Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | May 20, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | DYNARESOURCE INC | |
Entity Central Index Key | 0001111741 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 17,722,825 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Current Assets: | ||
Cash and Cash Equivalents | $ 1,442,263 | $ 2,685,576 |
Accounts Receivable | 829,451 | 1,074,724 |
Inventories | 1,787,121 | 1,588,778 |
Foreign Tax Receivable | 1,171,879 | 845,564 |
Other Current Assets | 359,195 | 372,936 |
Total Current Assets | 5,589,909 | 6,567,578 |
Mining Equipment and Fixtures (Net of Accumulated Depreciation of $1,277,742 and $1,203,562) | 2,588,759 | 2,449,354 |
Mining Concessions | 4,132,678 | 4,132,678 |
Operating Lease Asset | 861,668 | 0 |
Investments in Affiliate | 70,000 | 70,000 |
Other Assets | 97,027 | 96,409 |
TOTAL ASSETS | 13,340,041 | 13,316,019 |
Current Liabilities: | ||
Accounts Payable | 3,448,312 | 2,283,803 |
Accrued Liabilities | 1,389,186 | 1,567,840 |
Customer Advances | 1,750,000 | 1,750,000 |
Due to Non-controlling Interest | 231,500 | 231,500 |
Derivative Liability | 352,183 | 974,683 |
Current Portion of Operating Lease Liability | 63,195 | 0 |
Convertible Notes Payable | 838,125 | 838,125 |
Current Portion of Long Term Debt | 820,739 | 705,320 |
Total Current Liabilities | 8,893,240 | 8,351,271 |
Noncurrent Liabilities: | ||
Operating Lease Liability, Less Current Portion | 809,993 | 0 |
Long Term Debt, Less Current Portion | 1,091,791 | 1,097,915 |
TOTAL LIABILITIES | 10,795,024 | 9,449,186 |
Preferred Stock, Series C, $0.0001 per value, 1,733,221 shares Authorized, issued and outstanding | 4,333,053 | 4,333,053 |
STOCKHOLDERS' EQUITY (DEFICIT) | ||
Preferred Stock, Series A, $.0001 par value, 1,000 shares authorized, issued and outstanding | 1 | 1 |
Common Stock, $.01 par value, 25,000,000 shares authorized, 17,722,825 issued and 17,722,825 outstanding | 177,228 | 177,228 |
Preferred Rights | 40,000 | 40,000 |
Additional Paid In Capital | 56,622,159 | 56,622,159 |
Treasury Stock, 778,980 shares | (2,223,891) | (2,223,891) |
Accumulated Other Comprehensive Income | 1,100,434 | 1,247,198 |
Accumulated Deficit | (51,851,469) | (50,723,786) |
Total DynaResource, Inc. Stockholders' Equity | 3,864,462 | 5,138,909 |
Non-controlling Interest | (5,652,498) | (5,605,129) |
TOTAL EQUITY (DEFICIT) | (1,788,036) | (466,220) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ 13,340,041 | $ 13,316,019 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Accumulated depreciation, mining equipment and fixtures | $ 1,277,742 | $ 1,203,562 |
Series C, par value | $ 0.0001 | $ 0.0001 |
Series C, shares authorized | 1,733,221 | 1,733,221 |
Series C, shares issued | 1,733,221 | 1,733,221 |
Series C, shares outstanding | 1,733,221 | 1,733,221 |
Series A, par value | $ 0.0001 | $ 0.0001 |
Series A, shares authorized | 1,000 | 1,000 |
Series A, shares issued | 1,000 | 1,000 |
Series A, shares outstanding | 1,000 | 1,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares issued | 17,722,825 | 17,722,825 |
Common stock, shares outstanding | 17,722,825 | 17,722,825 |
Treasury stock | 778,980 | 778,980 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Statement [Abstract] | ||
REVENUE | $ 2,329,563 | $ 2,517,766 |
COSTS AND EXPENSES OF MINING OPERATIONS | ||
Production Costs Applicable to Sales | 451,291 | 326,847 |
Mine Production Costs | 1,055,940 | 454,861 |
Mine Exploration Costs | 862,300 | 827,299 |
Mine Expansion Costs | 3,638 | 159,900 |
Camp, Warehouse and Facilities | 671,774 | 666,409 |
Transportation | 250,826 | 87,668 |
Property Holding Costs | 105,962 | 152,387 |
General and Administrative | 644,677 | 594,443 |
Depreciation and Amortization | 74,180 | 66,642 |
Total Operating Expenses | 4,120,588 | 3,336,456 |
NET OPERATING LOSS | (1,791,025) | (818,690) |
OTHER INCOME (EXPENSE) | ||
Foreign Currency Gains | 139,352 | 806,514 |
Interest Expense | (126,389) | (55,551) |
Derivatives Mark-to-Market Gain | 622,500 | 1,982,482 |
Other Income | 373 | 380 |
Total Other Income | 635,836 | 2,733,825 |
NET INCOME (LOSS) BEFORE TAXES | (1,155,189) | 1,915,135 |
PROVISION FOR INCOME TAXES | 0 | 0 |
NET INCOME (LOSS) | (1,155,189) | 1,915,135 |
DEEMED DIVIDEND FOR SERIES C PREFERRED | (43,330) | (43,330) |
(INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST | 27,506 | 57,645 |
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ (1,171,013) | $ 1,929,450 |
EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO THE EQUITY HOLDERS OF DYNARESOURCE, INC.: | ||
Basic Earnings (Loss) Per Common Share | $ (0.07) | $ 0.11 |
Weighted Average Shares Outstanding - Basic | 17,722,825 | 17,722,825 |
Diluted Earnings (Loss) Per Common Share | $ (0.07) | $ 0.10 |
Weighted Average Shares Outstanding - Diluted | 17,722,825 | 19,473,378 |
OTHER COMPREHENSIVE INCOME (LOSS): | ||
Foreign Currency Translation Loss | $ (166,627) | $ (786,668) |
TOTAL OTHER COMPREHENSIVE LOSS | (166,627) | (786,668) |
TOTAL COMPREHENSIVE INCOME (LOSS) | (1,321,816) | 1,128,467 |
ATTRIBUTABLE TO: | ||
EQUITY HOLDERS OF DYNARESOURCE, INC. | (1,274,447) | 1,166,439 |
NON-CONTROLLING INTEREST | $ (47,369) | $ (37,972) |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Preferred A Stock | Preferred C Stock | Common Stock | Preferred Rights | Paid In Capital | Treasury Stock | Other Comprehensive Income | Accumulated Deficit | Non Controlling Interests | Total |
Shares, Beginning Balance at Dec. 31, 2017 | 0 | 0 | 17,722,825 | 40,000 | 778,980 | |||||
Amount, Beginning Balance at Dec. 31, 2017 | $ 1 | $ 0 | $ 177,228 | $ 40,000 | $ 56,622,159 | $ (2,223,891) | $ 1,265,853 | $ (50,898,357) | $ (5,416,168) | $ (433,175) |
Other Comprehensive Income | (806,341) | 19,673 | (786,668) | |||||||
Net Income (Loss) | 1,972,780 | (57,645) | 1,915,135 | |||||||
Shares, Ending Balance at Mar. 31, 2018 | 0 | 0 | 17,722,825 | 40,000 | 778,980 | |||||
Amount, Ending Balance at Mar. 31, 2018 | $ 1 | $ 0 | $ 177,228 | $ 40,000 | 56,622,159 | $ (2,223,891) | 459,512 | (48,925,577) | (5,454,140) | 695,292 |
Shares, Beginning Balance at Dec. 31, 2018 | 0 | 0 | 17,722,825 | 40,000 | 778,980 | |||||
Amount, Beginning Balance at Dec. 31, 2018 | $ 1 | $ 0 | $ 177,228 | $ 40,000 | 56,622,159 | $ (2,223,891) | 1,247,198 | (50,723,786) | (5,605,129) | (466,220) |
Other Comprehensive Income | (146,764) | (19,863) | (166,627) | |||||||
Net Income (Loss) | (1,127,683) | (27,506) | (1,155,189) | |||||||
Shares, Ending Balance at Mar. 31, 2019 | 0 | 0 | 17,722,825 | 40,000 | 778,980 | |||||
Amount, Ending Balance at Mar. 31, 2019 | $ 1 | $ 0 | $ 177,228 | $ 40,000 | $ 56,622,159 | $ (2,223,891) | $ 1,100,434 | $ (51,851,469) | $ (5,652,498) | $ (1,788,036) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Income (Loss) | $ (1,155,189) | $ 1,915,135 |
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities | ||
Gain on Derivative Liabilities | (622,500) | (1,982,482) |
Depreciation and Amortization | 74,180 | 66,642 |
Change in Operating Assets and Liabilities | ||
Accounts Receivable | 245,273 | (14,749) |
Inventory | (198,343) | (133,774) |
Foreign Tax Receivable | (326,315) | 154,405 |
Operating Lease Assets | (861,668) | 0 |
Other Assets | 13,123 | (379,591) |
Customer Advances | 0 | 500,000 |
Operating Lease Liabilities | 873,188 | 0 |
Accounts Payable | 1,164,509 | 794,513 |
Accrued Liabilities | 81,793 | (218,024) |
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES | (711,949) | 702,075 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of Equipment | (213,585) | (219,300) |
CASH FLOWS USED IN INVESTING ACTIVITIES | (213,585) | (219,300) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payment of Promissory Notes - Related Parties | 0 | (112,500) |
Payment of Note Payable | (169,675) | (42,065) |
CASH FLOWS USED IN FINANCING ACTIVITIES | (169,675) | (154,565) |
Effect of Foreign Exchange Rates | (148,104) | (786,668) |
NET DECREASE IN CASH | (1,243,313) | (458,458) |
CASH AT BEGINNING OF PERIOD | 2,685,576 | 3,528,735 |
CASH AT END OF PERIOD | 1,442,263 | 3,070,277 |
SUPPLEMENTAL DISCLOSURES | ||
Cash Paid for Interest | 127,702 | 51,549 |
Cash Paid for Income Taxes | 0 | 0 |
NON CASH TRANSACTIONS | ||
Conversion of Accounts Payable to Long-Term Debt | $ 260,447 | $ 504,094 |
1. NATURE OF ACTIVITIES AND SIG
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES | Nature of Activities, History and Organization DynaResource, Inc. (The “Company”, “DynaResource”, or “DynaUSA”) was organized September 28, 1937, as a California corporation under the name of West Coast Mines, Inc. In 1998, the Company re-domiciled to Delaware and changed its name to DynaResource, Inc. The Company is in the business of acquiring, investing in, and developing precious metal properties, and the production of precious metals. In 2000, the Company formed a wholly owned subsidiary, DynaResource de México S.A. de C.V., chartered in México (“DynaMéxico”). This Company was formed to acquire, invest in and develop resource properties in México. DynaMéxico owns a portfolio of mining concessions that currently includes its interests in the San José de Gracia Project (“SJG”) in northern Sinaloa State, México. The SJG District covers 69,121 hectares (170,802 acres) on the west side of the Sierra Madre mountain range. The Company currently owns 80% of the outstanding capital of DynaMéxico. In 2005, the Company formed DynaResource Operaciones de San Jose De Gracia S.A. de C.V. (“DynaOperaciones”), and acquired effective control of Mineras de DynaResource, S.A. de C.V. (formerly Minera Finesterre S.A. de C.V., “DynaMineras”). The Company owned 25% of DynaMineras and acquired effective control of DynaMineras by acquiring the option to purchase the remaining 75% of the Shares of DynaMineras. The Company finalized the option and acquisition of DynaMineras in January 2010, and now owns 100% of DynaMineras. The results of these subsidiaries are consolidated with those of the Company. From January 2008 through March 2011, DynaMéxico issued 100 Variable Capital Series “B” shares to Goldgroup Resources, Inc., a wholly owned subsidiary of Goldgroup Mining Inc. Vancouver BC (“Goldgroup”), in exchange for Goldgroup’s contribution of $18,000,000 to DynaMéxico. At March 14, 2011, Goldgroup owned 50% of the outstanding capital shares of DynaMéxico. On June 21, 2013, DynaResource acquired a Certificate for 300 Series “B” Variable Capital Shares of DynaMéxico, in exchange for the settlement of accounts receivable from DynaMéxico in the amount of $31,090,710 Mexican Pesos (approximately $2.4 million USD). After the issuance and receipt of the 300 Series B Shares, DynaUSA holds 80% of the total outstanding Capital of DynaMéxico. The Company elected to become a voluntary reporting issuer in Canada in order to avail itself of Canadian regulations regarding reporting for mining properties and, more specifically, National Instrument 43-101 (“NI 43-101”). This regulation sets forth standards for reporting resources in a mineral property and is a standard recognized in the mining industry. Reclassifications Certain financial statement reclassifications have been made to prior period balances to reflect the current period’s presentation format; such reclassifications had no impact on the Company’s consolidated statements of operations or consolidated statements of cash flows and had no material impact on the Company’s consolidated balance sheets. 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 revenue and expense. 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 further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items that: 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce 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 financial statements on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States. Principles of Consolidation The financial statements include the accounts of DynaResource, Inc., as well as DynaResource de México, S.A. de C.V. (80% ownership), DynaResource Operaciones S.A. de C.V. (100% ownership) and Mineras de DynaResource S.A. de C.V. (100% ownership). All significant inter-company transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated. Non-Controlling Interest The Company’s subsidiary, DynaResource de México S.A. de C.V, is 20% owned by Goldgroup Mining, Inc. On May 17, 2013, the ownership changed from 50% to 20%. The Company accounts for this outside interest as “non-controlling interest”. Investments in Affiliates The Company owns a 20% interest in DynaResource Nevada, Inc., a Nevada Corporation (“DynaNevada”), with one operating subsidiary in México, DynaNevada de México, S.A. de C.V. (“DynaNevada de México”), together “DynaNevada”. The Company accounts for this investment using the cost method. 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. Accounts Receivable and Allowances for Doubtful Accounts The allowance for accounts receivable is recorded when receivables are considered to be doubtful of collection. As of March 31, 2019, and December 31, 2018, respectively, no allowance has been made. 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 March 31, 2019 and December 31, 2018 are $1,171,879 and $845,564 respectively. Inventory Inventories are carried at the lower of cost or net realizable value and consist of mined tonnage, and gravity and flotation concentrates, and gravity tailings or flotation feed material. The inventories are $1,787,121 and $1,588,778 as of March 31, 2019 and December 31, 2018, respectively. Proven and Probable Reserves (No Known Reserves) The definition of proven and probable reserves is set forth in SEC Industry Guide 7 (“Industry Guide 7”). Proven reserves for which (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geological character is so well defined that size, shape, depth and mineral content of the reserves are well-established. Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observations. As of March 31, 2019, none of the Company's properties contain resources that satisfy the definition of proven and probable reserves. The Company classifies the development of its properties, including the San Jose de Gracia Property, as exploration stage projects since no proven or probable reserves have been established under Industry Guide 7. Property Substantially all costs, including design, engineering, 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 equipment which has alternative uses or significant salvage value, may be capitalized without proven and probable reserves. Depreciation is computed using the straight-line method with the exception of mining equipment. Mining equipment is depreciated using the units-of-production method based on tonnes processed over the estimated total mine life. Office furniture, equipment and light vehicles 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. Trailers, heavy vehicles and other site equipment are being depreciated on a straight-line method over estimated economic lives from 5 to 15 years. Buildings are being depreciated on straight line method over an estimated economic life of 20 years. Design, Construction, and Development Costs: When proven and probable reserves as defined by Industry Guide 7 exist, development costs are capitalized and the property is a commercially minable property. Mine development costs incurred either to develop new ore deposits, expand the capacity of operating mines, or to develop mine areas substantially in advance of current production would be capitalized. Costs of start-up activities and costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations as incurred. Costs of abandoned projects are charged to operations upon abandonment. All capitalized costs would be amortized using the units of production method over the estimated life of the ore body based on recoverable ounces to be mined from proven and probable reserves. Certain costs to design and construct mining and processing facilities may be incurred prior to establishing proven and probable reserves. As no proven and probable reserves have been established on any of the Company's properties, design, construction and development costs are not capitalized at any of the Company's properties, and accordingly, substantially all costs are expensed as incurred, resulting in the Company reporting larger losses than if such expenditures had been capitalized. Additionally, the Company does not have a corresponding depreciation or amortization of these costs going forward since these expenditures were expensed as incurred as opposed to being capitalized. As a result of these and other differences, the Company's financial statements may not be comparable to the financial statements of mining companies that have established reserves. Mining Properties Interests Mineral property interests include acquired interests in development and exploration stage properties, which are considered tangible assets. The amount capitalized relating to a mineral property interest represents its fair value at the time of acquisition. When a property does not contain mineralized material that satisfies the definition of proven and probable reserves, such as with the San Jose de Gracia Property, capitalized costs and mineral property interests are amortized using the straight-line method once production begins. As of March 31, 2019, the mining interests have been in the pilot production stage and therefore, no amortization has been expensed. Mining properties consist of 33 mining concessions covering approximately 9,920 hectares at the San Jose de Gracia property (“SJG”), the basis of which are amortized on the unit of production method based on estimated recoverable resources. If it is determined that the deferred costs related to a property are not recoverable over its productive life, those costs will be written down to fair value as a charge to operations in the period in which the determination is made. The amounts at which mineral properties and the related costs are recorded do not necessarily reflect present or future values. Impairment of Assets: 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 taking into account losses during processing and treatment of mineralized material. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company's estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold, silver and other commodity prices, production levels and costs and capital are each subject to significant risks and uncertainties. The recoverability of the book value of each property 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. As of the date of this filing, no events have occurred that would require write-down of any assets. As of March 31, 2019 and December 31, 2018, no indications of impairment existed. Asset Retirement Obligation: Pre-Pilot Production Costs During 2016, the Company has conducted rehabilitation activity at the San Pablo mine and has refurbished the Pilot Mill Facility at San Jose de Gracia and, in general prepared for test mining and pilot milling (“Pilot Production”) Operations. The costs associated with the rehabilitation, preparation, clean up and facilitation of this process are expensed as pre-pilot production costs. 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. Exploration Costs Exploration costs are charged to operations and expenses as incurred. Exploration, development, direct field costs and administrative costs are expensed in the period incurred. Foreign Currency Translation The functional currency for the subsidiaries of the Company is the Mexican Peso. As a result, the financial statements of the subsidiaries have been re-measured from Mexican Pesos into U.S. dollars using (i) current exchange rates for monetary asset and liability accounts, (ii) historical exchange rates for nonmonetary asset and liability accounts, (iii) historical exchange rates for revenues and expenses associated with nonmonetary assets and liabilities and (iv) the weighted average exchange rate of the reporting period for all other revenues and expenses. In addition, foreign currency translation gains and losses are reported as a separate component of stockholders’ equity (comprehensive income (loss)). The financial statements of the subsidiaries should not be construed as representations that Mexican Pesos have been, could have been or may in the future be converted into U.S. dollars at such rates or any other rates. Relevant exchange rates used in the preparation of the financial statements for the subsidiaries are as follows for the periods ended March 31, 2019 and December 31, 2018 (Mexican Pesos per one U.S. dollar): Mar 31, 2019 Dec 31, 2018 Exchange Rate at Period End Pesos 19.43 19.63 Relevant exchange rates used in the preparation of the income statement portion of financial statements for the subsidiaries are as follows for the periods ended March 31, 2019 and March 31, 2018 (Mexican Pesos per one U.S. dollar): Mar 31, 2019 Mar 31, 2018 Weighted Average Exchange Rate for the Three Months Ended Pesos 19.21 18.74 The Company recorded currency transaction gains (losses) of $139,352 and $806,514 for the three months ended March 31, 2019 and 2018, respectively. Income Taxes The Company accounts for income taxes under ASC 740 “Income Taxes” Income from the Company’s subsidiaries in México are taxed at applicable Mexican tax law. On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the “Act”) was signed into law. Among other provisions, the Act reduced the highest corporate tax rate from 35% to 21%. With the passage of the Act, the Company‘s deferred tax assets and liabilities were restated as of the effective date of the law to reflect the new applicable rate. The reduction to the net deferred tax asset was charged to tax expense in the period of the change and offset by a valuation allowance stemming from historical net operating loss carryforwards. Use of Estimates In order to prepare financial statement 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 financial statements and determines whether contingent assets and liabilities, if any, are disclosed in the 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. Comprehensive Income (Loss) ASC 220 “Comprehensive Income” Revenue Recognition The Company adopted ASC 606 “ Revenue from contracts with customers The amount of revenue recognized is initially recorded on a provisional basis based on the contract price and the estimated metal quantities based on assay data. The revenue is adjusted upon final settlement of the sale. The chief risk associated with the recognition of sales on a provisional basis is the fluctuations between the estimated quantities of precious metals base on the initial assay and the actual recovery from treatment and processing. Prior to the adoption of this standard the Company recognized revenue in accordance with ASC 605-10, " Revenue Recognition in Financial Statements The change in accounting principle from ASC 605 to ASC 606 did not impact the amount of revenue recognized in the Company’s financial statements. Stock-Based Compensation The Company accounts for stock options at fair value as prescribed in ASC 718. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model and provides for expense recognition over the service period, if any, of the stock option. The Company accounts for stock options issued and vesting to non-employees in accordance with ASC Topic 505-50 “ Equity -Based Payment to Non-Employees” Fair value of Financial Instruments The Company’s financial instruments consist of cash, receivables, payables and long-term debt. The carrying amount of cash, receivable and payables approximates fair value because of the short-term nature of these items. The carrying amount of long-term debt approximates fair value due to the relationship between the interest rate on long-term debt and the Company’s incremental risk adjusted borrowing rate. Per Share Amounts Earnings per share are calculated in accordance with ASC 260 “ Earnings per Share The Company had 2,523,689 warrants outstanding at March 31, 2019, of which 357,162 are exercisable at $2.50 and 2,166,527 are exercisable at $2.41, which upon exercise, would result in the issuance of 2,523,689 shares of common stock. The Company also had convertible debt instruments as of March 31, 2019 which, upon conversion at a valuation of $2.50 per share, would result in the issuance of 335,250 shares of stock. Three Months Three Months Ended March 31, 2019 Ended March 31, 2018 Net income (loss) attributable to common shareholders $ (1,171,013 ) $ 1,929,450 Shares: Weighted average number of common shares outstanding, Basic 17,722,825 17,722,825 Diluted weighted average number of common shares outstanding, Diluted 17,722,825 19,473,378 Basic earnings (loss) per share $ (0.07 ) $ 0.11 Diluted earnings (loss) per share $ (0.07 ) $ 0.10 Related Party Transactions FASB ASC 850, "Related Party 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 which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.” Recently Issued Accounting Pronouncements Leases In February 2016, FASB issued ASU 2016-02— Leases (Topic 842). The update is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. As such, The Company is required to adopt these provisions as of the fiscal year beginning on January 1, 2019. The Company elected the available practical expedients and adopted ASC 842 effective January 1, 2019, prospectively. The adoption of this standard resulted in the recognition of right-to-use assets and lease liabilities of $861,668 and $873,188 with no material impact on the results of operations and cash flows. See Note 10 for additional information regarding our leases. |
2. INVENTORIES
2. INVENTORIES | 3 Months Ended |
Mar. 31, 2019 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | The Company commenced underground test mining and pilot milling activities (“pilot production”) in the 2nd quarter of 2014. Rehabilitation of the San Pablo Mine and refurbishing of the Pilot Mill Facility and construction of the adjacent tailings pond continued through 2016. Inventories are carried at the lower of cost or net realizable value and consist of mined tonnage, gravity-flotation concentrates, and gravity tailings (or, flotation feed material). Inventory balances of March 31, 2019 and December 31, 2018, respectively, were as follows: 2019 2018 Mined Tonnage Stockpiled $ 1,678,792 $ 1,512,410 Mill Tonnage Stockpiled 108,329 76,368 Finished Material — — Total Inventories $ 1,787,121 $ 1,588,778 |
3. PROPERTY
3. PROPERTY | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY | Property consists of the following at March 31, 2019 and December 31, 2018: 2019 2018 Camp Buildings and Improvements $ 470,974 $ 470,974 Machinery and equipment 2,132,607 2,040,256 Transportation equipment 228,526 225,695 Office equipment 164,113 164,113 Office furniture and fixtures 78,802 78,802 Construction in Progress 791,479 673,076 Sub-total 3,866,501 3,652,916 Less: Accumulated depreciation (1,277,742 ) (1,203,562 ) Total Property $ 2,588,759 $ 2,449,354 The Company purchased equipment of $213,585 and $219,300 in the three months ended March 31, 2019 and 2018, respectively. Depreciation has been provided over each asset’s estimated useful life. Depreciation expense was $74,180 and $66,642 for the three months ended March 31, 2019 and 2018, respectively. |
4. MINING CONCESSIONS
4. MINING CONCESSIONS | 3 Months Ended |
Mar. 31, 2019 | |
Mining Concessions Abstract | |
MINING CONCESSIONS | Mining properties consist of the following at March 31, 2019 and December 31, 2018: 2019 2018 San Jose de Gracia (“SJG”): Total Mining Concessions $ 4,132,678 $ 4,132,678 Depletion expense was $0 and $0 for the three months ended March 31, 2019 and 2018 respectively. |
5. INVESTMENT IN AFFILIATE_RECE
5. INVESTMENT IN AFFILIATE/RECEIVABLES FROM AFFILIATE/OTHER ASSETS | 3 Months Ended |
Mar. 31, 2019 | |
Investments in and Advances to Affiliates, Schedule of Investments [Abstract] | |
INVESTMENT IN AFFILIATE/RECEIVABLES FROM AFFILIATE/OTHER ASSETS | Through December 31, 2016, the Company loaned a total of $805,760 to DynaResource Nevada, Inc. (“DynaNevada”), a Nevada Corporation, which owns 100% of one operating subsidiary in México, DynaNevada de México, S.A. de C.V. (“DynaNevada de México”). The terms of the Note Receivable provided for a “Convertible Loan”, repayable at 5% interest over a 3-year period, and convertible at the Company’s option into common stock of DynaNevada at $.25 / Share. DynaNevada is a related entity (affiliate), and through its subsidiary, DynaNevada de México has entered into an Option agreement with Grupo México (IMMSA) in México, for the exploration and development of approximately 3,000 hectares in the State of San Luis Potosi (“The Santa Gertrudis Property”). DynaNevada de México exercised the Option with IMMSA in March 2010, so that DynaNevada de México now owns 100% of the Santa Gertrudis Property. In June 2010, DynaNevada de México acquired an additional 6,000 hectares in the State of Sinaloa (the “San Juan Property”). As of March 31, 2019 and December 31, 2018 the loan was $70,000. |
6. CONVERTIBLE PROMISSORY NOTES
6. CONVERTIBLE PROMISSORY NOTES | 3 Months Ended |
Mar. 31, 2019 | |
Debt Disclosure [Abstract] | |
CONVERTIBLE PROMISSORY NOTES | Notes Payable – Series I In April and May 2013, the Company entered into note agreements with shareholders in the principal amount of $1,495,000, of which $340,000 was then converted to preferred shares within the same year, netting to proceeds of $1,155,000 (the “Series I Notes”). The Series I Notes bear simple interest at twelve and a half percent (12.5%), accrued for twelve months, and with the accrued interest to be added to the principal, and then interest will be paid by the Company, quarterly in arrears. The holders of the Series I Notes (in aggregate) are also entitled to receive ten percent (10%) of the net profits received by the Company, on the first fifty thousand tons processed through the mill facilities at San Jose de Gracia. Such net profits (if any) are to be calculated after deducting “all expenses related to the production”, and after a prior deduction of thirty-three percent (33%) from the net profits, to be deposited into a sinking fund cash reserve. To date, the Company has not produced any net profits as calculated in accordance with the Series I Notes. The Notes originally matured on December 31, 2015. In April 2015, the Company received note extensions (allonges) from all Series I note holders to ensure that all Series I Notes were in good standing and extended the maturity date of the Series I Notes to December 31, 2016. The Company paid $5,625 to one Series I debt holder during 2017. The remaining eight of the Series I notes totaling $759,375 have been subsequently extended to December 30, 2019. The Company has the right to prepay the Series I Notes with a ten percent (10%) penalty. The Series I Note holder retains the option, at any time prior to maturity or prepayment, to convert any unpaid principal and accrued interest into Common Stock at $5.00 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 on December 31, 2020. Notes Payable – Series II In 2013 and 2014, the Company entered into additional note agreements of $199,808 and $250,000, respectively (the “Series II Notes”) with similar terms as the Series I Notes. The Series II Notes bear simple interest at twelve and a half percent (12.5%), accrued for twelve months, and with the accrued interest to be added to the principal, and then interest will be paid by the Company, quarterly in arrears. The holders of the Series II Notes (in aggregate) are also entitled to receive ten percent (10%) of the net profits received by the Company, on the second fifty thousand tons processed through the mill facilities at San Jose de Gracia. Such net profits (if any) are to be calculated after deducting “all expenses related to the production” l, and after a prior deduction of thirty-three percent (33%) from the net profits, to be deposited into a sinking fund cash reserve. To date, the Company has not produced any net profits as calculated in accordance with the Series II Notes. The Notes originally matured on December 31, 2015. In 2018 the Company paid off one note for $112,500. The remaining two Series II Notes totaling $78,750 have been extended to December 30, 2019. The Company has the right to prepay the Series II Notes with a ten percent (10%) penalty. The Note holder may, at any time prior to maturity or prepayment, convert any unpaid principal and accrued interest into common stock of the Company at $5.00 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 on December 31, 2020. On June 30, 2015, the Company entered into conversion agreements with six (6) note holders. Principal and interest in the amount of $809,784 plus $33,120 of accrued interest (total of $842,904) was contracted to convert into 337,162 common shares. In addition, 337,162 warrants were issued which provide the option to purchase common shares at $2.50, with all warrants expiring December 31, 2017. The Company recorded $826,347 inducement expense related to these conversion transactions. On August 17, 2015, these common shares and warrants were issued. At March 31, 2019 and December 31, 2018, the principal and capitalized interest balance on the remaining Series I Notes was $759,375, and the principal and capitalized interest on the Series II Notes was $78,750, for a total Note balance of $838,125. The accrued interest for these notes was $28,828 and $25,150 as of March 31, 2019 and December 31, 2018, respectively. |
7. INCOME TAXES
7. INCOME TAXES | 3 Months Ended |
Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The Company has adopted ASC 740-10, “ Income Taxes” Deferred Tax Asset Related to: 2019 2018 Prior Year $ 13,169,883 $ 12,565,297 Tax Benefit for Current Year 373,315 604,586 Permanent Difference Due to Rate Change — — Total Deferred Tax Asset 13,543,198 13,169,883 Less: Valuation Allowance (13,543,198 ) (13,169,883 ) Net Deferred Tax Asset $ — $ — The income tax provision for the Company as of March 31, 2019 and 2018 differs from those computed using the blended statutory tax rate of 21% due to the following differences: 2019 2018 Book Income (Loss) $ (1,155,189 ) $ 1,915,135 Tax Expense (Benefit) at Statutory Rates (242,590 ) 478,784 Other Permanent Differences (130,725 ) (495,621 ) Change in Valuation Allowance 373,315 16,837 Provision for (Benefit from) Income Taxes, Net $ — $ — The net deferred tax asset and benefit for the current year is generated primarily from the cumulative net operating loss carry-forward which is approximately $52,900,000 at March 31, 2019 and will expire in the years 2027 through 2033. The realization of deferred tax benefits is contingent upon future earnings and is fully reserved at March 31, 2019. On December 11, 2013, the Mexican government enacted a tax reform that increased the effective tax rate applicable to the Company's Mexican operations. The law, effective January 1, 2014, increased the future corporate income tax rate to 30%, created a 10% withholding tax on dividends paid to non-resident shareholders and created a new Extraordinary Mining duty which is equal to 0.5% of gross revenues from the sale of gold, silver and platinum. Furthermore, the reform introduced a Special Mining Duty of 7.5%. The Special Mining Duty is deductible for income tax purposes. The Special Mining Duty is generally applicable to earnings before income tax, depreciation, depletion, amortization and interest. There will be no deductions related to development type costs but exploration and prospecting costs are deductible when incurred. Certain non-deducted exploration expenditures incurred prior to January 1, 2014 are also deductible in the calculation of the Special Mining Duty. For the periods ended March 31, 2019 and 2018, the Company had no taxes payable under the 7.5% Special Mining Duty. The Company or its subsidiaries file income tax returns in the United States and México. These tax returns are subject to examination by local taxation authorities provided the tax years remain open to audit under the relevant statute of limitations. The following summarizes the open tax years by major jurisdiction: United States: 2015 to 2018 México 2014 to 2018 The Company does not have any other material items of temporary or permanent differences, which give rise to deferred tax assets or liabilities. |
8. STOCKHOLDERS' EQUITY
8. STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | Authorized Capital Preferred Stock Common Stock 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. In October 2007, the Company issued 1,000 shares of Series A Preferred Stock to its CEO. At March 31, 2019 and December 31, 2018 there were 1,000 shares and 1,000 shares of Series A Preferred Stock outstanding, respectively. Series C Senior Convertible Preferred Shares On June 30, 2015, the Company issued 1,600,000 Series C Senior Convertible Preferred Shares (the “Series C Preferred Shares”) at $2.50 per share for gross proceeds of $4,000,000, as well as issuing 133,221 additional Series C Preferred Shares due to anti-dilution provisions (with no cash remuneration). Legal fees of $45,000 were deducted from the proceeds of this transaction at closing. These Series C Preferred Shares are convertible to common shares at $2.50 per share, through February 20, 2020. The Series C Preferred Shares may receive a 4% per annum dividend, payable if available, and in arrears. A description of the transaction which included the issuance of the Series C Preferred Shares is included below. The Dividend is calculated at 4.0% of $4,333,053 payable annually on June 30. The Company paid no dividends in 2018 or 2019. Financing Agreement with Golden Post Rail, LLC, a Texas Limited Liability Company On May 6, 2015, the Company, Golden Post Rail, LLC, a Texas limited liability company (“Golden Post”), and Mr. Koy W. (“K.D.”) Diepholz, Chairman-CEO of the Company entered into a Securities Purchase Agreement (the “SPA”). Pursuant to the SPA, Golden Post acquired the following securities: (a) 1,600,000 shares of Series C Senior Convertible Preferred Stock (the “Series C Preferred”) at a purchase price of $2.50 per share ($4M USD), plus an additional 133,221 shares of Series C Preferred pursuant to anti-dilution provisions. The Series C Preferred is entitled to receive dividends at the per share rate of four percent (4%) per annum, ranks senior (in priority) to the Common Stock, the Series A Preferred Stock, and each other class or series of equity security of the Company. The Series C Preferred is convertible into Common Stock of the Company at the price of $2.41 per share, and is entitled to anti-dilution protection for (i) subsequent equity issuances by the Company and (ii) changes in the Company’s ownership of DynaResource de México SA de CV (“DynaMéxico”). The Series C Preferred is also entitled to preemptive rights, and the holder has the right to designate one person to the Company’s Board of Directors as a Class III director. (b) A Common Stock Purchase Warrant (the “Golden Post Warrant”) for the purchase of 2,166,527 shares of the Company’s Common Stock, at an exercise price of $2.50 per share, and expiring June 30, 2020. The anti-dilution protections contained in the terms of the Series C Preferred are essentially replicated in the Golden Post Warrant. Pursuant to the SPA, the Company executed a Registration Rights Agreement pursuant to which Golden Post may require the Company to register the shares of Common Stock which may be issued upon the conversion of the Series C Preferred and the shares of Common Stock issuable upon the exercise of the Warrant, including any additional shares of Common Stock issuable pursuant to anti-dilution provisions. In 2015, due to underlying anti-dilutive provisions contained in the Series C Preferred Shares and the Golden Post Warrant, the Company incurred derivative liabilities of $2,419,359 in connection with the Series C Preferred Shares, and $2,963,378 in connection with the Golden Post Warrant. Additionally, the Company fully accreted the discount related to the Series C Preferred Shares and the Golden Post Warrant in the amount of $4,637,179, which is reflected “below” the net income (loss) amount. Also in 2015, the Company reported $87,374 deemed dividend for Golden Post Rail related to its 4% dividend terms. As the Company has not declared these dividends, it is required only as an item “below” the net income (loss) amount. The Derivative Liability is recalculated and adjusted quarterly. At December 31, 2018 the total Derivative Liability was $974,683 which included $402,909 for the Series C Preferred Shares, and $571,774 in connection with the Golden Post Warrants. At March 31, 2019 the total Derivative Liability was $352,183 which included $144,131 for the Series C Preferred Shares, and $208,052 in connection with the Golden Post Warrants. The Deemed Dividend for the three months ending March 31, 2019 and March 31, 2018 was $43,330, and $43,330 respectively. Due to the nature of this transaction as mandatorily redeemable, the preferred shares are classified as “temporary equity” on the balance sheet. Preferred Series C Carrying Value, December 31, 2018 4,333,053 Issuances at Fair Value, net of issuance costs — Bifurcation of Derivative Liability — Relative Fair Value of Warrants – Preferred Stock Discount — Accretion of Preferred Stock to Redemption Value — Carrying Value, March 31, 2019 4,333,053 Preferred Stock (Undesignated) In addition to the 1,000 shares designated as Series A Preferred Stock and the 1,733,221 shares designated as Series C Preferred Shares, the Company is authorized to issue an additional 16,266,779 shares of Preferred Stock, having a par value of $0.0001 per share. The Board of Directors of the Company has authority to issue the Preferred Stock from time to time in one or more series, and with respect to each series of the Preferred Stock, to fix and state by the resolution the terms attached to the Preferred Stock. At March 31, 2019 and December 31, 2018, there were no other shares of Preferred Stock outstanding. Separate Series; Increase or Decrease in Authorized Shares Common Stock The Company is authorized to issue 25,000,000 common shares at a par value of $0.01 per share. These shares have full voting rights. At March 31, 2019 and December 31, 2018, there were 17,722,825 shares outstanding, respectively. No dividends were paid for the periods ended March 31, 2019 and December 31, 2018. Preferred Rights The Company issued “Preferred Rights” for the rights to percentages of revenues generated from the San Jose de Gracia Pilot Production Plant, and received $158,500 in 2003 and $626,000 in 2002. This has been reflected as “Preferred Rights” in stockholders’ equity. As of December 31, 2004, $558,312 was repaid and as of December 31, 2005, an additional $186,188 was repaid, leaving a current balance of $40,000 and $40,000 as of March 31, 2019 and December 31, 2018, respectively. Stock Issuances 2018 Activity – None 2019 Activity – None. Treasury Stock At March 31, 2019 and December 31, 2018, there were 778,980 treasury shares outstanding. Warrants The Company had 2,523,689 warrants outstanding at March 31, 2019 and December 31, 2018. There were no warrants issued or exercised in the periods ending March 31, 2019 and December 31, 2018. The Company recorded no expense related to the issuance of these warrants since these warrants were issued in common stock for cash sales and note conversions. Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Intrinsic Value Balance at December 31, 2017 2,523,689 $ 2.45 2.51 $ — Granted — $ — $ — Exercised — $ — $ — Forfeited — $ — $ — Balance at December 31, 2018 2,523,689 $ 2.45 1.51 $ — Granted — $ — $ — Exercised — $ — $ — Forfeited — $ — $ — Balance at March 31, 2019 2,523,689 $ 2.45 1.26 $ — Exercisable at March 31, 2019 2,523,689 $ 2.45 1.26 $ — |
9. RELATED PARTY TRANSACTIONS
9. RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Related Party Transactions The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) 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; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have 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. Material related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Dynacap Group Ltd. The Company paid $31,250 and $18,750 to Dynacap Group, Ltd. (“Dynacap”, an entity controlled by the CEO of the Company) for consulting and other fees during the three months ended March 31, 2019 and 2018, respectively. Advances from Goldgroup Mining Inc. (“Goldgroup”) to Dyna México In 2014, Goldgroup advanced $111,500 to DynaMéxico and in 2013 Goldgroup advanced $120,000 USD to DynaMéxico. This total $231,500 is being carried by DynaMéxico as a Due to Non-Controlling Interest. |
10. COMMITMENTS AND CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
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 plans and Company activities at San Jose de Gracia, and considering the Company’s current and forward plans, and considering expenditures on mining concessions since 2002-2016, the Company does not anticipate that DynaMéxico will have any difficulties meeting the minimum annual expenditures for the concessions ($2,400 Mexican Pesos per hectare). DynaMéxico retains sufficient carry-forward amounts to cover over 10 years of the minimum expenditure (as calculated at the 2016 minimum, adjusted for annual inflation of 4%). Leases In addition to the surface rights held by DynaMéxico pursuant to the Mining Act Ley Minera y su Reglamento 20 Year Land Lease Agreement with the Santa Maria Ejido Community surrounding San Jose de Gracia was dated January 6, 2014 and continues through 2033. It covers an area of 4,399 hectares surrounding the main mineral resource areas of SJG, and provides for annual lease payments on January 1 st 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 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 1 st 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 March 31, 2019 the Company has two operating leases - a six and one half year lease for office space with a remaining term of forty-six months and a twenty year ground lease in association with it Mexico mining operations with a remaining term of fourteen 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 are lease cost are as follows: Three Months Ended March 31, 2019 Operating Lease – Office Lease $ 20,468 Operating Lease – Ground Lease 23,287 Short Term Lease Costs 1,480 Variable Lease Costs — TOTAL $ 45,235 Weighted average remaining lease term and weighted average discount rate are as follows: Weighted Average Remaining Lease Term (Years) – Operating Leases 11.00 Weighted Average Discount Rate – Operating Leases 12.50% Future minimum lease obligations are as follow for the twelve months ending March 31: YEAR 2020 $ 166,660 2021 170,973 2022 175,362 2023 164,979 2024 94,074 Thereafter 984,381 TOTAL $ 1,756,429 Other Contingencies The Company's mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company conducts its operations so as to protect public health and the environment, and believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations. Damages Awarded to DynaMéxico in México Litigation On October 5, 2016, DynaResource de México SA de C.V. (“DynaMéxico”), was awarded in excess of $48 M USD (Forty-Eight Million Dollars) in damages from Goldgroup Resources, Inc. (the “Goldgroup Damages”) by virtue of a Sentencia Definitiva (the “Definitive Sentence”) issued by the Thirty Sixth Civil Court of the Superior Court of Justice of the Federal District of México (Tribunal Superior de Justicia del Distrito Federal), File number 1120/2014. The Definitive Sentence included the considerations and resolutions by the Court, and additional Resolutions were also ordered in favor of DynaMéxico (together the Goldgroup Damages and the additional Resolutions are referred to as, the “Oct. 5, 2015 Resolution”). The October 5, 2015 Resolution is described in Part II, Item 1., Legal Proceedings. Litigation The Company believes that no material adverse change will occur as a result of the legal actions taken, and the Company further believes that there is little to no potential for the assessment of a material monetary judgment against the Company for legal actions it has filed in México. Further, the Company believes there is no legal basis for which to conduct arbitration proceedings. (See Part II, Item 1. Legal Proceedings). |
11. DERIVATIVE LIABILITIES
11. DERIVATIVE LIABILITIES | 3 Months Ended |
Mar. 31, 2019 | |
Derivative Liability [Abstract] | |
DERIVATIVE LIABILITIES | Preferred Series C Stock As discussed in Note 8, 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”, 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 for the three months ended March 31, 2019 and year ended December 31, 2018: March 31, 2019 December 31, 2018 Annual volatility rate 74 % 86 % Risk free rate 2.33 % 2.48 % Holding Period 5 years 5 years Fair Value of common stock $ 1.00 $ 1.13 The below table represents the change in the fair value of the derivative liability (Preferred Series C Stock) during the 3 months ending March 31, 2019 and the year ending December 31, 2018: Period Ended March 31, 2019 December 31, 2018 Fair value of derivative (Preferred Series C Stock), beginning of year $ 402,909 $ 1,531,789 Change in fair value of derivative (Preferred Series C Stock) (258,778 ) (1,128,880 ) Fair value of derivative (Preferred Series C Stock), end of period $ 144,131 $ 402,909 Preferred Series C Warrants As discussed in Note 8, the Company analyzed the embedded conversion features of the Series C Preferred Stock and determined that the Warrants qualified as a derivative liability and is required to be bifurcated and accounted for as such since the host and the embedded instrument are not clearly and closely related. The Company performed a valuation of the conversion feature. In performing the valuation, the Company applied the guidance in ASC 820, “Fair Value Measurements”, In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation model to determine the value of conversion feature of the Warrants based on the assumptions below for the periods ended March 31, 2019 and December 31, 2018: March 31, 2019 December 31, 2018 Annual volatility rate 74% 86% Risk free rate 2.33% 2.48% Holding Period 5 years 5 years Fair Value of common stock $ 1.00 $ 1.20 The below table represents the change in the fair value of the derivative liability (Preferred Series C Warrants) for the quarterly period ending March 31, 2019 and the year ending December 31, 2018. Period Ended March 31, 2019 December 31, 2018 Fair value of derivative liability (Warrants), beginning of year $ 571,774 $ 1,649,719 Change in fair value of derivative liability (Warrants) (363,722 ) (1,077,945 ) Fair value of derivative liability (Warrants), end of period $ 208,052 571,774 Total (Gain) Loss on Derivative Liability (Preferred Series C Stock and Warrant) The below table represents the total (gain) or loss, of the derivative liability (Preferred Series C Stock and Warrants) for the quarterly period ending March 31, 2019 and the year ending December 31, 2018. Period Ended March 31, 2019 December 31, 2018 Fair value of derivative liability (Preferred C Stock and Warrants), beginning of year $ 974,683 $ 3,181,508 Change in fair value of derivative liability (Stock and Warrants) (622,500 ) (2,206,825 ) Fair value of derivative liability (Stock and Warrants), end of period $ 352,183 974,683 |
12. NON-CONTROLLING INTEREST
12. NON-CONTROLLING INTEREST | 3 Months Ended |
Mar. 31, 2019 | |
Noncontrolling Interest [Abstract] | |
NON-CONTROLLING INTEREST | The Company’s Non-Controlling Interest recorded in the consolidated financial statements relates to an interest in DynaResource de México, S.A. de C.V. of 50% through May 13, 2013, and 20% thereafter. Changes in Non-Controlling Interest for the periods ended March 31, 2019 and December 31, 2018, respectively were as follows: Qtr. Ended March 31, 2019 Year Ended December 31, 2018 Beginning balance $ (5,605,129 ) $ (5,416,168 ) Operating income (loss (27,506 ) 197,128 Share of Other Comprehensive Income (Loss) (19,863 ) (386,089 ) Ending balance $ (5,652,498 ) $ (5,605,129 ) The Company began allocating a portion of other comprehensive income (loss) to the non-controlling interest with the adoption of ASC 160 as of January 1, 2009. However, this amount is only reflected in the income statement. |
13. FAIR VALUE OF FINANCIAL INS
13. FAIR VALUE OF FINANCIAL INSTRUMENTS | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | The ASC guidance for fair value measurements and disclosure establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Inputs Level 2 Inputs Level 3 Inputs As of March 31, 2019 and December 31, 2018, the Company’s financial assets were measured at fair value using Level 3 inputs, with the exception of cash, which was valued using Level 1 inputs. A description of the valuation of the Level 3 inputs is discussed in Note 11. Fair Value Measurement at March 31, 2019 Using: Quoted Prices in Active Markets For Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: None - - - - Totals $ - $ - $ - $ - Liabilities: Derivative Liabilities $ 352,183 - - 352,183 Totals $ 352,183 $ - $ - $ 352,183 Fair Value Measurement at December 31, 2018 Using: Assets: None - - - - Totals $ - $ - $ - $ - Liabilities: Derivative Liabilities $ 974,683 - - 974,683 Totals $ 974,683 $ - $ - $ 974,683 |
14. REVENUE CONCENTRATION
14. REVENUE CONCENTRATION | 3 Months Ended |
Mar. 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE CONCENTRATION | For the three months ended March 31, 2019 one customer accounted for 100% of revenue and for the three months ended March 31, 2018, one customer accounted for 100% of revenue. At March 31, 2019, one customer accounted for 100% of accounts receivable. At December 31, 2018, one customer accounted for 100% of accounts receivable. |
15. NOTES PAYABLE
15. NOTES PAYABLE | 3 Months Ended |
Mar. 31, 2019 | |
Notes Payable [Abstract] | |
NOTES PAYABLE | In June 2017, the Company entered into financing agreements for unpaid mining concession taxes for the period July 1, 2014 to December 31, 2015 in the amount of $533,580. The Company paid an initial 20% payment in the amount of $106,716 and financed the balance over 36 months at 18% interest. In February 2018 the Company entered into a financing agreement for unpaid mining concessions taxes for the year ended December 31, 2016 in the amount of $552,990. The Company paid an initial payment of $110,598 and financed the balance over 36 months at 18%. In June 2018 the Company entered into financing agreements for the unpaid mining concession taxes for the year ended December 31, 2017 and the period ending June 30, 2018 in the amount of $1,739,392. The Company paid an initial 20% payment of $347,826 and financed the balance over 36 months at 21.84% In February 2019 the Company entered into a financing agreement for unpaid mining concessions taxes for the period ended December 31, 2018 in the amount of $325,559. The Company paid an initial payment of $65,112 and financed the balance over 36 months at 21.84%. The following is a summary of the transaction during the periods ended December 31, 2018 and March 31, 2019: Balance at December 31, 2017 367,311 Exchange Rate Adjustment 1,861 Property Holding Taxes January 1, 2016 – June 30, 2018 2,292,122 Initial payment of 20% (458,423 ) 2018 principal payments (399,636 ) Balance at December 31, 2018 $ 1,803,235 Exchange Rate Adjustment 18,524 Property Holding Taxes July 1, 2018 – December 31, 2018 325,559 Initial payment of 20% (65,112 ) 2019 principal payments (169,676 ) Balance at March 31, 2019 $ 1,912,530 At March 31, 2019 future maturities of notes payable are as follows Year Ending March 31: 2020 $ 820,719 2021 838,657 2022 253,154 Total $ 1,912,530 |
16. SUBSEQUENT EVENTS
16. SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | The Company has evaluated events from March 31, 2019, through the date whereupon the financial statements were issued. As is described further under Part II – Item 1. Legal Proceedings, on May 9, 2019, the United States district court for the district of Colorado confirmed an arbitration award against DynaResource, Inc. and DynaResource de Mexico, S.A. de C.V. The district court’s decision overruled the recommendation previously issued by the magistrate judge to sustain the DynaResource entities’ motion to vacate the arbitration award. Each of DynaResource, Inc. and DynaResource de Mexico, S.A. de C.V. intends to exercise all of its rights, as appropriate, including an appeal. |
1. NATURE OF ACTIVITIES AND S_2
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Nature of Activities, History and Organization | DynaResource, Inc. (The “Company”, “DynaResource”, or “DynaUSA”) was organized September 28, 1937, as a California corporation under the name of West Coast Mines, Inc. In 1998, the Company re-domiciled to Delaware and changed its name to DynaResource, Inc. The Company is in the business of acquiring, investing in, and developing precious metal properties, and the production of precious metals. In 2000, the Company formed a wholly owned subsidiary, DynaResource de México S.A. de C.V., chartered in México (“DynaMéxico”). This Company was formed to acquire, invest in and develop resource properties in México. DynaMéxico owns a portfolio of mining concessions that currently includes its interests in the San José de Gracia Project (“SJG”) in northern Sinaloa State, México. The SJG District covers 69,121 hectares (170,802 acres) on the west side of the Sierra Madre mountain range. The Company currently owns 80% of the outstanding capital of DynaMéxico. In 2005, the Company formed DynaResource Operaciones de San Jose De Gracia S.A. de C.V. (“DynaOperaciones”), and acquired effective control of Mineras de DynaResource, S.A. de C.V. (formerly Minera Finesterre S.A. de C.V., “DynaMineras”). The Company owned 25% of DynaMineras and acquired effective control of DynaMineras by acquiring the option to purchase the remaining 75% of the Shares of DynaMineras. The Company finalized the option and acquisition of DynaMineras in January 2010, and now owns 100% of DynaMineras. The results of these subsidiaries are consolidated with those of the Company. From January 2008 through March 2011, DynaMéxico issued 100 Variable Capital Series “B” shares to Goldgroup Resources, Inc., a wholly owned subsidiary of Goldgroup Mining Inc. Vancouver BC (“Goldgroup”), in exchange for Goldgroup’s contribution of $18,000,000 to DynaMéxico. At March 14, 2011, Goldgroup owned 50% of the outstanding capital shares of DynaMéxico. On June 21, 2013, DynaResource acquired a Certificate for 300 Series “B” Variable Capital Shares of DynaMéxico, in exchange for the settlement of accounts receivable from DynaMéxico in the amount of $31,090,710 Mexican Pesos (approximately $2.4 million USD). After the issuance and receipt of the 300 Series B Shares, DynaUSA holds 80% of the total outstanding Capital of DynaMéxico. The Company elected to become a voluntary reporting issuer in Canada in order to avail itself of Canadian regulations regarding reporting for mining properties and, more specifically, National Instrument 43-101 (“NI 43-101”). This regulation sets forth standards for reporting resources in a mineral property and is a standard recognized in the mining industry. |
Reclassifications | Certain financial statement reclassifications have been made to prior period balances to reflect the current period’s presentation format; such reclassifications had no impact on the Company’s consolidated statements of operations or consolidated statements of cash flows and had no material impact on the Company’s consolidated balance sheets. |
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 revenue and expense. 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 further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items that: 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce 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 financial statements on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States. |
Principles of Consolidation | The financial statements include the accounts of DynaResource, Inc., as well as DynaResource de México, S.A. de C.V. (80% ownership), DynaResource Operaciones S.A. de C.V. (100% ownership) and Mineras de DynaResource S.A. de C.V. (100% ownership). All significant inter-company transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated. |
Non-Controlling Interest | The Company’s subsidiary, DynaResource de México S.A. de C.V, is 20% owned by Goldgroup Mining, Inc. On May 17, 2013, the ownership changed from 50% to 20%. The Company accounts for this outside interest as “non-controlling interest”. |
Investments in Affiliates | The Company owns a 20% interest in DynaResource Nevada, Inc., a Nevada Corporation (“DynaNevada”), with one operating subsidiary in México, DynaNevada de México, S.A. de C.V. (“DynaNevada de México”), together “DynaNevada”. The Company accounts for this investment using the cost method. |
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. |
Accounts Receivable and Allowances for Doubtful Accounts | The allowance for accounts receivable is recorded when receivables are considered to be doubtful of collection. As of March 31, 2019, and December 31, 2018, respectively, no allowance has been made. |
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 March 31, 2019 and December 31, 2018 are $1,171,879 and $845,564 respectively. |
Inventory | Inventories are carried at the lower of cost or net realizable value and consist of mined tonnage, and gravity and flotation concentrates, and gravity tailings or flotation feed material. The inventories are $1,787,121 and $1,588,778 as of March 31, 2019 and December 31, 2018, respectively. |
Proven and Probable Reserves (No Known Reserves) | The definition of proven and probable reserves is set forth in SEC Industry Guide 7 (“Industry Guide 7”). Proven reserves for which (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geological character is so well defined that size, shape, depth and mineral content of the reserves are well-established. Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observations. As of March 31, 2019, none of the Company's properties contain resources that satisfy the definition of proven and probable reserves. The Company classifies the development of its properties, including the San Jose de Gracia Property, as exploration stage projects since no proven or probable reserves have been established under Industry Guide 7. |
Property | Substantially all costs, including design, engineering, 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 equipment which has alternative uses or significant salvage value, may be capitalized without proven and probable reserves. Depreciation is computed using the straight-line method with the exception of mining equipment. Mining equipment is depreciated using the units-of-production method based on tonnes processed over the estimated total mine life. Office furniture, equipment and light vehicles 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. Trailers, heavy vehicles and other site equipment are being depreciated on a straight-line method over estimated economic lives from 5 to 15 years. Buildings are being depreciated on straight line method over an estimated economic life of 20 years. Design, Construction, and Development Costs: When proven and probable reserves as defined by Industry Guide 7 exist, development costs are capitalized and the property is a commercially minable property. Mine development costs incurred either to develop new ore deposits, expand the capacity of operating mines, or to develop mine areas substantially in advance of current production would be capitalized. Costs of start-up activities and costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations as incurred. Costs of abandoned projects are charged to operations upon abandonment. All capitalized costs would be amortized using the units of production method over the estimated life of the ore body based on recoverable ounces to be mined from proven and probable reserves. Certain costs to design and construct mining and processing facilities may be incurred prior to establishing proven and probable reserves. As no proven and probable reserves have been established on any of the Company's properties, design, construction and development costs are not capitalized at any of the Company's properties, and accordingly, substantially all costs are expensed as incurred, resulting in the Company reporting larger losses than if such expenditures had been capitalized. Additionally, the Company does not have a corresponding depreciation or amortization of these costs going forward since these expenditures were expensed as incurred as opposed to being capitalized. As a result of these and other differences, the Company's financial statements may not be comparable to the financial statements of mining companies that have established reserves. |
Mining Properties Interests | Mineral property interests include acquired interests in development and exploration stage properties, which are considered tangible assets. The amount capitalized relating to a mineral property interest represents its fair value at the time of acquisition. When a property does not contain mineralized material that satisfies the definition of proven and probable reserves, such as with the San Jose de Gracia Property, capitalized costs and mineral property interests are amortized using the straight-line method once production begins. As of March 31, 2019, the mining interests have been in the pilot production stage and therefore, no amortization has been expensed. Mining properties consist of 33 mining concessions covering approximately 9,920 hectares at the San Jose de Gracia property (“SJG”), the basis of which are amortized on the unit of production method based on estimated recoverable resources. If it is determined that the deferred costs related to a property are not recoverable over its productive life, those costs will be written down to fair value as a charge to operations in the period in which the determination is made. The amounts at which mineral properties and the related costs are recorded do not necessarily reflect present or future values. Impairment of Assets: 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 taking into account losses during processing and treatment of mineralized material. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company's estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold, silver and other commodity prices, production levels and costs and capital are each subject to significant risks and uncertainties. The recoverability of the book value of each property 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. As of the date of this filing, no events have occurred that would require write-down of any assets. As of March 31, 2019 and December 31, 2018, no indications of impairment existed. Asset Retirement Obligation: |
Pre-Pilot Production Costs | During 2016, the Company has conducted rehabilitation activity at the San Pablo mine and has refurbished the Pilot Mill Facility at San Jose de Gracia and, in general prepared for test mining and pilot milling (“Pilot Production”) Operations. The costs associated with the rehabilitation, preparation, clean up and facilitation of this process are expensed as pre-pilot production costs. |
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. |
Exploration Costs | Exploration costs are charged to operations and expenses as incurred. Exploration, development, direct field costs and administrative costs are expensed in the period incurred. |
Foreign Currency Translation | The functional currency for the subsidiaries of the Company is the Mexican Peso. As a result, the financial statements of the subsidiaries have been re-measured from Mexican Pesos into U.S. dollars using (i) current exchange rates for monetary asset and liability accounts, (ii) historical exchange rates for nonmonetary asset and liability accounts, (iii) historical exchange rates for revenues and expenses associated with nonmonetary assets and liabilities and (iv) the weighted average exchange rate of the reporting period for all other revenues and expenses. In addition, foreign currency translation gains and losses are reported as a separate component of stockholders’ equity (comprehensive income (loss)). The financial statements of the subsidiaries should not be construed as representations that Mexican Pesos have been, could have been or may in the future be converted into U.S. dollars at such rates or any other rates. Relevant exchange rates used in the preparation of the financial statements for the subsidiaries are as follows for the periods ended March 31, 2019 and December 31, 2018 (Mexican Pesos per one U.S. dollar): Mar 31, 2019 Dec 31, 2018 Exchange Rate at Period End Pesos 19.43 19.63 Relevant exchange rates used in the preparation of the income statement portion of financial statements for the subsidiaries are as follows for the periods ended March 31, 2019 and March 31, 2018 (Mexican Pesos per one U.S. dollar): Mar 31, 2019 Mar 31, 2018 Weighted Average Exchange Rate for the Three Months Ended Pesos 19.21 18.74 The Company recorded currency transaction gains (losses) of $139,352 and $806,514 for the three months ended March 31, 2019 and 2018, respectively. |
Income Taxes | The Company accounts for income taxes under ASC 740 “Income Taxes” Income from the Company’s subsidiaries in México are taxed at applicable Mexican tax law. On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the “Act”) was signed into law. Among other provisions, the Act reduced the highest corporate tax rate from 35% to 21%. With the passage of the Act, the Company‘s deferred tax assets and liabilities were restated as of the effective date of the law to reflect the new applicable rate. The reduction to the net deferred tax asset was charged to tax expense in the period of the change and offset by a valuation allowance stemming from historical net operating loss carryforwards. |
Use of Estimates | In order to prepare financial statement 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 financial statements and determines whether contingent assets and liabilities, if any, are disclosed in the 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. |
Comprehensive Income (Loss) | ASC 220 “Comprehensive Income” |
Revenue Recognition | The Company adopted ASC 606 “ Revenue from contracts with customers The amount of revenue recognized is initially recorded on a provisional basis based on the contract price and the estimated metal quantities based on assay data. The revenue is adjusted upon final settlement of the sale. The chief risk associated with the recognition of sales on a provisional basis is the fluctuations between the estimated quantities of precious metals base on the initial assay and the actual recovery from treatment and processing. Prior to the adoption of this standard the Company recognized revenue in accordance with ASC 605-10, " Revenue Recognition in Financial Statements The change in accounting principle from ASC 605 to ASC 606 did not impact the amount of revenue recognized in the Company’s financial statements. |
Stock-Based Compensation | The Company accounts for stock options at fair value as prescribed in ASC 718. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model and provides for expense recognition over the service period, if any, of the stock option. The Company accounts for stock options issued and vesting to non-employees in accordance with ASC Topic 505-50 “ Equity -Based Payment to Non-Employees” |
Fair value of Financial Instruments | The Company’s financial instruments consist of cash, receivables, payables and long-term debt. The carrying amount of cash, receivable and payables approximates fair value because of the short-term nature of these items. The carrying amount of long-term debt approximates fair value due to the relationship between the interest rate on long-term debt and the Company’s incremental risk adjusted borrowing rate. |
Per Share Amounts | Earnings per share are calculated in accordance with ASC 260 “ Earnings per Share The Company had 2,523,689 warrants outstanding at March 31, 2019, of which 357,162 are exercisable at $2.50 and 2,166,527 are exercisable at $2.41, which upon exercise, would result in the issuance of 2,523,689 shares of common stock. The Company also had convertible debt instruments as of March 31, 2019 which, upon conversion at a valuation of $2.50 per share, would result in the issuance of 335,250 shares of stock. Three Months Three Months Ended March 31, 2019 Ended March 31, 2018 Net income (loss) attributable to common shareholders $ (1,171,013 ) $ 1,929,450 Shares: Weighted average number of common shares outstanding, Basic 17,722,825 17,722,825 Diluted weighted average number of common shares outstanding, Diluted 17,722,825 19,473,378 Basic earnings (loss) per share $ (0.07 ) $ 0.11 Diluted earnings (loss) per share $ (0.07 ) $ 0.10 |
Related Party Transactions | FASB ASC 850, "Related Party 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 which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.” |
Recently Issued Accounting Pronouncements | Leases In February 2016, FASB issued ASU 2016-02— Leases (Topic 842). The update is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. As such, The Company is required to adopt these provisions as of the fiscal year beginning on January 1, 2019. The Company elected the available practical expedients and adopted ASC 842 effective January 1, 2019, prospectively. The adoption of this standard resulted in the recognition of right-to-use assets and lease liabilities of $861,668 and $873,188 with no material impact on the results of operations and cash flows. See Note 10 for additional information regarding our leases. |
1. NATURE OF ACTIVITIES AND S_3
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Exchange rates | Mar 31, 2019 Dec 31, 2018 Exchange Rate at Period End Pesos 19.43 19.63 Mar 31, 2019 Mar 31, 2018 Weighted Average Exchange Rate for the Three Months Ended Pesos 19.21 18.74 |
Computation of profit (loss) per share | Three Months Three Months Ended March 31, 2019 Ended March 31, 2018 Net income (loss) attributable to common shareholders $ (1,171,013 ) $ 1,929,450 Shares: Weighted average number of common shares outstanding, Basic 17,722,825 17,722,825 Diluted weighted average number of common shares outstanding, Diluted 17,722,825 19,473,378 Basic earnings (loss) per share $ (0.07 ) $ 0.11 Diluted earnings (loss) per share $ (0.07 ) $ 0.10 |
2. INVENTORIES (Tables)
2. INVENTORIES (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Inventory | 2019 2018 Mined Tonnage Stockpiled $ 1,678,792 $ 1,512,410 Mill Tonnage Stockpiled 108,329 76,368 Finished Material — — Total Inventories $ 1,787,121 $ 1,588,778 |
3. PROPERTY (Tables)
3. PROPERTY (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property | 2019 2018 Camp Buildings and Improvements $ 470,974 $ 470,974 Machinery and equipment 2,132,607 2,040,256 Transportation equipment 228,526 225,695 Office equipment 164,113 164,113 Office furniture and fixtures 78,802 78,802 Construction in Progress 791,479 673,076 Sub-total 3,866,501 3,652,916 Less: Accumulated depreciation (1,277,742 ) (1,203,562 ) Total Property $ 2,588,759 $ 2,449,354 |
4. MINING CONCESSIONS (Tables)
4. MINING CONCESSIONS (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Mining Concessions Abstract | |
Mining properties | 2019 2018 San Jose de Gracia (“SJG”): Total Mining Concessions $ 4,132,678 $ 4,132,678 |
7. INCOME TAXES (Tables)
7. INCOME TAXES (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Deferred tax asset | 2019 2018 Prior Year $ 13,169,883 $ 12,565,297 Tax Benefit for Current Year 373,315 604,586 Permanent Difference Due to Rate Change — — Total Deferred Tax Asset 13,543,198 13,169,883 Less: Valuation Allowance (13,543,198 ) (13,169,883 ) Net Deferred Tax Asset $ — $ — |
Income tax provision | 2019 2018 Book Income (Loss) $ (1,155,189 ) $ 1,915,135 Tax Expense (Benefit) at Statutory Rates (242,590 ) 478,784 Other Permanent Differences (130,725 ) (495,621 ) Change in Valuation Allowance 373,315 16,837 Provision for (Benefit from) Income Taxes, Net $ — $ — |
8. STOCKHOLDERS' EQUITY (Tables
8. STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Stockholders' Equity Note [Abstract] | |
Series C Preferred Stock | Preferred Series C Carrying Value, December 31, 2018 4,333,053 Issuances at Fair Value, net of issuance costs — Bifurcation of Derivative Liability — Relative Fair Value of Warrants – Preferred Stock Discount — Accretion of Preferred Stock to Redemption Value — Carrying Value, March 31, 2019 4,333,053 |
Warrant activity | Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Intrinsic Value Balance at December 31, 2017 2,523,689 $ 2.45 2.51 $ — Granted — $ — $ — Exercised — $ — $ — Forfeited — $ — $ — Balance at December 31, 2018 2,523,689 $ 2.45 1.51 $ — Granted — $ — $ — Exercised — $ — $ — Forfeited — $ — $ — Balance at March 31, 2019 2,523,689 $ 2.45 1.26 $ — Exercisable at March 31, 2019 2,523,689 $ 2.45 1.26 $ — |
10. COMMITMENTS AND CONTINGEN_2
10. COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Lease cost | Three Months Ended March 31, 2019 Operating Lease – Office Lease $ 20,468 Operating Lease – Ground Lease 23,287 Short Term Lease Costs 1,480 Variable Lease Costs — TOTAL $ 45,235 |
Weighted average remaining lease term and weighted average discount rate | Weighted Average Remaining Lease Term (Years) – Operating Leases 11.00 Weighted Average Discount Rate – Operating Leases 12.50% |
Future minimum lease obligations | YEAR 2020 $ 166,660 2021 170,973 2022 175,362 2023 164,979 2024 94,074 Thereafter 984,381 TOTAL $ 1,756,429 |
11. DERIVATIVE LIABILITIES (Tab
11. DERIVATIVE LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Total (gain) or loss, of the derivative liability | Period Ended March 31, 2019 December 31, 2018 Fair value of derivative liability (Preferred C Stock and Warrants), beginning of year $ 974,683 $ 3,181,508 Change in fair value of derivative liability (Stock and Warrants) (622,500 ) (2,206,825 ) Fair value of derivative liability (Stock and Warrants), end of period $ 352,183 974,683 |
Preferred Series C Stock | |
Valuation assumption | March 31, 2019 December 31, 2018 Annual volatility rate 74 % 86 % Risk free rate 2.33 % 2.48 % Holding Period 5 years 5 years Fair Value of common stock $ 1.00 $ 1.13 |
Change in the fair value of the derivative liability | Period Ended March 31, 2019 December 31, 2018 Fair value of derivative (Preferred Series C Stock), beginning of year $ 402,909 $ 1,531,789 Change in fair value of derivative (Preferred Series C Stock) (258,778 ) (1,128,880 ) Fair value of derivative (Preferred Series C Stock), end of period $ 144,131 $ 402,909 |
Preferred Series C Warrant | |
Valuation assumption | March 31, 2019 December 31, 2018 Annual volatility rate 74% 86% Risk free rate 2.33% 2.48% Holding Period 5 years 5 years Fair Value of common stock $ 1.00 $ 1.20 |
Change in the fair value of the derivative liability | Period Ended March 31, 2019 December 31, 2018 Fair value of derivative liability (Warrants), beginning of year $ 571,774 $ 1,649,719 Change in fair value of derivative liability (Warrants) (363,722 ) (1,077,945 ) Fair value of derivative liability (Warrants), end of period $ 208,052 571,774 |
12. NON-CONTROLLING INTEREST (T
12. NON-CONTROLLING INTEREST (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Noncontrolling Interest [Abstract] | |
Changes in non-controlling Interest | Qtr. Ended March 31, 2019 Year Ended December 31, 2018 Beginning balance $ (5,605,129 ) $ (5,416,168 ) Operating income (loss (27,506 ) 197,128 Share of Other Comprehensive Income (Loss) (19,863 ) (386,089 ) Ending balance $ (5,652,498 ) $ (5,605,129 ) |
13. FAIR VALUE OF FINANCIAL I_2
13. FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair value measurement | Fair Value Measurement at March 31, 2019 Using: Quoted Prices in Active Markets For Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: None - - - - Totals $ - $ - $ - $ - Liabilities: Derivative Liabilities $ 352,183 - - 352,183 Totals $ 352,183 $ - $ - $ 352,183 Fair Value Measurement at December 31, 2018 Using: Assets: None - - - - Totals $ - $ - $ - $ - Liabilities: Derivative Liabilities $ 974,683 - - 974,683 Totals $ 974,683 $ - $ - $ 974,683 |
15. NOTES PAYABLE (Tables)
15. NOTES PAYABLE (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Notes Payable [Abstract] | |
Summary of notes payable | Balance at December 31, 2017 367,311 Exchange Rate Adjustment 1,861 Property Holding Taxes January 1, 2016 – June 30, 2018 2,292,122 Initial payment of 20% (458,423 ) 2018 principal payments (399,636 ) Balance at December 31, 2018 $ 1,803,235 Exchange Rate Adjustment 18,524 Property Holding Taxes July 1, 2018 – December 31, 2018 325,559 Initial payment of 20% (65,112 ) 2019 principal payments (169,676 ) Balance at March 31, 2019 $ 1,912,530 |
Maturities of notes payable | At March 31, 2019 future maturities of notes payable are as follows Year Ending March 31: 2020 $ 820,719 2021 838,657 2022 253,154 Total $ 1,912,530 |
1. NATURE OF ACTIVITIES AND S_4
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (Details) | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 |
Accounting Policies [Abstract] | |||
Current exchange rate | 19.43 | 19.63 | |
Weighted average exhange rate for the period ended | 19.21 | 18.74 |
1. NATURE OF ACTIVITIES AND S_5
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Accounting Policies [Abstract] | ||
Net income attributable to common shareholders | $ (1,171,013) | $ 1,929,450 |
Shares: | ||
Weighted average number of common shares outstanding, Basic | 17,722,825 | 17,722,825 |
Diluted weighted average number of common shares outstanding, Diluted | 17,722,825 | 19,473,378 |
Basic earnings (loss) per share | $ (0.07) | $ 0.11 |
Diluted earnings (loss) per share | $ (0.07) | $ 0.10 |
1. NATURE OF ACTIVITIES AND S_6
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | |||
IVA receivable | $ 1,171,879 | $ 845,564 | |
Inventories | 1,787,121 | $ 1,588,778 | |
Currency transaction gains (losses) | $ 139,352 | $ 806,514 |
2. INVENTORIES (Details)
2. INVENTORIES (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Mined Tonnage Stockpiled | $ 1,678,792 | $ 1,512,410 |
Mill Tonnage Stockpiled | 108,329 | 76,368 |
Finished Material | 0 | 0 |
Total Inventories | $ 1,787,121 | $ 1,588,778 |
3. PROPERTY (Details)
3. PROPERTY (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Abstract] | ||
Camp buildings and improvements | $ 470,974 | $ 470,974 |
Machinery and equipment | 2,132,607 | 2,040,256 |
Transportation equipment | 228,526 | 225,695 |
Office equipment | 164,113 | 164,113 |
Office furniture and fixtures | 78,802 | 78,802 |
Construction in progress | 791,479 | 673,076 |
Sub-total | 3,866,501 | 3,652,916 |
Less: Accumulated depreciation | (1,277,742) | (1,203,562) |
Total Property | $ 2,588,759 | $ 2,449,354 |
3. PROPERTY (Details Narrative)
3. PROPERTY (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Purchase of Equipment | $ 213,585 | $ 219,300 |
Depreciation expense | $ 74,180 | $ 66,642 |
4. MINING CONCESSIONS (Details)
4. MINING CONCESSIONS (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Mining Concessions Abstract | ||
San Jose de Gracia ("SJG") total mining concessions | $ 4,132,678 | $ 4,132,678 |
4. MINING CONCESSIONS (Details
4. MINING CONCESSIONS (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Mining Concessions Abstract | ||
Depletion expense | $ 0 | $ 0 |
7. INCOME TAXES (Details)
7. INCOME TAXES (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Prior Year | $ 13,169,883 | $ 12,565,297 |
Tax Benefit for Current Year | 373,315 | 604,586 |
Permanent Difference Due to Rate Change | 0 | 0 |
Total Deferred Tax Asset | 13,543,198 | 13,169,883 |
Less: Valuation Allowance | (13,543,198) | (13,169,883) |
Net Deferred Tax Asset | $ 0 | $ 0 |
7. INCOME TAXES (Details 1)
7. INCOME TAXES (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Book Income (Loss) | $ (1,155,189) | $ 1,915,135 |
Tax Expense (Benefit) at Statutory Rates | (242,590) | 478,784 |
Other Permanent Differences | (130,725) | (495,621) |
Change in Valuation Allowance | 373,315 | 16,837 |
Provision for (Benefit from) Income Taxes, Net | $ 0 | $ 0 |
8. STOCKHOLDERS' EQUITY (Detail
8. STOCKHOLDERS' EQUITY (Details) - Preferred Series C Stock | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Carrying Value, Beginning | $ 4,333,053 |
Issuances at Fair Value, net of issuance costs | 0 |
Bifurcation of Derivative Liability | 0 |
Relative Fair Value of Warrants - Preferred Stock Discount | 0 |
Accretion of Preferred Stock to Redemption Value | 0 |
Carrying Value, Ending | $ 4,333,053 |
8. STOCKHOLDERS' EQUITY (Deta_2
8. STOCKHOLDERS' EQUITY (Details 1) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Stockholders' Equity Note [Abstract] | ||
Warrants, outstanding, beginning balance | 2,523,689 | 2,523,689 |
Warrants, granted | 0 | 0 |
Warrants, exercised | 0 | 0 |
Warrants, forfeited | 0 | 0 |
Warrants, outstanding, ending balance | 2,523,689 | 2,523,689 |
Warrants, outstanding, exercisable | 2,523,689 | |
Weighted average exercise price, outstanding, beginning balance | $ 2.45 | $ 2.45 |
Weighted average exercise price, granted | 0 | .00 |
Weighted average exercise price, exercised | 0 | .00 |
Weighted average exercise price, forfeited | 0 | .00 |
Weighted average exercise price, outstanding, ending balance | 2.45 | $ 2.45 |
Weighted average exercise price, outstanding, exercisable | $ 2.45 | |
Weighted average remaining contractual life, outstanding, beginning | 1 year 6 months 4 days | 2 years 6 months 4 days |
Weighted average remaining contractual life, outstanding, ending | 1 year 3 months 4 days | 1 year 6 months 4 days |
Weighted average remaining contractual life, outstanding, exercisable | 1 year 3 months 4 days | |
Intrinsic value, outstanding, beginning balance | $ 0 | $ 0 |
Intrinsic value, granted | 0 | 0 |
Intrinsic value, exercised | 0 | 0 |
Intrinsic value, forfeited | 0 | 0 |
Intrinsic value, ending balance | 0 | $ 0 |
Intrinsic value, outstanding, exercisable | $ 0 |
8. STOCKHOLDERS' EQUITY (Deta_3
8. STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares | Mar. 31, 2019 | Dec. 31, 2018 |
Stockholders' Equity Note [Abstract] | ||
Series C, par value | $ 0.0001 | $ 0.0001 |
Series C, shares authorized | 1,733,221 | 1,733,221 |
Series C, shares outstanding | 1,733,221 | 1,733,221 |
Series A, par value | $ 0.0001 | $ 0.0001 |
Series A, shares authorized | 1,000 | 1,000 |
Series A, shares issued | 1,000 | 1,000 |
Series A, shares outstanding | 1,000 | 1,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 25,000,000 | 25,000,000 |
Common stock, shares issued | 17,722,825 | 17,722,825 |
Common stock, shares outstanding | 17,722,825 | 17,722,825 |
Treasury stock | 778,980 | 778,980 |
10. COMMITMENTS AND CONTINGEN_3
10. COMMITMENTS AND CONTINGENCIES (Details) | 3 Months Ended |
Mar. 31, 2019USD ($) | |
Short Term Lease Costs | $ 1,480 |
Variable Lease Costs | 0 |
Total | 45,235 |
Office Lease | |
Operating Lease | 20,468 |
Ground Lease | |
Operating Lease | $ 23,287 |
10. COMMITMENTS AND CONTINGEN_4
10. COMMITMENTS AND CONTINGENCIES (Details 1) | Mar. 31, 2019 |
Commitments and Contingencies Disclosure [Abstract] | |
Weighted Average Remaining Lease Term (Years) - Operating Leases | 11 years |
Weighted Average Discount Rate - Operating Leases | 12.50% |
10. COMMITMENTS AND CONTINGEN_5
10. COMMITMENTS AND CONTINGENCIES (Details 2) | Mar. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2020 | $ 166,660 |
2021 | 170,973 |
2022 | 175,362 |
2023 | 164,979 |
2024 | 94,074 |
Thereafter | 984,381 |
Total | $ 1,756,429 |
11. DERIVATIVE LIABILITIES (Det
11. DERIVATIVE LIABILITIES (Details) - Preferred Series C Stock - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Annual volatility rate | 74.00% | 86.00% |
Risk free rate | 2.33% | 2.48% |
Holding Period | 5 years | 5 years |
Fair Value of common stock | $ 1 | $ 1.13 |
11. DERIVATIVE LIABILITIES (D_2
11. DERIVATIVE LIABILITIES (Details 1) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Fair value of derivative, beginning | $ 974,683 | $ 3,181,508 |
Change in fair value of derivative | (622,500) | (2,206,825) |
Fair value of derivative, ending | 352,183 | 974,683 |
Preferred Series C Stock | ||
Fair value of derivative, beginning | 402,909 | 1,531,789 |
Change in fair value of derivative | (258,778) | (1,128,880) |
Fair value of derivative, ending | $ 144,131 | $ 402,909 |
11. DERIVATIVE LIABILITIES (D_3
11. DERIVATIVE LIABILITIES (Details 2) - Preferred Series C Warrant - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Annual volatility rate | 74.00% | 86.00% |
Risk free rate | 2.33% | 2.48% |
Holding Period | 5 years | 5 years |
Fair Value of common stock | $ 1 | $ 1.20 |
11. DERIVATIVE LIABILITIES (D_4
11. DERIVATIVE LIABILITIES (Details 3) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Fair value of derivative, beginning | $ 974,683 | $ 3,181,508 |
Change in fair value of derivative | (622,500) | (2,206,825) |
Fair value of derivative, ending | 352,183 | 974,683 |
Preferred Series C Warrant | ||
Fair value of derivative, beginning | 571,774 | 1,649,719 |
Change in fair value of derivative | (363,722) | (1,077,945) |
Fair value of derivative, ending | $ 208,052 | $ 571,774 |
11. DERIVATIVE LIABILITIES (D_5
11. DERIVATIVE LIABILITIES (Details 4) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Derivative Liability [Abstract] | ||
Fair value of derivative, beginning | $ 974,683 | $ 3,181,508 |
Change in fair value of derivative liability | (622,500) | (2,206,825) |
Fair value of derivative, ending | $ 352,183 | $ 974,683 |
12. NON-CONTROLLING INTEREST (D
12. NON-CONTROLLING INTEREST (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Noncontrolling Interest [Abstract] | ||
Beginning balance | $ (5,605,129) | $ (5,416,168) |
Operating income (loss) | (27,506) | 197,128 |
Share of Other Comprehensive Income (Loss) | (19,863) | (386,089) |
Ending balance | $ (5,652,498) | $ (5,605,129) |
13. FAIR VALUE OF FINANCIAL I_3
13. FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) | Mar. 31, 2019 | Dec. 31, 2018 |
Assets: | ||
Total Asset | $ 0 | $ 0 |
Liabilities: | ||
Derivative Liabilities | 352,183 | 974,683 |
Total Liabilities | 352,183 | 974,683 |
Fair value Level 1 | ||
Assets: | ||
Total Asset | 0 | 0 |
Liabilities: | ||
Derivative Liabilities | 0 | 0 |
Total Liabilities | 0 | 0 |
Fair value Level 2 | ||
Assets: | ||
Total Asset | 0 | 0 |
Liabilities: | ||
Derivative Liabilities | 0 | 0 |
Total Liabilities | 0 | 0 |
Fair value Level 3 | ||
Assets: | ||
Total Asset | 0 | 0 |
Liabilities: | ||
Derivative Liabilities | 352,183 | 974,683 |
Total Liabilities | $ 352,183 | $ 974,683 |
14. REVENUE CONCENTRATION (Deta
14. REVENUE CONCENTRATION (Details Narrative) - One Customer | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2018 | |
Revenue | |||
Concentration risk | 100.00% | 100.00% | |
Accounts Receivable | |||
Concentration risk | 100.00% | 100.00% |
15. NOTES PAYABLE (Details)
15. NOTES PAYABLE (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2019 | Dec. 31, 2018 | |
Notes Payable [Abstract] | ||
Property Holding Taxes, Beginning | $ 1,803,235 | $ 367,311 |
Exchange Rate Adjustment | 18,524 | 1,861 |
Property Holding Taxes for the period | 325,559 | 2,292,122 |
Initial payment of 20% | (65,112) | (458,423) |
Principal payments | (169,676) | (399,636) |
Property Holding Taxes, Ending | $ 1,912,530 | $ 1,803,235 |
15. NOTES PAYABLE (Details 1)
15. NOTES PAYABLE (Details 1) | Mar. 31, 2019USD ($) |
Notes Payable [Abstract] | |
2020 | $ 820,719 |
2021 | 838,657 |
2022 | 253,154 |
Total | $ 1,912,530 |