SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 20222023.
OR
☐ | TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934 |
From the transition period ____________ to ___________.
Commission File Number 000-30371
DYNARESOURCE, INC. |
(Exact name of small business issuer as specified in its charter) |
Delaware |
| 94-1589426 |
(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
222 W. Las Colinas Blvd., Suite 1910 North Tower, Irving, Texas 75039
(Address of principal executive offices)
(972) 868-9066
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock | DYNR | OTC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
Non-accelerated Filer | ☐ | Smaller Reporting Company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. Yes ☐ No ☒
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2022,July 31, 2023 there were 20,746,65422,246,654 shares of Common Stock of the registrant outstanding.
TABLE OF CONTENTS
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| 7 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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CERTIFICATIONS
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2 |
Table of Contents |
DYNARESOURCE, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2022,2023 AND DECEMBER 31, 2021
(Unaudited)2022
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| 2022 |
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| 2021 |
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ASSETS |
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Current Assets |
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Cash and Cash Equivalents |
| $ | 20,951,218 |
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| $ | 15,719,238 |
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Accounts Receivable |
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| 1,512,572 |
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| 577,118 |
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Inventories |
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| 2,853,937 |
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| 2,110,203 |
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Foreign Tax Receivable |
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| 7,039,194 |
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| 4,742,180 |
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Other Current Assets |
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| 980,660 |
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| 667,742 |
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Total Current Assets |
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| 33,337,581 |
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| 23,816,481 |
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Mining Equipment and Fixtures (Net of Accumulated |
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Depreciation of $118,050 and $116,425) |
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| 1,104 |
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| 2,729 |
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Operating Lease |
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| 600,739 |
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| 648,381 |
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Mining Concessions |
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| 4,132,678 |
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| 4,132,678 |
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Other Assets |
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| 163,320 |
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| 162,174 |
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TOTAL ASSETS |
| $ | 38,235,422 |
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| $ | 28,762,443 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
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Current Liabilities: |
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Accounts Payable |
| $ | 2,542,366 |
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| $ | 1,275,679 |
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Accrued Expenses |
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| 5,373,167 |
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| 5,440,204 |
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Customer Advances |
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| 8,750,000 |
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| 9,250,000 |
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Derivative Liabilities |
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| 1,735,633 |
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| 3,898,914 |
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Convertible Notes Payable - Series I & II |
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| 543,279 |
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| 543,279 |
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Installment Notes Payable |
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| 1,943,153 |
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| 1,962,525 |
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Current Portion of Operating Lease Payable |
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| 71,244 |
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| 98,169 |
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Total Current Liabilities |
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| 20,958,842 |
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| 22,468,770 |
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Operating Lease Payable, Less Current Portion |
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| 558,914 |
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| 587,782 |
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TOTAL LIABILITIES |
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| 21,517,756 |
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| 23,056,552 |
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TEMPORARY EQUITY |
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Series C Senior Convertible Preferred Stock, $0.0001 par value, 1,734,992 shares authorized, issued and outstanding |
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| 4,337,480 |
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| 4,337,480 |
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Series D Senior Preferred Stock, $0.0001 par value, 3,000,000 shares authorized, 760,000 shares issued and outstanding |
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| 1,520,000 |
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| 1,520,000 |
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COMMITMENTS AND CONTINGENCIES |
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| 0 |
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| 0 |
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STOCKHOLDERS’ EQUITY (DEFICIT) |
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Preferred Stock, Series A, $0.0001 par value, 1,000 shares authorized, issued and outstanding |
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| 1 |
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| 1 |
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Common Stock, $0.01 par value, 40,000,000 shares authorized, 20,746,654 and 18,091,293 issued and outstanding |
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| 207,467 |
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| 180,913 |
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Preferred Rights |
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| 40,000 |
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| 40,000 |
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Additional Paid In Capital |
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| 56,022,782 |
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| 50,632,400 |
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Treasury Stock, 12,180 shares |
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| (34,773 | ) |
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| (34,773 | ) |
Accumulated Other Comprehensive Income |
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| (236,649 | ) |
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| (247,665 | ) |
Accumulated Deficit |
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| (45,138,642 | ) |
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| (50,722,465 | ) |
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) |
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| 10,860,186 |
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| (151,589 | ) |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
| $ | 38,235,422 |
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| $ | 28,762,443 |
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| 2023 |
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| 2022 |
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| (Unaudited) |
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| (Audited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 15,924,750 |
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| $ | 19,177,138 |
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Accounts receivable |
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| 1,347,391 |
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| 724,642 |
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Inventories |
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| 2,141,323 |
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| 2,720,811 |
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Foreign tax receivable |
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| 13,009,662 |
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| 9,355,863 |
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Other current assets |
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| 1,797,038 |
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| 1,145,501 |
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Total current assets |
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| 34,220,164 |
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| 33,123,955 |
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Right-of-use assets, net |
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| 525,742 |
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| 550,473 |
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Mining concessions |
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| 4,132,678 |
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| 4,132,678 |
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Deferred tax asset |
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| 4,181,625 |
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| 2,970,410 |
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Other assets |
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| 215,618 |
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| 165,396 |
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TOTAL ASSETS |
| $ | 43,275,827 |
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| $ | 40,942,912 |
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LIABILITIES. TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
| $ | 1,912,478 |
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| $ | 2,057,880 |
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Accrued expenses |
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| 9,425,094 |
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| 5,756,961 |
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Customer advances |
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| 10,000,000 |
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| 9,350,000 |
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Derivative liabilities |
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| 1,610,140 |
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| 2,172,417 |
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Current portion of operating lease payable |
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| 27,032 |
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| 28,868 |
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Installment notes payable |
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| 2,239,349 |
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| 1,968,251 |
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Total current liabilities |
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| 25,214,093 |
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| 21,334,377 |
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Operating lease payable, less current portion |
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| 531,882 |
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| 558,914 |
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TOTAL LIABILITIES |
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| 25,745,975 |
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| 21,893,291 |
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TEMPORARY EQUITY |
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Series C Senior Convertible Preferred Stock, $0.0001 par value, 1,734,992 shares authorized, issued and outstanding |
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| 4,337,480 |
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| 4,337,480 |
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Series D Senior Convertible Preferred Stock, $0.0001 par value, 3,000,000 shares authorized, 760,000 shares issued and outstanding |
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| 1,520,000 |
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| 1,520,000 |
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COMMITMENTS AND CONTINGENCIES |
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| - |
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| - |
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STOCKHOLDERS’ EQUITY |
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Preferred Stock, Series A, $0.0001 par value, 1,000 shares authorized, 0 and 1,000 issued and outstanding |
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| - |
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| 1 |
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Common Stock, $0.01 par value, 40,000,000 shares authorized 22,246,654 issued and outstanding |
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| 222,467 |
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| 222,467 |
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Preferred rights |
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| 40,000 |
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| 40,000 |
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Additional paid-in-capital |
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| 55,639,032 |
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| 56,889,031 |
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Treasury stock, 37,180 and 12,180 shares each period, at cost |
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| (95,023 | ) |
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| (34,773 | ) |
Accumulated other comprehensive income |
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| 463,295 |
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| 112,078 |
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Accumulated deficit |
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| (44,597,399 | ) |
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| (44,036,663 | ) |
TOTAL STOCKHOLDERS’ EQUITY |
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| 11,672,372 |
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| 13,192,141 |
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TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY |
| $ | 43,275,827 |
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| $ | 40,942,912 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
3 |
Table of Contents |
DYNA RESOURCE,DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 20222023 AND 20212022
(Unaudited)
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| Three Months June 30, 2022 |
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| Three Months June 30, 2021 |
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| Six Months June 30, 2022 |
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| Six Months June 30, 2021 |
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| Three Months June 30, 2023 |
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| Three Months June 30, 2022 |
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| Six Months June 30, 2023 |
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| Six Months June 30, 2022 |
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REVENUES |
| $ | 10,098,010 |
| $ | 10,526,313 |
| $ | 20,590,513 |
| $ | 15,439,025 |
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| $ | 10,912,169 |
| $ | 10,098,010 |
| $ | 22,865,248 |
| $ | 20,590,513 |
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COSTS AND EXPENSES OF MINING OPERATIONS |
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Production Costs Applicable to Sales |
| 1,147,235 |
| 778,885 |
| 1,912,730 |
| 1,160,151 |
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| 2,055,513 |
| 1,147,235 |
| 3,766,775 |
| 1,912,730 |
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Mine Production Costs |
| 1,611,371 |
| 1,442,932 |
| 2,839,255 |
| 2,249,402 |
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| 2,939,522 |
| 1,611,371 |
| 5,468,959 |
| 2,839,255 |
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Mine Exploration Costs |
| 1,578,780 |
| 1,273,241 |
| 2,456,968 |
| 2,285,989 |
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| 2,247,024 |
| 1,578,780 |
| 4,463,973 |
| 2,456,968 |
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Facilities Expansion Costs |
| 2,362,804 |
| 0 |
| 2,971,407 |
| 0 |
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| 539,593 |
| 2,362,804 |
| 824,671 |
| 2,971,407 |
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Exploration Drilling |
| 734,575 |
| 0 |
| 1,222,190 |
| 0 |
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| 627,875 |
| 734,575 |
| 1,125,275 |
| 1,222,190 |
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Camp, Warehouse and Facilities |
| 1,410,825 |
| 723,527 |
| 2,236,028 |
| 1,258,722 |
|
| 1,426,280 |
| 1,410,825 |
| 2,508,459 |
| 2,236,028 |
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Transportation |
| 719,574 |
| 355,134 |
| 1,110,214 |
| 593,698 |
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| 794,486 |
| 719,574 |
| 1,540,549 |
| 1,110,214 |
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Property Holding Costs |
| 36,814 |
| 36,903 |
| 72,781 |
| 79,650 |
|
| 41,670 |
| 36,814 |
| 81,191 |
| 72,781 |
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General and Administrative |
| 1,117,742 |
| 651,992 |
| 2,144,097 |
| 1,166,969 |
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| 2,265,390 |
| 1,117,742 |
| 5,230,983 |
| 2,144,097 |
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Depreciation and Amortization |
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| 813 |
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| 813 |
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| 1,625 |
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| 1,625 |
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| - |
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| 813 |
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| - |
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| 1,625 |
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Total Operating Expenses |
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| 10,720,533 |
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| 5,263,427 |
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| 16,967,295 |
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| 8,796,206 |
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| 12,937,353 |
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| 10,720,533 |
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| 25,010,835 |
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| 16,967,295 |
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NET OPERATING INCOME (LOSS) |
| (622,523 | ) |
| 5,262,886 |
| 3,623,218 |
| 6,642,819 |
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| (2,025,184 | ) |
| (622,523 | ) |
| (2,145,587 | ) |
| 3,623,218 |
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OTHER INCOME (EXPENSE) |
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Foreign Currency Gains (Losses) |
| 40,192 |
| 470,016 |
| 37,790 |
| 136,281 |
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Foreign Currency Gains |
| 15,973 |
| 40,192 |
| 34,227 |
| 37,790 |
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Interest Expense |
| (121,736 | ) |
| (369,197 | ) |
| (241,505 | ) |
| (730,419 | ) |
| (107,867 | ) |
| (121,736 | ) |
| (224,175 | ) |
| (241,505 | ) | ||||||||
Derivatives Adj. Mark-to-Market Gain (Loss) |
| 1,224,575 |
| 210,151 |
| 2,163,281 |
| (185,116 | ) | |||||||||||||||||||||||
Arbitration Award Expense |
| 0 |
| (1,111,111 | ) |
| 0 |
| (1,111,111 | ) | ||||||||||||||||||||||
Derivatives Mark-to-Market Gain |
| 392,843 |
| 1,224,575 |
| 562,277 |
| 2,163,281 |
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Other Income (Expense) |
|
| 513 |
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|
| 0 |
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|
| 1,039 |
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| 0 |
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|
| (2,398 | ) |
|
| 513 |
|
|
| 1,307 |
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|
| 1,039 |
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Total Other Income (Expense) |
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| 1,143,544 |
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|
| (800,141 | ) |
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| 1,960,605 |
|
|
| (1,890,365 | ) |
|
| 298,551 |
|
|
| 1,143,544 |
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|
| 373,636 |
|
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| 1,960,605 |
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NET INCOME BEFORE TAXES |
| 521,021 |
| 4,462,745 |
| 5,583,823 |
| 4,752,454 |
| |||||||||||||||||||||||
NET INCOME (LOSS) BEFORE TAXES |
| (1,726,633 | ) |
| 521,021 |
| (1,771,951 | ) |
| 5,583,823 |
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INCOME TAXES |
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| 0 |
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| 0 |
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| 0 |
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| 0 |
| ||||||||||||||||
INCOME TAXES (BENEFIT) |
|
| (1,134,192 | ) |
|
| - |
|
|
| (1,211,215 | ) |
|
| - |
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NET INCOME |
| $ | 521,021 |
| $ | 4,462,745 |
| $ | 5,583,823 |
| $ | 4,752,454 |
| |||||||||||||||||||
DEEMED DIVIDEND FOR SERIES C PREFERRED |
| $ | (58,575 | ) |
| (43,375 | ) |
| (117,150 | ) |
| (86,750 | ) | |||||||||||||||||||
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS |
| $ | 462,446 |
|
| $ | 4,419,370 |
|
| $ | 5,446,673 |
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| $ | 4,665,704 |
| ||||||||||||||||
NET INCOME (LOSS) |
| $ | (592,441 | ) |
| $ | 521,021 |
| $ | (560,736 | ) |
| $ | 5,583,823 |
| |||||||||||||||||
DEEMED DIVIDEND FOR SERIES C AND D PREFERRED |
| $ | (58,575 | ) |
| (58,575 | ) |
| (117,150 | ) |
| (117,150 | ) | |||||||||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS |
| $ | (651,016 | ) |
| $ | 462,446 |
|
| $ | (677,886 | ) |
| $ | 5,466,673 |
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EARNINGS PER SHARE DATA ATTRIBUTABLE TO THE EQUITY HOLDERS OF DYNARESOURCE, INC: |
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EARNINGS (LOSS) PER SHARE DATA ATTRIBUTABLE TO THE EQUITY HOLDERS OF DYNARESOURCE, INC: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Basic Earnings per Common Share |
| $ | 0.03 |
| $ | 0.25 |
| $ | 0.30 |
| $ | 0.26 |
| |||||||||||||||||||
Diluted Earnings per Common Share |
| $ | 0.03 |
| $ | 0.24 |
| $ | 0.30 |
| $ | 0.25 |
| |||||||||||||||||||
Basic Earnings (Loss) per Common Share |
| $ | (0.03 | ) |
| $ | 0.03 |
| $ | (0.03 | ) |
| $ | 0.30 |
| |||||||||||||||||
Diluted Earnings (Loss) per Common Share |
| $ | (0.03 | ) |
| $ | 0.03 |
| $ | (0.03 | ) |
| $ | 0.30 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Weighted Average Shares Outstanding, Basic |
| 17,810,364 |
| 17,722,825 |
| 18,135,305 |
| 17,722,825 |
|
| 22,246,654 |
| 17,810,364 |
| 22,246,654 |
| 18,135,305 |
| ||||||||||||||
Weighted Average Shares Outstanding, Diluted |
| 18,702,529 |
| 18,945,827 |
| 19,027,470 |
| 18,945,827 |
|
| 22,246,654 |
| 18,702,529 |
| 22,246,654 |
| 19,027,470 |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
OTHER COMPREHENSIVE INCOME |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Foreign Currency Exchange Gains (Losses) |
|
| 312,928 |
|
|
| (663,778 | ) |
|
| 11,016 |
|
|
| (371,407 | ) | ||||||||||||||||
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) |
|
| 312,928 |
|
|
| (663,778 | ) |
|
| 11,016 |
|
|
| (371,407 | ) | ||||||||||||||||
TOTAL COMPREHENSIVE INCOME |
| $ | 833,949 |
|
| $ | 3,798,967 |
|
| $ | 5,594,839 |
|
| $ | 4,381,047 |
| ||||||||||||||||
Foreign Currency Exchange Gains |
|
| 259,976 |
|
|
| 312,928 |
|
|
| 351,217 |
|
|
| 11,016 |
| ||||||||||||||||
TOTAL OTHER COMPREHENSIVE INCOME |
|
| 259,976 |
|
|
| 312,928 |
|
|
| 351,217 |
|
|
| 11,016 |
| ||||||||||||||||
TOTAL COMPREHENSIVE INCOME (LOSS) |
| $ | (332,465 | ) |
| $ | 833,949 |
|
| $ | (209,519 | ) |
| $ | 5,594,839 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4 |
Table of Contents |
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THREE AND SIX MONTHS ENDED JUNE 30, 2022,2023 AND 20212022
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Preferred A |
|
| Common |
|
| Preferred |
|
| Preferred |
|
| Paid In |
|
| Treasury |
|
| Treasury |
|
| Other Comp |
|
| Accumulated |
|
|
|
| ||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Rights |
|
| Amount |
|
| Capital |
|
| Shares |
|
| Amount |
|
| Income |
|
| Deficit |
|
| Totals |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
THREE MONTHS ENDED JUNE 30, 2021 |
| |||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2021 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 17,722,825 |
|
| $ | 177,228 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 50,407,333 |
|
|
| 516,480 |
|
| $ | (1,474,486 | ) |
| $ | 730,463 |
|
| $ | (58,967,119 | ) |
| $ | (9,086,580 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (663,778 | ) |
|
|
|
|
|
| (663,778 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,462,745 |
|
|
| 4,462,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 17,722,825 |
|
| $ | 177,228 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 50,407,333 |
|
|
| 516,480 |
|
| $ | (1,474,486 | ) |
| $ | 66,685 |
|
| $ | (54,504,374 | ) |
| $ | (5,287,613 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED JUNE 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 18,091,293 |
|
| $ | 180,913 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 50,632,400 |
|
|
| 12,180 |
|
| $ | (34,773 | ) |
| $ | (549,577 | ) |
| $ | (45,659,663 | ) |
| $ | 4,609,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Warrant Exercised |
|
|
|
|
|
|
|
|
|
| 2,655,361 |
|
|
| 26,554 |
|
|
|
|
|
|
|
|
|
|
| 5,390,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,416,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 312,928 |
|
|
|
|
|
|
| 312,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 521,021 |
|
|
| 521,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2022 |
|
| 1,000 |
|
| $ | - |
|
|
| 20,746,654 |
|
| $ | 207,467 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 56,022,782 |
|
|
| 12,180 |
|
| $ | (34,773 | ) |
| $ | (236,649 | ) |
| $ | (45,138,642 | ) |
| $ | 10,860,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIX MONTHS ENDED JUNE 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance January 1, 2021 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 17,722,825 |
|
| $ | 177,228 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 50,407,333 |
|
|
| 516,480 |
|
| $ | (1,474,486 | ) |
| $ | 438,092 |
|
| $ | (59,256,828 | ) |
| $ | (9,668,660 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (371,407 | ) |
|
|
|
|
|
| (371,407 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,752,454 |
|
|
| 4,752,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 17,722,825 |
|
| $ | 177,228 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 50,407,333 |
|
|
| 516,480 |
|
| $ | (1,474,486 | ) |
| $ | 66,685 |
|
| $ | (54,504,374 | ) |
| $ | (5,287,613 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIX MONTHS ENDED JUNE 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance January 1, 2022 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 18,091,293 |
|
| $ | 180,913 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 50,632,400 |
|
|
| 12,180 |
|
| $ | (34,773 | ) |
| $ | (247,665 | ) |
| $ | (50,722,465 | ) |
| $ | (151,589 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Warrant Exercised |
|
|
|
|
|
|
|
|
|
| 2,655,361 |
|
|
| 26,554 |
|
|
|
|
|
|
|
|
|
|
| 5,390,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,416,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,016 |
|
|
|
|
|
|
| 11,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,583,823 |
|
|
| 5,583,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2022 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 20,746,654 |
|
| $ | 207,467 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 56,022,782 |
|
|
| 12,180 |
|
| $ | (34,773 | ) |
| $ | (236,649 | ) |
| $ | (45,138,642 | ) |
| $ | 10,860,186 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
|
| Preferred A |
|
| Common |
|
| Preferred |
|
| Preferred |
|
| Paid In |
|
| Treasury |
|
| Treasury |
|
| Other Comp |
|
| Accumulated |
|
|
|
| ||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Rights |
|
| Amount |
|
| Capital |
|
| Shares |
|
| Amount |
|
| Income |
|
| Deficit |
|
| Totals |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
THREE MONTHS ENDED JUNE 30, 2022 |
| |||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 18,091,293 |
|
| $ | 180,913 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 50,632,400 |
|
|
| 12,180 |
|
| $ | (34,773 | ) |
| $ | (549,577 | ) |
| $ | (45,659,663 | ) |
| $ | 4,609,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Warrant Exercised |
|
|
|
|
|
|
|
|
|
| 2,655,361 |
|
|
| 26,554 |
|
|
|
|
|
|
|
|
|
|
| 5,390,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,416,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 312,928 |
|
|
|
|
|
|
| 312,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 521,021 |
|
|
| 521,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2022 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 20,746,654 |
|
| $ | 207,467 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 56,022,782 |
|
|
| 12,180 |
|
| $ | (34,773 | ) |
| $ | (236,649 | ) |
| $ | (45,138,642 | ) |
| $ | 10,860,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED JUNE 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2023 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 22,246,654 |
|
| $ | 222,467 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 56,889,031 |
|
|
| 12,180 |
|
| $ | (34,773 | ) |
| $ | 203,319 |
|
| $ | (44,004,958 | ) |
| $ | 13,315,087 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of Series A Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,000 |
|
|
| (1,250,000 | ) |
|
|
|
|
|
|
|
|
|
| (1,250,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of Series A Stock |
|
| (1,000 | ) |
|
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,249,999 | ) |
|
| (1,000 | ) |
|
| 1,250,000 |
|
|
|
|
|
|
|
|
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of Treasury Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25,000 |
|
|
| (60,250 | ) |
|
|
|
|
|
|
|
|
|
| (60,250 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 259,976 |
|
|
|
|
|
|
| 259,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (592,441 | ) |
|
| (592,441 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2023 |
|
| - |
|
| $ | - |
|
|
| 22,246,654 |
|
| $ | 222,467 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 55,639,032 |
|
|
| 37,180 |
|
| $ | (95,023 | ) |
| $ | 463,295 |
|
| $ | (44,597,399 | ) |
| $ | 11,672,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIX MONTHS ENDED JUNE 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
Balance January 1, 2022 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 18,091,293 |
|
| $ | 180,913 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 50,632,400 |
|
|
| 12,180 |
|
| $ | (34,773 | ) |
| $ | (247,665 | ) |
| $ | (50,722,465 | ) |
| $ | (151,589 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Warrant Exercised |
|
|
|
|
|
|
|
|
|
| 2,655,361 |
|
|
| 26,554 |
|
|
|
|
|
|
|
|
|
|
| 5,390,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,416,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,016 |
|
|
|
|
|
|
| 11,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,583,823 |
|
|
| 5,583,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2022 |
|
| 1,000 |
|
| $ | 1 |
|
|
| 20,746,654 |
|
| $ | 207,467 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 56,022,782 |
|
|
| 12,180 |
|
| $ | (34,773 | ) |
| $ | (236,649 | ) |
| $ | (45,138,642 | ) |
| $ | 10,860,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIX MONTHS ENDED JUNE 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||
Balance January 1, 2023 |
|
| 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of Series A Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,000 |
|
|
| (1,250,000 | ) |
|
|
|
|
|
|
|
|
|
| (1,250,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of Series A Stock |
|
| (1,000 | ) |
|
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,249,999 | ) |
|
| (1,000 | ) |
|
| 1,250,000 |
|
|
|
|
|
|
|
|
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of Treasury Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25,000 |
|
|
| (60,250 | ) |
|
|
|
|
|
|
|
|
|
| (60,250 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 351,217 |
|
|
|
|
|
|
| 351,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (560,736 | ) |
|
| (560,736 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2023 |
|
| - |
|
| $ | 0 |
|
|
| 22,246,654 |
|
| $ | 222,467 |
|
|
| 1 |
|
| $ | 40,000 |
|
| $ | 55,639,032 |
|
|
| 37,180 |
|
| $ | (95,023 | ) |
| $ | 463,295 |
|
| $ | (44,597,399 | ) |
| $ | 11,672,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements. |
5 |
Table of Contents |
DYNARESOURCE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2022,2023 AND 20212022
(Unaudited)
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITES: |
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
| $ | 5,583,823 |
| $ | 4,752,454 |
| |||||||||
Adjustments to reconcile net income to cash used in operating activities |
|
|
|
|
| |||||||||||
Change in Derivatives |
| (2,163,281 | ) |
| 185,116 |
| ||||||||||
Net Income (Loss) |
| $ | (560,736 | ) |
| $ | 5,583,823 |
| ||||||||
Adjustments to reconcile net income (loss) to cash used in operating activities |
|
|
|
|
| |||||||||||
Change in Fair Value of Derivatives |
| (562,277 | ) |
| (2,163,281 | ) | ||||||||||
Depreciation and Amortization |
| 1,625 |
| 1,625 |
|
| - |
| 1,625 |
| ||||||
Amortization of Loan Discount |
| 0 |
| 274,623 |
| |||||||||||
Operating Lease Assets |
| 24,731 |
| 47,642 |
| |||||||||||
Deferred Taxes |
| (1,211,215 | ) |
| - |
| ||||||||||
Change in Operating Assets and Liabilities |
|
|
|
|
|
|
|
|
|
| ||||||
Accounts Receivable |
| (935,454 | ) |
| (2,988,252 | ) |
| (622,749 | ) |
| (935,454 | ) | ||||
Inventories |
| (743,734 | ) |
| (760,869 | ) |
| 579,488 |
| (743,734 | ) | |||||
Foreign Tax Receivable |
| (2,297,014 | ) |
| (1,024,312 | ) |
| (3,653,799 | ) |
| (2,297,014 | ) | ||||
Operating Lease Assets |
| 47,642 |
| 42,331 |
| |||||||||||
Other Assets |
| (314,064 | ) |
| 975,119 |
|
| (701,759 | ) |
| (314,064 | ) | ||||
Accounts Payable |
| 1,266,687 |
| (910,394 | ) |
| (145,402 | ) |
| 1,266,687 |
| |||||
Accrued Expenses |
| (67,037 | ) |
| 1,019,905 |
|
| 3,668,133 |
| (67,037 | ) | |||||
Customer Advances |
| (500,000 | ) |
| 6,750,000 |
|
| 650,000 |
| (500,000 | ) | |||||
Lease Liabilities |
|
| (55,793 | ) |
|
| (46,140 | ) |
|
| (28,868 | ) |
|
| (55,793 | ) |
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES |
| (176,600 | ) |
| 8,271,206 |
| ||||||||||
CASH FLOWS USED IN OPERATING ACTIVITIES |
| (2,564,453 | ) |
| (176,600 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
| |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| |||||||||||
Proceeds from Exercise of Stock Warrants |
| 5,416,936 |
| 0 |
|
| - |
| 5,416,936 |
| ||||||
Purchase of Series A Preferred Stock |
| (1,250,000 | ) |
| - |
| ||||||||||
Acquisition of Treasury Stock |
| (60,250 | ) |
| - |
| ||||||||||
Payments of Notes Payable |
|
| (59,015 | ) |
|
| (36,460 | ) |
|
| - |
|
|
| (59,015 | ) |
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES |
| 5,357,921 |
| (36,460 | ) |
| (1,310,250 | ) |
| 5,357,921 |
| |||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Effects of Foreign Exchange |
|
| 50,659 |
|
|
| (373,802 | ) | ||||||||
Effects of Foreign Currency |
|
| 622,315 |
|
|
| 50,659 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
| 5,231,980 |
| 7,860,944 |
|
| (3,252,388 | ) |
| 5,231,980 |
| |||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
| 15,719,238 |
|
|
| 1,504,016 |
|
|
| 19,177,138 |
|
|
| 15,719,238 |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
| $ | 20,951,218 |
|
|
| 9,364,960 |
|
| $ | 15,924,750 |
|
| $ | 20,951,218 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
SUPPLEMENTAL DISCLOSURES |
|
|
|
|
|
|
|
|
|
| ||||||
Cash Paid for Interest |
| $ | 44,410 |
|
| $ | 243,979 |
|
| $ | - |
|
| $ | 44,410 |
|
Cash Paid for Income Taxes |
| $ | 0 |
|
| $ | 0 |
|
| $ | 200,000 |
|
| $ | - |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6 |
Table of Contents |
DYNARESOURCE, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2022 AND 20212023
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities, History and Organization
DynaResource, Inc. (the “Company” or “DynaResource”) was organized September 28, 1937, as a California corporation under the name of West Coast Mines, Inc. In 1998, the Company re-domiciled to Delaware and changed its name to DynaResource, Inc. The Company is in the business of acquiring, investing in, and developing precious metal properties, and the production of precious metals.
In 2000, the Company formed a wholly owned subsidiary, DynaResource de México S.A. de C.V., chartered in México (“DynaMéxico”). This Company was formed to acquire, invest in and develop resource properties in México. DynaMéxico owns a portfolio of mining concessions that currently includes its interests in the San José de Gracia Project (“SJG”) in northern Sinaloa State, México. The SJG District covers 9,920 hectares (24,513 acres) on the west side of the Sierra Madre mountainMountain range. The Company currently owns 100% of the outstanding capital of DynaMéxico. A 20% minority interest in Dyna México was held by Goldgroup Resources Inc., a wholly owned subsidiary of Goldgroup Mining Inc. Vancouver BC (“Goldgroup”) until February 24, 2020.
In 2005, the Company formed DynaResource Operaciones de San José De Gracia S.A. de C.V. (“DynaOperaciones”) and acquired control of Mineras de DynaResource, S.A. de C.V. (formerly Minera Finesterre S.A. de C.V., “DynaMineras”). The Company owns 100% of DynaMineras.
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 reporting standard widely recognized in the mining industry.
Significant Accounting Policies
The Company’s management selects accounting principles generally accepted in the United States of America and adopts methods for their application. The application of accounting principles requires the estimating, matching and timing of revenues and expenses. The accounting policies used conform to generally accepted accounting principles which have been consistently applied in the preparation of these financial statements.
The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. Management acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that: 1)(1) recorded transactions are valid; 2)(2) valid transactions are recorded; and 3)(3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods presented.
Basis of Presentation
The Company prepares its unaudited consolidated financial statements on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States.
Correction of an Error
The derivative liability in the Company’s December 31, 2022 balance sheet presented herein has been corrected to $2,172,417 from $2,334,377 from the Company’s Form 10-K which was filed with the Securities and Exchange Commission on April 17, 2023. The error was a typographical error made in that single line item and it did not impact any other financial statement balances including total liabilities, net income, earnings per share, or management compensation.
7 |
Table of Contents |
Use of Estimates
In order to prepare unaudited consolidated financial statements in conformity with accounting principles generally accepted in the United States, management must make estimates, judgments and assumptions that affect the amounts reported in the unaudited consolidated financial statements and determines whether contingent assets and liabilities, if any, are disclosed in the unaudited consolidated financial statements. The ultimate resolution of issues requiring these estimates and assumptions could differ significantly from resolution currently anticipated by management and on which the financial statements are based.
Principles of Consolidation
The unaudited consolidated financial statements include the accounts of DynaResource, Inc., as well as DynaResource de México, S.A. de C.V. (100% ownership), DynaResource Operaciones S.A. de C.V. (100% ownership) and Mineras de DynaResource S.A. de C.V. (100% ownership). All significant inter-company transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated.
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 June 30, 20222023, the Company had $19,076,828 ofhas $14,388,760 in deposits in U.S. Banksbanks in excess of the FDIC limit. Management does not believeThe Company reduces this risk by maintaining such deposits at high quality financial institutions that the Company is at risk of loss on cash.management believes are creditworthy.
Accounts Receivable and Allowances for Doubtful Accounts
The Company maintains an allowance for doubtful accounts receivable is recorded when receivables are considered to be doubtful of collection.based upon its customers’ financial condition and payment history, and its historical collection experience and expected collectability. As of June 30, 2022,2023 and December 31, 2021, respectively,2022, no allowance has been deemed necessary.
Foreign Tax Receivable
Foreign Tax Receivable is comprised of recoverable value-added taxes (“IVA”) charged by the Mexican government on goods and services rendered. Under certain circumstances, these taxes are recoverable by filing a tax return. Amounts paid for IVA are tracked and held as receivables until the funds are remitted. The total amounts of the IVA receivable as of June 30, 2022, and December 31, 2021 are $7,039,194 and $4,742,180, respectively.
Inventory
Inventories are carried at the lower of cost or net realizable value and consist of mined tonnage, gravity and flotation concentrates, and gravity tailings or flotation feed material. The inventories are $2,853,937 and $2,110,203 as of June 30, 2022, and December 31, 2021, respectively.
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.
8 |
Table of Contents |
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 includes diluting materials and allowances 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 June 30, 2022,2023, the Company fitsmeets the definition of an exploration stage issuer which is defined as an issuer that has no material property with established proven and probable mineral reserves disclosed. An exploration stage property is a property that has no mineral reserves disclosed.as defined by Regulation S-K, Item 1300.
Property, Plant & Equipment
Substantially all mine development costs,property, plant and equipment at the 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’s corporate office, are being amortized over the term of the lease of 10 years. As of June 30, 2023, all property, plant and equipment are fully depreciated or amortized.
Design, Construction, and Development Costs: Mine development costs include engineering and metallurgical studies, drilling and other related costs to delineate an ore body, the removal of overburden to initially expose an ore body at open pit surface mines, and the building of access ways, shafts, lateral access, drifts, ramps and other infrastructure at underground mines.
When proven and probable reserves (as defined by Reg. 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’s properties, the design, construction and development costs are not capitalized at any of the Company’s properties, and accordingly, substantially all such costs are expensed as incurred, resulting in the Company reporting higher operating costs than if such expenditures had been capitalized. Additionally, the Company does not have a corresponding depreciation or amortization of these costs going forward since such costs were expensed as incurred as opposed to being capitalized. As a result of these and other differences, the Company’s financial statements may not be comparable to the financial statements of mining companies that have established reserves.
Mineral Property Interests
Mineral property interests include acquired interests in development and exploration stage properties and are considered tangible assets. The amount capitalized relating to a mineral property interest represents its fair value at the time of acquisition. When a property does not contain mineralized material that satisfies the definition of proven and probable reserves, such as with the San José de Gracia Property, capitalized costs and mineral property interests are amortized using the straight-line method once production begins. As of June 30, 2022, the mining interests have been in the pilot production stage and therefore, no amortization has been expensed. Mining properties consist of 33 mining concessions covering approximately 9,920 hectares at the San José de Gracia property, the basis of which are amortized on the unit of production method based on estimated recoverable resources.property. If it is determined that the deferred costs related to a property are not recoverable over its productive life, those costs will be written down to fair value as a charge to operations in the period in which the determination is made. The amounts at which mineral properties and the related costs are recorded do not necessarily reflect present or future values.
9 |
Table of Contents |
Impairment of Assets: The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Mineral properties are monitored for impairment based on factors such as mineral prices, government regulation and taxation, the Company’s continued right to explore the area, exploration reports, assays, technical reports, drill results and its continued plans to fund exploration programs on the property.
For operating mines, recoverability is measured by comparing the undiscounted future net cash flows to the net book value. When the net book value exceeds future net undiscounted cash flows, an impairment loss is measured and recorded based on the excess of the net book value over fair value. Fair value for operating mines is determined using a combined approach, which uses a discounted cash flow model for the existing operations and a market approach for the fair value assessment of exploration land claims. Future cash flows are estimated based on quantities of recoverable mineralized material, expected gold and silver prices (considering current and historical prices, trends and related factors), production levels, operating costs, capital requirements and reclamation costs, all based on life-of-mine plans. The term “recoverable mineralized material” refers to the estimated amount of gold or other commodities that will be obtained after considering losses during processing and treatment of mineralized material. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company’s estimates of future cash flows are based on numerous assumptions, and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold, and silver, commodity prices, production levels and costs and capital are each subject to significant risks and uncertainties.
The recoverability of the book value of each property will be assessed annually for indicators of impairment such as adverse changes to any of the following:
· | estimated recoverable ounces of gold, silver or other precious minerals; |
· | estimated future commodity prices; |
· | estimated expected future operating costs, capital expenditures and reclamation expenditures. |
A write-down to fair value will be recorded when the expected future cash flow is less than the net book value of the property, or when events or changes in the property indicate that carrying amounts are not recoverable. This analysis will be completed as needed, and at least annually.needed. As of the date of this filing, no events have occurred that would require the write-down of any assets. As of June 30, 2022,2023 and December 31, 2021,2022, no indications of impairment existed.
Asset Retirement Obligation
As the Company is not obligated to remediate the mining properties, no Asset Retirement Obligation (“ARO”) has been established. Changes in regulations or laws, any instances of non-compliance with laws or regulations that result in fines, or any unforeseen environmental contamination could result in a material impact to the amounts charged to operations for reclamation and remediation. Significant judgments and estimates are made when estimating the fair value of AROs. Expected cash flows relating to AROs could occur over long periods of time and the assessment of the extent of environmental remediation work is highly subjective. Considering all of these factors that go into the determination of an ARO, the fair value of the AROs can materially change over time.
Property Holding Costs
Holding costs to maintain a property on a care and maintenance basis are expensed in the period they are incurred. These costs include security and maintenance expenses, lease and claim fees and payments, and environmental monitoring and reporting costs.
10 |
Table of Contents |
Exploration Costs
Exploration costs, are charged to operations and expensed as incurred. Exploration,including exploration, development, direct field costs and related administrative costs are expensed in the period incurred.
Leases
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.
Transactions in and Translations of Foreign Currency
The functional currency for the subsidiaries of the Company is the Mexican Peso. As a result, the financial statements of the subsidiaries have been translated from Mexican Pesos into U.S. dollars using (i) yearendyear-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 unaudited financial statements of the subsidiaries should not be construed as representations that Mexican Pesos have been, could have been or may in the future be converted into U.S. dollars at such rates or any other rates.
Relevant exchange rates used in the preparation of the unaudited financial statements for the subsidiaries are as follows for the periods ended June 30, 2022,2023, and December 31, 20212022 (Mexican Pesos per one U.S. dollar):
|
| |||||||
|
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Current Exchange Rate |
|
| 17.12 |
|
|
| 19.48 |
|
Relevant exchange rates used in the preparation of the income statement portion of unaudited financial statements for the subsidiaries are as follows for the periods ended June 30, 2022,2023 and June 20, 20212022 (Mexican Pesos per one U.S. dollar):
|
| |||||||
|
|
| June 30, 2023 |
|
| June 30, 2022 |
| ||
Weighted Average Exchange Rate for the Six Months Ended |
|
| 18.17 |
|
|
| 20.27 |
|
The Company recorded currency transaction gains (losses) of $37,790$34,227 and $136,281$37,790 for the six months ended June 30, 20222023 and 2021,2022, 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 is taxed isin accordance with applicable Mexican tax law and enacted rates.
11 |
|
Table of Contents |
Comprehensive Income (Loss)
ASC 220 “Comprehensive Income” establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The Company’s comprehensive income (loss) 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 follows ASC 606 “Revenue from contractsContracts with customersCustomers”. The Company generates revenue by selling gold and silver concentrate 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. The revenue is adjusted upon final settlement of the sale. The chief risk associated with the recognition of sales on a provisional basis is the fluctuation (if any) between the estimated quantities of precious metals base on the initial assay and the actual recovery from treatment and processing.
As of June 30, 2022,2023, there are $8,750,000$10,000,000 in customer deposit liabilities for payments received in advance, all of which are expected to be settled, by the delivery of product, in 2022.the third quarter of 2023.
During the six months ended June 30, 2022,2023, and the year ended December 31, 2021,2022, there was $9,350,000 and $9,250,000, and $1,500,000respectively of revenue recognized during the period from customer deposit liabilities (deferred contract revenue) from prior periods, and $0 ofno customer deposits were refunded to the customer due to order cancellation.
We have elected to account for shippingShipping and handling costs asare considered fulfillment costs after the customer obtains control of the goods.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash, receivables, payables and long-term debt. The carrying amount of cash, receivableCash, receivables and payables approximatesapproximate fair value because of the short-term nature of these items. The carrying amountAs of June 30, 2023 and December 31, 2022, there were no long-term debt approximatesassets or liabilities, measured at their estimated fair value due to the relationship between the interest rate on long-term debt and the Company’s incremental risk adjusted borrowing rate.value.
Earnings (Loss) Per Share Amounts
Earnings (loss) per share, attributable to the common equity holders of DynaResource, 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 (loss) per share areis 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 (loss) per share computation in periods where the Company has incurred a net loss attributable to the common equity holders or where the average stock price was below the exercise price of the respective potentially dilutive common share, as their effect would be considered anti-dilutive.
The For the six months ended June 30, 2023, the Company had warrants outstanding at June 30, 2022 which upon exercise, would result in the issuance3,518,540 of 892,165potentially dilutive common shares of common stock. The warrants were exercisable at $.01 per share. The Company also had convertible debt instruments as of June 30, 2022 which, upon conversion at valuations of $2.50that have been excluded from diluted earnings per share, as their effect would result inbe considered anti-dilutive due to the issuance of 217,312 shares ofnet loss for the quarter attributable to the common stock.equity holders.
The Company had warrants outstanding at December 31, 2021 which upon exercise, would result in the issuance of 3,060,998 shares of common stock. Of these warrants, 2,168,833 were exercisable at $2.04 per share and 892,615 were exercisable at $.01 per share. The Company also had convertible debt instruments as of December 31, 2021 which, upon conversion at valuations of $2.50 per share, would result in the issuance of 217,312 shares of common stock.
|
| Six Months Ended June 30, 2022 |
|
| Six Months Ended June 30, 2021 |
| ||
Net income (loss) attributable to common shareholders |
| $ | 5,466,673 |
|
| $ | 4,665,704 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, Basic |
|
| 18,135,305 |
|
|
| 17,722,825 |
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of common shares outstanding, |
|
| 19,027,470 |
|
|
| 18,945,827 |
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
| $ | 0.30 |
|
| $ | 0.26 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share |
| $ | 0.30 |
|
| $ | 0.25 |
|
12 |
Table of Contents |
At June 30, 2022, 217,312 shares of potentially dilutive common stock related to convertible debt were excluded from the diluted earnings per share calculation because the exercise and conversion prices exceeded the average stock price and therefore their effect would be anti-dilutive.
At June 30, 2021, 2,168,833 shares of potentially dilutive common stock related to outstanding stock warrants and 2,227,312 shares of potentially dilutive common stock related to convertible debt were excluded from the diluted earnings per share calculation because the exercise and conversion prices exceeded the average stock price and therefore their effect would be anti-dilutive. In addition, at June 30, 2021, 1,260,633 of potentially dilutive common stock related to outstanding warrants were excluded from the diluted earnings per share calculation because the ratio of expenses related to the shares to issuable shares exceeded the basic earnings per share and therefore their effect would be anti-dilutive.
Related Party Transactions
FASB ASC 850, “Related“Related Party Disclosures”Disclosures” requires companies to include in their financial statements, disclosures of material related party transactions. The Company discloses all material related party transactions. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party is also a related party if it 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.
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 of June 30, 2022,2023 and December 31, 2021, respectively,2022 were as follows:
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Mined Tonnage |
| $ | 2,743,912 |
| $ | 2,042,633 |
|
| $ | 1,988,426 |
| $ | 2,610,116 |
| ||
Gold-Silver Concentrates |
|
| 110,025 |
|
|
| 67,570 |
|
|
| 152,897 |
|
|
| 110,695 |
|
Total Inventories |
| $ | 2,853,937 |
|
| $ | 2,110,203 |
|
| $ | 2,141,323 |
|
| $ | 2,720,811 |
|
NOTE 3 -– PROPERTY, PLANT & EQUIPMENT
Property consistsAs of the following at June 30, 20222023 and December 31, 2021:
|
| 2022 |
|
| 2021 |
| ||
Leasehold improvements |
| $ | 9,340 |
|
| $ | 9,340 |
|
Office equipment |
|
| 31,012 |
|
|
| 31,012 |
|
Office furniture and fixtures |
|
| 78,802 |
|
|
| 78,802 |
|
Sub-total |
|
| 119,154 |
|
|
| 119,154 |
|
Less: Accumulated depreciation |
|
| (118,050 | ) |
|
| (116,425 | ) |
Total Property |
| $ | 1,104 |
|
| $ | 2,729 |
|
Depreciation2022, all the Company’s property, plant and amortization hasequipment have been provided over each asset’s estimated useful life. Depreciationfully depreciated, amortized or expensed, as discussed in “Property, Plant and amortization expense was $1,625 and $1,625 for the six months ended June 30, 2022 and 2021, respectively.Equipment” in Note 1 above.
NOTE 4 - MINING CONCESSIONS
Mining properties consist of the San José de Gracia concessions. Mining Concessions were $4,132,678 and $4,132,678 atas of June 20, 202230, 2023 and December 31, 2021, respectively.2022. There was no depletion expense during the six months ended June 30, 2023 and 2022, and 2021.as the Company is an exploration stage issuer (See Note 1).
NOTE 5 - CONVERTIBLE PROMISSORY NOTES
Notes Payable - Series I
In April and May 2013, the Company entered into note agreements with shareholders in the principal amount of $1,495,000 (the “Series I Notes”), of which $340,000 was then converted to preferred shares within the same year, netting proceeds of $1,155,000. The Series I Notes bear simple interest at twelve and a half percent (12.5%), accrued for twelve months, and with the accrued interest to be added to the principal, and then interest will be paid by the Company, quarterly in arrears.
Each Series I Note holder retained the option, at any time prior to maturity or prepayment, to convert any unpaid principal and accrued interest into Common Stock at $2.50 per share. If the Series I Note is converted into Common Stock, at the time of conversion, the holder would also receive warrants, in the same number as the number of common shares received upon conversion, to purchase additional common shares of the Company for $7.50 per share, with such warrants expiring one year from their conversion date.
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.
As of June 30, 2022 and December 31, 2021, six Series I Notes remained outstanding with a total balance of $455,905. The Series I Notes were paid off in July 2022.
Notes Payable - Series II
In 2013 and 2014, the Company entered into additional note agreements of $199,808 and $250,000, respectively (the “Series II Notes”) with similar terms as the Series I Notes. The Series II Notes bear simple interest at twelve and a half percent (12.5%), accrued for twelve months, and with the accrued interest to be added to the principal, and then interest will be paid by the Company, quarterly in arrears.
Each Series II Note holder may, at any time prior to maturity or prepayment, convert any unpaid principal and accrued interest into common stock of the Company at $2.50 per share. At the time of conversion, the holder would receive a warrant to purchase additional common shares of the Company for $7.50 per share, such warrant expiring one year from the conversion date.
The Series II 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 $84,757 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.
As of June 30, 2022 and December 31, 2021, two Series II Notes remained outstanding with a balance of $87,374. The Series II Notes were paid off in July 2022.
NOTE 6 -5- INCOME TAXES
The Company has adopted ASC 740-10, “Income Taxes”, which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company’sOur income tax expense and effective income tax rate forare significantly impacted by the periodmix of our domestic and foreign earnings before income taxes. The Mexican applicable statutory rate is 30% which is higher than the U.S. federal and state combined statutory rate of approximately 21%. For the six months ended June 30, 2022 and for2023, the period ended June 30, 2021 varies fromincrease in the statutoryeffective benefit rate of 21%is primarily due to a valuation allowance which creates a near zero effective tax rate. The Company intendsthe beneficial impact of mark to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of the valuation allowance. However, given our current earnings and anticipated future earnings, it is reasonably possible thatmarket discrete items booked in the near future sufficient positive evidence may become availablequarter when compared to support the conclusion that no valuation allowance is necessary.net loss before income taxes of $1,771,951.
NOTE 7-6 - STOCKHOLDERS’ EQUITY
The total number of shares of all classes of capital stock which the corporation has the authority to issue is 60,001,000 shares, consisting of (i) twenty million and one thousand (20,001,000)20,001,000 shares of Preferred Stock, par value $0.0001 per share (“Preferred Stock”), of which 1,000 shares are 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)40,000,000 shares of Common Stock, par value $0.01 per share (“Common Stock”). As of June 30, 2022,2023, 15,265,008 shares of Preferred Stock remain undesignated.
13 |
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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 issuedAs of December 31, 2022, there were 1,000 shares of Series A Preferred Stock to its CEO. At,outstanding. On April 19, 2023, the Company repurchased the Series A Preferred Stock from the CEO (see Note 13 – Related Party Transactions). The Series A Preferred shares were subsequently cancelled. As of June 30, 2022 and December 31, 2021,2023, there were 1,000no shares of Series A Preferred Stock outstanding.
Series C Senior Convertible Preferred Stock
AtAs of June 30, 20222023 and December 31, 20212022 there were 1,734,992 and 1,734,992 Series C Preferred shares outstanding. As of June 30, 2022,2023, these Series C Preferred Shares are convertible to common shares at $2.04 per share or redeemable in cash at the shareholder’s option 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. At30th. As of June 30, 2022,2023, dividends for the years 2016 to 20212023 totaling $1,053,777$1,227,276 were in arrears.
Due to the nature of the Series C Preferred Shares as mandatorily redeemable, the Series C Preferred Shares are classified as “temporary equity” on the balance sheet.
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, and related agreements. A summary of the transactions and related agreements is set forth below:
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On October 11, 2021. the Company filed an amended designation of Series D Preferred with the State of Delaware.
Retirement of Convertible Debt
certain shareholders. On October 7, 2021, the Company paid $2,500,000 to repurchase one note that was convertible into Series D Preferred.note.
The remaining ten noteholders of notes convertible into Series D Preferred Stock elected to convert their notes totaling $1,520,000 into Series D Preferred Stock at $2.00 per share. On October 18, 2021, the Company issued 760,000 shares of Series D Preferred Stock for these notes.
In addition, the redemption of the notes trigged an acceleration of the amortization of the original loan discount booked at the issuance of the notes (see discussion below), which discount (in the amount of $287,508 in October 2021) was being amortized over the 24 month life of the notes.
All Series D noteholders agreed to waive the non-dilution rights contained in their original notes.
At June 30, 2022 and December 31, 2021, there were 760,000 and 760,000 Series D Preferred shares outstanding, respectively. The Series D Preferred shares are convertible to common shares at $2.00 per share, through October 18, 2026. The Series D Preferred Shares are entitled toStock may receive a 4% per annum dividend, payable when declared by the Boardif available, and in arrears. The dividend is calculated at 4.0% of Directors. At$1,520,000 payable annually on October 18th. As of June 30, 2023 dividends for the year 2022 no dividends had been declared by the Board.totaling $60,800 were in arrears.
Due to the nature of the Series D Preferred as mandatorily redeemable by the Company at the election of the Series D Preferred stock holderstockholder at any time following maturity, the Series D Preferred shares areStock is classified as “temporary equity” on the balance sheet.
Due to the anti-dilutive provisions contained in the May 6, 2015, Securities Purchase Agreement, the Series C Preferred and the 2015 Warrant, the Company incurred derivative liabilities upon issuance of these securities. On May 14, 2020, in connection with the Series D Convertible Note financing, the expiration dates for the Series C Preferred and the 2015 Warrant were extended to June 30, 2022. In addition, a new derivative liability was incurred due to the issuance of additional warrants. At December 31, 2021, the total derivative liability was $3,898,914, which included $1,019,431 for the Series C Preferred, $1,320,380 in connection with the 2015 Warrant, and $1,559,103 in connection with the additional warrants. As of June 30, 2022, only the additional warrants derivative liability remained, for a total derivative liability of $1,735,633. The 2015 Warrant was exercised on June 28, 2022 at an above market price, resulting in no derivative liability. The Series C Preferred shares are convertible at an above market price or redeemable by the holder on demand. The accrueddeemed dividends on the Series C and D Preferred Stock for the six months endingended June 30, 2023 and 2022, were $117,150 and June 30, 2021, were $117,160 and $86,750,$117,150, 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).income.
Preferred Stock (Undesignated)
In addition to the 1,000 shares designated as Series A Preferred Stock, and the 1,734,992 shares designated as Series C Preferred SharesStock, and the 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. AtAs of June 30, 20222023 and December 31, 2021,2022, there were no other shares of Preferred Stock outstanding.
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 a particular 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.
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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. AtAs of June 30, 20222023, and December 31, 2021,2022, there were 20,746,654 and 18,091,29322,246,654 shares outstanding, respectively.outstanding. No dividends were declared or paid forduring the periodssix months ended June 30, 20222023 and 2021, respectively.2022.
Preferred Rights
The Company issued “Preferred Rights” for the rights to percentages of revenues generated from the San José de Gracia Pilot Production Plant and received $784,500 for these rights. The “Preferred Rights” are reflected in stockholders’ equity. As of June 30, 2022,2023, $744,500 had been repaid, leaving a current balance of $40,000 and $40,000 as of June 30, 20222023, and December 31, 2021, respectively.2022.
Stock Issuances
OnThere were no issuances of stock during the six months ended June 28, 2022, the Company issued 2,655,361 shares of common stock upon the exercise of a warrant to purchase 2,655,361 shares, by one warrant holder for $2.04 a share.
On October 18, 2021, the Company issued 368,468 shares of common stock upon the exercise of warrants to purchase 368,468 shares, by five warrant holders for $.01 a share.30, 2023.
Treasury Stock
During the six months ended June 30, 2022 no2023, 25,000 shares of the Company’s common stock heldpreviously issued in treasury (treasury stock)return for services were issued.returned to the Company as part of a settlement of fees.
During the year ending December 31, 2021, 504,300 treasury sharesThere were issued, in consideration of services provided to the Company.
Outstanding treasury shares total 12,18037,180 and 12,180 atshares of Treasury Stock outstanding as of June 30, 20222023 and December 31, 2021, respectively.2022.
Warrants
20222023 activity
As of June 30, 2023, the Company had outstanding warrants, which were a part of the issuance of notes convertible into Series D Convertible Preferred Stock in 2020, to purchase 892,165 shares of common stock:
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| Number of Shares |
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| Weighted Average Exercise Price |
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| Weighted Average Remaining Contractual Life (Years) |
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| Intrinsic Value |
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Balance as of December 31, 2022 |
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| 892,165 |
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| $ | 0.01 |
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| 7.37 |
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| - |
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Granted |
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| - |
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| - |
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| - |
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| - |
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Exercised |
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| - |
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| - |
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| - |
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| - |
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Forfeited |
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| - |
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| - |
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| - |
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| - |
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Balance as of June 30, 2023 |
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| 892,165 |
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| 0.01 |
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| 6.88 |
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| - |
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Exercisable as of June 30, 2023 |
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| 892,165 |
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| $ | 0.01 |
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| 6.88 |
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| - |
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A derivative liability was incurred at the issuance of the Series D warrants in 2020. As of June 30, 2023, the derivative liability totaled $1,610,140. See Note 8 below.
Table of Contents |
At June 30, 2022, the Company had outstanding warrants to purchase 892,165 shares of common stock. On June 28, 2022 one warrant holder exercised a warrant to purchase a total of 2,655,361 shares of common stock for $2.04 a share.
2021 activity
At December 31, 2021, the Company had outstanding warrants to purchase 3,060,998 shares of common stock. On October 18, 2021, five warrant holders exercised warrants to purchase 368,468 shares of common stock for $0.01 a share.
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| Number of Shares |
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| Weighted Average Exercise Price |
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| Weighted Average Remaining Contractual Life (Years) |
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| Intrinsic Value |
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Balance at December 31, 2020 |
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| 3,429,466 |
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| $ | 1.30 |
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| 4.40 |
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| 0 |
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Granted |
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| - |
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| $ | 0 |
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| - |
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| 0 |
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Exercised |
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| 368,468 |
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| $ | 0.01 |
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| - |
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| 0 |
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Forfeited |
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| - |
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| $ | 0 |
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| - |
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| 0 |
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Balance at December 31, 2021 |
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| 3,060,998 |
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| $ | 1.46 |
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| 2.79 |
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| 0 |
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Granted |
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| - |
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| $ | 0 |
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| - |
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| 0 |
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Exercised |
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| 2,166,775 |
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| $ | 2.04 |
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| - |
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| 0 |
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Forfeited |
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| 2,058 |
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| $ | 2.04 |
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| - |
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| 0 |
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Balance at June 30, 2022 |
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| 892,165 |
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| $ | 0.01 |
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| 7.88 |
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| 0 |
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Exercisable at June 30, 2022 |
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| 892,165 |
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| $ | 0.01 |
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| 7.88 |
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| 0 |
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NOTE 8 - RELATED PARTY TRANSACTIONS
Dynacap Group Ltd.
The Company paid $87,500 and $33,750 to Dynacap Group, Ltd. (an entity controlled by the CEO of the Company) for consulting and other fees during the periods ended June 30, 2022, and 2021, respectively.
NOTE 97 - COMMITMENTS AND CONTINGENCIES
Concession Taxes
The Company is required to pay taxes in México in order to maintain mining concessions owned by DynaMéxico. Additionally, the Company is required to incur a minimum amount of expenditures each year for all concessions held. The minimum expenditures are calculated based upon the land area, as well as the age of the concessions. Amounts spent in excess of the minimum may be carried forward indefinitely over the life of the concessions and are adjusted annually for inflation. Based on Management’s recent business activities and current and forward plans and considering expenditures on mining concessions since 2002-2017from 2002 to 2017 and continuing expenditures in current and forward activities, the Company does not anticipate that DynaMéxico will have any difficulties meeting the minimum annual expenditures for the concessions ($388 - $2,400 Mexican Pesos per hectare). DynaMéxico retains sufficient carry- forward amounts to cover over 10 years of the minimum annual expenditure (as calculated at the 2017 minimum, adjusted for annual inflation of 4%).
Leases
In addition to the surface rights held by DynaMéxico pursuant to the Mining Actof México and its Regulations (Ley Minera y su Reglamento), DynaMineras maintains access and surface rights to the SJG Project pursuant to a 20-year Land Lease Agreement with the Santa Maria Ejido Community, the owners of the surface rights. The Land Lease Agreement was dated January 6, 2014 and continues through January 2033. It covers an area of 4,399 hectares surrounding the main mineral resource areas of SJG and provides for annual lease payments on January 1st each year by DynaMineras, in the amount of $1,359,443 pesosPesos (approximately $73,000 USD) adjusted for inflation based on the Mexico minimum wage increase. Rent was $3,015,112$4,414,124 Pesos (approx. $149,000(approximately $243,000 USD) for the year ended December 31, 2021.2023, which was paid during the first quarter of 2023. The Land Lease Agreement provides DynaMineras with surface access to the core resource areas of SJG (4,399 hectares), and allows for all permitted mining and exploration activities.
The Company leases office space for its corporate headquarters in Irving, Texas. In September 2017, the Company entered into a sixty-six-month extension of the lease through January 2023. As part of the agreement the Company received six months free rent as a finish out allowance. The Company capitalized the leasehold improvement costs and amortized them over the rent abatement period as rent expense. The Company makes tiered lease payments on the 1st of each month.
Effective January 1, 2019, the Company adopted ASC 842, which requires recognition of a right-of-use asset and lease liability for all leases at the commencement date based on the present value of lease payments over the lease term. Additional qualitative and quantitative disclosures regarding the Company’s leasing arrangements are also required. The Company adopted ASC 842 prospectively and elected the package of transition practical expedients that does not require reassessment of (1) whether any existing or expired contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company has elected other available practical expedients to not separate lease and non-lease components, which consist principally of common area maintenance charges, for all classes of underlying assets and to exclude leases with an initial term of 12 months or less.
The Company determines if a contract is or contains a lease at inception. As of June 30, 2022,2023, the Company has two operating leases: a six and one-half year lease forcorporate office space with a remaining term of seven months, and a twenty-year ground lease in association with its México mining operations withoperations. An agreement for the lease of expanded office space was signed in the first quarter of 2023 and will commence when the build-out of the space is complete, which is anticipated to be during the third quarter of 2023. Until that time, the existing space is being leased on a month-to-month basis. The ground lease has a remaining term of thirteenapproximately 10 years. Variable lease costs consist primarily of variable common area maintenance, storage parking and utilities. The Company’s leases do not have any residual value guarantees or restrictive covenants.
As the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated using the Company’s interest rate of promissory notes.
The Company’s components of lease cost are as follows:
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| Period Ended |
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| June 30, 2022 |
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Operating Lease - Office Lease |
| $ | 43,645 |
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Operating Lease - Ground Lease |
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| 45,567 |
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Short Term Lease Costs |
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| 7,544 |
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Variable Lease Costs |
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| 0 |
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TOTAL |
| $ | 96,756 |
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Weighted average remaining lease term and weighted average discount rate are as follows: |
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Weighted Average Remaining Lease Term (Years) - Operating Leases |
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| 10.12 |
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Weighted Average Discount Rate - Operating Leases |
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| 12.50 | % |
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Estimated future minimum lease obligations are as follow for the years ending June 30: |
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YEAR |
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2022 |
| $ | 143,156 |
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2023 |
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| 94,074 |
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2024 |
|
| 96,896 |
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2025 |
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| 99,803 |
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2026 |
|
| 102,797 |
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Thereafter |
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| 684,885 |
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Total |
| $ | 1,221,611 |
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Less Imputed Interest |
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| (591,453 | ) |
OPERATING LEASE PAYABLE |
| $ | 630,158 |
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NOTE 108 - DERIVATIVE LIABILITIESLIABILITY
Series C Preferred Stock
As discussed in Note 7, the Company analyzed the embedded conversion features of the Series C Preferred Stock and determined that the 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:
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| 2022 |
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| 2021 |
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Annual volatility rate |
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| 0 | % |
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| 147 | % |
Risk free rate |
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| 2.92 | % |
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| 0.73 | % |
Remaining Term |
| 0.00 years |
|
| 0.50 years |
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Fair Value of common stock |
| $ | 1.95 |
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| $ | 1.75 |
|
For the six and twelve months ended June 30, 2022 and December 31, 2021, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.
The below table represents the change in the fair value of the derivative liability during the six and twelve months ended June 30, 2022 and December 31, 2021.
Period Ended |
| 2022 |
|
| 2021 |
| ||
Fair value of derivative (stock), beginning of period |
| $ | 1,019,431 |
|
| $ | 601,313 |
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Change in fair value of derivative |
|
| (1,019,431 | ) |
|
| 418,118 |
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Fair value of derivative on the date of issuance |
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| 0 |
|
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| 0 |
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Fair value of derivative (stock), end of period |
| $ | 0 |
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| $ | 1,019,431 |
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2015 Warrant
As discussed in Note 7, the Company analyzed the embedded conversion features of the Series C Preferred Stock and determined that the 2015 Warrant (acquired at the same time as the Series C Preferred 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 2015 Warrant based on the assumptions below:
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| 2022 |
|
| 2021 |
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Annual volatility rate |
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| 0 | % |
|
| 147 | % |
Risk free rate |
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| 2.92 | % |
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| 0.73 | % |
Remaining Term |
| 0.00 years |
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| 0.50 years |
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Fair Value of common stock |
| $ | 1.95 |
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| $ | 1.75 |
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For the six and twelve months ended June 30, 2022, and December 31, 2021, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.
The below table represents the change in the fair value of the derivative liability during the periods ended June 30, 2022, and December 31, 2021.
Period Ended |
| 2022 |
|
| 2021 |
| ||
Fair value of derivative (warrant), beginning of period |
| $ | 1,320,380 |
|
| $ | 817,613 |
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Change in fair value of derivative |
|
| (1,320,380 | ) |
|
| 502,767 |
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Fair value of derivative on the date of issuance |
|
| 0 |
|
|
| 0 |
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Fair value of derivative (warrant), end of period |
| $ | 0 |
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| $ | 1,320,380 |
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Warrants issued withIssued With the Notes convertible intoConvertible Into Series D Preferred
As discussed in Note 7,6, the Company analyzed the conversion features of the promissory notes convertible into Series D Preferred and determined that the 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 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.
Table of Contents |
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 issued with the notes convertible into Series D Preferred based on the assumptions below:
|
| 2022 |
|
| 2021 |
| ||||||||||
Period Ended |
| June 30, 2023 |
|
| Dec 31, 2022 |
| ||||||||||
Annual volatility rate |
| 121 | % |
| 147 | % |
| 115 | % |
| 116 | % | ||||
Risk free rate |
| 2.92 | % |
| 0.73 | % |
| 4.87 | % |
| 4.41 | % | ||||
Remaining Term |
| 7.88 years |
| 8.37 years |
|
| 6.88 years |
| 7.37 years |
| ||||||
Fair Value of common stock |
| $ | 1.95 |
| $ | 1.75 |
|
| $ | 1.81 |
| $ | 2.44 |
|
For the six and twelve months ended June 30, 20222023 and December 31, 2021,2022, 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 six and twelve months ended June 30, 20222023 and December 31, 2021.2022.
Period Ended |
| 2022 |
|
| 2021 |
|
| June 30, 2023 |
|
| Dec 31, 2022 |
| ||||
Fair value of derivative (warrants), beginning of period |
| $ | 1,559,103 |
| $ | 952,634 |
|
| $ | 2,172,417 |
| $ | 1,559,103 |
| ||
Fair value of derivative on the date of issuance |
| 0 |
| 0 |
| |||||||||||
Exercise of warrants |
| 0 |
| (659,558 | ) |
| - |
| - |
| ||||||
Change in fair value of derivative |
|
| 176,530 |
|
|
| 1,266,027 |
|
|
| (562,277 | ) |
|
| 613,314 |
|
Fair value of derivative (warrants), end of period |
| $ | 1,735,633 |
|
| $ | 1,559,103 |
|
| $ | 1,610,140 |
|
| $ | 2,172,417 |
|
NOTE 119 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The ASC 820 guidance for fair value measurements and disclosure establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 Inputs - Quoted prices for identical instruments in active markets.
Level 2 Inputs - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs - Instruments with primarily unobservable value drivers.
As of June 30, 2022,2023 and December 31, 2021,2022, the Company’s financial assets and liabilities 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 10.8.
Table of Contents |
|
|
|
|
| Quoted Prices in Active Markets For Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||
Fair Value Measurement at June 30, 2022 Using: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative Liabilities |
| $ | 1,735,633 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 1,735,633 |
|
Totals |
| $ | 1,735,633 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 1,735,633 |
|
Fair Value Measurement at December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities |
| $ | 3,898,914 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3,898,914 |
|
Totals |
| $ | 3,898,914 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3,898,914 |
|
|
| Total |
|
| Quoted Prices in Active Markets For Identical Assets (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
| ||||
Fair Value Measurement as of June 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative Liabilities |
| $ | 1,610,140 |
|
| $ | - |
|
| $ | - |
|
| $ | 1,610,140 |
|
Totals |
| $ | 1,610,140 |
|
| $ | - |
|
| $ | - |
|
| $ | 1,610,140 |
|
Fair Value Measurement as of December 31, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities |
| $ | 2,172,417 |
|
| $ | - |
|
| $ | - |
|
| $ | 2,172,417 |
|
Totals |
| $ | 2,172,417 |
|
| $ | - |
|
| $ | - |
|
| $ | 2,172,417 |
|
NOTE 1210 - REVENUECUSTOMER CONCENTRATION
The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:
For each of the six months ended June 30, 2023 and 2022, and 2021, one and three customerscustomer accounted for 100% of revenue, respectively.revenue.
AtAs of June 30, 20222023 and December 31, 2021, one and2022, one customer accounted for 100% of accounts receivable, respectively.receivable.
NOTE 1311 - NOTES PAYABLE
In JuneSeptember 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 JuneSeptember 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 an interest rate of 21.84%. per annum.
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%. per annum.
In JuneSeptember 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 (six months) on the reduced Francisco Arturo mining concession.
18 |
Table of Contents |
As of JuneSeptember 2019, the Company ceased making monthly payments on the above noted Francisco Arturo concession notes and has petitioned the Hacienda (Mexican federal tax authority) for a reduction in the liability which is pro-rata to the reduction in the Francisco Arturo concession above.concession. For financial reporting purposes the Company continues to carry all notes (to finance unpaid mining concession taxes) at their unpaid principal amount and accrues interest on a monthly basis. AtAs of June 30, 2022, $1,281,7602023, $1,981,947 of accrued interest on the notes was included in accrued liabilities on the unaudited 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 transactionactivity during the six and twelve months ended June 30, 2022 and December 31, 2021:2023:
Balance December 31, 2020 |
| $ | 2,081,435 |
|
Exchange Rate Adjustment |
|
| (57,504 | ) |
2021 Principal Payments |
|
| (61,406 | ) |
Balance December 31, 2021 |
|
| 1,962,525 |
|
Exchange Rate Adjustment |
|
| 39,643 |
|
2022 Principal Payments |
|
| (59,015 | ) |
Balance June 30, 2022 |
| $ | 1,943,153 |
|
Balance December 31, 2022 |
| $ | 1,968,251 |
|
Exchange Rate Adjustment |
|
| 271,098 |
|
2023 Principal Payments |
|
| - |
|
Balance June 30, 2023 |
| $ | 2,239,349 |
|
NOTE 1412 - REVOLVING CREDIT LINE FACILITY
On February 4, 2021, the Company (through DynaMineras) entered into a Revolving Credit Line Facility and Commercial Offtake Agreement (the “RCL”), with a commercial buyer. The RCL was extended in December 2022 through December 2023. Under the terms of the RCL:
| · | The Company will deliver 100% of its produced concentrates to the buyer and provider of the RCL, through December 31, |
| · | An initial RCL was established by the buyer in the amount of $3.75M USD; |
| · | On May 1, 2021, the RCL increased to an amount equal to 80% of the prior 3 months’ revenue; |
| · | Each successive month, the RCL shall be adjusted according to the Company’s prior 3 months’ revenue; |
| · | The RCL shall never be less than $3.75M USD; |
| · | The RCL will be interest free for 45 days; |
| · | The RCL is to be repaid through deliveries of concentrates or cash within 120 days; |
The RCL is included under Customer Advances on the unaudited consolidated balance sheet.
Deposits under Revolving Credit Line Facility
Under the terms of the RCL, DynaMineras received the following advances from the buyer:buyer (in millions):
(1) | $ | |
(2) | $ | |
(3) | $9.20 advance on March | |
|
| |
(4) | $ | |
(5) | $ | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
NOTE 1613 – RELATED PARTY TRANSACTIONS
Dynacap Group Ltd.
The Company paid $87,500 to Dynacap Group, Ltd. (“Dynacap”, an entity formerly controlled by the CEO of the Company) for consulting and other fees during the period ended June 30, 2022. There were no fees paid to Dynacap or any other related party for the six months ended June 30, 2023.
On April 19, 2023, the Company repurchased the Series A Preferred Stock from the CEO. There are no other related party transactions that require disclosure.
19 |
Table of Contents |
NOTE 14 - SUBSEQUENT EVENTS
On July 17, 2023, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Amendment”). The Company has evaluated events commencingAmendment was adopted by the Company’s stockholders at the annual meeting of stockholders held on July 14, 2023. Pursuant to the Amendment, the Company’s Series A Preferred Stock was removed as a series of Preferred Stock, and the composition of the Company’s Board of Directors was revised by redesignating the incumbent Class II Directors as Class I Directors and the incumbent Class III Director as the Class II Director, and removing the position of Class III Director. The foregoing description of the Amendment is qualified in its entirety by reference to the full text of the Amendment, a copy of which Amendment is available as Appendix I to the Company’s Proxy Statement on Schedule 14A filed with the SEC on June 30, 202212, 2023 and through the date the financial statements were issued, and determined the following items required disclosure:incorporated herein in its entirety by reference.
On July 1, 2022,August 2, 2023, the Company paidentered into (1) an Amendment Agreement (the “OP Amendment”) to the Gold Concentrate Purchase Agreement dated February 1, 2021, as amended (the “Offtake Agreement”) by and between the Company’s affiliate, DynaResource de Mexico, SA de CV (“Dyna Mex”), and an affiliate of Ocean Partners Holdings Limited (“Ocean Partners”), MK Metal Trading Mexico SA de CV (“Buyer”), and (2) a Stock Purchase Agreement (the “Stock Purchase Agreement”) by and between the Company and Ocean Partners. The Amendment and the Stock Purchase Agreement were entered into pursuant to the terms of the Memorandum of Understanding dated June 29, 2023 (the “MOU”) by and between the Company and Ocean Partners.
The principal terms of the OP Amendment are as follows:
· | To extend the term of the Offtake Agreement until December 31, 2026, with evergreen annual extensions thereafter until either party terminates the Offtake Agreement on at least 365 days’ notice. | |
· | To provide for a $1 million termination fee payable by the Company to Ocean Partners in certain circumstances. | |
· | To increase the maximum advance line of credit under the Offtake Agreement to $17.5 million. | |
· | To give the Company the option to convert the advance credit line under the Offtake Agreement, to a maximum of $10.0M, into a revolving credit facility repayable over 12 months at 3M SOFR + 7.50% amortized as follows: Month 1, interest only; Month 2-11, 5% principal plus interest; and Month 12, 50% principal plus interest. Converting to a revolving credit facility would reduce the availability on the advance credit line on a pro rata percentage basis. | |
· | To provide Ocean Partners a right of first refusal, during the term of the Offtake Agreement, to provide offtake financing and purchase other concentrates (zinc, silver, copper, etc.) and doré from the Company’s open pit and underground operations. |
20 |
Table of Contents |
Pursuant to the Stock Purchase Agreement, the Company issued and sold to Ocean Partners 1,000,000 shares of the Company’s Common Stock for a purchase price of $5,000,000. In addition, the Company has agreed to appoint Brent Omland, or another person nominated by Ocean Partners, as a director of the Company subject to approval by the Company’s Board of Directors, consent to which approval shall not to be unreasonably withheld as consistent with the Board’s fiduciary duties, for a term running through the next annual meeting of the Company’s stockholders. Such nominee will be nominated, subject to approval by the Company’s Board of Directors, consent to which approval shall not to be unreasonably withheld as consistent with the Board’s fiduciary duties, for reelection by the shareholders at such annual meeting.
The foregoing descriptions of the Amendment and the Stock Purchase Agreement (“SPA”) are qualified in their entirety by reference to the full text of the Series IAmendment and Series II Convertible Notes Payable.the Stock Purchase Agreement, copies of which are attached hereto as Exhibits 10.1 and 10.2, respectively, and incorporated herein by reference. The representations, warranties and covenants contained in the Amendment and the SPA were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to the agreements, and may be subject to limitations agreed upon by the contracting parties.
The Memorandum of Understanding of this transaction was disclosed in a Form 8-K filed with the Securities & Exchange Commission on July 6, 2023, and incorporated herein by reference.
Table of Contents |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to in this report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to in this 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, (i) risks inherent in the mining business (including risks related to the development of large-scale mining projects, environmental hazards, industrial accidents, weather or geologically related conditions), (ii) changes in the market prices of precious metals and in the cost of mining and refining ores, (iii) the uncertainties inherent in the Company’s production, exploratory and developmental activities, including risks relating to permitting and regulatory delays (including the impact of government shutdowns), ground conditions and grade and recovery variability, (iv) any future labor disputes or work stoppages (involving the Company and its subsidiaries or third parties), (v) the uncertainties inherent in the estimation of mineral reserves and resources, (vi) changes that could result from the Company’s future acquisition of new mining properties or businesses, (vii) the Company’s reliance on a single purchaser to whom the Company markets its production, (viii) the effects of environmental and other governmental regulations in the United States and Mexico, (ix) the effects of changes in the general economic environment, including inflationary pressures, bank depositary risks, and the threat of recession, (x) the risks inherent in the ownership or operation of or investment in mining properties or businesses in foreign countries, and (xi) the Company’s ability to raise additional financing necessary to conduct its business. Readers are cautioned not to put undue reliance on forward-looking statements risks, uncertainties and assumptions discussed in this report.
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 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 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 assurance that forward looking statements will prove to be correct.
Company
The Company is a minerals investment, management, and exploration company, and currently conducting test mining and pilot milling operations through an operating subsidiary in México, with specific focus on precious and base metalsthe prolific
San Jose de Gracia high grade gold project in México.
We currently conduct operationsactivities in México through our operating subsidiaries.subsidiary DynaResource de Mexico SA de CV. (“DynaMexico”). 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 José de Gracia Property (“SJG”), in northern Sinaloa State, México. We also own 100% of Mineras de DynaResource S.A. de C.V. (“DynaMineras”), the exclusive operator of the San José de Gracia Project, under contract with DynaMéxico. DynaOperaciones is the exclusive management company for registered employees.
Project Improvements, Expansion and Increased Output (2017 To Present)
The Company continues its business plan of test mining and pilot milling operations at San José de Gracia, 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 the January 2015 startup of the test mining and milling activities at SJG, the Company has increased daily output from an initial 75average of 100 tons per 24-hour operating day, to a current 300average of approximately 550 tons per 24-hour operating day, and duringday. During the second quarter 2022half of 2023, the Company expects to achieve production output from test mining and milling activities, to an average of 500approximately 700 tons per 24-hour operating day. (Note the Summary of Test Mining and Pilot Mill Operations for 2018 to 2022 below).
22 |
Table of Contents |
Since January 2017, the Company has expended over 23$36.6 million USD in non-operatingnon-recurring costs, generally classified as project improvements and expansion costs which have been expensed in the company’s financial statements.statements and other uses of cash which are non-recurring such as debt repayment, purchase of the Series A preferred stock and legal fees. These funds have been provided primarily from cash flows from operations. An itemized list of these non-operating costs is described below:
Mill Expansion: |
| $ | 5,498,000 |
| ||||
Mill Expansion |
| $ | 7,093,000 |
| ||||
Tailings Pond Expansion |
| 265,000 |
|
| 1,464,000 |
| ||
Machinery and Equipment |
| 1,963,000 |
|
| 3,140,000 |
| ||
Mining Camp Expansion |
| 146,000 |
|
| 146,000 |
| ||
Medical Facility |
| 126,000 |
|
| 126,000 |
| ||
Mine Development - San Pablo |
| 2,748,000 |
|
| 2,748,000 |
| ||
Mine Expansion - San Pablo East |
| 915,000 |
|
| 915,000 |
| ||
Mine Expansion - Tres Amigos |
| 1,599,000 |
|
| 1,599,000 |
| ||
Exploration Drilling |
| 1,257,000 |
|
| 3,610,000 |
| ||
SIG Mining Concessions |
| 1,542,000 |
|
| 2,014,000 |
| ||
Surface Rights and Permitting |
| 791,000 |
|
| 1,036,000 |
| ||
Debt Retirement |
| 2,985,000 |
|
| 3,528,000 |
| ||
Purchase of Series A Preferred Stock |
| 1,250,000 |
| |||||
Legal Fees |
|
| 3,894,000 |
|
|
| 7,952,000 |
|
Total |
| $ | 23,729,000 |
|
| $ | 36,621,000 |
|
The Company is currently reporting all costs of minetest mining operations, project improvements, and project expansion as expenses in accordance with the United States General Accepted Accounting Principal (GAAP) requirements.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 forwardcarry-forward from México operations of $18.5$8 million USD which is available to offset future taxable earnings.
Summary of Test Mining and Pilot Mill Operations
Annual Results from 2018 to 2022:
|
| Total Tons Mined & |
|
| Reported Mill Feed Grade (g/t |
|
| Reported Recovery |
|
| Estimated Gross Gold Concentrates Recovered |
|
| Net Gold Concentrates Sold |
| |||||
Year |
| Processed |
|
| Au) |
|
| % |
|
| (Au oz.) |
|
| (Au oz.) |
| |||||
2018 |
|
| 52,038 |
|
|
| 9.82 |
|
|
| 86.11 | % |
|
| 14,147 |
|
|
| 13,418 |
|
2019 |
|
| 66,031 |
|
|
| 5.81 |
|
|
| 86.86 | % |
|
| 10,646 |
|
|
| 9,713 |
|
2020 |
|
| 44,218 |
|
|
| 5.65 |
|
|
| 87.31 | % |
|
| 7,001 |
|
|
| 5,828 |
|
2021 |
|
| 97,088 |
|
|
| 9.67 |
|
|
| 88.79 | % |
|
| 26,728 |
|
|
| 22,566 |
|
2022 |
|
| 137,740 |
|
|
| 8.18 |
|
|
| 80.00 | % |
|
| 28,988 |
|
|
| 25,554 |
|
Test mining and pilot milling operations in 2022 yielded 137,740 tons of material, test mined from underground access and processed through pilot milling plant operations. These test pilot operations in 2022 yielded approximately 28,988 gross ounces of gold recovered, and net of dry weight and provisional assay at the buyer’s facilities of approximately 25,554 ounces of gold sold.
Table of Contents |
Summary of Test MiningQuarterly Results for the Six Months Ended June 30, 2023 and Pilot Mill Operations for 2018 to 2022:
|
|
|
|
|
| |||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
| ||||||||||||||||||||
|
Test pilot operations in 2021 yielded 97,088 Tons mined and processed from underground test mining activity and pilot milling operations; and the production of approximately 26,728 gross Oz Au, and net of dry weight adjustments at the buyer’s facilities, the production of approximately 22,566 Oz Au. The Company reports net revenue of $35,886,046 net of buyer’s price discount and refining and treatment costs.
Summary of Test Mining and Pilot Mill Operations for the six months ended June 30, 2022 and 2021:
|
|
|
|
| ||||||||||||||||
| ||||||||||||||||||||
|
|
| Total Tons Mined & Processed |
|
| Reported Mill Feed Grade (g/t Au) |
|
| Reported Recovery % |
|
| Estimated Gross Gold Concentrates Recovered (Au oz.) |
|
| Net Gold (1) Concentrates Sold (Au oz.) |
| |||||
Six Months Ended June 30, 2023 |
|
| 104,667 |
|
|
| 6.19 |
|
|
| 73.87 | % |
|
| 15,378 |
|
|
| 14,248 |
|
Six Months Ended June 30, 2022 |
|
| 58,315 |
|
|
| 9.39 |
|
|
| 80.00 | % |
|
| 14,090 |
|
|
| 12,004 |
|
(1) | Gold concentrate sold during the quarter is not equal to gold concentrate recovered during the quarter due to timing of shipments Mill tonnage processed, feed grade and recovery rates are estimates based on internal reports of assays and estimated weights of tonnage mined and shipped to the plant. 2022 estimated tonnage has been adjusted down from those included in the table presented in the June 30, 2022 Form 10-Q to reflect management’s updated estimates of tonnage processed and of gold recovered and delivered for sale. |
Test pilot operations in Q1 2022three months ended March 31, 2023 yielded 27,51153,258 tons mined and processed through mill operations (306facility (an average of 592 tons per day) ; and the recovery of 7,1108,204 gross Au Oz Au resulting in sales of 6,0006,810 gross Au Oz contained in gold-silver concentrates, and the receipt$11,953,079 of $10,492,503 in revenuesrevenue, net of buyer’s price discount, refining and treatment costs.
Test pilot operations in Q2 2022three months ended June 30, 2023 yielded 33,65551,409 tons mined and processed through mill operations (370facility (average of 565 tons per day) ; and the recovery of 7,8347,173 gross Au Oz Au resulting in sales of 6,0047,438 gross Au Oz contained in gold-silver concentrates, and the receipt$13,505,752 of $10,098,010 in revenuesrevenue, net of buyer’s price discount, refining and treatment costs. The revenue from three months ended June 30, 2023 was offset by adjustments in final settlements of $(2,593,583) on provisional settlements recorded on prior period shipments. Consistent with ongoing practice, the final settlement assays can lag up to a period of six months due to Buyer’s receipt of final assay from the independent assay firm.
Reported recovery percentage in the six months ended June 30, 2023 is less than the recovery percentage reported in the six months ended June 30, 2022 as a result of the expansion of the Company’s mill operations, and a resulting decrease in operating efficiency. The Company added two ball mills to the mill facility in fourth quarter 2022, which commenced test mill operations with increased capacity in 2023. With this additional capacity, the Company achieved an increase in tonnage processed from 58,315 in the six months ended June 30, 2022 (average of 322 tons per day) to 104,667 during the six months ended June 30, 2023 (average of 578 tons per day), and during the same periods the Company reported a decrease in feed grade from 9.39 g/t Au to 6.19 g/t Au. The decrease in recovery percentage from 80% to 73.87% was a result of processing inefficiencies due to the new ball mill installations, testing activities and other 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.
The drop in the feed grade at the pilot plant facility is a result of some 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 commenced the opening to another test mining area of SJG. The Company expects to achieve the access to an additional test mining area at SJG during the third quarter, 2023.
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Additional Test Mining and Mill Operations Disclosure
DynaMinerasThe Company expects to continue its test underground mining activity and pilot milling operations in the third quarter 2022,2023, and projects an increased output to an average of 500approximately 700 tons per 24-hour operating day from the mine and mill during the quarter.third quarter 2023.
Results for the three and six months ended June 30, 20222023 and 20212022
REVENUE. The Company processed 61,166 tons (306 per day) during the first six months of 2022 compared to 17,342 tons (194 per day) in 2021. Additionally, the ore process was a higher grade of 9.35 Oz Au per ton compared to 8.98 Oz Au per ton in 2021, resulting in an increase of ounces recovered from 10,320 in 2021 to 14,943 in [the first six months of] 2022. This resulted in an increase in gross ounces sold from 9,437 in 2021 to 12,004 in 2022, increasing revenues from $15,439,025 to $20,590,513REVENUE: Revenue for the six months ended June 30, 20212023 and 2022 respectively.was $22,865,248 and $20,590,513. Revenue for the three months ended June 30, 2023 and 2022 was $10,912,169 and $10,098,010. The increase was a result of an increase in tonnage mined and processed during the six months ended June 30, 2023 from 58,315 tons in 2022 to 104,667 in 2023. The increase in tonnage during the six months ended June 30, 2023 was offset by a reduction in the feed grade of the material processed from 9.39 g/t au in the six months period ending June 30, 2022 to 6.19 g/t au per ton for the six months ended June 30, 2023. In addition, the Company’s recovery rates declined from 80.0% in the six months ended June 30, 2022 to 73.87% in the six months ended June 30, 2023, due primarily to the reduced efficiency while implementing two new ball mills into the pilot mill operations. In addition, during the three months ended June 30, 2023, the Company recorded adjustments in final settlements related to provisional settlements from prior periods of $(2,593,583).
PRODUCTION COSTS RELATED TO SALES.SALES: Production costs related to sales for the six months ended June 30, 2023 and 2022 were $3,766,775 and June 30, 2021 were $1,912,730 and $1,160,151, respectively.$1,912,730. Production costcosts for the three months ended June 30, 2023 and 2022 were $2,055,513 and 2021 were $1,147,215 and $778,885, respectively.$1,147,235. These are expenses directly related to the test milling, packaging and shipping of primarily gold and other precious metals product.concentrates. The increase is consistent witha result of the increase in tonnage processthe volume of test mining and ounces recovered.milling activities from an average of 322 tons per day in the six months ended June 30, 2022 to an average of 578 tons per day in the six months ended June 30, 2023.
MINE PRODUCTION COSTS. MineCOSTS: Costs associated with test mining activities (mine production costscosts) for the six months ended June 30, 2023 and 2022 were $5,468,959 and 2021 were $2,839,255 and $2,249,402, respectively and $1,611,371 and $1,442,932$2,839,255. Mine production costs for the three months ended June 30, 2023 and 2022 were $2,939,522 and 2021, respectively.$1,611,371. The Company allocates total test mining costs between production and waste based on tonnage mined. These costs were directly related to the extraction of mine tonnage to be processed at the mill. The increase is consistent withpilot mill facility. For the increasesix months ended June 30, 2023, the Company test mined 97,229 tons of material compared to 63,984 tons in tonnage mined. Cost per ton of ore mined was $44 a ton both years. Mine production costs as a percentage of revenue dropped from 14.6% to 13.7%.the six months ended June 30, 2022.
MINE EXPLORATION COSTS.COSTS: Mine exploration costs for the six months ended June 30, 2023 and 2022 were $4,463,973 and 2021 were $2,456,968 and $2,285,989, respectively and $1,578,780 and $1,273,241$2,456,968. Costs for the three months ended June 30, 2023 and 2022 were $2,247,024 and 2021, respectively. These were$1,578,780. Mine exploration costs are the costs of extracting waste material in order to reach the materialstonnage of material to be extracted for processing.processing at the pilot mill facility. For the six months ended June 30, 2023 the Company mined 81,154 tons of waste compared to 54,030 in the six months ended June 30, 2022. The Company allocates total mining costs between production and waste based on tonnage on a monthly basis. Mineincrease in mine exploration costs as a percentagewas largely due to the initiative to open an additional area at SJG for test mining activities commencing in the second quarter of revenue dropped from 14.8% to 12.0%. The decrease in cost is a result of the decrease in waste tonnage as a percentage of total tonnage mined from 52.2% to 45.8%2023.
FACILITIES EXPANSION COSTS: Facilities expansion costs for the six months ended June 30, 2023 and 2022 were $824,671 and 2021$2,971,407. Expansion costs for the three months ended June 30, 2023 and 2022 were $2,971,407$539,593 and 0, respectively.$2,362,804. The major expense wasexpenses reported for the six months ended June 30, 2022 were the expansion of the tailings pond and the acquisition and preparation for the installation of two new Ball Mill which upon completion will increase processing capacityball mills. The major expenses reported in the six months ended June 30, 2023 have been additions to 700 tons a day. The Company expects the expansionball mill installations and related improvements to be complete by July. These are cost which would normally be capitalized under U.S Gaap but are expensed under Reg. S-K, Item 1300 because of the Company ismill facility, and mining infrastructure for the access to an exploration stage issuer lacking proven and probable reserves.additional test mining area at SJG.
EXPLORATION DRILLING.DRILLING: During the 1stfirst quarter of 2022, the Company beginbegan an exploration drilling program for the purposes of updating the Company’s CND NI 43-101 Mineral Resource Estimate. Total cost ofExploration expenditures for the exploratory drilling program in the first six months ofended June 30, 2023 and 2022 was $1,222,190 including $734,575 inwere $1,125,275 and $1,222,190. Exploration Costs for the 2nd quarter.three months ended June 30, 2023 and 2022 were $627,875 and $734,575.
TRANSPORTATION. TransportationCAMP, WAREHOUSE AND FACILITIES: Camp, warehouse and support facility costs for the six months ended June 30, 2023 and 2022 were $2,508,459 and 2021 were $1,110,214 and $593,698, respectively. Transportation cost$2,236,028. Costs for the three months ended June 30, 2023 and 2022 were $1,426,280 and 2021 were $719,574 and $355,134, respectively.$1,410,825. These wererepresent the costs of transportingsupporting the product to the customer for treatment and sale. The increase in reflective of the increase in fuel and transportation costs.
CAMP, WAREHOUSE AND SUPPORT FACILITIES. Camp, warehouse and support facility cost for the six months June 30, 2022 and 2021 were $2,236,028 and $1,258,722, respectively and $1,410,825 and $723,527 for the three months ended June 30, 2022 and 2021, respectively. These were the support costs of thetest mining facilities including housing, food, security and warehouse operations. The increases wereincrease in costs recorded for the six months ended June 30, 2023 was a result of the Company’s increase in test mining operationsactivity as a result of the facilities expansion and the increase in exploration costs.
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TRANSPORTATION: Transportation costs for the six months ended June 30, 2023 and 2022 were $1,540,549 and $1,110,214. Costs for the three months ended June 30, 2023 and 2022 were $794,486 and $719,574. These costs relate to the transporting of the primarily gold concentrates to the customer for treatment and sales. The increase in costs is primarily due to an increase in tonnage of ore hauled from mine to plant and an overall increase in fuel and transportation costs.
PROPERTY HOLDING COSTS.COSTS: Property holding costs for the six months ended June 30, 2023 and 2022 were $81,191 and 2021$72,781. Costs for the three months ended June 30, 2023 and 2022 were $72,781$41,670 and $79,650, respectively.$36,814. These costs were primarily taxes on mining concessions, taxes, leases on land and other direct costs of maintaining the SJG property. These costcosts are relatively consistent from year to year regardless of the level of mining activity.
GENERAL AND ADMINISTRATIVE EXPENSES.EXPENSE: General and administrative expenses for the six months ended June 30, 2023 and 2022 were $5,230,983 and 2021$2,144,097. Costs for the three months ended June 30, 2023 and 2022 were $2,144,097$2,265,390 and $1,166,969, respectively.$1,117,742. 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 in costs in 2023 was primarily an increase in legal fees associated ongoing legalas discussed in the legal summary, including a non-recurring legal expense of $3,000,000 tied to the successful outcome of litigation that was previously accrued, and due to an overall increase in administrative costs supporting the CompaniesCompany’s increase in activity.
OTHER INCOME (EXPENSE).: Other income (expense) for the six months ended June 30, 2023, and 2022 was $373,636 and 2021 was 1,960,605 and $(1,890,365),$1,960,605, respectively. Included in this categoryother income in 2023 was interest expense of $(224,175), change in derivative of $562,277, currency exchange gain of $34,227 and miscellaneous income of $1,307. The increase in the derivative liability was primarily due to the decrease in remaining life of the underlying securities and the Company’s common stock value remaining under the term of conversion. There was a benefit in the 2nd quarter of 2022 from the maturity of two of the underlying securities which eliminated those derivatives. Included in other income in 2022 was interest expense of $(241,505), change in derivative of $2,163,281, currency transactionexchange gain (loss) of $37,790 and miscellaneous income of 1,039.$1,039. Other income (expense) for the three months ended June 30, 2023, and 2022 was $298,551 and $1,143,544, respectively. Included in this categoryother income in 20212023 was interest expense of $(730,419)$(107,867), change in derivative of $(185,116),$392,843, currency transactionexchange gain (loss) of $136,281$15,973 and a one-time arbitration awardmiscellaneous expense of $1,111,111.$(2,398). The decreaseincrease in the derivative liability was primarily due to maturity of twothe decrease in remaining life of the underlying securities and the Company’s common stock value remaining under the conversion terms. The decreaseterm of conversion. Included in other income in 2022 was interest expense was the result of a reduction$(121,736), change in the Company’s debt. For a more detailed explanationderivative of the 2021 arbitration award see Legal Proceedings.$1,224,575, currency exchange gain of $40,192 and miscellaneous income of $513.
OTHER COMPREHENSIVE INCOME (LOSS).INCOME: Other comprehensive income (loss) includes the Company’s net income (loss) plus the unrealized currency translationexchange gain (loss) for the period. The Company’s other comprehensive lossincome for the six months ended June 30, 20222023 and 20212022 consisted of unrealized currency gains (losses) of $11,016$351,217 and $(371,407),$11,016, respectively. The change is due to the variances in the pesocurrency exchange rates between the US Dollar and Mexican Peso throughout the two periods. The Company’s other comprehensive income for the three months ended June 30, 2023 and 2022 consisted of unrealized currency gains of $259,976 and $312,928, respectively. The change is due to the variances in the currency exchange rates between the US Dollar and Mexican Peso throughout the two periods.
Liquidity and Capital Resources
As of June 30, 2022,2023, the Company had working capital of $12,378,739,$9,006,071 comprised of current assets of $33,337,581$34,220,164 and current liabilities of $20,958,842.$25,214,093. This represented an increasea decrease of $11,031,028$2,783,507 from the working capital of $1,347,711 maintained by the Company of $11,789,578 as of December 31, 2021.2022. The primary reasonsreason for the increase were funds generated fromdecrease was due to a decrease in the Company’s operating profit and proceeds from the exercise of stock warrants.cash.
Net cash provided by (used in)used in operations for the six months ended June 30, 2022 and 20212023 was $(2,564,453) compared to a use of $(176,600) and $8,271,206, respectively.during the six months ended June 30, 2022. The decrease in the funds providedcash flow from operations was a resultprimarily due to the Company’s loss in 2023, primarily attributed to the ongoing expenses of expansion and increased output in the operating profits being applied to reduce payables and other debt.six months ended June 30, 2023.
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Net cash provided by (used in)
The Company reported no investing activities for the six months ended June 30, 20222023, and 2021 was $0 and $0, respectively.June 30, 2022. Expenditures necessaryreported for the expansion of mining operationsfacilities totaled $824,671 and $2,971,407 and $0 induring the six months ended June 30, 2023 and June 30, 2022, and 2021, respectively, which would normally have been included in this category but were expensesexpensed due to the company’s being an exploration stage issuerlack of proven and probable reserves at the SJG Project, which therefore, requires the Company to expense costs as defined in SEC Reg. S-K, Item 1300.incurred related to expansion of test mining and milling activities.
Net cash provided by (used in) financing activities for the six months ended June 30, 2023 and 2022 was $(1,310,250) and 2021 was $5,357,921, and $(36,460), respectively. The 2021 usage represented principal payments on long-term debt.net cash used in financing activities in the six months ended June 30, 2023 was used to purchase the Series A preferred stock previously held by the Company’s Chairman / CEO. The net cash provided by financing activities in the six months ended June 30, 2022 source of funds was proceedsderived from the exercise and purchase of common stock warrants, offset by payments to reduce debt.warrants.
Off-Balance Sheet Arrangements
As of June 30, 2022,2023, 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 PlanCompany’s plan of operation for the next twelve months includes DynaMineras continuing the improvement and expansion of the test mining and pilot milling operations at SJG. The Company commenced its testingtest mining and pilot milling activities in fall 2015, at the rate of an average of approximately 100 tons per 24-hour operating day from the mine and approximately the same output from the processing plant.day. Over the past fiveseven years, the Company has gradually increased its output to a current average of approximately 300600 tons per 24-hour operating day from the minestest mining activity and processing plant.test milling facility. In 2022the six months ended June 30, 2023, the Company anticipates completioncompleted the current planned expansion of expansionthe pilot mill facility with the installation and addition to reach a capacitypilot plant operations of two new ball mills. The Company expects to increase efficiency of activities in second semester 2023, and to achieve an additional increase in output to an average of approximately 700 tons per 24-hour operating days from the processing plant. The Company expects to operate at approximately 500 tons per day in the second half of 2022.day.
The Company funds its general and administrative expenses in the US from the cash flow from the Company’s operating subsidiaries, DynaMineras and DynaOperaciones. These amounts are eliminatedsubsidiary in consolidation.Mexico. The Company believes that cash on hand and includingthe cash flow to be generated from its current test mining and pilot mill operations, is adequate to fund its ongoing general and administrative expenses through the subsequent twelve months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2022.2023. 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 as of the end of the period covered by this Form 10-Q. 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 Exchange Act 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 Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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We recognize the importance of having effective controls in place to manage risks and ensure the integrity of our financial reporting. We are committed to continuously improving our control environment through ongoing monitoring, testing, and remediation of control deficiencies. Our management team is actively involved in overseeing the effectiveness of our controls, and we have established a culture of accountability and transparency to ensure that all employees understand their roles and responsibilities in maintaining a strong control environment. We are also investing in technology to streamline our control processes and reduce the risk of errors and fraud. We believe that these efforts will enable us to develop a high level of control effectiveness.
Changes in Internal Control over Financial Reporting
TheDuring the second quarter of 2023 the Company has not made any changechanges in its internal control over financial reporting to begin to remediate the disclosure controls and procedures that occurred duringwere not effective as of December 31, 2022. These changes include establishment of an Audit Committee, which is composed of four of the period covered by this reportCompany’s independent directors, strategic planning on Form 10-Q that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.the Company’s information technology and risk management processes and implementation of additional key controls and approvals.
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PART II
ITEM 1. LEGAL PROCEEDINGS
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”AAA”), seeking monetary and nonmonetary relief, and citing the Earn In/Option Agreement as the basis for its filing. On August 25, 2016, the AAA issued a ruling in favor of Goldgroup against the Company and DynaMéxico (the “Arbitration Award”“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, the Company and DynaMéxico agreed to release the $1.111 million bond that had been posted, and paid an additional $4,054 in interest, in full satisfaction of the monetary portion of the Arbitration Award. Since that time, the Company has fully performed the non-monetary portion of the Arbitration Award, which included the election of a Goldgroup designee to the board of DynaMéxico, yet Goldgroup continues to challenge the Company’s actions before the Colorado U.S. District Court.xico.
2014 Court filing by DynaMéxico, inDynaResource de Mexico SA de CV Legal Update & Disclosure:
On December 9, 2014, DynaMéxicoMarch 3, 2023, Goldgroup Resources Inc. (“Goldgroup”) filed a commercial lawsuitformal notice with the México Federal Legal Authorities, which confirmed Goldgroup’s complete withdrawal of all legal claims in Mexico and under Mexican law against Goldgroup, its parent company Goldgroup Mining Inc.,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 AAA,courts 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 awardedwith respect to DynaMéxico against Goldgroup. On October 5, 2015, the Trial Court awarded DynaMéxico damages in excess of US $48 million.and Goldgroup Resources Inc. are fully resolved and are no longer subject to appeal.
Consequence of the México legal ruling and the Goldgroup legal withdrawal:
1. | The $48,280,808.34 USD damages award (dated October 05, 2015) in favor of DynaMéxico and against Goldgroup Resources Inc., confirmed by Mexican courts in 2019, is final, conclusive, and enforceable under Mexican law. Goldgroup Resources’ challenges to that award have been fully denied and the damages award is final. |
2. | Goldgroup’s challenges to DynaMéxico’s share ownership have also been fully denied and consequently, under Mexican law, Goldgroup owns no shares in DynaMéxico. |
Mercuria Energy Trading S.A vs Mineras de DynaResource S.A. de C.V.
In 2020, Mercuria Energy Trading, S.A. (“Mercuria”) initiated an arbitration proceeding against Mineras de Dynaresource, S.A. de C.V. (“Mineras”), arising out of the earlier-terminated supply agreement between the parties. In January 2022, the arbitration panel awarded Mercuria the sum of US$1,822,674, plus interest at 2% over the quarterly compounded USD 3- month LIBOR rate, from February 2020 forward. In August 2022, the panel also assessed costs of the arbitration proceeding against Mineras, in the aggregate amount of £ 376,232.75. DynaResource has appealedaccrued $1,000,000 for the $48 million damagesarbitration award on multiple occasions, yet the award stands and has been affirmed byrelated costs.
As Mineras is a varietycompany 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 DynaMéxiconationality, under Mexican law which requires physical possessionMineras has the right to legally oppose the recognition and enforcement of shares to evidence ownership.
Thethe award to DynaMéxicoMercuria, the assessment of the shares formerly owned by Goldgroup, does not satisfy the $48 million damages award in favor of DynaMéxico.
2020 Petition for Recognition of the $48M Damages Award
On December 5, 2020, the Companyany costs, and DynaMéxico filed an Original Petition for Recognition of the $48 million damages award in favor of DynaMéxico, in US. District Court in Dallas County, Texas (the “Texas U.S. District Court”), under principles of international comity. On May 12, 2021, The Texas U.S. District Court issued a ruling stating the Court was not obligated to recognize the $48 million damages award in the United States. On May 14, 2021, the Company and DynaMéxico filed a Notice of Appeal of that ruling.any supplemental award.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On June 28, 2022, Golden Post Rail, LLC exercised its warrant to acquire 2,655,361 shares of the Company’s common stock at a price of $2.04 per share, for a total exercise price of $5,416,936. The warrant was granted on May 6, 2015 with an original maturity date of June 30, 2020, and the period of exercise was extended for two years in 2020.None.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.On or about July 27, 2023, but effective as of April 19, 2023, the Company entered into Employment Agreements (the “Employment Agreements”) with each of its named executive officers, as disclosed in the Company’s Form 10-K for the year ended December 31, 2022: K.W. (“K.D.”) Diepholz, CEO and CFO; Dr. Jose Vargas Lugo, Executive Vice President; and Rene L.F. Mladosich, General Manager of the Company’s San Jose de Gracía Project. The Employment Agreements were entered into pursuant to the terms of the Multi-Party Agreement (the “MPA”) by and among the Company, Golden Post Rail, LLC (“Golden Post”), MKR 2022 Grantor Retained Annuity Trust, and Mr. Diepholz. The principal terms of the MPA and the Employment Agreements were described in the Company’s Current Report on Form 8-K filed with the SEC on April 26, 2023. Copies of the Employment Agreements are attached hereto as Exhibits 10.1, 10.2, and 10.3, respectively, and incorporated herein by reference.
On August 2, 2023, the Company entered into (1) an Amendment Agreement (the “OP Amendment”) to the Gold Concentrate Purchase Agreement dated February 1, 2021, as amended (the “Offtake Agreement”) by and between the Company’s affiliate, DynaResource de Mexico, SA de CV (“Dyna Mex”), and an affiliate of Ocean Partners Holdings Limited (“Ocean Partners”), MK Metal Trading Mexico SA de CV (“Buyer”), and (2) a Stock Purchase Agreement (the “Stock Purchase Agreement”) by and between the Company and Ocean Partners. The Amendment and the Stock Purchase Agreement were entered into pursuant to the terms of the Memorandum of Understanding dated June 29, 2023 (the “MOU”) by and between the Company and Ocean Partners.
The principal terms of the OP Amendment are as follows:
· | To extend the term of the Offtake Agreement until December 31, 2026, with evergreen annual extensions thereafter until either party terminates the Offtake Agreement on at least 365 days’ notice. | |
· | To provide for a $1 million termination fee payable by the Company to Ocean Partners in certain circumstances. | |
· | To increase the maximum advance line of credit under the Offtake Agreement to $17.5 million. | |
· | To give the Company the option to convert the advance credit line under the Offtake Agreement, to a maximum of $10.0M, into a revolving credit facility repayable over 12 months at 3M SOFR + 7.50% amortized as follows: Month 1, interest only; Month 2-11, 5% principal plus interest; and Month 12, 50% principal plus interest. Converting to a revolving credit facility would reduce the availability on the advance credit line on a pro rata percentage basis. | |
· | To provide Ocean Partners a right of first refusal, during the term of the Offtake Agreement, to provide offtake financing and purchase other concentrates (zinc, silver, copper, etc.) and doré from the Company’s open pit and underground operations. |
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Pursuant to the Stock Purchase Agreement, the Company issued and sold to Ocean Partners 1,000,000 shares of the Company’s Common Stock for a purchase price of $5,000,000. In addition, the Company has agreed to appoint Brent Omland, or another person nominated by Ocean Partners, as a director of the Company subject to approval by the Company’s Board of Directors, consent to which approval shall not to be unreasonably withheld as consistent with the Board’s fiduciary duties, for a term running through the next annual meeting of the Company’s stockholders. Such nominee will be nominated, subject to approval by the Company’s Board of Directors, consent to which approval shall not to be unreasonably withheld as consistent with the Board’s fiduciary duties, for reelection by the shareholders at such annual meeting.
The foregoing descriptions of the Amendment and the Stock Purchase Agreement (“SPA”) are qualified in their entirety by reference to the full text of the Amendment and the Stock Purchase Agreement, copies of which are attached hereto as Exhibits 10.1 and 10.2, respectively, and incorporated herein by reference. The representations, warranties and covenants contained in the Amendment and the SPA were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to the agreements, and may be subject to limitations agreed upon by the contracting parties.
The Memorandum of Understanding of this transaction was disclosed in a Form 8-K filed with the Securities & Exchange Commission on July 6, 2023, and incorporated herein by reference.
ITEM 6. EXHIBITS
Exhibit Number; |
| Name of Exhibit |
10.1 | Employment Agreement dated as of April 19, 2023, between the Company and K.W. (“K.D.”) Diepholz. | |
10.2 | Employment Agreement dated as of April 19, 2023, between the Company and Dr. Jose Vargas Lugo. | |
10.3 | Employment Agreement dated as of April 19, 2023, between the Company and Rene L.F. Mladosich. | |
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Date: | By: | /s/ K.W. (“K.D.”) Diepholz | |
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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.
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