camp and related facilities which comprise the San JoseJosé de GracíaGracia Property (“SJG”), in northern Sinaloa State, México. We also own 100%
In addition to investing in the increase and expansion of Mineras de DynaResource S.A. de C.V. (“DynaMineras”),its test mining and milling activities at SJG in 2023, the exclusive operatorCompany has focused on corporate governance, with the intention of meeting the San José de Gracía Project, under contract with DynaMéxico. DynaOperaciones islisting requirements for other exchanges in the exclusive management company for registered employees.US and/or Canada.
Project Improvements, Expansion and Increased Output (2017 To 2021)to 2023)
TheSince 2017, the Company continues its business plan of operationshas conducted test mining and pilot milling activities at San Jose de Gracía, which isSJG, and to improve, increase and expand test mining and pilot milling operations and generally, to increase production of gold ounces. ounces, and since 2022 to continue exploration activities at SJG with the target to increase primarily gold resources.
Since January 2015the startup of the test mining and milling activities at SJG in January 2015, the Company has increased daily output from an initial 75average of 100 tons per 24-hour operating day, to a current 300an average of approximately 550 tons per 24-hour operating day in 2023. In 2023, the volume processed increased over 44% from an average of 377 tons per 24-hour day to an average of 550 tons per 24-hour day in 2023.
During the first half of 2024, the Company expects to begin to achieve capacity from test mining and milling activities of approximately an average of 800 tons per 24-hour operating day and during first quarter 2021 the Company expectsbuild processing capacity to achieve production outputan average of 500900 to 1,000 tons per 24-hour operating day. (Noteday in the Summarysecond half of Test Mining and Pilot Mill Operations for 2018 to 2021 below).2024.
Since January 2017, the Company has expended over $18.5approximately $28.3 million USD in non-operatingnon-recurring costs, generally classified as project improvements and expansion costs which have been expensed in the company’s consolidatedCompany’s financial statements. TheseThe funds for these expenditures have been provided primarily from cash flows from operations. An itemized listoperations and from the sale of these non-operatingthe Company’s equity.
23
Of the approximately $28.3 million in non-recurring costs, is described below:the Company has spent the following on facilities expansion:
Mill Expansion |
| $ | 3,108,000 |
|
Tailings Pond Expansion |
|
| 265,000 |
|
Machinery and Equipment |
|
| 1,416,000 |
|
Mining Camp Expansion |
|
| 146,000 |
|
Medical Facility |
|
| 126,000 |
|
Mine Development - San Pablo |
|
| 2,748,000 |
|
Mine Expansion - San Pablo East |
|
| 915,000 |
|
Mine Expansion – Tres Amigos |
|
| 1,599,000 |
|
SIG Mining Concessions |
|
| 1,401,000 |
|
Exploration and Developmental Drilling |
|
| 35,000 |
|
Surface Rights and Permitting |
|
| 528,000 |
|
Debt Retirement |
|
| 2,985,000 |
|
Legal Fees |
|
| 3,381,000 |
|
Total |
| $ | 18,653,000 |
|
Mill Expansion |
| $ | 7,893,000 |
|
Tailings Pond Expansion |
|
| 1,464,000 |
|
Machinery and Equipment |
|
| 3,165,000 |
|
Mining Camp Expansion |
|
| 272,000 |
|
Total |
| $ | 12,794,000 |
|
The Company has spent the following amounts on mine development:
Mine Development - San Pablo |
| $ | 4,968,000 |
|
Mine Expansion - San Pablo East |
|
| 915,000 |
|
Mine Expansion - Tres Amigos |
|
| 1,599,000 |
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Exploration Drilling |
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| 5,000,000 |
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SJG Mining Concessions |
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| 2,014,000 |
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Surface Rights and Permitting |
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| 1,042,000 |
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Total |
| $ | 15,538,000 |
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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)(“GAAP”) requirements. The result of expensing all costs is that the Company has accumulated a net loss carry forward from México operations of $12.5approximately $22 million USD which is available to offset future taxable earnings.
Results for the Years Ended December 31, 20212023 and 20202022
Summary of Test Mining and Pilot Mill Operations for 2021, 2020, 2019 and 2018:2018 to 2023:
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Year |
| Estimated Total Tonnes |
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| Estimated Reported Mill |
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| Estimated Reported |
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| Estimated Gross Gold |
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| Estimated Net Gold |
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2018 |
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| 52,038 |
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| 9.82 |
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| 86.11 | % |
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| 14,147 |
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| 13,418 |
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2019 |
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| 66,031 |
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| 5.81 |
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| 86.86 | % |
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| 10,646 |
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| 9,713 |
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2020 |
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| 44,218 |
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| 5.65 |
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| 87.31 | % |
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| 7,001 |
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| 5,828 |
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2021 |
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| 97,088 |
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| 9.67 |
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| 88.79 | % |
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| 26,728 |
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| 22,566 |
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2022 |
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| 137,740 |
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| 8.18 |
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| 88.05 | % |
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| 31,905 |
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| 25,554 |
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2023 |
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| 198,518 |
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| 5.58 |
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| 76.50 | % |
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| 27,252 |
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| 24,829 |
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DynaMineras continued to increase its test underground mining activity and pilot milling operations in 2021 and increased output from 200 to 300 tons per 24-hour operating /day from the mine and mill during. With the opening of an additional ball mill in the first quarter of 2022 the Company projects an increase in capacity to 500 tons per day.
Test pilot operations in 20212023 yielded 97,088198,618 Tons mined and processed from underground test mining activity and pilot milling operations;activities and the production of approximately 26,72827,252 gross Oz Au, and net of dry weight adjustments at the buyer’s facilities, the production of approximately 22,56624,829 Oz Au. The Company reports net revenue of $35,886,046 net of buyer’s price discount and refining and treatment costs.
Test pilot operations in 20202022 yielded 44,218137,740 Tons mined and processed from underground test mining activity and pilot milling operations;activities and the production of approximately 7,00131,905 gross Oz Au, and net of dry weight adjustments at the buyer’s facilities, the production of approximately 5,82825,554 Oz Au.
The decrease in the estimated recovery percentage from 88.05% to 76.50% was a result of processing different types of ore on a larger scale, testing activities, and adjustments to the operating inputs of the new ball mills. We believe the test mill operations will achieve increased efficiencies as we gain experience with larger volumes of material processed. However, the Company believes the reported recovery percentage may continue to be a reduced percentage from prior periods, as we process larger volumes of material and our milling processes are refined.
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The drop in the feed grade at the pilot plant facility is a result of dilution experienced in the test mining activities, and partially due to the increase in test mining tonnage. To increase the tonnage of higher-grade test mining material available for test mill processing, the Company has opened another test mining area of SJG in the fourth quarter of 2023. The Company reports net revenue of $9,048,831 net of buyer’s price discount and refining and treatment costs.
DynaMineras expects to continue itsachieve the access to an additional test underground mining activity and pilot milling operations in 2022; and projects the output of 500 tons per 24-hour operating day from the mine and mill in 2022.area at SJG during 2024.
REVENUE. RevenuesREVENUE: Revenue decreased approximately 10.5% to $35,573,194 for the yearsyear ended December 31, 2021,2023 from $39,767,460 for the year ended December 31, 2022. As discussed above, the Company’s yield decreased in 2023, which attributed to a 2.8% decrease in delivered ounces for the year. Additionally, revenue in the first half of 2023 was offset by adjustments in final settlements of $2,593,583 based on provisional settlements recorded on 2022 shipments. Consistent with ongoing practice, the final settlement assays are recorded in the period received, of which the process may generally include a delay of three to six months due to Buyer’s receipt of final assay from the independent assay firm prior to July 2023. The Company has worked with the buyer and 2020the independent assay firm to develop processes to shorten the period of waiting on the final settlement assays, and during the last quarter of 2023,the final settlement adjustments were $35,886,046being processed and $9,048,831, respectively.received in approximately 4-6 weeks. The increase wasCompany believes it has addressed the resultissues contributing to the differences in the assays that occurred since the installation of the opening of the Tres Amigos minenew milling equipment in 2020 which yielded a higher grade of ore and the increase in plant processing capacity to 300 tons a day. The ore feed grade increase from 5.65 g/t in 2020 to 9.67 g/t in 2021. This combined with higher gold prices resulted in a 297% increase in revenue on a 120% increase in tonnage processed.late 2022.
PRODUCTION COSTS RELATED TO SALES.SALES: Production costs related to sales for the years ended December 31, 2021,2023 and 20202022 were $2,909,401$8,256,062 and $1,166,135,$4,413,649, respectively. These are expenses directly related to the milling, packaging and shipping of primarily gold and other precious metals product. This represents a decreasean increase in the milling cost per ounce delivered (according to the preliminary settlements) from $173 per ounce to $333 per ounce. The increase in the cost per ounce recovered ofis primarily related to the decrease in feed grade from 8.18 g/t Au in 2022 to 5.58 g/t in 2023, resulting in an increase in tonnage processed from 137,740 in 2022 to 198,518 in 2023. The Company expanded its pilot milling from $167 per OZcapacity late in 2022, which allows the Company to $109 per OZ.process more tonnage and process ore with a lower grade.
MINE PRODUCTION COSTS.COSTS: Mine production costs for the years ended December 31, 2021,2023 and 20202022 were 3,965,467$11,156,677 and $2,370,972$6,500,975 respectively. These costs were directly related to the extraction of mine tonnage to be processed at the mill. The increase was a result in theis primarily due to an increase in tonnage mine. However,mined as well as an increase in cost per ton from $47.98 per ton in 2022 to $54.77 per ton in 2023. The increase in the cost per ton dropped from $66.84 per tonis primarily related to higher labor, equipment and fuel costs due to inflation in 2020 to $45.57 as resultMexico of the increased volumeover 5% in tonnage.2023.
MINE EXPLORATION COSTS.COSTS: Mine exploration costs for the years ended December 31, 2021,2023 and 20202022 were $5,198,057$8,311,027 and $1,610,747,$5,707,832, respectively. These were the costs of extracting waste material to reach the materials to be extracted for processing. The increase was a result of the increase in activity as well asvolume. However, the increasepercentage of waste tonnage dropped from 49.2% of total tonnage mined in waste tonnage.2022 to 46% in 2023.
MINEFACILITIES EXPANSION COSTS: MineCOSTS: Facilities expansion costs for the years ended December 31, 2021,2023 and 20202022 were $1,478,725$2,554,505 and $909,190,$6,058,588, respectively. These were the costs associated with the expansion of the mining facilities and the cost associated with preparing the Tres Amigos for production. The 2021 largely consisted offacilities. Primary expenditures in 2023 were additional costs related to the new ball mill.mills, including a new crusher, and concentrators on the front and the backs of the mill to aid in free gold recovery. 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.
TRANSPORTATION. Transportation costsEXPLORATION DRILLING: Exploration drilling expenses for the years ended December 31, 2021,2023 and 20202022 were $1,330,414$2,514,544 and $528,423,$2,484,072, respectively. These were the costs of transporting the productThe Company began a new drilling program in 2022 to the customer for treatmentupdate its Canadian National Instrument 43-101 resource estimate. The Company drilled 43 drill holes totaling 5,056 meters during 2022 and sale. The increase is consistent with the overall increase75 drill holes totaling 21,931 meters in production and sales.2023.
CAMP, WAREHOUSE AND SUPPORT FACILITIES.FACILITIES: Camp, warehouse and support facility cost for the years ended December 31, 2021,2023 and 20202022 were $2,913,832$5,453,778 and $2,036,610,$4,403,660, 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.
TRANSPORTATION: Transportation costs for the years ended December 31, 2023 and 2022 were $2,898,272 and $2,261,681, respectively. These were the costs of transporting material between the mine and the mill, and delivery of the concentrate to the customer for treatment and sale. The increase was a result of the overall increase in volume transported and the general increase in fuel and trucking costs.
PROPERTY HOLDING COSTS.COSTS: Property holding costs for the years ended December 31, 2021,2023 and 20202022 were $127,731$172,663 and $137,377,$149,571, respectively. These costs were concessions taxes, leases on land and other direct costs of maintaining the property. The current costs consist only
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GENERAL AND ADMINISTRATIVE EXPENSES.EXPENSES: General and administrative expenses for the years ended December 31, 2021,2023 and 20202022 were $4,773,473$8,592,745 and $2,966,073$4,134,902 respectively. These general and administrative expenses were the costs of operating the Company not directly associated with the minetest mining and pilot mill operations including management, accounting, and legal expenses. The increase is reflectivein costs in 2023 was primarily an increase in legal fees as discussed in the legal summary, including a non-recurring legal expense of $3,000,000 tied to the successful outcome of litigation and due to an overall increase in activity, anadministrative costs supporting the Company’s increase in activity.
STOCK COMPENSATION EXPENSE: Stock compensation expense including $1,005,223 value of stock issued for services and a $381,871 bad debt write off.
OTHER INCOME (EXPENSE). Other incomewas $881,250 for the years ended December 31, 2021,2023 and 2020 was $(4,622,364) and $(2,685,878), respectively. Included2022 related to the vesting of restricted stock awards issued in this category in 2021 was interest expense of $(1,573,125), change in derivative liability of $(2,186,912), currency transaction gain of $247,712, and an arbitration award payment of $(1,111,111). Included in this category in 2020 was interest expense of $(1,133,360), change in derivative of $(1,186,964), currency transaction loss of $(361,127), and other expense of $(4,427). The increase in derivative liability is the result of the increase in the Company’s stock price on the Company’s black scholes calculation of the liability for stock warrants and convertible debt. See Item Three Legal Proceedings for discussion of the arbitration award.2022.
NON-CONTROLLING INTEREST. The non-controlling interest portion of the net lossOTHER INCOME (EXPENSE): Other income (expense) for the years ended December 31, 2021,2023 and 20202022 was $0$(235,675) and $61,589,$1,336,841, respectively. This representedIncluded in 2022 was interest expense of $450,324, mark-to-market gain on the non-controllingderivative liability of $1,726,497, currency translation gain of $58,426, and other income of $2,242. Included in 2023 was interest shareexpense of Dyna México’s loss. The 2020 allocation included only$567,792, mark-to-market gain on the non-controlling interest’s sharederivative liability of the net$375,076, currency translation loss for Januaryof $45,177 and February as the non-controlling interest was eliminated at the endother income of February 2020.$2,218.
OTHER COMPREHENSIVE INCOME (LOSS). : Comprehensive income (loss) includes the Company’s net income (loss) plus the unrealized foreign currency translation gain (loss) for the period. The Company’s other comprehensive loss for the years ended December 31, 2021,2023 and 20202022 consisted of unrealized foreign currency translation gains (losses) of $(685,757)$585,622 and $100,582, respectively. The YTD change is due$359,743, respectively, of which $383,604 of the 2023 gain related to a cumulative translation adjustment resulting from the variances inunrealized gains on the peso exchange rates throughoutCompany’s deferred tax asset arising from the two years.Mexico net operating loss.
Liquidity and Capital Resources
As of December 31, 2021,2023, the Company had negative working capital of $1,347,711, comprised of current assets of $23,816,481 and current liabilities of $22,468,770. This represented$10,261,645, a increase of $7,126,703decrease from the working capital maintained by the Company of $(5,778,992)$11,789,578, as of December 31, 2020.2022. The primary reasonreasons for the increasedecrease is related to a decrease in cash related to the Company’s net loss, which included over $29.5 million of non-recurring expenditures as discussed herein, an decrease in the Company’s current foreign tax receivable as delays in refunds of the IVA tax warranted classification as long-term in 2023, and an increase in cash balance generated from the Company’s operations.accounts payable and accrued expenses.
Net cash provided by (used in)used in operations for the year ended December 31, 2021,2023 was $17,516,205$17,679,309 compared to $(2,421,108) in$1,781,225 during the year ended December 31, 2020.2022. The increase in cash used is largely due the result ofnet loss in 2023 and the Company’s increased operating profitsincrease in exploration activities and proceeds from its customer advance.decrease in working capital.
Net cash provided by (used)used in investing activities for the yearsyear ended December 31, 2021, and 20202023 was $0 and $0, respectively. In 2021 and 2020 expenditures necessary$115,273 for the purchase of computer equipment and leasehold improvements to expand the Corporate office. In 2023 and 2022, expenditures related to facilities expansion costs of mining operations totaling $1,478,725$2,554,505 and $909,190,$6,058,588, respectively, which would normally have beenwere expensed under subpart 1300 of Regulation S-K and not included in this category were expensed due to the company’s lack of proven and probable reserves.investing activities.
Net cash provided by (used in) financing activities for the year ended December 31, 2021,2023, was $(2,557,721)$3,689,750 compared to $3,594,323$4,778,958 for the year ended December 31, 2020.2022. In 2023, the Company received proceeds of $5,000,000 from the sale of a 1,000,000 shares of common stock offset by the purchase of the Company’s Series A Preferred stock for $1,250,000 and repurchase of shares that were returned to treasury stock for $60,250.
Through December 31 2023, the Company’s available liquidity and operations have been financed primarily through its operations and the revenue generated from the sale of product. The 2020 funds represent the netrevenue from operations was supplemented by proceeds from the Series Dsale of common stock and customer advances as well as the cash flow from operations. Although the Company has incurred net losses and net cash outflows from operating activities and investing activities for the year ended December 31, 2023, there were many expenses which were made that were not expended for the production of revenue, such as exploration drilling and mine expansion and non-recurring legal success fees paid. If these expenses had not been made, the Company’s net loss would have been minimized. The Company believes it’s cash and cash receipts from its revenue arrangements, will be sufficient to meet its working capital and capital expenditure needs for at least the next 12 months from the date these financial statements were available for issuance. Additionally, the Company believes its revenue will be greater due to material being mined from the additional mine opened and improvements made to the productivity of the milling activities. Future capital requirements will depend on many factors, including the Company’s rate of mining, milling and exploration activities and growth. To the extent that existing capital and revenue growth are not sufficient to fund future activities, the Company may need to raise capital through additional equity or debt financing. The 2021 expenditure isAdditional funds may not be available on terms favorable to the partial repaymentCompany or at all. Failure to raise additional capital, if needed, could have a material adverse effect on the Company’s financial position, results of that financing.operations and cash flows.
Off-Balance Sheet Arrangements
26
As of December 31, 2021,2023, 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 operationsactivities and exploration drilling at SJG.
During the first six months of 2024, the Company plans to mine and mill an average of approximately 800 tons of material a day, with that rate increasing to an average of approximately 1,000 tons a day during the second half of 2024. The Company commencedhas opened a second mine late in 2023 and is consistently test mining additional material during the first quarter of 2024. The Company plans to open a third mine during the second quarter of 2024 in an area anticipated to provide high feed grade material.
The Company plans to continue its testing activities in fall 2015 atexploration drilling program with two to three rigs on site. Management and geologists will make decisions based on the rate of approximately 100 tons per 24-hour operating day from the minedrill results, corporate strategies and approximately the same output from the processing plant. Over the past five years, themarket conditions, surface mapping, sampling and target generation. The Company has gradually increased its outputcontracted with a "Qualified Person" within the meaning of subpart 1300 of Regulation S-K and Canadian Standard NI 43-101 to approximately 300 tons per 24-hour operating day frominterpret the mines and processing plant. In 2022, the Company projectsdata collected in order to complete its next phase of expansion to reach the output of approximately 500 tons per 24-hour operating day from the mine and the processing plant.compile a formal Mineral Resource Estimate update in 2024.
The Company funds its general and administrative expenses in the U.S. from its Mexican operations. The Company believes that cash on hand, and including cash flow generated from its current operations, is adequate to fund its ongoing general and administrative expenses through 2022.
Capital Expenditures
The Company’s primary activitiescapital expenditures relate to the test mining and pilot milling operationsactivities of the SJG property throughProject. The Company expanded its Mexican subsidiaries.pilot milling plant in 2022 with the addition and installation of two ball mills and expanded the tailings pond with water being recycled to the plant. The Company has continued to refine the milling process throughout 2023 with the addition of front and back end concentrators and utilization of the original mill for grinding. All capital expenditures are expensed as we are an exploration stage issuer under subpart 1300 of Regulation S-K.
Exploration Stage
No Known Reserves
The SJG propertyCompany is without known reserves. Under U.S. standards, mineralization may not be classified as a “reserve” unless a determination has been made that the mineralization could be economicallycurrently an exploration stage issuer and legally produced or extracted at the time the reserve determination is made.
Exploitation Amendment Agreement (“EAA”)
On May 15, 2013, DynaMineras entered into an Exploitation Amendment Agreement (“EAA”) with DynaMéxico. The EAA grants to DynaMineras the right to finance, explore, develop and exploit the SJG Property, in exchange for: (A) Reimbursement ofreporting all costs associatedof mine operations, improvements, and expansion as expenses in accordance with financing, maintenance, exploration, developmentSection 1300 of Regulation S-K and exploitation ofUS GAAP requirements, and therefore the SJG Property, whichabove costs are not reflected as capitalized assets on the Company’s balance sheet. The Company has started test mining, milling and extraction activities prior to be charged and billed by DynaMineras to DynaMéxico; and, (B) After Item (A) above, the receipt by DynaMineras of 75% of gross receipts received by DynaMéxico from the sale of all minerals produced from SJG, to the point that DynaMineras has received 200% of its advanced funds; and, (C) after items (A) and (B) above; the receipt by DynaMineras of 50% of all gross receipts received by DynaMéxico from the sale of all minerals produced from SJG, and throughout the term of the EAA; and, (D) in addition to Items (A), (B), and (C) above, DynaMineras shall receive a 2.5% NSR (“Net Smelter Royalty”) on all minerals sold from SJG over the term of the EAA. The total Advances made by DynaMineras to DynaMéxico as of December 31, 2014 is $4,025,000. The EAA is the third and latest Amendment to the original Contract Mining Services and Mineral Production Agreement (the “Operating Agreement”), which was previously entered into by DynaMineras with DynaMéxico in April 2005, wherein DynaMineras was named the Exclusive Operating Entity at SJG. The Operating Agreement was previously amended in September 2006 (the “First Amendment”) and amended again at July 15, 2011 (the “Second Amendment”). The Term of the Second Amendment is 20 years, and the EAA (Third Amendment) provides for the continuation of the 20 Year Term from the date of the Second Amendment (July 15, 2011). The agreement was terminated in October 2021 and all operations consolidated in Dyna Mexico.determining mineral reserves.
DynaMéxico General Powers of Attorney
The Chairman-CEOChairman of the Board of Directors and Chief Executive Officer 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 applicable.required for smaller reporting companies.
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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated into and forming an integral part of this Form 10-K are the audited consolidated financial statements for the Company for the years ended December 31, 2021 and 2020. The Company’s consolidated financial statements as of and for the year December 31, 20212023 and 2020 of the Company2022 included in this Form 10-K have been audited by Davidson & Company LLP and Armanino LLP, an independent registered public accounting firm,firms, for the years ended December 31, 2023 and 2022, respectively, as set forth in their report.
Consolidated Financial Statements included in the Form 10-K:
Consolidated Financial Statements included in the Form 10-K: | ||
Report of Independent Registered Public Accounting Firm PCAOB ID: 32 Report of Independent Registered Public Accounting Firm PCAOB ID: 731 |
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| 33 | |
Consolidated Statements of |
| 35 |
Consolidated Statement of Changes in Stockholders’ Equity/(Deficit) |
| 36 |
| 37 | |
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38 |
28
Report of Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of
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”) as of December 31, 2023, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for the year endedDecember 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows in the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 audits 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 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 audits 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 entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the 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 financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Deferred Tax Asset
The Company has recognized significant deferred tax assets in respect of unused tax losses. The recovery of the deferred tax assets depends on achieving sufficient taxable profits in the future. Future taxable profits to be used for utilization of tax losses accumulated by the Company mainly represent income from mining operations to be earned by the Company’s main operating subsidiary. The assessment of the potential to utilize the tax losses is dependent on the forecast profitability of the subsidiary. This requires management’s judgment and estimation on key inputs such as expected production, sales volumes, commodity prices, grade and tonnage estimates and operating costs. There is inherent uncertainty involved in forecasting timing and quantum of future taxable profits, which support the extent to which tax assets are recognized. Therefore, this is the key judgmental area our audit is concentrated on.
29
Our audit procedures included the following:
We have served as the Company’s auditor since 2023.
/s/ Davidson & Company LLP
Chartered Professional Accountants
Vancouver, Canada
April 15, 2024
30
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
DynaResource, Inc.
Irving, Texas
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of DynaResource, Inc. (the "Company") and subsidiaries as of December 31, 2021 and 2020,2022, the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the yearsyear 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 atas of December 31, 2021 and 2020,2022, 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
Our audit of its internal control overthe consolidated 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 auditstatements 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. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
ArmaninoLLP
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Derivative Liabilities
As described in Note 10 to the consolidated financial statements, the derivative liabilities represent the embedded conversion features of the Series C Preferred Stock, Preferred Series C Warrants, and Series D Notes Kicker Warrants. The Company has classified the derivative liabilities as Level 3 liabilities and the fair value of the liabilities are evaluated each reporting period. As of December 31, 2021, the derivative liabilities were $3,898,914. The derivative liabilities include both quantitative and qualitative components. The calculation of the fair value of the derivative liabilities used a Black-Scholes pricing model. Key components of the fair value calculation included: the annual volatility rate, the risk-free rate, the remaining term, and the fair value of the underlying common stock.
The principal considerations for our determination that performing procedures relating to the fair value of the derivative liabilities is a critical audit matter are: there was significant judgment and estimation used by management in determining the fair value of the derivative liabilities, which led to an increased level of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence obtained relating to the derivative liabilities, including the qualitative component.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included documenting the control environment in which judgements were made. These procedures also included, testing the reasonableness of the assumptions management used in the Black-Scholes pricing model, recalculating the change in fair value, and performing a stress-test on the assumptions.
ArmaninoLLP
Dallas, Texas
April 17, 2023
We have served as the Company'sCompany’s auditor since 2020.from 2020 to 2022. In 2023, we became the predecessor auditor.
March 24,
31
32
DYNARESOURCE, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2023 and 2022
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ASSETS |
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash |
| $ | 5,603,713 |
|
| $ | 19,177,138 |
|
Accounts receivable |
|
| 880,473 |
|
|
| 724,642 |
|
Inventories |
|
| 2,089,194 |
|
|
| 2,720,811 |
|
Foreign tax receivable |
|
| 4,434,958 |
|
|
| 9,355,863 |
|
Other current assets |
|
| 1,137,162 |
|
|
| 1,145,501 |
|
Total current assets |
|
| 14,145,500 |
|
|
| 33,123,955 |
|
|
|
|
|
|
|
| ||
Property and equipment (net of accumulated depreciation and amortization of $12,239 and $119,154) |
|
| 103,034 |
|
|
| — |
|
Right-of-use assets, net |
|
| 848,822 |
|
|
| 550,473 |
|
Mining concessions |
|
| 4,132,678 |
|
|
| 4,132,678 |
|
Deferred tax asset, net |
|
| 4,264,115 |
|
|
| 2,970,410 |
|
Foreign tax receivable |
|
| 11,768,613 |
|
|
| — |
|
Other assets |
|
| 175,588 |
|
|
| 165,396 |
|
TOTAL ASSETS |
| $ | 35,438,350 |
|
| $ | 40,942,912 |
|
|
|
|
|
|
|
| ||
LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
| ||
Current liabilities |
|
|
|
|
|
| ||
Accounts payable |
| $ | 2,768,634 |
|
| $ | 2,057,880 |
|
Accrued expenses |
|
| 7,727,621 |
|
|
| 5,756,961 |
|
Customer advances |
|
| — |
|
|
| 9,350,000 |
|
Derivative liabilities |
|
| 1,797,341 |
|
|
| 2,172,417 |
|
Note payable |
|
| 9,750,000 |
|
|
| — |
|
Current portion of operating lease payable |
|
| 104,117 |
|
|
| 28,868 |
|
Installment notes payable |
|
| 2,259,432 |
|
|
| 1,968,251 |
|
Total current liabilities |
|
| 24,407,145 |
|
|
| 21,334,377 |
|
Operating lease payable, less current portion |
|
| 825,762 |
|
|
| 558,914 |
|
Deferred tax liability |
|
| 334,236 |
|
|
| — |
|
Asset retirement obligation |
|
| 198,468 |
|
|
| — |
|
TOTAL LIABILITIES |
|
| 25,765,611 |
|
|
| 21,893,291 |
|
|
|
|
|
|
|
| ||
TEMPORARY EQUITY |
|
|
|
|
|
| ||
Series C Senior Convertible Preferred Stock, $0.0001 par value, 1,734,992 shares authorized, issued and outstanding |
|
| 4,337,480 |
|
|
| 4,337,480 |
|
Series D Senior Convertible Preferred Stock, $0.0001 par value, 3,000,000 shares authorized, 760,000 shares issued and outstanding |
|
| 1,520,000 |
|
|
| 1,520,000 |
|
|
|
|
|
|
|
| ||
COMMITMENTS AND CONTINGENCIES |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
| ||
STOCKHOLDERS' EQUITY |
|
|
|
|
|
| ||
Preferred Stock, Series A, $0.0001 par value, 0 and 1,000 shares authorized, issued and outstanding |
|
| — |
|
|
| 1 |
|
Common Stock, $0.01 par value, 40,000,000 and 40,000,000 shares authorized 23,371,708 and 22,246,654 issued and outstanding |
|
| 233,717 |
|
|
| 222,467 |
|
Preferred rights |
|
| 40,000 |
|
|
| 40,000 |
|
Additional paid-in-capital |
|
| 61,509,032 |
|
|
| 56,889,031 |
|
Treasury stock, 37,180 and 12,180 shares at cost |
|
| (95,023 | ) |
|
| (34,773 | ) |
Accumulated other comprehensive income |
|
| 697,700 |
|
|
| 112,078 |
|
Accumulated deficit |
|
| (58,570,167 | ) |
|
| (44,036,663 | ) |
|
| 3,815,259 |
|
|
| 13,192,141 |
| |
TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY |
| $ | 35,438,350 |
|
| $ | 40,942,912 |
|
|
33 |
|
|
| 2021 |
|
| 2020 |
| ||
ASSETS |
|
|
|
|
|
| ||
Current assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 15,719,238 |
|
| $ | 1,504,016 |
|
Accounts receivable |
|
| 577,118 |
|
|
| 840,743 |
|
Inventories |
|
| 2,110,203 |
|
|
| 603,967 |
|
Foreign tax receivable |
|
| 4,742,180 |
|
|
| 2,179,914 |
|
Appeal bond |
|
| 0 |
|
|
| 1,111,111 |
|
Other current assets |
|
| 667,742 |
|
|
| 578,661 |
|
Total current assets |
|
| 23,816,481 |
|
|
| 6,818,412 |
|
|
|
|
|
|
|
|
|
|
Property and equipment (net of accumulated |
|
|
|
|
|
|
|
|
depreciation of $116,425 and $113,176) |
|
| 2,729 |
|
|
| 5,978 |
|
Right-of-use assets |
|
| 648,381 |
|
|
| 735,220 |
|
Mining concessions |
|
| 4,132,678 |
|
|
| 4,132,678 |
|
Other assets |
|
| 162,174 |
|
|
| 165,380 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | 28,762,443 |
|
| $ | 11,857,668 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 1,275,679 |
|
| $ | 2,274,011 |
|
Accrued expenses |
|
| 5,440,204 |
|
|
| 3,385,093 |
|
Customer advances |
|
| 9,250,000 |
|
|
| 2,500,000 |
|
Derivative liabilities |
|
| 3,898,914 |
|
|
| 2,371,560 |
|
Current portion of convertible notes payable |
|
| 543,279 |
|
|
| 0 |
|
Current portion of operating lease payable |
|
| 98,169 |
|
|
| 82,733 |
|
Current portion of long-term debt |
|
| 1,962,525 |
|
|
| 1,984,007 |
|
Total current liabilities |
|
| 22,468,770 |
|
|
| 12,597,404 |
|
|
|
|
|
|
|
|
|
|
Convertible notes payable - Series D (net of amortized discount of $0 and $755,214) |
|
| 0 |
|
|
| 3,264,786 |
|
Convertible notes payable - Series I & II, less current portion |
|
| 0 |
|
|
| 543,279 |
|
Operating lease payable, less current portion |
|
| 587,782 |
|
|
| 685,951 |
|
Long term debt, less current portion |
|
| 0 |
|
|
| 97,428 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITES |
|
| 23,056,652 |
|
|
| 17,188,848 |
|
TEMPORARY EQUITY |
|
|
|
|
|
|
|
|
Series C Senior Convertible Preferred Stock, $0.0001 par value, 1,734,992 shares authorized, issued and outstanding |
|
| 4,337,480 |
|
|
| 4,337,480 |
|
|
|
|
|
|
|
|
| |
Series D Senior Convertible Preferred Stock, $0.0001 par value, 3,000,000 shares authorized, 760,000 and 0 shares issued and outstanding |
|
| 1,520,000 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
| 0 |
|
|
| 0 |
|
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 and 40,000,000 shares authorized |
|
|
|
|
|
|
|
|
18,091,293 and 17,722,825 issued and outstanding |
|
| 180,913 |
|
|
| 177,228 |
|
Preferred rights |
|
| 40,000 |
|
|
| 40,000 |
|
Additional paid-in-capital |
|
| 50,632,400 |
|
|
| 50,407,333 |
|
Treasury stock, 12,180 and 516,480 shares |
|
| (34,773 | ) |
|
| (1,474,486 | ) |
Accumulated other comprehensive income |
|
| (247,665 | ) |
|
| 438,092 |
|
Accumulated deficit |
|
| (50,722,465 | ) |
|
| (59,256,828 | ) |
TOTAL STOCKHOLDERS’ DEFICIT |
|
| (151,589 | ) |
|
| (9,668,660 | ) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT |
| $ | 28,762,443 |
|
| $ | 11,857,668 |
|
The accompanying notes are an integral part of these consolidated financial statements.
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 20212023 AND 20202022
|
| 2021 |
|
| 2020 |
|
| 2023 |
|
| 2022 |
| ||||
REVENUE |
| $ | 35,886,046 |
| $ | 9,048,831 |
|
| $ | 35,573,194 |
|
| $ | 39,767,460 |
| |
COSTS AND EXPENSES OF MINING OPERATION |
|
|
|
|
|
|
|
|
|
|
| |||||
Production cost applicable to sales |
| 2,909,401 |
| 1,166,135 |
|
|
| 8,256,062 |
|
|
| 4,413,649 |
| |||
Mine production costs |
| 3,965,467 |
| 2,370,972 |
|
|
| 11,156,677 |
|
|
| 6,500,975 |
| |||
Mine exploration costs |
| 5,198,057 |
| 1,610,747 |
|
|
| 8,311,027 |
|
|
| 5,707,832 |
| |||
Mine expansion costs |
| 1,478,725 |
| 909,190 |
| |||||||||||
Facilities expansion costs |
|
| 2,554,505 |
|
|
| 6,058,588 |
| ||||||||
Exploration drilling |
|
| 2,514,544 |
|
|
| 2,484,072 |
| ||||||||
Camp, warehouse and facilities |
| 2,913,832 |
| 2,036,610 |
|
|
| 5,453,778 |
|
|
| 4,403,660 |
| |||
Transportation |
| 1,330,414 |
| 528,423 |
| |||||||||||
Transportation costs |
|
| 2,898,272 |
|
|
| 2,261,681 |
| ||||||||
Property holding costs |
| 127,731 |
| 137,377 |
|
|
| 172,663 |
|
|
| 149,571 |
| |||
Stock based compensation |
|
| 881,250 |
|
|
| 881,250 |
| ||||||||
General and administrative |
| 4,773,473 |
| 2,966,073 |
|
|
| 8,592,745 |
|
|
| 4,134,902 |
| |||
Depreciation and amortization |
|
| 3,249 |
|
|
| 3,249 |
|
|
| 12,239 |
|
|
| 2,729 |
|
TOTAL OPERATING EXPENSES |
|
| 22,700,349 |
|
|
| 11,728,776 |
|
|
| 50,803,762 |
|
|
| 36,998,909 |
|
NET OPERATING INCOME (LOSS) |
| 13,185,697 |
| (2,679,945 | ) |
|
| (15,230,568 | ) |
|
| 2,768,551 |
| |||
|
|
|
|
|
| |||||||||||
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency gains (loss) |
| 247,712 |
| (361,127 | ) |
|
| (45,177 | ) |
|
| 58,426 |
| |||
Interest expense |
| (1,573,125 | ) |
| (1,133,360 | ) |
|
| (567,792 | ) |
|
| (450,324 | ) | ||
Derivatives mark-to-market gain (loss) |
| (2,186,912 | ) |
| (1,186,964 | ) | ||||||||||
Arbitration award expense |
| (1,111,111 | ) |
| 0 |
| ||||||||||
Other income (expense) |
|
| 1,072 |
|
|
| (4,427 | ) | ||||||||
Derivatives mark-to-market gain |
|
| 375,076 |
|
|
| 1,726,497 |
| ||||||||
Other income |
|
| 2,218 |
|
|
| 2,242 |
| ||||||||
TOTAL OTHER INCOME (EXPENSE) |
| (4,622,364 | ) |
| (2,685,878 | ) |
|
| (235,675 | ) |
|
| 1,336,841 |
| ||
|
|
|
|
|
|
|
|
|
|
|
| |||||
NET INCOME (LOSS) BEFORE TAXES |
| 8,563,333 |
| (5,365,823 | ) |
|
| (15,466,243 | ) |
|
| 4,105,392 |
| |||
PROVISION FOR INCOME TAXES |
|
| 28,970 |
|
|
| 0 |
| ||||||||
INCOME TAXES BENEFIT |
|
| (932,739 | ) |
|
| (2,580,410 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
NET INCOME (LOSS) |
| $ | 8,534,363 |
| $ | (5,365,823 | ) |
| $ | (14,533,504 | ) |
| $ | 6,685,802 |
| |
|
|
|
|
|
| |||||||||||
DEEMED DIVIDEND FOR SERIES C & D PREFERRED |
| (188,699 | ) |
| (173,499 | ) |
|
| (234,299 | ) |
|
| (234,299 | ) | ||
LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST |
|
| 0 |
|
|
| 61,589 |
| ||||||||
|
|
|
|
|
| |||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS |
| $ | 8,345,664 |
|
| $ | (5,477,733 | ) |
| $ | (14,767,803 | ) |
| $ | 6,451,503 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
EARNINGS PER SHARE ATTRIBUTABLE TO THE |
|
|
|
|
| |||||||||||
EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO THE |
|
|
|
|
|
| ||||||||||
EQUITY HOLDERS OF DYNARESOURCE, INC. |
|
|
|
|
|
|
|
|
|
|
| |||||
Basic earnings (loss) per common share |
| $ | (0.65 | ) |
| $ | 0.33 |
| ||||||||
Weighted average shares outstanding – Basic |
|
| 22,705,923 |
|
|
| 19,456,765 |
| ||||||||
Diluted earnings (loss) per common share |
| $ | (0.65 | ) |
| $ | 0.29 |
| ||||||||
Weighted average shares outstanding – Diluted |
|
| 22,705,923 |
|
|
| 22,890,246 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Basic and Diluted Income (loss) per common share |
| $ | 0.47 |
|
| $ | (0.31 | ) | ||||||||
Weighted average shares outstanding – Basic and Diluted |
|
| 17,797,528 |
|
|
| 17,722,825 |
| ||||||||
|
|
|
|
|
| |||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
| |||||||||||
Foreign currency translation gain (loss) |
|
| (685,757 | ) |
|
| 100,582 |
| ||||||||
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) |
|
| (685,757 | ) |
|
| 100,582 |
| ||||||||
|
|
|
|
|
| |||||||||||
OTHER COMPREHENSIVE INCOME |
|
|
|
|
|
| ||||||||||
Unrealized foreign currency translation gain |
|
| 585,622 |
|
|
| 359,743 |
| ||||||||
TOTAL OTHER COMPREHENSIVE INCOME |
|
| 585,622 |
|
|
| 359,743 |
| ||||||||
TOTAL COMPREHENSIVE INCOME (LOSS) |
| $ | 7,848,606 |
|
| $ | (5,265,241 | ) |
| $ | (13,947,882 | ) |
| $ | 7,045,545 |
|
|
|
|
|
|
| |||||||||||
ATTRIBUTABLE TO: |
|
|
|
|
| |||||||||||
EQUITY HOLDERS OF DYNARESOURCE, INC. |
| $ | 7,848,606 |
|
| $ | (5,191,983 | ) | ||||||||
NON-CONTROLLING INTEREST |
| $ | 0 |
|
| $ | (73,258 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 20212023 AND 20202022
|
| Preferred A |
|
| Common |
|
| Preferred |
|
| Preferred |
|
| Paid In |
|
| Treasury |
|
| Treasury |
|
| Other Comp |
|
| Accumulated |
|
| Non Controlling |
|
|
| ||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Rights |
|
| Amount |
|
| Capital |
|
| Shares |
|
| Amount |
|
| Income |
|
| Deficit |
|
| Interests |
|
| Totals |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance January 1, 2020 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 17,722,825 |
|
| $ | 177,228 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 56,622,159 |
|
|
| 778,980 |
|
| $ | (2,223,891 | ) |
| $ | 325,841 |
|
| $ | (53,952,594 | ) |
| $ | (5,723,663 | ) |
| $ | (4,734,919 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock Issued for Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (649,405 | ) |
|
| (262,500 | ) |
|
| 749,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 112,251 |
|
|
|
|
|
|
| (11,669 | ) |
|
| 100,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,304,234 | ) |
|
| (61,589 | ) |
|
| (5,365,823 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination of Non-Controlling Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,565,421 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,796,921 |
|
|
| 231,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 17,722,825 |
|
| $ | 177,228 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 50,407,333 |
|
|
| 516,480 |
|
| $ | (1,474,486 | ) |
| $ | 438,092 |
|
| $ | (59,256,828 | ) |
| $ | 0 |
|
| $ | (9,668,660 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock Issued for Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (434,490 | ) |
|
| (504,300 | ) |
|
| 1,439,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,005,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Warrants Exercised |
|
|
|
|
|
|
|
|
|
| 368,468 |
|
|
| 3,685 |
|
|
|
|
|
|
|
|
|
|
| 659,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 663,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (685,757 | ) |
|
|
|
|
|
|
|
|
|
| (685,757 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 8,534,363 |
|
|
|
|
|
|
| 8,534,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021 |
|
| 1000 |
|
| $ | 1 |
|
|
| 18,091,293 |
|
| $ | 180,913 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 50,632,400 |
|
|
| 12,180 |
|
| $ | (34,773 | ) |
| $ | (247,665 | ) |
| $ | (50,722,465 | ) |
| $ | 0 |
|
| $ | (151,589 | ) |
|
| Preferred A |
|
| Common |
|
| Preferred |
|
| Preferred |
|
| Paid In |
|
| Treasury |
|
| Treasury |
|
| Other Comp |
|
| Accumulated |
|
|
|
| ||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Rights |
|
| Amount |
|
| Capital |
|
| Shares |
|
| Amount |
|
| Income (Loss) |
|
| Deficit |
|
| Totals |
| ||||||||||||
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 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Stock Based Compensation |
|
| — |
|
|
| — |
|
|
| 1,500,000 |
|
|
| 15,000 |
|
|
| — |
|
|
| — |
|
|
| 866,250 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 881,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Stock Warrants Exercised |
|
| — |
|
|
| — |
|
|
| 2,655,361 |
|
|
| 26,554 |
|
|
| — |
|
|
| — |
|
|
| 5,390,381 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,416,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Other Comprehensive Income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 359,743 |
|
|
| — |
|
|
| 359,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net Income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,685,802 |
|
|
| 6,685,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Balance, December 31, 2022 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 22,246,654 |
|
| $ | 222,467 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 56,889,031 |
|
|
| 12,180 |
|
| $ | (34,773 | ) |
| $ | 112,078 |
|
| $ | (44,036,663 | ) |
| $ | 13,192,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Sale of Common Stock |
|
| — |
|
|
| — |
|
|
| 1,000,000 |
|
|
| 10,000 |
|
|
| — |
|
|
| — |
|
|
| 4,990,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Issuance of Non-Dilution Shares |
|
| — |
|
|
| — |
|
|
| 125,054 |
|
|
| 1,250 |
|
|
| — |
|
|
| — |
|
|
| (1,250 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Stock Based Compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 881,250 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 881,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Purchase of Series A Preferred Stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,000 |
|
|
| (1,250,000 | ) |
|
| — |
|
|
| — |
|
|
| (1,250,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Cancellation of Series A Preferred Stock |
|
| (1,000 | ) |
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,249,999 | ) |
|
| (1,000 | ) |
|
| 1,250,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Acquisition of Treasury Stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 25,000 |
|
|
| (60,250 | ) |
|
| — |
|
|
| — |
|
|
| (60,250 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Other Comprehensive Income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 585,622 |
|
|
| — |
|
|
| 585,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net Loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (14,533,504 | ) |
|
| (14,533,504 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Balance, December 31, 2023 |
|
| — |
|
| $ | — |
|
|
| 23,371,708 |
|
| $ | 233,717 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 61,509,032 |
|
|
| 37,180 |
|
| $ | (95,023 | ) |
| $ | 697,700 |
|
| $ | (58,570,167 | ) |
| $ | 3,815,259 |
|
The accompanying notes are an integral part of these consolidated financial statements.
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 20212023 AND 20202022
|
| 2021 |
|
| 2020 |
| ||
CASH FLOWS FROM OPERATING ACTIVITES: |
|
|
|
|
|
| ||
Net Income (Loss) |
| $ | 8,534,363 |
|
| $ | (5,365,823 | ) |
Adjustments to reconcile net income (loss) to cash used in operating activities |
|
|
|
|
|
|
|
|
Change in derivatives |
|
| 2,186,912 |
|
|
| 1,186,964 |
|
Depreciation and amortization |
|
| 3,249 |
|
|
| 3,249 |
|
Amortization of loan discount |
|
| 755,214 |
|
|
| 343,279 |
|
Stock issued for services |
|
| 1,005,223 |
|
|
| 100,000 |
|
Non-dilution stock issuance |
|
| 0 |
|
|
| 4,427 |
|
Change in operating assets and liabilities |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 263,625 |
|
|
| 262,462 |
|
Inventories |
|
| (1,506,236 | ) |
|
| (80,878 | ) |
Foreign tax receivable |
|
| (2,562,266 | ) |
|
| (882,527 | ) |
Appeal bond |
|
| 1,111,111 |
|
|
| (1,111,111 | ) |
Right-of-use assets |
|
| 86,839 |
|
|
| 77,641 |
|
Other assets |
|
| (85,875 | ) |
|
| (237,849 | ) |
Accounts payable |
|
| (998,332 | ) |
|
| 214,582 |
|
Accrued expenses |
|
| 2,055,111 |
|
|
| 1,633,622 |
|
Customer advances |
|
| 6,750,000 |
|
|
| 1,500,000 |
|
Operating lease liabilities |
|
| (82,733 | ) |
|
| (69,146 | ) |
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES |
|
| 17,516,205 |
|
|
| (2,421,108 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock warrants |
|
| 3,685 |
|
|
| 0 |
|
Proceeds from borrowing |
|
| 0 |
|
|
| 4,020,000 |
|
Payments of convertible notes |
|
| (2,500,000 | ) |
|
| (359,033 | ) |
Payments of long-term debt |
|
| (61,406 | ) |
|
| (66,644 | ) |
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES |
|
| (2,557,721 | ) |
|
| 3,594,323 |
|
|
|
|
|
|
|
|
|
|
Effects of foreign currency exchange |
|
| (743,262 | ) |
|
| (23,771 | ) |
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVILANTS |
|
| 14,215,222 |
|
|
| 1,149,444 |
|
CASH AND CASH EQUIVILANTS AT BEGINNING OF PERIOD |
|
| 1,504,016 |
|
|
| 354,572 |
|
CASH AND CASH EQUIVILANTS AT END OF PERIOD |
| $ | 15,719,238 |
|
| $ | 1,504,016 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | 583,144 |
|
| $ | 206,642 |
|
Cash paid for income taxes |
| $ | 0 |
|
| $ | 0 |
|
NON-CASH TRANSACTION |
|
|
|
|
|
|
|
|
Accrued interest rolled into notes payable |
| $ | 0 |
|
| $ | 23,933 |
|
|
| 2023 |
|
| 2022 |
| ||
CASH FLOWS USED IN OPERATING ACTIVITES: |
|
|
|
|
|
| ||
Net Income (loss) |
| $ | (14,533,504 | ) |
| $ | 6,685,802 |
|
Adjustments to reconcile net income to cash used in operating activities |
|
|
|
|
|
| ||
Derivatives mark-to-market gain |
|
| (375,076 | ) |
|
| (1,726,497 | ) |
Depreciation and amortization |
|
| 12,239 |
|
|
| 2,729 |
|
Stock based compensation |
|
| 881,250 |
|
|
| 881,250 |
|
Deferred tax asset |
|
| (614,073 | ) |
|
| (2,970,410 | ) |
Change in operating assets and liabilities |
|
|
|
|
|
| ||
Accounts receivable |
|
| (155,831 | ) |
|
| (147,524 | ) |
Inventories |
|
| 631,617 |
|
|
| (610,608 | ) |
Foreign tax receivable |
|
| (6,847,708 | ) |
|
| (4,613,683 | ) |
Leased assets |
|
| (298,349 | ) |
|
| 97,908 |
|
Other assets |
|
| (1,853 | ) |
|
| (480,981 | ) |
Accounts payable |
|
| 710,754 |
|
|
| 782,201 |
|
Accrued expenses |
|
| 2,169,128 |
|
|
| 316,757 |
|
Customer advances |
|
| 400,000 |
|
|
| 100,000 |
|
Operating lease liabilities |
|
| 342,097 |
|
|
| (98,169 | ) |
CASH FLOWS USED IN OPERATING ACTIVITIES |
|
| (17,679,309 | ) |
|
| (1,781,225 | ) |
|
|
|
|
|
|
| ||
CASH FLOWS USED IN INVESTING ACTIVITIES |
|
|
|
|
|
| ||
Purchase of property and equipment |
|
| (115,273 | ) |
|
| — |
|
CASH FLOWS USED IN INVESTING ACTIVITIES |
|
| (115,273 | ) |
|
| — |
|
|
|
|
|
|
|
| ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Proceeds from sale of common stock |
|
| 5,000,000 |
|
|
| — |
|
Proceeds from exercise of stock warrants |
|
| — |
|
|
| 5,416,935 |
|
Purchase of series A preferred stock |
|
| (1,250,000 | ) |
|
| — |
|
Acquisition of treasury stock |
|
| (60,250 | ) |
|
| — |
|
Payments of convertible notes |
|
| — |
|
|
| (543,279 | ) |
Payments of installment notes |
|
| — |
|
|
| (94,698 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
| 3,689,750 |
|
|
| 4,778,958 |
|
Effects of foreign currency exchange |
|
| 531,407 |
|
|
| 460,167 |
|
NET INCREASE (DECREASE) IN CASH |
|
| (13,573,425 | ) |
|
| 3,457,900 |
|
CASH AT BEGINNING OF YEAR |
|
| 19,177,138 |
|
|
| 15,719,238 |
|
CASH AT END OF YEAR |
| $ | 5,603,713 |
|
| $ | 19,177,138 |
|
|
|
|
|
|
|
| ||
SUPPLEMENTAL DISCLOSURES |
|
|
|
|
|
| ||
Cash paid for interest |
| $ | — |
|
| $ | 63,277 |
|
Cash paid for income taxes |
| $ | 200,000 |
|
| $ | 28,970 |
|
|
|
|
|
|
|
| ||
NON-CASH TRANSACTIONS |
|
|
|
|
|
| ||
Conversion of customer advance into note payable |
| $ | 9,750,000 |
|
| $ | — |
|
Recognition of right of use asset and lease liability |
| $ | 361,745 |
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
37
DYNARESOURCE, INC.INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20212023 and 20202022
NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities, History and Organization
DynaResource, Inc. (The(the “Company”, or “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, theThe Company formed ahas one wholly owned subsidiary in the United States, DynaMéxico US Holding, LLC (“US Holding”) and three wholly owned subsidiaries in México, DynaResource de México, S.A. de C.V., chartered in México (“DynaMéxico”), Mineras de DynaResource S.A. de C.V. (“DynaMineras”), and DynaResource Operaciones de San Jose De Gracia S.A. de C.V. (“DynaOperaciones”). ThisAlthough the Company was formedconsiders the three Mexican subsidiaries to acquire, invest in and develop resource properties in México.be wholly owned, each has issued one qualifying share to a second shareholder as required under Mexican law, with such qualifying shares held by either US Holding or DynaResource’s Chief Executive Officer. DynaMéxico owns a portfolio of mining concessions that currently includescomprises its interests100% interest in the San José de GracíaGracia Project (“SJG”) in northern Sinaloa State, México.
Principles of Consolidation
The SJG District covers 9,920 hectares (24,513 acres) onconsolidated financial statements include the west sideaccounts of the Sierra Madre mountain range. DynaUSA currently owns 80% of the outstanding capital of DynaMéxico. DynaMéxico currently holds 20% of the Shares of DynaMéxico as treasury shares, after complete foreclosure and recovery of those shares on February 20, 2020 from Goldgroup ResourcesDynaResource, Inc., a wholly owned subsidiary of Goldgroup Mining Inc. Vancouver, BC (“Goldgroup”).
In 2005, the Company formedas well as DynaResource Operaciones de San Jose De GracíaMéxico, S.A. de C.V. (“DynaOperaciones”) as an operating subsidiary to manage registered employees,(100% ownership), DynaResource Operaciones S.A. de C.V. (100% ownership) and acquired effective control of Mineras de DynaResource S.A. de C.V. (formerly Minera Finesterre S.A. de C.V., “DynaMineras”)(100% ownership). All significant intercompany transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated.
Significant Accounting Policies
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 recognizedCompany’s management selects accounting principles generally accepted in the mining industry.United States of America and adopts methods for their application. The application of accounting principles requires the estimating, matching and timing of revenues and expenses. The accounting policies used conform to generally accepted accounting principles which have been consistently applied in the preparation of these consolidated financial statements.
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'sCompany’s system of internal accounting control is designed to assure, among other items, that: 1)(1) recorded transactions are valid; 2)valid; (2) valid transactions are recorded;recorded; and 3)(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 These consolidated financial statements in conformity with accounting principles generally acceptedhave been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities at their carrying value in the United States, management must make estimates, judgments and assumptions that affectnormal course of business for the amounts reportedforeseeable future.
Correction of an Error
The derivative liability in the consolidated financial statements and determines whether contingent assets andCompany’s December 31, 2022 balance sheet presented herein has been corrected to $2,172,417 from $2,334,377. The change in accrued liabilities if any, are disclosed in the consolidated financial statements. The ultimate resolutionCompany’s statement of issues requiring these estimatescash flows presented herein has been corrected to $316,757 from $96,757 and assumptions could differ significantly the net income for the year ended December 31, 2022, attributable to common shareholders in Note 2 presented herein has been corrected from $6,744,654 to $6,451,503from the resolution currently anticipated byCompany’s Form 10-K which was filed with the Securities and Exchange Commission on April 17, 2023. The errors were typographical errors and it did not impact any other financial statement balances including total liabilities, net income, earnings per share, or management compensation.
38
Exploration Stage Issuer (No Reserves Disclosed)
The definitions of Measured Mineral Resource, Mineral Reserve and Mineral Resource are set forth in SEC Regulation S-K, Item 1300 (“Reg. S-K, Item 1300”).
Measured mineral resource is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of conclusive geological evidence and sampling. The level of geological certainty associated with a measured mineral resource is sufficient to allow a qualified person to apply modifying factors in sufficient detail to support detailed mine planning and final evaluation of the economic viability of the deposit. Because a measured mineral resource has a higher level of confidence than the level of confidence of either an indicated mineral resource or an inferred mineral resource, a measured mineral resource may be converted to a proven mineral reserve or to a probable mineral reserve.
Mineral reserve is an estimate of tonnage and grade or quality of indicated and measured mineral resources that, in the opinion of the qualified person, can be the basis of an economically viable project. More specifically, it is the economically mineable part of a measured or indicated mineral resource, which the consolidated financial statements are based.
Principles of Consolidation
The consolidated financial statements include the accounts of DynaResource, Inc., as well as DynaResource de México, S.A. de C.V. (100% ownership), DynaResource Operaciones S.A. de C.V. (100% ownership)includes diluting materials and Mineras de DynaResource S.A. de C.V. (100% ownership). All significant inter-company transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated.
Non-Controlling Interest
The Company’s subsidiary, DynaResource de México S.A. de C.V, was 20% owned by Goldgroup Resources, Inc. until February 20, 2020allowances for losses that may occur when the material is mined or extracted.
Mineral resource is a concentration or occurrence of material of economic interest in or on the Earth’s crust in such form, grade or quality, and quantity that there are reasonable prospects for economic extraction. A mineral resource is a reasonable estimate of mineralization, taking into account relevant factors such as cut-off grade, likely mining dimensions, location or continuity, that, with the assumed and justifiable technical and economic conditions, is likely to, in whole or in part, become economically extractable. It is not merely an inventory of all mineralization drilled or sampled.
As of December 31, 2023, the Company recoveredcontinues to meets the sharesdefinition of an exploration stage issuer which is defined as partial satisfaction of a legal judgement. See Note 11 for further details.an issuer that has no material property with established proven and probable mineral reserves as defined by Regulation S-K, Item 1300.
Segment Information
The Company accountedoperates as one segment: test mining and milling gold-silver concentrate for this outside interest as a “non-controlling interest” through February 2020. A 20% share of operating income (loss) and comprehensive income (loss) was allocated to the non-controlling interest through the date of the recovery of the shares.sale from its location in Mexico.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. At times, cash balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. As of December 31, 2021,2023, the Company had $15,266,823$5,250,603 of deposits in U.S. BanksUnited States banks in excess of the FDIC limit. In addition, the Company does not have any cash equivalents as of December 31, 2023 and 2022. The Company does not believe it isreduces this risk by maintaining such deposits at a risk of loss.high quality financial institutions that management believes are creditworthy.
Accounts Receivable and Allowances for Doubtful Accounts
Accounts receivable consists of trade receivables which are recorded net of allowance for doubtful accounts for the sale of metal concentrate, as well as net of an embedded derivative based on mark-to-market adjustments for outstanding provisional invoices based on forward metal prices. The allowance for accounts receivable is recorded when receivables are considered to be doubtful of collection.uncollectible. As of December 31, 2021,2023 and 2020, respectively,2022, no allowance has been made. During the year the Company recorded a $381,871 bad debt write offAs of receivables from a former customer of the Company. At, December 31, 20212023 management believes all current receivablesaccounts receivable are fully collectable.
Mined Tonnage Inventory
Inventories
Mined tonnage inventory represents ore that has been mined and is available for further processing. The stockpiles of mined tonnage are measured by estimating the number of tonnes added and removed from the stockpile, an estimate of the contained metals (based on assay data) and the estimated metallurgical recovery rates. Costs are allocated to stockpiles based on the relative values of material stockpiled and processed using current mining costs incurred, including applicable overhead. Material is removed at each stockpile’s average cost per tonne. Stockpiles are carried at the lower of average cost of net realizable value. Net realizable value represents the estimated future sales price of the product based on current and long-term metal prices, less the estimated cost to complete production and bring the product the sale.
Concentrate Inventory
39
InventoriesConcentrate inventory include metal concentrates located either at the Company’s facilities or in transit to its customer’s port. Concentrate inventories are carried at the lower of cost of production or net realizable value and consist of mined tonnage, gravity and flotation concentrates, and gravity tailings or flotation feed material. The inventories were $2,110,203 and $603,967 as of December 31, 2021 and December 31, 2020, respectively.based on current metals prices.
Foreign Tax Receivable
Foreign Tax Receivabletax 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.rendered. Under certain circumstances, these taxes are recoverable by filing a tax returnreturn. Amounts paid for IVA are tracked and application for reimbursement. IVA amounts charged to and paid by the company are recorded and carriedheld as receivables until the funds are collectedreceived by the company. The total amounts of the IVA receivable as of December 31, 2021Company.
Property and December 31, 2020 were $4,742,180Equipment
Substantially all property and $2,179,914, respectively.
Proven and Probable Reserves (No Known Reserves)
The definition of proven and probable reserves is set forth in SEC Industry Guide 7 (“Industry Guide 7”). Proven reserves for which (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, grade and/or quality are computed from the results of detailed sampling and (2) the sites for inspection, sampling and measurement are spaced so closely and the geological character is so well defined that size, shape, depth and mineral content of the reserves are well-established. Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observations.
As of December 31, 2021, none of the Company's properties contain resources that satisfy the definition of proven and probable reserves. The Company classifies the development of its properties, including the San Jose de Gracía Property, as exploration stage projects since no proven or probable reserves have been established under Industry Guide 7.
Technical Report and Resource Estimate According to Canadian National Instrument 43-101 (2012)
In 2012, DynaMéxico commissioned Servicios y Proyectos Mineros (“SPM”) for the production of Technical Report 43-101 (“43-101”) at San Jose de Gracía. Additionally, DynaMéxico commissioned Mr. Robert Sandefur, a senior reserve analyst for Chlumsky, Armbrust & Meyer LLC, Lakewood, CO (“CAM”) to produce a mineral resource estimate for the 4 main vein systemsequipment at the property. The Company plans to update this report in 2022.
Property and Equipment
Substantially all mine development costs,Company’s mines, 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 hashave alternative uses or significant salvage value, may be capitalized without proven and probable reserves. Depreciation is computed using the straight-line method.
Office furniture and equipment are being depreciated on a straight-line method over estimated economic lives ranging from 3 to 5 years. Leasehold improvements, which relate to the Company'sCompany’s corporate office, are being amortized over the term of the lease of 10 years.which is 52 months.
Mine Development Costs
Design, Construction, and Development Costs:Mine development costs are expensed as incurred and include engineering and metallurgical studies, drilling and other related costs to delineate an ore body, the removal of overburden to initially expose an ore body at open pit surface mines, and the building of access ways, shafts, lateral access, drifts, ramps and other infrastructure at underground mines.
When proven and probable reserves as(as defined by Industry Guide 7Reg. S-K, Item 1300) exist, development costs are capitalized, and the property is a commercially minable property.capitalized. Mine development costs incurred either to develop new ore deposits, expand the capacity of operating mines, or to develop mine areas substantially in advance of current production would also be capitalized. Costs of start-up activities and costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations as incurred. Costs of abandoned projects are charged to operations upon abandonment. All capitalized costs would be amortized using the units of production method over the estimated life of the ore body based on recoverable ounces to be mined from proven and probable reserves.
Certain costs to design and construct mining and processing facilities may be incurred prior to establishing proven and probable reserves. As no proven and probable reserves have been established on any of the Company'sCompany’s properties, the design, construction and development costs are not capitalized at any of the Company's properties, and accordingly, substantially all costs are expensed as incurred, resulting in the Company reporting larger operating expenses than if such expenditures had been capitalized. Additionally, the Company does not have a corresponding depreciation or amortization of these costs going forward since these expenditures were expensed as incurred as opposed to being capitalized. As a result of these and other differences, the Company's consolidated financial statements may not be comparable to the consolidated financial statements ofCompany’s properties.
Mining Concessions
The Company’s mining companies that have established reserves as defined in Industry Guide 7.
Mineral Properties Interests
Mineral property interestsconcessions include acquired interests in development and exploration stage properties whichand are considered tangible assets. The amount capitalized relating to a mineral property interestthe Company’s mining concessions represents its fair value at the time of acquisition. When a property does not contain mineralized material that satisfies the definition of proven and probable reserves, such as with the San Jose de Gracía Property, capitalized costs and mineral property interests are amortized using the straight-line method once production begins. As of December 31, 2021, the mining interests have been in the pilot production stage and therefore, no amortization has been expensed. Mining properties consist of 33 mining concessions covering approximately 9,920 hectares at the San Jose de Gracía property (“SJG”), the basis of which are amortized on the unit of production method based on estimated recoverable resources. If it is determined that the deferred costs related to a property are not recoverable over its productive life, those costs will be written down to fair value as a charge to operations in the period in which the determination is made. The amounts at which mineral propertiesmining concessions 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'sCompany’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“recoverable mineralized material"material” refers to the estimated amount of
40
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'sCompany’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 othersilver, 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 iswill be assessed annually for indicators of impairment such as adverse changes to any of the following:
|
| |
|
| |
|
|
A write-down to fair value willwould be recorded whenif 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 iswill be completed as needed, and at least annually.needed. As of the date of this filing, no events have occurred that would require the write-down of any assets. As of December 31, 2021,2023 and 2020,2022, no indications of impairment existed.
Asset Retirement Obligation
As the Company is not obligated to remediate the mining properties, no Asset Retirement Obligation (“ARO”)
The Company records a liability based on the best estimate of costs for site closure and reclamation activities that the Company is legally or contractually required to remediate. The provision for closure and reclamation liabilities is estimated using expected cash flows based on engineering and environmental reports and accreted to full value over time through periodic charges to income.
During 2023, a significant upgrade was made to the milling facility and therefore, an ARO has been established. established as of December 31, 2023 at the estimated costs to decommission the plant and tailings pond at the end of the estimated live of the mines in operation as of December 31, 2023. As the Company is an exploration stage property that does not qualify for asset capitalization, the costs associated with the obligation are charged to operations.
Changes in regulations or laws, any instances of non-compliance with laws or regulations that result in fines, or any unforeseen environmental contamination could result in a material impact to the amounts charged to operations for reclamation and remediation. Significant judgments and estimates are made when estimating the fair value of AROs. Expected cash flows relating to AROs could occur over long periods of time and the assessment of the extent of environmental remediation work is highly subjective. Considering all the factors that go into the determination of an ARO, the fair value of the AROs can materially change over time.
Property Holding Costs
Holding costs to maintain the property are expensed in the period they are incurred. These costs include security and maintenance expenses, lease and claim fees and payments, and environmental monitoring and reporting costs.
Exploration Costs
Exploration costs, including exploration, development, direct field costs and related administrative costs are expensed in the period incurred.
Leases
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.
41
Transactions inIn and Translations ofOf 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 statementsForeign currency transactions are translated into the functional currency of the subsidiaries shouldrespective currency of the entity or division, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at period-end exchange rates are recognized in profit or loss. Non-monetary items that are not be construedre-translated at period end are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value, which are translated using the exchange rates as representations that Mexican Pesos have been, could have been or mayat the date when fair value was determined. Gains and losses are recorded in the future be converted into U.S. dollars at such rates or any other rates.statement of operations and comprehensive income (loss).
Relevant exchange rates used in the preparation of the financial statements for the subsidiaries are as follows for the years ended December 31, 20212023 and 20202022 (Mexican Pesos per one U.S. dollar):
|
| |||||||||||
|
| |||||||||||
|
|
|
|
|
| December 31, 2023 |
|
| December 31, 2022 |
| ||
Current exchange rate |
| Pesos |
|
| 16.97 |
|
|
| 19.48 |
|
Weighted average exchange rate for the year ended |
| Pesos |
|
| 17.23 |
|
|
| 20.11 |
|
The Company recorded currency transaction gains (losses) of $247,712$(45,177) and $58,426 for the yearyears ended December 31, 20212023 and $(361,127) for the year ended December 31, 2020.2022, respectively.
Income Taxes
The Company accounts for income taxes under ASC 740 “Income Taxes”using the liability method, recognizing certain temporary differences between the financial reporting basis of liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset for the Company, as measured by the statutory tax rates in effect. The Company derives the deferred income tax charge or benefit by recording the change in either the net deferred income tax liability or asset balance for the year. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.
Income from the Company’s subsidiaries in México are taxed 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.
42
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 (loss) 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 underfollows ASC 606 “Revenue from contractsContracts with customersCustomers”. The Company generates revenue by selling gold and silver produceconcentrate material produced 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 (upon such delivery) to direct the use of and obtain substantially all the remaining benefits from the material and the customer has the risk of loss.
The amount of revenue recognized is initially recorded on a provisional basis based on the contract price and the estimated metal quantities based on assay data. Adjustments to the provisional sales prices are made to take into account the mark-to-market changes based on the forward prices of metals until final settlement occurs. The revenuechanges in price between the provisional sales price and final sales price are considered an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the concentrate at the quoted metal prices at the time of delivery. The embedded derivative, which does not qualify for hedge accounting, is adjusted uponto market through revenue at final settlement. Market changes in the prices of metals between the delivery and final settlement dates will result in adjustments to revenues related to previously recorded sales of the sale.concentrate. The chief risk associated with the recognition of sales on a provisional basis is the fluctuationsfluctuation (if any) between the estimated quantities of the precious metals based on the initial assay and the actual recovery from treatment and processing.
As of December 31, 2021, there are $9,250,000 in customer advances for payments received during the period for contracts expected to be settled in 2022.
During the years ended December 31, 2021,2023 and December 31, 2020,2022, there was $1,500,000were $9,350,000 and $0$9,250,000, respectively of revenue recognized during the periodyear from customer deposit liabilities (deferred contract revenue) from prior periods, and $0 ofno customer deposits were refunded to the customer due to order cancellation.
As of and for the year ended December 31, 2021, and December 31, 2020, there are no deferred contract costs or commissions.
We have elected to account for shippingShipping and handling costs asare considered fulfillment costs after the customer obtains control of the concentrate.goods.
Derivative Financial Instruments
Certain warrants are treated as derivative financial liabilities. The estimated fair value, based on the Black-Scholes model, is adjusted on a quarterly basis with gains or losses recognized in the statements of operations and comprehensive income (loss). The Black-Scholes model is based on significant assumptions such as volatility, dividend yield, and expected term.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, receivables, payablesaccounts receivable, accounts payable, note payable and long-term debt.installment notes payable and derivative liabilities. The carrying amount of cash, accounts receivable, accounts payable and payablesnote payable approximates fair value because of the short-term nature of these items. The carrying amount of long-terminstallment notes payable debt approximates fair value due to the relationship between the interest rate on long-terminstallment notes payable debt and the Company’s incremental risk adjusted borrowing rate. The fair value of derivative liabilities is based on the Black-Scholes model.
Earnings (Loss) Per Share
Earnings (loss) per share attributable to the common equity holders of the Company 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 and convertible preferred shares and convertible notes and are excluded from the diluted earnings per share computation in periods where the Company has incurred a net loss, as their effect would be considered anti-dilutive.
43
The Company had 3,060,998 warrantsCompany’s Series C Preferred Stock and related outstanding dividends are convertible into 2,853,721 shares of Common Stock at December 31, 2021 which upon exercise, would result in2023. The Company’s Series D Preferred Stock and related outstanding dividends are convertible into 820,800 shares of common stock at December 31, 2023. During the issuance of 3,060,998years ended December 31, 2022 and 2023, the Company had warrants outstanding to purchase 892,165 shares of common stock. Of these warrants 2,168,833 were exercisable at $2.05 per share and 892,165 were exercisable at $.01 per share. The Company also had convertible debt instruments as of December 31, 2021 which, upon conversion at $2.50 per share, would result in the issuance of 217,312These shares of common stock.
The Company had 3,429,466 warrants outstanding at December 31, 2020 which upon exercise, would result in the issuance of 3,429,466 shares of common stock. Of these warrants 2,168,833 were exercisable at $2.05 per share and 1,260,633 were exercisable at $.01 per share. The Company also had convertible debt instruments as of December 31, 2020 which, upon conversion at valuations from $2.00 to $2.50 per share, would result in the issuance of 2,227,312 shares of common stock.
|
| Years ended December 31 |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net income (loss) attributable to common shareholders |
| $ | 8,345,664 |
|
| $ | (5,477,733 | ) |
Shares: |
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, Basic |
|
| 17,797,528 |
|
|
| 17,722,825 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, Diluted |
|
| 17,797,528 |
|
|
| 17,722,825 |
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share |
| $ | 0.47 |
|
| $ | (0.31 | ) |
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share |
| $ | 0.47 |
|
| $ | (0.31 | ) |
At December 31, 2021, 2,168,833 shares of potentially dilutive common stock related to outstanding stock warrants and 217,312 shares of potentially dilutive common stock related to convertible debt were excluded from the diluted earnings per share calculation, using the treasury stock method, because the exercise and conversion prices exceeded the average stock price and therefore their effect would be anti-dilutive. In addition, at December 31, 2021, 892,165 of potentially dilutive common stock related to outstanding stock were excluded from the diluted earnings per share calculation as the net income impact of the converted shares would cause earnings per share to increase, therefore their effect would be antidilutive.
At December 31, 2020,these potentially dilutive common shares related to stock warrantsare included in the weighted average diluted shares outstanding for the year ended December 31, 2022 and convertible debt wereare excluded fromfor the diluted earnings per share computation because the Company incurred a net loss and therefore their effectyear ended December 31, 2023, as including them would be anti-dilutive.
|
| Years ended December 31, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net income (loss) attributable to common shareholders |
| $ | (14,767,803 | ) |
| $ | 6,451,503 |
|
Shares: |
|
|
|
|
|
| ||
Weighted average number of common shares outstanding, Basic |
|
| 22,705,923 |
|
|
| 19,456,765 |
|
|
|
|
|
|
|
| ||
Weighted average number of common shares outstanding, Diluted |
|
| 22,705,923 |
|
|
| 22,890,246 |
|
|
|
|
|
|
|
| ||
Basic earnings (loss) per share |
| $ | (0.65 | ) |
| $ | 0.33 |
|
|
|
|
|
|
|
| ||
Diluted earnings (loss) per share |
| $ | (0.65 | ) |
| $ | 0.29 |
|
Diluted Earnings Per Share is calculated as follows:
|
| Dec 31, 2022 |
| |
Net income attributable to common shareholders |
| $ | 6,451,503 |
|
|
|
|
| |
Deemed Dividends of Series C Preferred Stock |
|
| 173,499 |
|
Deemed Dividends of Series D Preferred Stock |
|
| 60,800 |
|
|
|
|
| |
Adjusted Diluted Earnings |
| $ | 6,685,802 |
|
|
|
|
| |
Weighted average number of share outstanding - Basic |
|
| 19,456,765 |
|
|
|
|
| |
Series C Preferred Stock Common Stock Equivalent |
|
| 2,643,081 |
|
Series D Preferred Stock Common Stock Equivalent |
|
| 790,400 |
|
|
|
|
| |
Weighted average number of share outstanding - Diluted |
|
| 22,890,246 |
|
|
|
|
| |
Diluted Earnings Per Share |
| $ | 0.29 |
|
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.
Significant Judgments, Estimates and Assumptions
The preparation of financial statements in accordance with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
44
the financial statements, and the reported amounts of revenues and expenses during the period. These judgments, estimates and assumptions are regularly evaluated and are based on management’s experience and knowledge of the relevant facts and circumstances. While management believes the estimates to be reasonable, actual results could differ from those estimates and could impact future results of operations and cash flows.
The areas which require significant judgment and estimates that management has made at the financial reporting date, that could result in a material change to the carrying amounts of assets and liabilities, in the event actual results differ from the assumptions made, relate to, but are not limited to the following:
Significant judgments:
Recently Issued Accounting Standards
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the potential impact of the adoption of this new guidance on our Consolidated Financial Statements and related disclosures.
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 atas of December 31, 20212023 and 2020,2022, respectively, were as follows:
|
| 2021 |
|
| 2020 |
| ||||||||||
|
|
|
|
|
|
| 2023 |
|
| 2022 |
| |||||
Mined Tonnage |
| $ | 2,042,633 |
| $ | 555,608 |
|
| $ | 2,061,149 |
|
| $ | 2,610,116 |
| |
Gold-Silver Concentrates |
|
| 67,570 |
|
|
| 48,359 |
|
|
| 28,045 |
|
|
| 110,695 |
|
Total Inventories |
| $ | 2,110,203 |
|
| $ | 603,967 |
|
| $ | 2,089,194 |
|
| $ | 2,720,811 |
|
45
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment consists of the following atas of December 31, 20212023 and 2020:2022:
|
| 2021 |
|
| 2020 |
| ||||||||||
|
|
|
|
|
|
| 2023 |
|
| 2022 |
| |||||
Leasehold improvements |
| $ | 9,340 |
| $ | 9,340 |
|
| $ | 21,274 |
|
| $ | 9,340 |
| |
Office equipment |
| 31,012 |
| 31,012 |
|
|
| 42,483 |
|
|
| 31,012 |
| |||
Office furniture and fixtures |
|
| 78,802 |
|
|
| 78,802 |
|
|
| 24,453 |
|
|
| 78,802 |
|
Other |
|
| 27,063 |
|
|
| — |
| ||||||||
Sub-total |
| 119,154 |
| 119,154 |
|
|
| 115,273 |
|
|
| 119,154 |
| |||
Less: Accumulated depreciation |
|
| (116,425 | ) |
|
| (113,176 | ) | ||||||||
Total Property |
| $ | 2,729 |
|
| $ | 5,978 |
| ||||||||
Less: Accumulated depreciation and amortization |
|
| (12,239 | ) |
|
| (119,154 | ) | ||||||||
Total Property and Equipment |
| $ | 103,034 |
|
| $ | - |
|
Depreciation and amortization has been provided over each asset’s estimated useful life. Depreciation and amortization expense was $3,249$12,239 and $3,249$2,729 for the years ended December 31, 20212023 and 20202022 respectively.
NOTE 4 – MINING CONCESSIONS
Mining properties consist of the San Jose de Gracía (“SJG”) concessions. Mining Concessions were $4,132,678$4,132,678 and $4,132,678$4,132,678 at December 31, 20212023 and December 31, 2020,2022, respectively.
There As the Company is an exploration stage company, there was no depletion expense for the years ended December 31, 20212023 and 2020.2022.
NOTE 5 - ACCRUED LIABILITIES
As of December 31, 2023 and 2022, the Company had the following accrued liabilities:
|
| December 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Accrued interest |
| $ | 2,352,869 |
|
| $ | 1,532,971 |
|
Accrued mining expenses |
|
| 2,104,938 |
|
|
| 1,138,698 |
|
Accrued payroll taxes |
|
| 1,122,644 |
|
|
| 920,685 |
|
Other accrued liabilities |
|
| 2,147,170 |
|
|
| 2,164,607 |
|
Total accrued liabilities |
| $ | 7,727,621 |
|
| $ | 5,756,961 |
|
NOTE 6 - DERIVATIVE LIABILITIES
Warrants Issued With the Notes Convertible into Series D Preferred Stock
In fiscal 2020, the Company closed a financing agreement with Golden Post Rail, LLC (“Golden Post”) and certain shareholders whereby the Company issued convertible promissory notes that bore interest at 10% and were convertible into shares of Series D Senior Convertible Preferred Stock and common stock purchase warrants (“2020 warrants”) at an exercise price of $0.01 per share, with an expiry of ten years. These 2020 warrants contain anti-dilution provisions. See Note 12. The Company analyzed the conversion features of the promissory notes convertible into Series D Preferred Stock 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.
46
The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used the Black-Scholes model to determine the value of conversion feature of the Warrants issued with the notes convertible into Series D Preferred Stock based on the assumptions below:
|
| 2023 |
|
| 2022 |
| ||
Annual volatility rate |
|
| 123 | % |
|
| 116 | % |
Risk free rate |
|
| 4.23 | % |
|
| 4.41 | % |
Remaining term |
| 6.37 years |
|
| 7.37 years |
| ||
Fair value of common stock |
| $ | 2.02 |
|
| $ | 2.44 |
|
For the years ended December 31, 2023 and 2022, 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 years ended December 31, 2023 and 2022.
Year Ended |
| 2023 |
|
| 2022 |
| ||
Fair value of derivative (warrants), beginning of year |
| $ | 2,172,417 |
|
| $ | 1,559,103 |
|
Exercise of warrants |
|
| — |
|
|
| — |
|
Change in fair value of derivative |
|
| (375,076 | ) |
|
| 613,314 |
|
Fair value of derivative (warrants), end of year |
| $ | 1,797,341 |
|
| $ | 2,172,417 |
|
NOTE 7 – ADVANCE CREDIT LINE FACILITY/CUSTOMER ADVANCES
On February 4, 2021, the Company entered into a Advance Credit Line Facility and Purchase Agreement (the “ACL”), with a commercial buyer. On August 2, 2023, the ACL was extended through December 2026 in an Amendment Agreement (the “Amendment”). Under the terms of the ACL and Amendment:
The ACL is included under Customer Advances on the consolidated balance sheet as of December 31 2022.
Deposits under Advance Credit Line Facility
Under the terms of the ACL, the Company received the following advances from the buyer (in millions):
47
NOTE 8 – NOTE PAYABLE
On December 1, 2023, the Company exercised its option under the Advance Credit Line Facility and Purchase Agreement (the “ACL”) to convert the outstanding ACL balance of $9,750,000 into a one year note payable bearing interest at 3M SOFR + 7.5%. The notes is repayable as follows: Month 1, interest only; Month 2-11, 5% principal plus interest; and Month 12, final 50% principal plus interest.
NOTE 9 – INSTALLMENT NOTES PAYABLE
In June 2018, the Company entered into financing agreements for the unpaid mining concession taxes on the Francisco Arturo mining concession for the year ended December 31, 2017 and the period ending June 30, 2018 in the amount of $1,739,392. The Company paid an initial 20% payment of $347,826 and financed the balance over 36 months at 22%.
In February 2019, the Company entered into a financing agreement for unpaid mining concession taxes on the Francisco Arturo mining concession for the year ended December 31, 2018 in the amount of $335,350. The Company paid an initial 20% payment of $67,070 and financed the balance over 36 months at an interest rate of 22%.
In June 2018, the Company applied for a reduction of the Francisco Arturo mining concession, from 69,121 hectares to 3,280 hectares. On July 31, 2018, the application for reduction was approved and the Company paid an initial amount of 985,116 MNP (Pesos), for the second semester 2018 mining concessions taxes on the reduced Francisco Arturo mining concession. The Company continues to accrue an amount of $22,500 (USD) per semester on the reduced Francisco Arturo mining concession.
As of June 2019, the Company ceased making monthly payments on the above noted Francisco Arturo concession notes and has petitioned the Hacienda for a reduction in the liability equal to the reduction in the Francisco Arturo concession above. For financial reporting purposes the Company continues to carry all notes at unpaid principal amount and accrues interest on a monthly basis. At December 31, 2023, $2,244,771 of accrued interest on the notes was included in accrued liabilities on the accompanying consolidated balance sheet.
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 $ 299,474. The Company paid an initial 20% payment of $59,895 and financed the balance over 36 months at an interest rate of 22%.
The following is a summary of the transaction during the years ended December 31, 2023, and December 31, 2022:
Balance December 31, 2021 |
| $ | 1,962,525 |
|
Exchange Rate Adjustment |
|
| 100,424 |
|
2022 Principal Payments |
|
| (94,698 | ) |
Balance December 31, 2022 |
|
| 1,968,251 |
|
Exchange Rate Adjustment |
|
| 291,181 |
|
2023 Principal Payments |
|
| — |
|
Balance December 31, 2023 |
| $ | 2,259,432 |
|
NOTE 10 - ASSET RETIREMENT OBLIGATION
During 2023, a significant upgrade was made to the milling facility and therefore, an ARO has been established as of December 31, 2023 at the estimated undiscounted costs totaling $316,800 to decommission the plant and tailings pond at the end of the estimated
48
live of the mines in operation as of December 31, 2023, discounted using credit-adjusted, risk-free interest rate of 9.2%. As this is an exploration stage property that does not qualify for asset capitalization, the costs associated with the obligation are charged to operations.
|
| December 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Asset retirement obligation at beginning of year |
| $ | - |
|
| $ | - |
|
Additions to ARO liability |
|
| 198,468 |
|
|
| — |
|
Asset retirement obligation at end of year |
| $ | 198,468 |
|
| $ | - |
|
NOTE 11 - CONVERTIBLE PROMISSORY NOTES
Notes Payable – Series I
In April and May 2013, the Company entered into note agreements with shareholders in the principal amount of $1,495,000,$1,495,000, of which $340,000$340,000 was then converted to preferred shares within the same year, netting proceeds of $1,155,000$1,155,000 (the “Series I Notes”). The Series I Notes bear simple interest at twelve and a half percent (12.5%),12.5% accrued for twelve months, and with the accrued interest to be added to the principal, and then interest will be paid by the Company, quarterly in arrears.
The Notes originally matured on December 31, 2015. As of December 31, 2018, seven of the Series I Notes totaling $646,875 had subsequently been extended to December 30, 2019. On December 31, 2019, the Company entered into agreements to extend seven outstanding notes totaling $646,875 plus accrued interest totaling $34,277 for new total notes of $681,152 until December 31, 2020.
On March 31, 2020, the Company entered into agreements to extend the seven outstanding notes totaling $681,152 plus accrued interest totaling $21,286 for a new total of $702,438 until June 30, 2022. At December 31, 2020 one note for $246,533 was paid off leaving six Series I Notes remaining outstanding with a total balance of $455,905.
At December 31, 2021, six Series I Notes remained outstanding with a total balance of $455,905. The Company has the right to prepay the Series I Notes with a ten percent (10%) penalty.
The Series I Note holders retainretained the option, at any time prior to maturity or prepayment, to convert any unpaid principal and accrued interest into Common Stock at $2.50$2.50 per share. If the Series I Note is converted into Common Stock, at the time of conversion, the holder would also receive warrants, in the same number as the number of common shares received upon conversion, to purchase additional common shares of the Company for $7.50$7.50 per share, with such warrants expiring one year from their conversion date.
The Notes originally matured on December 31, 2015. The notes were extended multiple times including some interest payments being rolled into the principal. At December 31, 2021, six Series I Notes remained outstanding with a total balance of $455,905.
On July 1, 2022 the remaining Series I Notes were repaid 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 $199,808$199,808 and $250,000,$250,000, respectively (the “Series II Notes”) with similar terms as the Series I Notes. The Series II Notes bear simple interest at twelve and a half percent (12.5%)12.5%, accrued for twelve months, and with the accrued interest to be added to the principal, and then interest will be paid by the Company, quarterly in arrears
The Notes originally matured on December 31, 2015. On December 31, 2019 the Company entered into agreements to extend the two notes totaling $78,750 plus accrued interest of $5,977 for total new notes of $84,726 to December 31, 2020. One note for $112,500 was not extended and was past due as of December 31, 2019. At December 31, 2019 three Series II notes remained outstanding for $197,226.
On March 31, 2020, the Company entered into agreements to extend the two notes totaling $84,726 plus accrued interest of $2,648 for total new notes of $87,374 to June 30, 2022. One note for $112,500 was not extended and was paid off in May 2020. At December 31, 2020, two Series II notes remained outstanding for $87,374.
At December 31, 2021, two Series II notes remained outstanding with a balance of $87,374. The Company has the right to prepay the Series II Notes with a ten percent (10%) penalty.
arrears. The Note holder may,retained the option to at any time prior to maturity or prepayment, convert any unpaid principal and accrued interest into common stock of the Company at $2.50$2.50 per share. At the time of conversion, the holder would receive a warrant to purchase additional common shares of the Company for $7.50$7.50 per share, such warrant expiring one year from their conversion date.
The Notes originally matured on December 31, 2015. The notes were extended multiple times including some interest payments being rolled into principal. At December 31, 2021, two Series II notes remained outstanding with a balance of $87,374.
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 12– STOCKHOLDERS’ EQUITY
The total number of shares of all classes of capital stock which the Company has the authority to issue is 60,001,000 shares, consisting of (i) twenty million and one thousand (20,001,000) shares of Preferred Stock, par value $0.0001 per share (“Preferred Stock”), of which 1,734,992 are designated as Series C Preferred Stock, and 3,000,000 shares are designated as Series D Preferred Stock, and (ii) forty million (40,000,000) shares of Common Stock, par value $0.01 per share (“Common Stock”). As of December 31, 2023, 15,266,008 of Preferred Stock remain undesignated.
Series A Preferred Stock
49
The Company had designated 1,000 shares of its Preferred Stock as Series A, having a par value of $0.0001 per share. Holders of the Series A Preferred Stock had he right to elect a majority of the Board of Directors of the Company. In 2007, the Company issued 1,000 shares of Series A Preferred Stock to its current CEO. At December 31, 2022 there were 1,000 shares of Series A Preferred Stock outstanding. On April 19, 2023 the Company repurchased the Series A Preferred stock from the CEO for $1,250,000. On July 17, 2023 the Company amended its certificate of incorporation to cancel the Series A Preferred stock.
Series C Senior Convertible Preferred Stock
As of December 31, 2023 and 2022, there were 1,734,992 and 1,734,992 Series C Preferred shares outstanding, respectively. These Series C Preferred Shares are convertible to common shares at $1.95 per share, redeemable on demand and include anti-dilution protection on both the Preferred Series C and the 2,655,361 of Common Stock acquired through the exercise of the Series C stock warrants in June 2022. The Series C Preferred Shares may receive a 4% per annum dividend, payable if available, and in arrears. The Dividend is calculated at 4.0% of $4,337,480 payable annually on June 30. As of December 31, 2023, dividends for the years ending December 31, 2017 through 2023 totaling $1,227,276 were in arrears. (2022 - $1,053,777).
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.
Attached to the Series C Preferred Stock issued in 2015 were 2,000,000 warrants (the “2015 Warrant”), which gave the holder the right to purchase common shares at $2.50 per share. After anti-dilution protection, these warrants became 2,166,527 warrants to purchase common shares at $2.04 and on June 28, 2022, the 2015 Warrant was exercised and the common shares were issued.
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 and related agreements with certain shareholders totaling $4,020,000 which was convertible into Series D Senior Preferred Stock. The noteholders also received the 2020 warrants, as outlined in Note 6, for the purchase of an aggregate of 1,260,633 shares of the Company’s common stock at an exercise price of $.01 a share.
On October 7, 2021, the Company paid $2,500,000 to repurchase one note. The remaining ten noteholders elected to convert their notes totaling $1,520,000 into Series D Preferred Stock at $2.00 per share. On October 18, 2021, the Company issued 760,000 shares of Series D Preferred Stock for these notes. The Series D Preferred Stock may receive a 4% per annum dividend, payable if available, and in arrears. The dividend is calculated at 4.0% of $1,520,000 payable annually on October 18th. As of December 31, 2023 dividends for the years 2022 and 2023 totaling $121,600 were in arrears. Concurrently with the note conversion the noteholders exercised 368,468 of the 2020 warrants to purchase 368,468 shares of the Company’s common stock at $.01 per share.
Due to the nature of the Series D Preferred Stock, as mandatorily redeemable by the Company at the election of the Series D Preferred stockholder at any time following maturity, the Series D Preferred Stock is classified as “temporary equity” on the balance sheet.
The deemed dividends on the Series C and D Preferred Stock for the years ended December 31, 2023 and 2022, were $234,299 and $234,299, respectively. As the Company has not declared these dividends, it is required as an item “below” the net income amount on the accompanying consolidated statements of income.
Preferred Stock (Undesignated)
In addition to the 1,734,992 authorized shares designated as Series C Preferred Shares and 3,000,000 authorized shares designated as Series D Preferred Stock, the Company is authorized to issue an additional 15,266,008 shares of Preferred Stock, having a par value of $0.0001 per share. The Board of Directors of the Company has authority to issue the Preferred Stock from time to time in one or more series, and with respect to each series of the Preferred Stock, to fix and state by the resolution the terms attached to the Preferred Stock. At December 31, 2023 and December 31, 2022, there were no other shares of Preferred Stock outstanding.
Separate Series; Increase or Decrease in Authorized Shares. The shares of each series of Preferred Stock may vary from the shares of any other series thereof in any or all of the foregoing respects and in any other manner. The Board of Directors may increase the number of shares of Preferred Stock designated for any existing series by a resolution adding to such series authorized and unissued shares of Preferred Stock not designated for any other series. Unless otherwise provided in the Preferred Stock Designation, the
50
Board of Directors may decrease the number of shares of Preferred Stock designated for any existing series by a resolution subtracting from such series authorized and unissued shares of Preferred Stock designated for such existing series, and the shares so subtracted shall become authorized, unissued and undesignated shares of Preferred Stock.
Common Stock
The Company is authorized to issue 40,000,000 common shares at a par value of $0.01 per share. These shares have full voting rights. At December 31, 2023 and December 31, 2022, there were 23,371,708 and 22,246,654 common stock shares outstanding, respectively. No dividends were paid for the years ended December 31, 2023 and 2022, respectively.
Preferred Rights
In 2003, the Company issued “Preferred Rights” and received $784,500 for these rights. This has been reflected as “Preferred Rights” in stockholders’ equity in accompanying consolidated balance sheets. As of December 31, 2023, $744,500 had been repaid, leaving a current balance of $40,000 and $40,000 as of December 31, 2023 and 2022, respectively.
Stock Issuances
On August 4, 2023 the Company sold 1,000,000 common shares for $5.00 per share. In connection with the sales the Company issued 125,054 shares to the Series C Preferred Stockholder under the Series C anti-dilution provision.
On June 28, 2022, the Company issued 2,655,361 shares of common stock upon the exercise of the 2,166,775 warrants by one warrant holder for $2.04 a share. There shares carry the antidilution provision of the Series C Preferred stock.
On December 28, 2022, the Compensation Committee approved restricted common stock awards to employees, directors and consultants of the Company. The stock awards approved vested 25% immediately with the remainder vesting 25% each year on December 28 for the next three years, subject to resignation or termination provisions. The awards totaled 1,500,00 shares and the Company recorded stock compensation expense of $881,250 representing value of the 25% of shares that vested in 2022 and an additional $881,250 of stock compensation expense representing the value of the 25% of shares that vested in 2023.
Treasury Stock
During the year ended December 31, 2023, 25,000 shares of the Company’s common stock previously issued for services were returned to the Company as part of a settlement of fees.
During the year ending December 31, 2022, there were no treasury stock transactions.
At December 31, 2023 and 2022, 37,180 and 12,180 treasury shares were held by the Company.
Warrants
On June 28, 2022, one warrant holder exercised 2,166,775 warrants to purchase 2,655,361 shares of common stock for $2.04 a share. These shares carry the antidilution provisions of the Series C preferred Stock.
As of December 31, 2023, the Company had a total of 892,165 warrants outstanding.
51
|
|
|
|
| Weighted |
|
| Weighted |
|
|
|
| ||||
|
|
|
|
| Average |
|
| Average |
|
|
|
| ||||
|
|
|
|
| Exercise |
|
| Remaining |
|
|
|
| ||||
|
| Number |
|
| Price |
|
| Contractual |
|
| Intrinsic |
| ||||
|
| of Shares |
|
| per share |
|
| Life (Years) |
|
| Value |
| ||||
Balance at December 31, 2021 |
|
| 3,060,998 |
|
| $ | 1.46 |
|
|
| 2.79 |
|
|
| — |
|
Exercise of the 2015 warrant |
|
| (2,166,775 | ) |
|
| 2.04 |
|
|
|
|
|
| — |
| |
Forfeiture of the 2015 warrant |
|
| (2,058 | ) |
|
| — |
|
|
|
|
|
| — |
| |
Balance at December 31, 2022 |
|
| 892,165 |
|
| $ | 0.01 |
|
|
| 7.37 |
|
|
| — |
|
Exercise of warrants |
|
| — |
|
|
| — |
|
|
|
|
|
| — |
| |
Forfeiture of the warrants |
|
| — |
|
|
| — |
|
|
|
|
|
| — |
| |
Balance at December 31, 2023 |
|
| 892,165 |
|
| $ | 0.01 |
|
|
| 6.37 |
|
|
| — |
|
Exercisable at December 31, 2023 |
|
| 892,165 |
|
| $ | 0.01 |
|
|
| 6.37 |
|
|
| — |
|
NOTE 13 – STOCK BASED COMPENSATION
On December 28, 2022, the Company issued 1,500,000 shares of restricted common stock to certain key employees and consultants. The shares were 25% vested at issuance and vest an additional 25% on December 28, 2023, 2024, and 2025. The shares were valued at the closing stock price of $2.35 on the date of issuance and accounted for under ASC 718. Stock compensation expense for the years ended December 31, 2023 and 2022 was $881,250 representing the 25% vested portion of the total stock value. As of December 31, 2023, deferred compensation totaling $1,762,500 will be expensed pro rata upon vesting.
NOTE 14 – 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 ourthe 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.
WeThe Company assess the realization of our deferred tax assets to determine whether an income tax valuation allowance is required. Based on all available evidence, both positive and negative, and the weight of that evidence to the extent such evidence can be objectively verified, we determine whether it is more likely than not that all or a portion of the deferred tax assets will be realized.
The main factors that we consider include:
| |
| |
| |
| |
|
We considerCompany considers 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.
52
|
| December 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Deferred Tax Assets: |
|
|
|
|
|
| ||
Federal net operating loss carryforwards |
| $ | 1,389,426 |
|
| $ | 509,711 |
|
Foreign net operating loss carryforwards |
|
| 6,288,045 |
|
|
| 2,459,782 |
|
Lease liability |
|
| 195,275 |
|
|
| — |
|
Accrued bonus |
|
| 105,240 |
|
|
| — |
|
Other |
|
| 185,867 |
|
|
| 917 |
|
Gross Deferred Tax Assets |
|
| 8,163,853 |
|
|
| 2,970,410 |
|
Valuation allowance |
|
| (3,468,858 | ) |
|
| — |
|
Total Deferred Tax Asset |
|
| 4,694,995 |
|
|
| 2,970,410 |
|
|
|
|
|
|
|
| ||
Deferred Tax Liabilities: |
|
|
|
|
|
| ||
Right of use asset |
|
| (178,253 | ) |
|
| — |
|
Other |
|
| (252,627 | ) |
|
| — |
|
Total Deferred Tax Liabilities |
|
| (430,880 | ) |
|
| — |
|
|
|
|
|
|
|
| ||
Net Deferred Tax Asset |
| $ | 4,264,115 |
|
| $ | 2,970,410 |
|
Deferred Tax Liability |
| $ | 334,236 |
|
| $ | - |
|
The Company's pre-tax income (loss) by jurisdiction was as follows for the years ending December 31, 20212023 and December 31, 2020:2022
|
| Year ended December 31, |
| Year ended December 31, |
| |||||||||||
|
| 2021 |
|
| 2020 |
|
| December 31, |
| December 31, |
| |||||
|
|
|
|
|
|
| 2023 |
|
| 2022 |
| |||||
Domestic |
| $ | (10,064,644 | ) |
| $ | (3,955,124 | ) |
| $ | (3,925,864 | ) |
| $ | 3,221,618 |
|
Foreign |
| 18,627,977 |
|
| (1,410,699 | ) |
|
| (11,540,379 | ) |
|
| 883,774 |
| ||
Total |
| $ | 8,563,333 |
|
| $ | (5,365,823 | ) |
| $ | (15,466,243 | ) |
| $ | 4,105,392 |
|
The provision for income taxes for continuing operations for the year ended December 31, 20212023 and 20202022 consist of the following:following
|
| Year ended December 31, |
| Year ended December 31, |
|
| December 31, |
| December 31, |
| ||||||
|
| 2021 |
|
| 2020 |
|
| 2023 |
|
| 2022 |
| ||||
Current income taxes |
|
|
|
|
|
|
|
|
|
|
| |||||
Federal |
| $ | - |
| $ | - |
|
| $ | (148,666 | ) |
| $ | 220,000 |
| |
State |
| - |
| - |
|
|
| — |
|
|
| — |
| |||
Foreign |
|
| 28,970 |
|
|
| - |
|
|
| (170,000 | ) |
|
| 170,000 |
|
Total current income taxes |
| 28,970 |
|
| - |
|
| $ | (318,666 | ) |
| $ | 390,000 |
| ||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Deferred income taxes |
|
|
|
|
|
|
|
|
|
|
| |||||
Federal |
| - |
| - |
|
| $ | (983,296 | ) |
| $ | (510,629 | ) | |||
State |
| - |
| - |
|
|
| — |
|
|
| — |
| |||
Foreign |
|
| - |
|
|
| - |
|
|
| 369,223 |
|
|
| (2,459,781 | ) |
Total deferred income taxes |
| - |
| - |
|
| $ | (614,073 | ) |
| $ | (2,970,410 | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Total income tax expense (benefit) |
| $ | 28,970 |
|
| $ | - |
| ||||||||
Total income tax benefit |
| $ | (932,739 | ) |
| $ | (2,580,410 | ) |
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, 20212023 includes state minimum taxes, permanent differences, and deferred tax assets for which a fullthe valuation allowance has been placed.released. A corresponding tax expensebenefit is included for the year ended December 31, 20212023 to reflect the decreaserelease in the valuation allowance.
|
| Year ended December 31, |
|
| Year ended December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Tax Expense at statutory federal rate of 21% |
| $ | 1,798,300 |
|
| $ | (1,126,823 | ) |
State income taxes, net of federal income tax benefit |
|
|
|
|
|
|
|
|
Permanent Differences |
|
| 501,707 |
|
|
| 342,351 |
|
Foreign Rate Differential |
|
| 1,103,990 |
|
|
| (126,963 | ) |
Change in Valuation Allowance |
|
| (1,144,539 | ) |
|
| 953,120 |
|
Other |
|
| (2,230,488 | ) |
|
| (41,685 | ) |
Income tax expense (benefit) |
| $ | 28,970 |
|
| $ | 0 |
|
|
| December 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
Tax Expense at statutory federal rate of 21% |
| $ | (3,247,911 | ) |
| $ | 808,560 |
|
Permanent differences |
|
| (118,773 | ) |
|
| 927,343 |
|
Foreign rate differential |
|
| (1,038,635 | ) |
|
| 56,580 |
|
Return to provision |
|
| (274,501 | ) |
|
| — |
|
GILTI NOL impact |
|
| — |
|
|
| 145,913 |
|
GILTI NOL adjustment – previously offset by valuation allowance |
|
| — |
|
|
| 7,781,388 |
|
Change in valuation allowance |
|
| 3,468,858 |
|
|
| (12,328,462 | ) |
Statutory to GAAP |
|
| 278,223 |
|
|
| — |
|
Other |
|
| — |
|
|
| 28,268 |
|
Income tax benefit |
| $ | (932,739 | ) |
| $ | (2,580,410 | ) |
The net deferred tax asset and benefit for the current year is generated primarily from cumulative net operating loss carryforward, which totals approximately $28 million at December 31, 2023.
Deferred
|
| December 31, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
United States Expiring 2029 to 2037 |
| $ | - |
|
| $ | - |
|
United States Indefinite Limited to 80% |
|
| 6,578,856 |
|
|
| 2,800,000 |
|
Foreign NOLs |
|
| 21,742,318 |
|
|
| 8,200,000 |
|
Total Net Operating Loss Carryforward |
| $ | 28,321,174 |
|
| $ | 11,000,000 |
|
At December 31, 2023, the carryforwards available to offset US federal future taxable income taxes reflectconsisted of net operating loss (“NOL”) carryforwards of approximately $6.6 million pre-tax, all of which, have no expiration date. Future NOL utilization will be subject to the tax effects80-percent of temporary differences between the carrying amount of assets and liabilities for financial reporting purposestaxable income limitation, as all remaining NOLs have been generated after 2017 and the amount used for income tax purposes.passage of the Tax Cuts and Jobs Act of 2017. The following table discloses those significant componentsCompany’s Mexico net operating losses of our deferred tax assets$21.7 million pre-tax are subject to a ten-year carryforward period and liabilities, including any valuation allowance:the Company anticipates utilizing its Mexico NOL in future years before expiration.
|
| 2021 |
|
| 2020 |
| ||
Long-term deferred tax assets: |
|
|
|
|
|
| ||
Federal Net Operating Loss Carryforwards |
| $ | 12,327,599 |
|
| $ | 13,473,000 |
|
State Net Operating Loss Carryforwards |
|
|
|
|
|
|
|
|
Other |
|
| 862 |
|
|
|
|
|
Total deferred tax assets before valuation allowance |
|
| 12,328,461 |
|
| 13,473,000 |
| |
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Valuation Allowance |
|
| (12,328,461 | ) |
|
| (13,473,000 | ) |
Net deferred tax assets and liabilities |
| $ | 0 |
|
| $ | 0 |
|
During the year ended December 31, 2021,2022, the valuation allowance decreased by $1.2 million.was released. The Company believes a full valuation allowance against the net deferred tax asset is appropriateno longer warranted based on the negativepositive evidence against future taxable income. The Company is currentlyin recent years. Such positive evidence includes no longer being in a three-year cumulative losslosses, the rising prices in gold, utilization of current year tax attributes, and does not believe there is evidence to suggest futureprojected taxable income to realize its deferred tax assets. in the future.
The Company will continue to evaluate the realiziability of its deferred tax assets in future years.
We account for uncertain tax positions in accordance with ASC 740-10-25, which prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The following table summarized the total changes in unrecognized tax benefits in continuing operations during the years ended December 31, 2021 and 2020. Such amounts include unrecognized tax benefits that have impacted deferred tax assets and liabilities as of December 31, 2021 and 2020.
|
| 2021 |
|
| 2020 |
| ||
Balance - beginning of year |
| $ | - |
|
| $ | - |
|
Gross increases - tax positions in prior period |
| 0 |
|
| 0 |
| ||
Gross decreases - tax positions in prior period |
| 0 |
|
| 0 |
| ||
Gross increases - tax positions in current period |
| 0 |
|
| 0 |
| ||
Settlement |
| 0 |
|
| 0 |
| ||
Lapse of Statute of limitations |
| 0 |
|
| 0 |
| ||
Uncertain Tax Benefit - end of year |
| $ | 0 |
|
| $ | 0 |
|
The total amount of unrecognized tax benefits as of December 31, 2021 was $0, of which none, if recognized, would affect our effective tax rate and income tax benefit from continuing operations.
OurCompany’s practice is to recognize interest and penalties related to income tax matterstaxes in income tax expense in our consolidated statements of operations. We did not havecontinuing operations, as incurred. There were no any interest or penalties on unrecognizeduncertain tax benefits accrued ator interest and penalties related to uncertain tax benefits as of December 31, 2021.2023.
The Company is subject to income taxes in the US federal jurisdiction and various state jurisdictions andas well as Mexico. With few exceptions, theThe Company is no longer subject to US federal, state and local tax examinations by tax authorities for years prior to fiscal year 2017.2021. 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.
At December 31, 2021, our carryforwards availableThe 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 offset future taxable income consistedbe indefinitely reinvested. Determination of (1) federal net operating loss (“NOL”) carryforwards of approximately $19.1 million pre-tax, $16.4 million of which expires in 2029 to 2037 and $2.7 million of which has no expiration date, (2) foreign net operating losses of $12.5 million. Our ability to utilize NOL carryforwards to reduce future taxable income may be limited under Section 382 of the Internal Revenue Code if certain ownership changes in our company occur during a rolling three-year period. These ownership changes include purchases of common stock under share repurchase programs, the offering of stock by us, the purchase or sale of our stock by 5% shareholders, as defined in the Treasury regulations, or the issuance or exercise of rights to acquire our stock. If such ownership changes by 5% shareholders result in aggregate increases that exceed 50 percentage points during the three-year period, then Section 382 imposes an annual limitation on the amount of our taxable income that may be offset by the NOL carryforwards orunrecognized deferred tax credit carryforwards at the time of ownership change.
|
| 2021 |
|
| 2020 |
| ||
U.S. earnings (loss) from continuing operations |
| $ | 8,563,333 |
|
| $ | 0 |
|
|
|
|
|
|
|
|
|
|
U.S. federal income tax expense (benefit) |
|
|
|
|
|
|
|
|
State income tax expense (benefit) |
|
|
|
|
|
|
|
|
Foreign income tax expense (benefit) |
| 28,970 |
|
| 0 |
| ||
Total tax expense (benefit) from continuing operations |
| 28,970 |
|
| 0 |
| ||
Federal Deferred Incoome Taxes |
|
|
|
|
|
|
|
|
State Deferred Income Taxes |
|
|
|
|
|
|
|
|
Foreign income tax expense (benefit) |
|
|
|
|
|
|
|
|
Total Deferred Income taxes from continuing operations |
| 0 |
|
| 0 |
| ||
|
|
|
|
|
|
|
|
|
Total Provision for income taxes |
| $ | 28,970 |
|
| $ | 0 |
|
NOTE 7 – STOCKHOLDERS’ EQUITY
Authorized Capital. The total number of shares of all classes of capital stock which the corporation shall have the authority to issue is 60,001,000 shares, consisting of (i) twenty million and one thousand (20,001,000) shares of Preferred Stock, par value $0.0001 per share (“Preferred Stock”), of which one thousand (1,000) shares shall be designated as Series A Preferred Stock, 1,734,992 are designated as Series C Preferred Stock, and 3,000,000 shares are designated as Series D Preferred Stock and (ii) forty million (40,000,000) shares of Common Stock, par value $0.01 per share (“Common Stock”). As of December 31, 2021, 15,265,008 of Preferred stock remain undesignated.
Series A Preferred Stock
The Company has designated 1,000 shares of its Preferred Stock as Series A, having a par value of $0.0001 per share. Holders of the Series A Preferred Stock have the right to elect a majority of the Board of Directors of the Company. The Company issued 1,000 shares of Series A Preferred Stock to its CEO. At December 31, 2021 and December 31, 2020, there were 1,000 shares of Series A Preferred Stock outstanding.
Series C Senior Convertible Preferred Stock
At December 31, 2021 and December 31, 2020 there were 1,734,992 and 1,734,992 Series C Preferred shares outstanding, respectively. These Series C Preferred Shares are convertible to common shares at $2.50 per share, through June 30, 2022 and include anti-dilution protection. The Series C Preferred Shares may receive a 4% per annum dividend, payable if available, and in arrears. The Dividend is calculated at 4.0% of $4,337,480 payable annually on June 30. At December 31, 2021 dividendsliability for the years 2017 to 2021 totaling $866,940 were in arrears.
Due to the nature of this transaction as mandatorily redeemable by the Company at the election of the Series C preferred stock shareholder at maturity, the Series C Senior Convertible Preferred Shares are classified as “temporary equity” on the balance sheet.
|
| Preferred Series C |
| |
|
|
|
| |
Carrying Value, December 31, 2019 |
| $ | 4,333,053 |
|
Issuances at Fair Value, Net of Issuance Costs |
|
| - |
|
Bifurcation of Derivative Liability |
|
| - |
|
Relative Fair Value of Warrants – Preferred Stock Discount |
|
| 4,427 |
|
Accretion of Preferred Stock to Redemption Value |
|
| - |
|
Carrying Value, December 31, 2020 |
|
| 4,337,480 |
|
|
|
|
|
|
Bifurcation of Derivative Liability |
|
| - |
|
Issuances at Fair Value, Net of Issuance Costs |
|
| - |
|
Relative Fair Value of Warrants – Preferred Stock Discount |
|
| - |
|
Accretion of Preferred Stock to Redemption Value |
|
| - |
|
Carrying Value, December 31, 2021 |
| $ | 4,337,480 |
|
Series D Senior Convertible Preferred Stock
Financing Agreement with Golden Post Rail, LLC, a Texas Limited Liability Company, and with Shareholders of DynaResource, Inc.
On May 14, 2020, the Company closed an additional financing agreement with Golden Post, and with certain individual shareholders of DynaUSA (“DynaUSA Shareholders”), and related agreements. A summary of the transactions and related agreements are set forth below:
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On October 11, 2021 the Company filed an amended designation of Series D Preferred Stock with the State of Delaware which removed the anti-dilution provisions of the original designation.
Retirement of Series D Convertible Debt
On October 7, 2021, the Company paid $2,500,000 to repurchase one note that was convertible into Series D Preferred Stock.
The remaining 10 noteholders of notes convertible into Series D Preferred Stock elected to convert their notes totaling $1,520,000 into Series D Preferred stock at $2.00 per share. On October 18, 2021 the Company issued 760,000 shares of Series D Preferred Stock for these notes.
In addition the redemption of the Series D notes trigged an acceleration of the amortization of the original loan discount booked at the issuance of the Series D notes (see discussion below) and being amortized over the 24 month life of the notes of $287,508 in October 2021.
As part of the transaction all Series D noteholders agreed to waive the non-dilution rights contained in the original note and an amendment of the Series D Preferred Stock designation was filed with the State of Delaware.
At December 31, 2021 and December 31, 2020, there were 760,000 and 0 Series D Preferred shares outstanding, respectively. These Series D Preferred Shares are convertible to common shares at $2.00 per share, through October 18, 2026. The Series D Preferred Shares may receive a 4% per annum dividend, payable if available, and in arrears. The Dividend is calculated at 4.0% of $1,520,000 payable annually on October 18. At December 31, 2021, no dividends were in arrears.
Due to the nature of this transaction as mandatorily redeemable by the Company at the election of the Series D preferred stock holder at maturity, the Series D preferred shares are classified as “temporary equity” on the balance sheet.
Due to underlying anti-dilutive provisions contained in the Series C Preferred Stock and the Golden Post Warrant, the Company incurred derivative liabilities. On May 14, 2020 in connection with the Series D Convertible Note financing, the expiration date for the Series C Preferred Stock and the Golden Post warrants were extended to June 30, 2022. In addition, a new derivative liability was incurred due to the issuance of warrants for kicker shares. At December 31, 2021, the total derivative liability was $3,898,914 which included $1,019,431 for the Series C Preferred Stock, and $1,320,380 in connection with the Golden Post Warrants and $1,559,103 in connection with the Series D Convertible Note Kicker Warrants. At December 31, 2020, the total derivative liability was $2,371,560 which included $601,313 for the Series C Preferred Stock, and $817,613 in connection with the Golden Post Warrants and $952,634 in connection with the Series D Convertible Note Kicker Warrants. The deemed dividend for the years ending December 31, 2021, and December 31, 2020 were $188,699 and $173,490, respectively. As the Company has not declared these dividends, it is required only as an item “below” the net income (loss) amount on the accompanying consolidated statements of income (loss).
A discount of $1,098,492 was recorded on the Series D financing as a result of the valuation the total liabilities including the derivatives . The discount was amortized over the two year life of the loan on a straight line basis.
Preferred Stock (Undesignated)
In addition to the 1,000 shares designated as Series A Preferred Stock, the 1,734,992 shares designated as Series C Preferred Shares and 3,000,000 shares designated as Series D Preferred Stock, the Company is authorized to issue an additional 15,265,008 shares of Preferred Stock, having a par value of $0.0001 per share. The Board of Directors of the Company has authority to issue the Preferred Stock from time to time in one or more series, and with respect to each series of the Preferred Stock, to fix and state by the resolution the terms attached to the Preferred Stock. At December 31, 2021 and December 31, 2020, there were no other shares of Preferred Stock outstanding.
Separate Series; Increase or Decrease in Authorized Shares. The shares of each series of Preferred Stock may vary from the shares of any other series thereof in any or all of the foregoing respects and in any other manner. The Board of Directors may increase the number of shares of Preferred Stock designated for any existing series by a resolution adding to such series authorized and unissued shares of Preferred Stock not designated for any other series. Unless otherwise provided in the Preferred Stock Designation, the Board of Directors may decrease the number of shares of Preferred Stock designated for any existing series by a resolution subtracting from such series authorized and unissued shares of Preferred Stock designated for such existing series, and the shares so subtracted shall become authorized, unissued and undesignated shares of Preferred Stock.
Common Stock
The Company is authorized to issue 40,000,000 common shares at a par value of $0.01 per share. These shares have full voting rights. At December 31, 2021 and December 31, 2020, there were 18,091,293 and 17,722,825 shares outstanding, respectively. No dividends were paid for the years ended December 31, 2021 and 2020, respectively.
Preferred Rights
The Company issued “Preferred Rights” for the rights to percentages of revenues generated from the San Jose de Gracía Pilot Production Plant and received $784,500 for these rights. This has been reflected as “Preferred Rights” in stockholders’ equity. As of December 31, 2021, $744,500 had been repaid, leaving a current balance of $40,000 and $40,000 as of December 31, 2021 and 2020, respectively
Stock Issuances
On October 18, 2021, the Company issued 368,468 shares of common stock upon the exercise of 368,468 warrants by five warrant holders for $.01 a share.
There were no issuances of common stock during the year ending December 31, 2020.
Treasury Stock
During the year ending December 31, 2021, 504,300 treasury shares were transferred for services provided to the Company. At December 31, 2021, 12,180 treasury shares remained outstanding.
During the year ending December 31, 2020, 262,500 treasury shares were transferred for services provided to the Company. At December 31, 2020, 516,480 treasury shares remained outstanding.
Warrants
2021 Activity
On October 18, 2021, five warrant holders exercised a total of 368,468 warrant to purchase 368,468 shares of common stock for $.01 a share.
At December 2021, the Company had a total of 3,060,998 warrants outstanding.
2020 Activity
On May 13, 2020 the Company issued 2,306 warrants to purchase shares of common stock with an exercise price of $2.05 per sharetemporary differences related to anti-dilution provisionsinvestments in these non-U.S. subsidiaries that are essentially permanent in duration is not practicable.
54
On May 14, 2020, the Company issued 1,260,633 warrants to purchase shares of common stock with an exercise price of $.01 per share as kicker shares as part of the Series D note agreements. These warrants expire on May 14, 2030.
On June 30, 2020, as part of the Series D note agreement the Company issued 2,166,527 warrants to purchase shares of common stock with an exercise price of $2.05 per share to replace the 2,166,527 warrants previously outstanding which expired on that date. These warrants expire on June 30, 2022.
At December 2020, the Company had a total of 3,429,466 warrants outstanding.
The Company recorded no expense related to the issuance of these warrants since these warrants were issued in common stock for cash sales and note conversions.
|
| Number of Shares |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Life (Years) |
|
| Intrinsic Value |
| ||||
Balance at December 31, 2019 |
|
| 2,166,527 |
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| $ | 2.45 |
|
|
| 0.51 |
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| |
Granted |
|
| 3,429,466 |
|
| $ | 1.30 |
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|
| 4.33 |
|
|
| - |
|
Exercised |
|
| - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
Forfeited |
|
| 2,166,527 |
|
| $ | - |
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|
|
|
|
|
| - |
|
Balance at December 31, 2020 |
|
| 3,429,466 |
|
| $ | 1.30 |
|
|
| 4.33 |
|
|
|
|
|
Granted |
|
| - |
|
| $ | - |
|
|
|
|
|
|
| - |
|
Exercised |
|
| 368,468 |
|
| $ | 0.01 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
| - |
|
| $ | - |
|
|
|
|
|
|
| - |
|
Balance at December 31, 2021 |
|
| 3,060,998 |
|
| $ | 1.46 |
|
|
| 2.79 |
|
|
|
|
|
Exercisable at December 31, 2021 |
|
| 3,060,998 |
|
| $ | 1.46 |
|
|
| 2.79 |
|
|
| - |
|
NOTE 8 – RELATED PARTY TRANSACTIONS
Related Party Transactions
Dynacap Group Ltd.
The Company paid $285,999 and $114,250 to Dynacap Group, Ltd. (“Dynacap”, an entity controlled by the CEO of the Company) for consulting and other servoces during the years ended December 31, 2021 and 2020, respectively.
NOTE 915 – 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 under an Earn In/Option Agreement. 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. The Company fulfilled its obligations under the Arbitration Award prior to the beginning of 2023. On March 5, 2024, the Colorado U.S. District Court issued an Order denying requests for additional relief by both the Company and Goldgroup and stating that the case is closed.
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:
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. 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.
Concession Taxes
The Company is required to pay taxes in México in order to maintain mining concessions owned by DynaMéxico. Additionally, the Company is required to incur a minimum amount of expenditures each year for all concessions held. The minimum expenditures are calculated based upon the land area, as well as the age of the concessions. Amounts spent in excess of the minimum may be carried forward indefinitely over the life of the concessions and are adjusted annually for inflation. Based on Management’s recent business activities and current and forward plans and considering expenditures on mining concessions from 2002-2017 and continuing expenditures in current and forward activities, the Company does not anticipate that DynaMéxico will have any difficulties meeting the minimum annual expenditures for the concessions ($388 – $2,400 Mexican Pesos per hectare). DynaMéxico retains sufficient carry-forwardcarryforward amounts to cover over 10 years of the minimum expenditure (as calculated at the 2017 minimum, adjusted for annual inflation of 4%).
55
Leases
Leases
In addition to the surface rights held by DynaMéxico pursuant to the Mining Actof México and its Regulations (Ley Minera y su Reglamento), DynaMineras maintains access and surface rights to the SJG Project pursuant to the 20-year Land Lease Agreement. The 20 Year Land Lease Agreement with the Santa Maria Ejido Community surrounding San Jose de Gracía was dated January 6, 2014 and continues through January 2033. It covers an area of 4,399 hectares surrounding the main mineral resource areas of SJG and provides for annual lease payments on January 1st1st each year by DynaMineras of $1,359,443$1,359,443 pesos adjusted for inflation based on the Mexico minimum wage increase commencing in 2014. Rent was $3,015,112$4,414,124 Pesos (approx. $149,000$249,000 USD) for the year ended December 31, 2021.2023. The Land Lease Agreement provides DynaMineras with surface access to the core resource areas of SJG (4,399 hectares)(4,399 hectares), and allows for all permitted mining and exploration activities from the owners of the surface rights (Santa Maria Ejido community).
The Company leases office space for its corporate headquarters in Irving, Texas. In September 2017,February 2023, the Company entered into a sixty-six-monthfifty-two-month extension of the lease through January 2023.with additional office space. As part of the agreement the lease term commenced and the Company received sixfour months free rent as aupon completion of the finish out allowance.of the new space. The expansion was completed and the Company capitalizedmoved into the leasehold improvement costs and amortized them over the rent abatement period as rent expense.office space affective August 1, 2023 The Company makes tiered lease payments on the 1st1st of each month.
Effective January 1, 2019, the Company adopted ASC 842, which requires recognition of a right-of-use asset and lease liability for all leases at the commencement date based on the present value of lease payments over the lease term. Additional qualitative and quantitative disclosures regarding the Company's leasing arrangements are also required. The Company adopted ASC 842 prospectively and elected the package of transition practical expedients that does not require reassessment of (1) whether any existing or expired contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company has elected other available practical expedients to not separate lease and non-lease components, which consist principally of common area maintenance charges, for all classes of underlying assets and to exclude leases with an initial term of 12 months or less.
The Company determines if a contract is or contains a lease at inception. As of December 31, 2021,2023, the Company has two operating leases - a six- and one-half yearfifty-two month lease for office space with a remaining term of twenty-fourforty-seven months and a twenty-year ground lease in association with its México mining operations with a remaining term of thirteenten 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 costexpense are as follows:
|
| Year Ended December 31, 2021 |
|
| Year Ended |
| ||
Operating Lease – Office Lease |
| $ | 86,237 |
|
| $ | 99,627 |
|
Operating Lease – Ground Lease |
| 148,636 |
|
|
| 94,074 |
| |
Short Term Lease Costs |
| 12,471 |
|
|
| 18,570 |
| |
Variable Lease Costs |
|
| 0 |
|
|
| 154,917 |
|
TOTAL |
| $ | 247,344 |
|
| $ | 367,188 |
|
Weighted average remaining lease term and weighted average discount rate are as follows:
Weighted Average Remaining Lease Term (Years) – Operating Leases | 6.96 | |||
Weighted Average Discount Rate – Operating Leases | 12.50 | % |
Estimated future minimum lease obligations are as follow for the years ending December 31:
YEAR |
|
|
|
|
|
| ||
2022 |
| $ | 179,377 |
| ||||
2023 |
| 101,499 |
| |||||
2024 |
| 96,896 |
|
| $ | 216,046 |
| |
2025 |
| 99,803 |
|
|
| 221,426 |
| |
2026 |
| 102,797 |
|
|
| 226,903 |
| |
2027 |
|
| 211,191 |
| ||||
2028 |
|
| 109,058 |
| ||||
Thereafter |
|
| 684,884 |
|
|
| 469,946 |
|
Total |
| $ | 1,265,256 |
|
|
| 1,454,570 |
|
Less Imputed Interest |
|
| (579,305 | ) |
|
| (524,691 | ) |
OPERATING LEASE LIABILITY |
| $ | 685,951 |
|
| $ | 929,879 |
|
56
NOTE 10 – DERIVATIVE LIABILITIES
Preferred Series C Stock
As discussed in Note 7, the Company analyzed the embedded conversion features of the Series C Preferred Stock and determined that the stock qualified as a derivative liability and is required to be bifurcated and accounted for as such since the host and the embedded instrument are not clearly and closely related. The Company performed a valuation of the conversion feature. In performing the valuation, the Company applied the guidance in ASC 820, “Fair Value Measurements”, to nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). To measure fair value, the Company incorporates assumptions that market participants would use in pricing the asset or liability and utilizes market data to the maximum extent possible.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation model to determine the value of conversion feature of the Series C Preferred Stock based on the assumptions below:
|
| 2021 |
|
| 2020 |
| ||
Annual volatility rate |
|
| 147 | % |
|
| 156 | % |
Risk free rate |
|
| 0.73 | % |
|
| 0.13 | % |
Remaining Term |
| 0.50 years |
|
| 1.50 years |
| ||
Fair Value of common stock |
| $ | 1.75 |
|
| $ | 0.78 |
|
For the years ended December 31, 2021, and December 31, 2020, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.
The table below represents the change in the fair value of the derivative liability during the years ended December 31, 2021, and December 31, 2020.
Period Ended |
| 2021 |
|
| 2020 |
| ||
Fair value of derivative (stock), beginning of period |
| $ | 601,313 |
|
| $ | 37,038 |
|
Change in fair value of derivative |
|
| 418,118 |
|
|
| 276,547 |
|
Fair value of derivative on the date of issuance |
|
| 0 |
|
|
| 287,728 |
|
Fair value of derivative (stock), end of period |
| $ | 1,019,431 |
|
| $ | 601,313 |
|
Preferred Series C Warrants
As discussed in Note 7, the Company analyzed the embedded conversion features of the Series C Preferred Stock and determined that the Warrants qualified as a derivative liability and is required to be bifurcated and accounted for as such since the host and the embedded instrument are not clearly and closely related. The Company performed a valuation of the conversion feature. In performing the valuation, the Company applied the guidance in ASC 820, “Fair Value Measurements”, to nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). To measure fair value, the Company incorporates assumptions that market participants would use in pricing the asset or liability and utilizes market data to the maximum extent possible.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation model to determine the value of conversion feature of the Warrants based on the assumptions below:
|
| 2021 |
|
| 2020 |
| ||
Annual volatility rate |
|
| 147 | % |
|
| 156 | % |
Risk free rate |
|
| 0.73 | % |
|
| 0.13 | % |
Remaining Term |
| 0.50 years |
|
| 1.5 years |
| ||
Fair Value of common stock |
| $ | 1.75 |
|
| $ | 0.78 |
|
For the years ended December 31, 2021, and December 31, 2020, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.
The table below represents the change in the fair value of the derivative liability during years ended December 31, 2021, and December 31, 2020.
Period Ended |
| 2021 |
|
| 2020 |
| ||
Fair value of derivative (warrants), beginning of period |
| $ | 817,613 |
|
| $ | 49,066 |
|
Change in fair value of derivative |
|
| 502,767 |
|
|
| 367,781 |
|
Fair value of derivative on the date of issuance |
|
| 0 |
|
|
| 400,766 |
|
Fair value of derivative(warrants), end of period |
| $ | 1,320,380 |
|
| $ | 817,613 |
|
Series D Notes Kicker Warrants
As discussed in Note 7, the Company analyzed the conversion features of the Series D Notes and determined that the Warrants qualified as a derivative liability. The fair value was required to be allocated among the notes, conversion features, and the warrants, and then remeasured at each reporting date. The Company performed a valuation of the conversion feature. In performing the valuation, the Company applied the guidance in ASC 820, “Fair Value Measurements”, to nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). To measure fair value, the Company incorporates assumptions that market participants would use in pricing the asset or liability and utilizes market data to the maximum extent possible.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation model to determine the value of conversion feature of the Series D Warrants based on the assumptions below:
|
| 2021 |
|
| 2020 |
| ||
Annual volatility rate |
|
| 147 | % |
|
| 156 | % |
Risk free rate |
|
| 0.73 | % |
|
| 0.13 | % |
Remaining Term |
| 8.37 years |
|
| 9.37 yrs |
| ||
Fair Value of common stock |
| $ | 1.75 |
|
| $ | 0.78 |
|
For the years ended December 31, 2021, and December 31, 2020, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.
The table below represents the change in the fair value of the derivative liability during the years ended December 30, 2021, and December 31, 2020.
Period Ended |
| 2021 |
|
| 2020 |
| ||
Fair value of derivative (warrants), beginning of period |
| $ | 952,634 |
|
| $ | 0 |
|
Fair value of derivative on the date of issuance |
|
| 0 |
|
|
| 409,998 |
|
Exercise of warrants |
|
| (659,558 | ) |
|
| - |
|
Change in fair value of derivative |
|
| 1,266,027 |
|
|
| 542,636 |
|
Fair value of derivative(warrants), end of period |
| $ | 1,559,103 |
|
| $ | 952,634 |
|
NOTE 11 – NON-CONTROLLING INTEREST
The Company’s Non-Controlling Interest recorded in the consolidated financial statements relates to an interest in DynaResource de México, S.A. de C.V. of 50% through May 13, 2013, and 20% until February 24, 2020 when the minority interest was eliminated. Changes in Non-Controlling Interest for the year ended December 31, 2020.
|
| 2020 |
| |
Beginning balance |
| $ | (5,723,663 | ) |
Operating income (loss) |
|
| (61,589 | ) |
Share of Other Comprehensive Income (loss) |
|
| (11,669 | ) |
Elimination of Non-Controlling Interest |
|
| 5,796,921 |
|
Ending balance |
| $ | 0 |
|
NOTE 1216 – 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;markets; quoted prices for identical or similar instruments in markets that are not active;active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs– Instruments with primarily unobservable value drivers.
As of December 31, 2021,2023 and December 31, 2020,2022, the Company’s financial assets were carried at fair value and were measured at fair value using Level 3 inputs, with the exception of cash, which was valued using Level 1 inputs. A description of the valuation of the Level 3 inputs is discussed in Note 10.
Fair Value Measurement at December 31, 2021 Using: |
|
|
| Quoted Prices in Active Markets For Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| |||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative Liabilities |
| $ | 3,898,914 |
|
|
| 0 |
|
|
| 0 |
|
| $ | 3,898,914 |
|
Totals |
| $ | 3,898,914 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3,898,914 |
|
Fair Value Measurement at December 31, 2020 Using: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities |
| $ | 2,371,560 |
|
|
| 0 |
|
|
| 0 |
|
| $ | 2,371,560 |
|
Totals |
| $ | 2,371,560 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 2,371,560 |
|
|
|
|
|
| Quoted Prices |
|
| Significant |
|
| Significant |
| ||||
Fair Value Measurement at December 31, 2023: |
|
|
|
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative Liabilities |
| $ | 1,797,341 |
|
|
| - |
|
|
| - |
|
| $ | 1,797,341 |
|
Totals |
| $ | 1,797,341 |
|
| $ | - |
|
| $ | - |
|
| $ | 1,797,341 |
|
Fair Value Measurement at December 31, 2022: |
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| ||||
Liabilities: |
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|
|
|
|
| ||||
Derivative Liabilities |
| $ | 2,172,417 |
|
|
| - |
|
|
| - |
|
| $ | 2,172,417 |
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Totals |
| $ | 2,172,417 |
|
| $ | - |
|
| $ | - |
|
| $ | 2,172,417 |
|
NOTE 1317 – REVENUE CONCENTRATIONCONCENTRATIONS
For the years ended December 31, 2023 and 2022, one customer accounted for 100% of revenue and accounts receivable.
NOTE 18 - SEGMENTED INFORMATION
The Company operates as one segment: test-mining and pilot milling gold-silver concentrate for sale from its location in Mexico, and had certain customers whose revenue individually represented 10%the following geographic concentrations as of December 31, 2023 and 2022:
57
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| Mexico |
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| United States |
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| Total |
| |||
December 31, 2023 |
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| ||||||
Mineral property |
| $ | 4,132,678 |
|
| $ | - |
|
| $ | 4,132,678 |
|
Property and equipment |
|
| — |
|
|
| 103,034 |
|
|
| 103,034 |
|
Current assets |
|
| 8,475,858 |
|
|
| 5,669,642 |
|
|
| 14,145,500 |
|
Other assets |
|
| 15,271,752 |
|
|
| 1,785,386 |
|
|
| 17,057,138 |
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Total assets |
| $ | 27,880,288 |
|
| $ | 7,558,062 |
|
| $ | 35,438,350 |
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| |||
December 31, 2022 |
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|
|
| |||||||
Mineral property |
| $ | 4,132,678 |
|
| $ | - |
|
| $ | 4,132,678 |
|
Property and equipment |
|
| — |
|
|
| — |
|
|
| — |
|
Current assets |
|
| 23,272,128 |
|
|
| 9,851,827 |
|
|
| 33,123,955 |
|
Other assets |
|
| 3,092,483 |
|
|
| 593,796 |
|
|
| 3,686,279 |
|
Total assets |
| $ | 30,497,289 |
|
| $ | 10,445,623 |
|
| $ | 40,942,912 |
|
Period Ended |
| December 31, 2023 |
|
| December 31, 2022 |
| ||
Total comprehensive income (loss) for the year - Mexico |
| $ | (11,249,628 | ) |
| $ | 3,559,456 |
|
Total comprehensive income (loss) for the year - United States |
|
| (2,698,254 | ) |
|
| 3,486,089 |
|
Total comprehensive income (loss) for the year |
| $ | (13,947,882 | ) |
| $ | 7,045,545 |
|
NOTE 19 – RELATED PARTY TRANSACTIONS
During the years ended December 31, 2023 and 2022, the Company paid or moreaccrued $370,000 and $75,000 in management fees to its directors. Included in accounts payable at December 31, 2023 is $100,734 due to related parties.
Restricted Stock Awards
During the year ended December 31, 2022 the Compensation Committee approved stock awards to employees, directors and consultants of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or moreCompany. The stock awards approved were issued to each of the Company’s total accounts receivable, as follows:
Forindividuals/entities and vested 25% immediately and the remainder vest 25% each year on December 31st for the next three years, subject to resignation or termination provisions. The awards totaled 1,500,000 shares of which 1,175,000 were awarded to officers and/or directors. Total stock-based compensation recognized on awards granted to related parties totalled $690,313 during each of the years ended December 31, 20212023 and 2020, three and three customers accounted for 100% of revenue, respectively.2022.
At December 31, 2021 and 2020, one and four customers accounted for 100% of accounts receivable, respectively.
NOTE 14 – NOTES PAYABLE
In June 2018, the Company entered into financing agreements for the unpaid mining concession taxes on the Francisco Arturo mining concession for the year ended December 31, 2017 and the period ending June 30, 2018 in the amount of $1,739,392. The Company paid an initial 20% payment of $347,826 and financed the balance over 36 months at 22%
In February 2019, the Company entered into a financing agreement for unpaid mining concession taxes on the Francisco Arturo mining concession for the year ended December 31, 2018 in the amount of $335,350. The Company paid an initial 20% payment of $67,070 and financed the balance over 36 months at an interest rate of 22%.
In June 2018, the Company applied for a reduction of the Francisco Arturo mining concession, from 69,121 hectares to 3,280 hectares. On July 31, 2018, the application for reduction was approved and the Company paid an initial amount of 985,116 MNP (Pesos), for the second semester 2018 mining concessions taxes on the reduced Francisco Arturo mining concession. The Company continues to accrue an amount of $22,500 (USD) per semester on the reduced Francisco Arturo mining concession.
As of June 2019, the Company ceased making monthly payments on the above noted Francisco Arturo concession notes and has petitioned the Hacienda for a reduction in the liability equal to the reduction in the Francisco Arturo concession above. For financial reporting purposes the Company continues to carry all notes at unpaid principal amount and accrues interest on a monthly basis. At December 31, 2021, $1,061,243 of accrued interest on the notes was included in accrued liabilities on the consolidated balance sheet.
In October 2019, the Company entered into a financing agreement for unpaid mining concession taxes on the core mining concessions in the amount of $299,474. The Company paid an initial 20% payment of $59,895 and financed the balance over 36 months at an interest rate of 22%.
The following is a summary of the transaction during the years ended December 30, 2021, and December 31, 2020:
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|
|
| |
Balance December 31, 2019 |
| $ | 2,272,431 |
|
Exchange Rate Adjustment |
|
| (124,352 | ) |
2020 Principal Payments |
|
| (66,644 | ) |
Balance December 31, 2020 |
|
| 2,081,435 |
|
Exchange Rate Adjustment |
|
| (57,504 | ) |
2021 Principal Payments |
|
| (61,406 | ) |
Balance December 31, 2021 |
| $ | 1,962,525 |
|
NOTE 15 – REVOLVING CREDIT LINE FACILITY
On February 4, 2021 Mineras de DynaResource SA de CV (“Seller”) entered into a Revolving Credit Line Facility and Commercial Offtake Agreement (the “RCL”), with a commercial buyer. Under the terms of the RCL:
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The RCL is included under Customer Advances on the consolidate balance sheet
Deposits under Revolving Credit Line Facility
Under the terms of the RCL, Mineras de DynaResource received the following advances from the buyer:
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NOTE 16 –20– SUBSEQUENT EVENTS
The Company has evaluated events from December 31, 2021,2023, through the date whereupon the consolidated financial statements were issued, and has described below the events subsequent to the end of the period.period:
London CourtOn February 19, 2024., the Board of International Arbitration
On January 27, 2022,Directors approved the DynaResource, Inc. 2024 Equity Incentive Plan (the “Company”) received word from its counsel that the London Court of International Arbitration issued a First Final Partial Award (the “Partial Award”“Plan”), in favorwhich the Company intends to submit for stockholder approval at the 2024 annual meeting of Mercuria Energy Trading S.A.,stockholders. Pursuant to the Plan, the Company may issue various types of equity incentives, including stock options, restricted stock, and stock appreciation rights, to employees, directors, and consultants. The Plan has a Swiss company (“Mercuria”)term of 10 years and against Mineras de DynaResource S.A. de C.V. (“Mineras”), a subsidiaryprovides for the issuance of no more than an aggregate 2,700,000 shares of common stock over the life of the Company whichPlan. The Plan is chartered in Mexico and whose offices are also located in Mexico.
The Partial Award requires that Mineras pay Mercuriaadministered by the sum of $1,676,014 for an undersupply of metal concentrate production between October 2019 and December 2020. The Partial Award also requires that Mineras pay Mercuria the sum of $146,659 in connection with a net overpayment by Mercuria for metal concentrates.
The arbitration panel retained jurisdiction to address any outstanding fees and expenses.
The Company notes the following: since Mineras is a company of Mexican nationality, under Mexican law Mineras has the right to legally oppose the recognition and enforcementCompensation Committee of the Partial Award and any supplementalBoard of Directors.
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On February 19, 2024, the Company issued 400,000 stock option awards to a new independent director, at an exercise price of $5.00 per share, with such options vesting in 25% increments on each of the first four anniversaries of the date of the award.
59
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.Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2021.2023. 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 of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;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,accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management of the Company;Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 Internal Control—Integrated Framework) at December 31, 2021.2023. Based on its evaluation, our management concluded that, as of December 31, 2021,2023, 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.
60
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
61
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 includes the Company’s insider trading policies and procedures, which are reasonably designed to promote compliance with insider trading laws, rules and regulations. 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 consultantsdirectors of the Company.Company as of December 31, 2023. The directors will continue to serve until the next annual shareholders meeting, or until their successors are elected and qualified. All Directors have been elected to serve through 2022. All officers serve at the discretion of the President, Chairman of the Board of Directors and members of the Board of Directors.Chief Executive Officer.
Name | Age |
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| Held Since | |||||
K. W. (“K.D.”) Diepholz | 66 |
| Chairman of The Board of Directors | May 1995 | |||||
222 W. Las Colinas Blvd |
| May 1997 | |||||||
Suite 1910 | Financial Officer and Treasurer |
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| ||||||
Irving, Texas 75039 | |||||||||
Dr. Jose Vargas Lugo (1) | 63 |
| Director of Operations - México | August 2011 | |||||
Enrique Dunant Y5 de Mayo #963 |
| August 2013 | |||||||
Fracc, Los Parques | |||||||||
Guamuchil, Sin CP 81460 | |||||||||
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Rene L.F. Mladosich | 60 |
| General Manager at San Jose de Gracía | October 2019 | |||||
Sierra Grande #134 | Director | July 2022 | |||||||
Fraccionamiento Lomas de | |||||||||
Mazatlán, Sinaloa 82110 | |||||||||
Dale G. Petrini | 69 | Independent Director, Chairman of the Compensation | December 2016 | ||||||
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| 35 | Independent Director, Chairman of the Audit Committee | July 2015 |
222 W. Las Colinas Blvd. | and Chairman of the Nominating Committee | ||
Suite 1910 North Tower | |||
Irving, TX. 75039 | |||
John C. Wasserman | 83 | Independent Director | October 2019 |
222 W. Las Colinas Blvd. | July 2022 | ||
Suite 1910 North Tower | |||
Irving, Texas 75039 | |||
Ronald Vail (1) | 76 | Independent Director | April 2023 |
222 W. Las Colinas Blvd. | |||
Suite 1910 North Tower | |||
Irving, Texas 75039 |
(1) Effective February 16, 2024, the Company appointed Dr. Quinton Hennigh and Mr. Brent Omland as Directors to the Board of Directors of the Company; and the Company accepted the resignations of Dr. Jose Vargas Lugo and Mr. Ronald Vail from the Company’s Board of Directors in order to make the two board seats available. Dr. Vargas Lugo will remain in his position with the Company as Director of Operations – Mexico, and Mr. Vail became a non-voting Board observer.
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 since 1995.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;1995; the acquisition of an additional 25% interest in San José de Gracía in 1998;
62
1998; the acquisition and consolidation of 100% of the rights to the San José de Gracía from prior owners, culminating in March 2000;2000; the acquisition and consolidation of several outstanding Concessions at the San José de Gracía from previous Mexican owners during 2000-2003;2000- 2003; the direction and management of the test mining and pilot mill operations at San José de Gracía during 2003-2006;2003-2006; the negotiation of the Stock Purchase/Earn In Agreement in 2006;2006; the negotiation of the surface rights agreement with the Santa Maria Ejido in 2013;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;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.Mexico..
Mr. Mladosich was named General Manager at SJG in January 2016 – June 2017, and again in October 2019.
Dr. Jose Vargas Lugo. Dr. Vargas is a licensed physician with graduatewho 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;2000; as it commenced activities to acquire and consolidate the San Jose de Gracía District. Over more than the past + 10 Years,years, Dr. Vargas has proven to be an integral part of the Company’s activities at San Jose de Gracía and in Sinaloa State;State, involved in all facets of the Company’s business. Dr. Vargas has proven instrumental in the areas of public relations, community relations, governmental affairs, environmental matters, and overall management of the company’s business activities in México.
Pedro Ignacio Teran Cruz. Mr. Teran is a graduate Geologist from the Universidad de Sonora, México. He has over 28 years’ experience in mineral exploration, mine development is a successful and respected Geological Consultant in México and is credited with defining significant resources at several projects. From 1986 to 1992, he was Project Geologist for Minera Real de Angeles, SA de CV (Frisco/Placer Dome Inc, now Alamos Gold), in which under his participation, explored and discovered the "Mulatos Gold Deposit" Sonora, México, and later as a Project Manager, the "San Felipe Gold Project" BC, México, both now in production. From 1992 to 1996, Mr. Teran worked as a Mine Geologist with Hecla Mining Co and explored and advanced into production the open pit "La Choya Gold Mine". From 1996 to 1999, Mr. Teran worked as Geology Superintendent for Compañia Minera Lluvia de Oro (Santa Cruz Gold, Now NWM Mining Corp.) and at the open pit "Lluvia de Oro Gold Mine", Sonora, México. From 1999 to 2001, Mr. Teran worked as a Consultant Geology performing due diligences for Tara Gold Resources in several projects located in la Sierra Madre Occidental. From 2001 to 2005, he worked as Manager of Geology Department for the Compañia Minera Pangea SA de CV (Queenstake Resources, Nevada Pacific and now McEwen Mining), in the "El Magistral Gold Mine" Sinaloa, México. Under his direction of exploration, the reserves were increased substantially and formed part of the team to put the project in production. During 2005 and part of 2006, Mr. Teran worked as Data Manager for Linear Gold Corp. in the "Ixhuatan Project" Chiapas, México. He built the computer block model and Resources Estimation. From 2006 to 2008, he worked as Project Manager for Pediment Exploration Ltd., now Argonaut Gold Inc. in the "San Antonio Gold Project" located in BCS, México.
Since 2008, Mr. Teran began working as a Consultant Geologist with DynaResource, Inc. in the "San Jose de Gracía Gold Project" located in Sinaloa, México, an advanced exploration project.
John C. Wasserman. Mr. Wasserman is a Partner with Wasserman, Bryan, Landry & Honold, LLP Law firm, Perrysburg Ohio. He is a stockholder of the Company and brings the following credentials to the Board of Directors:
University of Detroit (PHB);; Ohio State University, Law School (JD) – Graduate work in business administration;administration; University of Toledo – Undergraduate and Graduate work in business administration;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;Appeals; Member, Ohio State, Lucas County, Ohio (past President) and Toledo, Ohio Bar Associations;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;Commission; Member of the ten year Plan Committee of Waterville, Ohio;Ohio; Member, Past Board Member, Secretary Treasurer and President of Toledo, Ohio Rotary;Rotary; Past Assistant District Governor, Area 4 of District 6600 of Rotary International;International; Member of Timberlake Investments, LLC, an investment LLC;LLC; Board Member, Victory Center of Toledo, Ohio;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;Counsel and with Ohio Bureau of Unemployment, as Hearing Officer;Officer; and as a Former Acting Judge, Maumee, Ohio Municipal Court;Court Past Toledo Ohio Exchange Club Member (President). Mr. Wasserman was selected one of Jaycees Top Ten Young men of Toledo, Ohio;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;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.
63
Dale G. Petrini.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.Rose. Mr. Rose is a Partner at Cross Tie Capital, Ltd, a Texas family investment office with a focus on alternative assets. Through this role, Mr. Rose serves in various operating roles of Cross Tie’s portfolio companies, including Chief Operating Officer 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 a graduate of Texas Christian University in Fort Worth, Texas. Mr. Rose is the appointee to the Board of Directors by Golden Post, LLC., the holder of the Series C convertible preferred shares.
Ronald Vail. Mr. RoseVail graduated from the University of Toledo with degrees in Commercial Studies and Business Administration. While at the University he participated in student government. He started working for United Parcel Service the week before he started at the University and was there for nearly 40 years. He held hourly positions as a loader/unloaded and delivery driver before going into management. Mr. Vail held positions in Human Resources to include Employment, Safety, and Benefits. He later became Employment Manager and then Human Resource Manager in two UPS Districts. In the early 1980’s he transferred to a Divisional Operations Manager. Assignments included major Sorting Facilities Divisions, an over-the-road FE, and then several delivery operations. Mr. Vail taught UPS National Schools and was on loan to The Southern Christian Leadership Conference for five weeks. He went on to coordinate UPS’s Management by Commitment (MBC) method of managing used by all functions and levels of management in the organization. He held this position for several years both Regionally and Nationally and coordinated teams around the country working on Service, Cost, and Production concerns. Mr. Vail was VP of Vail Products, a specialty hospital bed business the family developed, built, and distributed out of Toledo. Since retiring in 2002, Mr. Vail devotes time to The University of Toledo fund-raising, and mentoring student athletes.
Dr. Quinton Hennigh. Dr. Hennigh is an exploration geologist with 33 years’ experience, predominantly in the gold industry. He holds a M.Sc. and Ph.D. in geology and geochemistry from the Colorado School of Mines. Early in his career, he explored for gold for major mining companies including Homestake Mining Company, Newcrest Mining Ltd., and Newmont Mining Corporation. Beginning in 2007, Dr. Hennigh shifted focus to the junior mining space where he has worked for several successful gold explorers, notably Gold Canyon Resources where he led the discovery of the 5.2 million ounce Springpole gold deposit, Ontario. Currently, Dr. Hennigh is Technical and Geologic Director to Crescat Capital and is CEO of private miner, San Cristobal Mining.
On February 19, 2024, the Company issued 400,000 stock option awards to Mr. Hennigh at an exercise price of $5.00 per share, with such options vesting in 25% increments on each of the first four anniversaries of the date of the award.
Brent Omland. Mr. Omland is a 2011 graduatemining executive with 20 years of Texas Christian University in Fort Worth, Texas.
Key Employees and Consultants
Praxedis Martinez (Senior Engineer – Advisor)
College: UNIVERSIDAD DE GUANAJUATO, Guanajuato, Gto. 1964-1969. Degree: Mine Engineer and metallurgist.
Graduate School: Escuela de Graduados en Administración INSTITUTO TECNOLÓGICO Y DE ESTUDIOS SUPERIORES DE MONTERREY, México, D.F. 1978-1980
Degree: MBA.
Company CÍA Minera La Campana, S.A. DE C.V., Reforma Mine. Group: Peñoles; Engineering Department Assistant; Dec. 1969- Feb. 1970; Shift Foreman, March 1969- Dec. 1971; Supervision of mine exploration and development works such as tunnels, crosscuts and raise shafts; Stope preparation works, Stope exploitation; Mercurio Mexicano, SA. De C.V., Tiro General mine Superintendent, January 1972- Dec. 1972, Responsible for the operation of Tiro General Mine;
Servicios Industriales Peñoles, Briquetting plant Construction and other construction works inside the lead smelter of Met – Mex Peñoles in Torreon, Resident engineer, January 1973- December 1973; Responsible for supervising several contractor’s works.
Praxedis Martinez Ramos Company, Mining and ore sales, ore concentration and concentrates sales. Mine plant equipment fabrication. Metallurgical consulting and laboratory testing. Mineral Perlite expansion, January 1974 – July 1993, during this time, in society with Mr. José Luis Martínez, we exploited 6 different mines located in Zacatecas, Durango, and Coahuila States, in one of them we operated a flotation plant. In some of these mines the ore was sold as extracted to the Met-Mex Peñoles Smelter in Torreón; from some other mines the ore would be concentrated in custom flotation plants and the concentrates then sold to the Smelter; and in other cases, the ore was concentrated in our own plant, a small shop for Mine Plant Equipment was started and operated, a Mineral Perlite expansion furnace was set up, and continued working until Dec. 2003.
Desarrollos Mineros del Centro, SA. De CV., Luismin, Metallurgical Research Manager, August 1993 – January 1998, Responsible for the Research Area, which included the following laboratories: Assay, Water analysis, Metallurgical, Pilot Plant, Biotechnology, Tests were done in Flotation, Bottle roll cyanidation, Column Cyanidation Acid leach, Filtration, Thickening, Gold diagnostic leach, Mass balance, Work index (Wi) determination, Equipment calculation, Statistical analysis of plant operation, Ore Bio-oxidation, Ore Bioleaching. The Biotechnology testing was done in cooperation with Little Bear and McClelland Labs. And with Dr. Corale Bryerley as consultant.
Praxedis Martinez Ramon, Mineral Perlite expansion, Metallurgical consulting, February 1998 – December 2004, during this period I continued to operate the Perlite expansion furnace. Also, metallurgical consulting to several miners and mining Companies including Minas de San Luis;
Servicios Administrativos Luismin, SA de CV., Metallurgical troubleshooting in the Goldcorp Mexico plants, New projects metallurgical research design and supervision, January 2005 – June 2008, Part of the Technical Services Direction team, reporting to the Metallurgical manager;
SGS, Durango Laboratory, Planning and supervising test work for the different clients’ projects in Mexico, July 2008 – June 2013, together with the heads of the different section of the lab, examining the samples of ore that needed testing different of routine work;
La Salle University (ULSA), in the Laguna region, teachingexperience in the mining and construction career, August 2013 to date;
Praxedis Martinez Ramos, Privatemetals trading industry. Mr. Omland is a graduate of the University of British Columbia and a Canadian CPA. Mr. Omland has also worked in finance roles for Teck Resources and in senior finance roles for an integrated lead mining and metallurgical consulting, July 2013smelting group based in Australia (Ivernia/Enirgi Metals). He also serves on the Board of Directors for Dore Copper Mining Corp, Galantas Gold Corporation and Nicola Mining Inc., all listed on the TSX-v.
Mr. Omland was elected pursuant to date, Consultingthe terms of the Stock Purchase Agreement (the "Stock Purchase Agreement”) dated August 2, 2023, by and between the Company and Ocean Partners Holdings Limited ("Ocean Partners”) filed as Exhibit 10.2 to Minerasthe Company’s Form 8-K filed with the SEC on August 10, 2023, which is incorporated herein by reference.
Mr. Omland is the co-CEO of Ocean Partners, which purchases gold produced by the Company pursuant to that certain Gold Concentrate Purchase Agreement dated February 1, 2021, as amended (the "Offtake Agreement”), by and between the Company’s affiliate, DynaResource de DynaResourceMexico, SA de CV., since May 2017CV, and an affiliate of Ocean Partners, MK Metal Trading Mexico SA de CV, a copy of which was filed as Exhibit 10.1 to date, mainlythe Company’s Form 8-K filed with the SEC on August 10, 2023, which is incorporated herein by reference. In 2023, Ocean Partners paid the Company $35.3 million under the Offtake Agreement.
64
Involvement in the plant expansion project at San Jose de Gracía.
Certain Legal Proceedings
Bradford J. Saulter (VP. – Shareholder Relations). Attended University of Texas, Austin, Texas; Marketing Department of Metagram, Inc., a Dallas National Marketing Company; Regional Manager for Lugar, Lynch, & Associates, A Dallas Financial Services Company, Involved in Sales & Marketing of Various Investment Products; Independent Marketing Consultant; Series 22 & 63 Securities License; Vice President / Marketing - Dynacap Group Ltd. (1992 - Present); Director: Farm Partners, Inc. (1992 - Present), Vice President – Investor Relations - DynaResource, Inc., Dallas, Texas (1995 to present).
To the knowledge of the Company, no presentnone 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 formerintegrity of any director, executive officer, or person nominated to become a director or executive officer of the Company, or consultants to the Company, has ever:Company.
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ITEM 11. EXECUTIVE COMPENSATION
The following officers earned the following compensation for the years ended December 31, 2023 and 2022:
Name and Principal Position |
| Year |
| Salary |
|
| Bonus |
|
| Stock |
|
| All Other |
|
| Total Compensation |
|
| Market |
| ||||||
K.W. (“K.D.”) Diepholz |
| 2023 |
| $ | 321,000 |
|
|
| — |
| (1) | $ | 411,250 |
|
|
| — |
|
| $ | 732,250 |
|
| $ | 707,000 |
|
CEO and President |
| 2022 |
| $ | 426,000 |
|
| $ | 53,250 |
|
| $ | 411,250 |
|
|
| — |
|
| $ | 889,500 |
|
| $ | 1,281,000 |
|
Dr. Jose Vargas Lugo |
| 2023 |
| $ | 150,228 |
| (2) | $ | 75,000 |
| (4) | $ | 58,750 |
|
| $ | 66,858 |
| (3) | $ | 350,836 |
|
| $ | 101,000 |
|
Director of Operations - Mexico |
| 2022 |
| $ | 92,027 |
|
| $ | 44,008 |
|
| $ | 58,750 |
|
|
| — |
|
| $ | 194,785 |
|
| $ | 183,000 |
|
Rene L.F. Mladosich |
| 2023 |
| $ | 204,512 |
| (2) | $ | 100,000 |
| (4) | $ | 132,188 |
|
|
| — |
|
| $ | 436,700 |
|
| $ | 227,250 |
|
GM of SJG Project |
| 2022 |
| $ | 141,251 |
|
| $ | 100,310 |
|
| $ | 132,188 |
|
|
| — |
|
| $ | 373,749 |
|
| $ | 411,750 |
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(1) The CEO’s bonus for the year ended December 31, 2023 is to be determined at an upcoming meeting of the Compensation Committee and will be reported on Form 8-K.
(2) Compensation amounts paid to these executives were denominated in pesos and therefore varies from his employment agreement due to exchange rate differences.
(3) Represents payroll tax paid on behalf of the recipient in lieu of bonus.
(4) 2023 bonuses have been approved by the compensation committee to the paid in 2024.
In December 2022, the Compensation Committee approved restricted stock awards to employees, directors and consultants of the Company. 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. Each of the above named executive officers signed three-year employment agreements with the Company in July 2023 with customary terms and change of control provisions.
The following directors received the following compensation for the years ended December 31, 2021,2023 and 2020. These officers(*) do2022:
Name of Director |
| Year |
|
| Cash |
|
| Stock Awards |
|
| Total |
|
| Market Value |
| ||||
Dale Petrini |
| 2023 |
|
| $ | 75,000 |
|
| $ | 44,063 |
|
| $ | 119,063 |
|
| $ | 75,750 |
|
Independent Director |
| 2022 |
|
| $ | 25,000 |
|
| $ | 44,063 |
|
| $ | 69,063 |
|
| $ | 109,688 |
|
John C. Wasserman |
| 2023 |
|
| $ | 75,000 |
|
| $ | 44,063 |
|
| $ | 119,063 |
|
| $ | 75,750 |
|
Independent Director |
| 2022 |
|
| $ | 25,000 |
|
| $ | 44,063 |
|
| $ | 69,063 |
|
| $ | 109,688 |
|
Ronald Vail (1) |
| 2023 |
|
| $ | 70,000 |
|
| $ | — |
|
| $ | 70,000 |
|
| $ | — |
|
Independent Director |
| 2022 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Phillip Rose |
| 2023 |
|
| $ | 75,000 |
|
| $ | — |
|
| $ | 75,000 |
|
| $ | — |
|
Independent Director |
| 2022 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
(1) Mr. Vail was appointed to the board of directors in April 2023 and his compensation was prorated for his length of service in 2023.
Beginning in calendar year 2023 at the recommendation of an outside valuation consultant, the Compensation Committee approved cash compensation to the non-employee directors of $100,000 per year for service on the Company’s Board of Directors and all committees thereof. As of December 31, 2023 there was $25,000 in annual board compensation accrued but not have employment contracts withpaid for each of the Company.independent directors.
Name and principal position |
| Year |
| Salary |
|
| Bonus |
|
| Stock Awards |
|
| Option Awards |
| Non-equity incentive plan compensation |
| Nonqualified deferred compensation |
| All other compensation * | ||||
K.W. (“K.D.”) Diepholz, |
| 2021 |
| $ | 254,167 |
|
| $ | 224,375 |
|
| $ | 792,000 |
|
| None |
| None |
| None |
| None | |
CEO/President |
| 2020 |
| $ | 250,000 |
|
| None |
|
| None |
|
| None |
| None |
| None |
| None | |||
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Dr. Jose Vargas Lugo; EVP., |
| 2021 |
| $ | 42,783 |
|
| None |
|
| None |
|
| None |
| None |
| None |
| None | |||
President of México Operation |
| 2020 |
| $ | 75,707 |
|
| None |
|
| None |
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| None |
| None |
| None |
| None | |||
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Rene L.F. Mladosich; |
| 2021 |
| $ | 118,302 |
|
| None |
|
| $ | 99,000 |
|
| None |
| None |
| None |
| None | ||
GM of San Jose de Gracía Project |
| 2020 |
| $ | 101,890 |
|
| None |
|
| None |
|
| None |
| None |
| None |
| None | |||
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Pedro Ignacio Teran Cruz, |
| 2021 |
| $ | 51,055 |
|
| None |
|
| None |
|
| None |
| None |
| None |
| None | |||
Dir. of Exp. and Dev. |
| 2020 |
| $ | 52,073 |
|
| None |
|
| None |
|
| None |
| None |
| None |
| None | |||
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Bradford J. Saulter |
| 2021 |
| $ | 90,000 |
|
| None |
|
| None |
|
| None |
| None |
| None |
| None | |||
VP., Investor Relations |
| 2020 |
| $ | 90,000 |
|
| None |
|
| None |
|
| None |
| None |
| None |
| None |
65
Stock Issued to Officers and Directors
The Compensation Committee approved restricted stock awards to employees, directors and consultants of the Company. 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 28 for the next three years, subject to resignation or termination provisions. The awards totaled 1,500,000 shares of which 1,175,000 were awarded to officers and/or directors.
The Compensation Committee approved stock awards to employees, directors and consultants of the Company. The stock awards approved, issued and vested 25% immediately and the remainder vest 25% each year on December 28 for the next three years, subject to resignation or termination provisions. Officers and directors received the following restricted stock during the year ended December 31, 2022. No stock was issued for compensation during the year ended December 31, 2023.
Name of |
Officer/Director | Number of Restricted |
| Common Stock | |||||||||
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Rene L.F. Mladosich | 225,000 | |||||||||||
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Dr. Jose Vargas Lugo |
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| 75,000 | |||||||||||
Dale Petrini | 75,000 | |||||||||||
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The following presents the market value of outstanding equity awards for the Company’s named executive officers as of December 31, 2023:
Name of Named Executive Officer |
Award Type | Number of Unvested Shares | Outstanding Equity Awards at December 31, 2023 |
Koy W (“K.D.”) Diephotz | Restricted Stock | 350,000 | $ 707,000 |
Rene L.F. Mladosich | Restricted Stock | 112,500 | 227,250 |
Dr. Jose Vargas Lugo | Restricted Stock | 50,000 | 101,000 |
Board Committees
Although the Company is not a listed issuer and therefore not subject to the requirements pertaining to audit and compensation committees in Exchange Act Rules 10A-3 and 10C-1, the Company has established the following three committees of its Board of Directors:
66
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth the amount and nature of beneficial ownership of each of the executive officers and directors of the Company and each person known to be a beneficial owner of more than five percent of the issued and outstanding shares of common stock of the Company as of December 31, 2021.2023. The following table sets forth the information based on 18,091,29322,246,654 (1) common shares issued and outstanding (1) as of December 31, 2021.2023.
COMMON STOCK |
| Beneficial Owner |
| Address |
| Common Shares |
|
| Percent Ownership |
| ||
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Common Stock |
| K.W. (“K.D.”) Diepholz Chairman / CEO |
| 222 W. Las Colinas Blvd. Suite 1910 North Tower Irving, Texas 75039 |
|
| 2,265,100 |
|
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| 12.52 | % |
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Common Stock |
| Gareth Nichol |
| Denver, Colorado |
|
| 2,646,922 |
|
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| 14.63 | % |
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Common Stock |
| Dr. Jose Vargas Lugo EVP, Director |
| Plutarco Elías Calles 47 Guamúchil Sin. Mex. 81450 |
|
| 274,508 |
|
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| 1.52 | % |
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Common Stock |
| Pedro I. Teran Cruz EVP; Director |
| Hermosillo, Sonora México |
|
| 37,500 |
|
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| 0.21 | % |
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Common Stock |
| Bradford J. Saulter VP., Investor Relations |
| 222 W. Las Colinas Blvd. Suite 1910 North Tower Irving, Texas 75039 |
|
| 124,439 |
|
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| 0.69 | % |
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Common Stock |
| John C. Wasserman Director; |
| Waterville, Ohio 43566 |
|
| 134,389 |
|
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| 0.74 | % |
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Common Stock |
| Dale G. Petrini Director |
| Houston, Texas 77027 |
|
| 187,689 |
|
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| 1.04 | % |
|
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** |
| Philip A. Rose (2) Director |
| Westlake, Texas |
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| All Officers, Directors and Beneficial owners as a Group (10 holders) |
|
|
|
| 5,670,547 |
|
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| 31.34 | % |
Beneficial Owner |
|
| Shares Beneficially Owned |
|
| Percent of Outstanding |
| ||
K.W. (“K.D.”) Diepholz |
|
|
| 2,965,100 |
|
|
| 12.69 | % |
Matt Rose |
|
|
| 3,146,840 |
| (1) |
| 13.46 | % |
Gareth Nichol |
|
|
| 2,646,922 |
| (2) |
| 11.33 | % |
Rene L.F. Mladosich |
|
|
| 275,000 |
|
|
| 1.18 | % |
Dr. Jose Vargas Lugo |
|
|
| 374,508 |
|
|
| 1.60 | % |
John C. Wasserman |
|
|
| 279,317 |
|
|
| 1.20 | % |
Dale G. Petrini |
|
|
| 262,689 |
| (3) |
| 1.12 | % |
Ronald Vail |
|
|
| 245,001 |
| (4) |
| 1.05 | % |
Phillip A. Rose |
|
|
| — |
|
|
| — |
|
All Officers, Directors and Beneficial Owners as a group (9 persons) |
|
|
| 10,195,377 |
|
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| 43.63 | % |
|
(1) Does not include 1,734,992 shares of common stock issuable upon the conversion of 1,734,992 |
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No officer or director holds options which are either (a) vestedcurrently convertible or (b) will vest within 60 days.783,976 shares of common stock issuable upon the exercise of a cashless warrant which is currently exercisable.
OPTIONS/WARRANTSEquity Compensation Plans
The officers and directors and those 5% beneficial owners held the following options/warrants asAs of December 31, 2021:2023, the Company has a restricted stock award plan that the Compensation Committee approved in 2022 for employees, directors, and consultants of the Company.
None.
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 |
2022 Equity Compensation Plan (Approved by security holders in 2023 annual meeting) |
| 1,500,000 |
| N/A |
| 750,000 |
Total |
| 1,500,000 |
| N/A |
| 750,000 |
On February 19, 2024, the Board of Directors approved the DynaResource, Inc. 2024 Equity Incentive Plan (the “Plan”), which the Company intends to submit for stockholder approval at the 2024 annual meeting of stockholders. Pursuant to the Plan, the Company may issue various types of equity incentives, including stock options, restricted stock, and stock appreciation rights, to employees, directors, and consultants. The Plan has a term of 10 years and provides for the issuance of no more than an aggregate 2,700,000 shares of common stock over the life of the Plan. The Plan is administered by the Compensation Committee of the Board of Directors.
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%
|
67
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 Series |
| Beneficial Owner |
| Address |
| Preferred |
| Percent |
Series C |
| Golden Post Rail LLC |
| 1110 Post Oak Place |
| 1,734,992 |
| 100.0% |
PREFERRED SHARES (SERIES D)
Preferred Series |
| Beneficial Owner |
| Address |
| Preferred |
| Percent |
Series D |
| Dale Petrini |
| 29 Bash Pl |
| 50,000 |
| 6.58% |
Series D |
| Gareth Nichol |
| 5 Greenwood Rd |
| 500,000 |
| 65.79% |
Series D |
| Ronald Vail |
| 6766 Pine Circle Toledo, OH 43617 |
| 100,000 |
| 13.16% |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Dynacap Group Ltd.Director Independence.
The Company paid $285,999Board of Directors has determined that Dale Petrini, Phillip Rose, John Wasserman and $114,250Ronald Vail are independent directors under the definition adopted by NASDAQ in its listing rules. Dr. Quinton Hennigh and Brent Omland, who were appointed as Directors to Dynacap Group, Ltd. (“Dynacap”, an entity controlled by the CEOBoard of Directors of the Company) for consulting and other fees duringCompany on February 16, 2024 are also determined to be independent directors under the years ended December 31, 2021 and 2020, respectively. Dynacap retained two subcontractors who provided accounting, administrative and executive support services to the Company during recent years.definition adopted by NASDAQ.
Cash Advances by Management
None
Stock Issued to Management
Officers and directors received the follow stock as compensation during the year ended December 31, 2021
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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.
68
ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES
Our independent registered public accounting firm is ArmaninoDavidson & Company LLP, San Ramon, CA,Vancouver, BC, Auditor Firm ID: 32731
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 20212023 and 20202022 was $222,202$218,696 and $230,359,$130,748, respectively.
- None.
- None.
- None.
The Company doesAudit Committee has policies and procedures requiring pre-approval by the Audit Committee of the engagement of the Company’s independent auditor to perform audit services, as well as permissible non-audit services.
AUDIT SERVICES: The terms and fees for the Company’s annual audit are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit, required quarterly reviews, subsidiary audits and other procedures required to be performed by the auditor to form an opinion on our financial statements, and such other procedures including information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control. Other audit services may also include statutory audits or financial audits for subsidiaries and services associated with SEC registration statements, periodic reports and other documents filed with the SEC or used in connection with securities offerings.
AUDIT RELATED SERVICES: Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of our financial statements or that are traditionally performed by the independent auditor. Audit-related services are subject to the specific pre-approval of the Audit Committee. Audit-related services include, among others, due diligence services relating to potential business acquisitions/dispositions; accounting consultations relating to accounting, financial reporting or disclosure matters not have anclassified as audit committee.services; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; financial audits of employee benefit plans; agreed-upon or expanded audit procedures relating to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements.
TAX SERVICES: Tax services are subject to the specific pre-approval of the Audit Committee. The Audit Committee will not approve the retention of the independent auditor in connection with a transaction the sole business purpose of which may be tax avoidance and the tax treatment of which may not be supported by the Internal Revenue Code and related regulations. |
ALL OTHER SERVICES: Pre-approval by the Audit Committee is required for those permissible non-audit services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC’s rules on auditor independence. |
Not applicable.
69 |
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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10.9 | Note Purchase Agreement (incorporated by reference from the Current Report on Form 8-K filed with the SEC on July 2, 2015, Exhibit 10.1. File No. 000-30371) | |
10.11 | Multi-Party Agreement, dated as of April 19, 2023 by and among DynaResource, Inc., Golden Post Rail, LLC, MKR 2022 Grantor Retained Annuity Trust, and Koy W. (“K.D.”) Diepholz (incorporated by reference to Form 8-K dated April 26, 2023). | |
10.12 |
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23.1 | Consent of Davidson & Company LLP, Independent Registered Accounting Firm | |
23.2 | Consent of Armanino LLP, Independent Registered Public Accounting | |
101 | The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 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, 2023 and 2022, (ii) the Audited Consolidated Balance Sheets as of December 31, 2023 and 2022, (iii) the Audited Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2023 and 2022, (iv) the Audited Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022, 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) |
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* Filed herewith.
ITEM 16. 10K SUMMARY
Not Applicable.
Exhibit Number; Name72
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SIGNATURES
In accordance with Section 13 or 15(d)the requirements of the Securities Exchange Act of 1934, the CompanyRegistrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
DynaResource, Inc. | |||
Date: April 15, 2024 | By: | s/ K.W. (“K.D.”) | |
Diepholz | |||
SIGNATURES
In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
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K.W. (“KD”) Diepholz, | ||||
| Chairman |
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 | ||
| Rene LF Mladosich | |||
/s/ |
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| Dale G. Petrini |
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/s/ John C. Wasserman | /s/ Phillip Rose | ||
John C. Wasserman | Phillip Rose | ||
/s/ Ronald Vail | |||
Ronald Vail | |||
April 15, 2024 | |||
Dated |
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