SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021.

OR

☐     TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934

From the transition period ___________ to ____________.

Commission File Number 000-30371

DYNARESOURCE, INC.

(Exact name of small business issuer as specified in its charter)

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

222 W Las Colinas Blvd., Suite 1910 North Tower, Irving, Texas 75039

(Address of principal executive offices)

(972) 868-9066

(Issuer's telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

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

Indicate by a check mark whether the company is a shell company (as defined by Rule 12b-2 of the Exchange Act): Yes ☐    No ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. Yes ☐    No ☒

As of July 31, 2021, there were 17,722,825 shares of Common Stock of the issuer outstanding.

TABLE OF CONTENTS

PART I.	FINANCIAL STATEMENTS
ITEM 1.	Unaudited Financial Statements
	Notes to Unaudited Financial Statements	7
ITEM 2.	Management's Discussion and Analysis and Plan of Operation	33
ITEM 3.	Quantitative and Qualitative Disclosure About Market Risk	44
ITEM 4.	Controls and Procedures	44
PART II.	OTHER INFORMATION
ITEM 1.	Legal Proceedings	45
ITEM 2.	Unregistered Sales of Securities and Use of Proceeds	49
ITEM 3.	Default Upon Senior Securities	49
ITEM 4.	Mine Safety Disclosures	49
ITEM 5.	Other Information	49
ITEM 6.	Exhibits	50
CERTIFICATIONS
EXHIBIT 31.1	CHIEF EXECUTIVE OFFICER CERTIFICATION
EXHIBIT 31.2	CHIEF FINANCIAL OFFICER CERTIFICATION
EXHIBIT 32.1	CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

2

DYNARESOURCE, INC.

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2021 AND DECEMBER 31, 2020

	2021			2020
	(Unaudited)
ASSETS
Current Assets
Cash and Cash Equivalents	$	9,364,960		$	1,504,016
Accounts Receivable		3,828,995			840,743
Inventories		1,364,836			603,967
Foreign Tax Receivable		3,204,226			2,179,914
Appeal Bond		-			1,111,111
Other Current Assets		714,766			578,661
Total Current Assets		18,477,783			6,818,412
Mining Equipment and Fixtures (Net of Accumulated
Depreciation of $114,801 and $113,176)		4,353			5,978
Operating Lease		692,889			735,220
Mining Concessions		4,132,678			4,132,678
Investment in Affiliate		70,000			70,000
Other Assets		95,267			95,380
TOTAL ASSETS	$	23,472,970		$	11,857,668
LIBILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts Payable	$	1,363,617		$	2,274,011
Accrued Expenses		4,404,998			3,385,093
Customer Advances		9,250,000			2,500,000
Derivative Liabilities		2,556,676			2,371,560
Current Portion of Convertible Notes Payable – Series D		3,539,409			-
Current Portion of Convertible Notes Payable – Series I & II		543,279			-
Current Portion of Long-Term Debt		2,009,461			1,984,007
Current Portion of Operating Lease Payable		92,386			82,733
Total Current Liabilities		23,759,826			12,597,404
Convertible Notes Payable – Series D, (Net of Unamortized Discount of $480,591 and $755,214), Less Current Portion		-			3,264,786
Convertible Notes Payable – Series I & II, Less Current Portion		-			543,279
Long Term Debt, Less Current Portion		33,119			97,428
Operating Lease Payable, Less Current Portion		630,158			685,951
TOTAL LIABILITIES		24,423,103			17,188,848
Preferred Stock, Series C, $0.0001 par value, 1,734,992 shares Authorized, issued and outstanding		4,337,480			4,337,480
COMMITMENTS AND CONTINGENCIES		-			-
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, Series A, $0.0001 par value, 1,000 shares authorized, issued and outstanding		1			1
Common Stock, $0.01 par value, 40,000,000 shares authorized 17,722,825 and 17,722,825 issued and outstanding		177,228			177,228
Preferred Rights		40,000			40,000
Additional Paid In Capital		50,407,333			50,407,333
Treasury Stock, 516,480 and 516,480 shares		(1,474,486	)		(1,474,486	)
Accumulated Other Comprehensive income		66,685			438,092
Accumulated Deficit		(54,504,374	)		(59,256,828	)
TOTAL STOCKHOLDERS’ DEFICIT		(5,287,613	)		(9,668,660	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	23,472,970		$	11,857,668

The accompanying notes are an integral part of these consolidated financial statements.

3

DYNARESOURCE, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Unaudited)

	Three Months June 30, 2021			Three Months June 30, 2020			Six Months June 30, 2021			Six Months June 30, 2020
REVENUES	$	10,526,313		$	(3,409	)	$	15,439,025		$	414,635
COSTS AND EXPENSES OF MINING OPERATIONS
Production Costs Applicable to Sales		778,885			-			1,160,151			211,575
Mine Production Costs		1,442,932			-			2,249,402			533,901
Mine Exploration Costs		1,273,241			-			2,285,989			40,825
Mine Expansion Costs		-			639,656		- _				909,190
Camp, Warehouse and Facilities		723,527			421,282			1,258,722			873,324
Transportation		355,134			(446	)		593,698			75,734
Property Holding Costs		36,903			31,306			79,650			68,129
General and Administrative		651,992			1,097,315			1,166,969			1,517,571
Depreciation and Amortization		813			812			1,625			1,625
Total Operating Expenses		5,263,427			2,189,925			8,796,206			4,231,874
NET OPERATING INCOME (LOSS)		5,262,886			(2,193,334	)		6,642,819			(3,817,239	)
OTHER INCOME (EXPENSE)
Foreign Currency Gains (Losses)		470,016			(230,310	)		136,281			(339,685	)
Interest Expense		(369,197	)		(269,865	)		(730,419	)		(404,445	)
Derivatives Adj. Mark-to-Market Gain (Loss)		210,151			(750,524	)		(185,116	)		(689,275	)
Arbitration Award Expense		(1,111,111	)		-			(1,111,111	)		-
Other Income (Expense)		-			(4,427	)	-_				(4,427	)
Total Other Income (Expense)		(800,141	)		(1,255,126	)		(1,890,365	)		(1,437,832	)
NET INCOME (LOSS) BEFORE TAXES		4,462,745			(3,448,460	)		4,752,454			(5,255,071	)
INCOME TAXES		-			-			-			-
NET INCOME (LOSS)	$	4,462,745		$	(3,448,460	)	$	4,752,454		$	(5,255,071	)
DEEMED DIVIDEND FOR SERIES C PREFERRED	$	(43,375	)		(43,330	)		(86,750	)		(86,660	)
LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS	$	-		$	-		$	-		$	61,589
NET INCOME (LOSS)ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	4,419,370		$	(3,491,790	)	$	4,665,704		$	(5,280,142	)
EARNINGS (LOSS) PER SHARE DATA  ATTRIBUTABLE TO THE EQUITY HOLDERS OF DYNARESOURCE, INC:
Basic Loss per Common Share	$	0.25		$	(0.20	)	$	0.26		$	(0.30	)
Diluted Loss per Common Share	$	0.24		$	(0.19	)	$	0.25		$	(0.30	)
Weighted Average Shares Outstanding, Basic		17,722,825			17,722,825			17,722,825			17,722,825
Weighted Average Shares Outstanding, Diluted		18,945,827			17,722,825			18,945,827			17,722,825
OTHER COMPREHENSIVE LOSS
Foreign Currency Exchange Gains (Losses)		(663,778	)		10,683			(371,407	)		1,144,987
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)		(663,778	)		10,683			(371,407	)		1,144,987
TOTAL COMPREHENSIVE INCOME (LOSS)	$	3,798,967		$	(3,437,777	)	$	4,381,047		$	(4,110,084	)
ATTRIBUTABLE TO:
EQUITY HOLDERS OF DYNARESOURCE, INC.	$	3,798,967		$	(3,437,777	)	$	4,381,047		$	(4,036,826	)
NON-CONTROLLING INTERESTS	$	-		$	-		$	-		$	(73,258	)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	3,798,967		$	(3,437,777	)	$	4,381,047		$	(4,110,084	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

DYNARESOURCE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

FOR THREE AND SIX MONTHS ENDED JUNE 30, 2021, AND 2020

	Preferred A				Common				Preferred		Preferred		Paid In			Treasury			Treasury			Other Comp			Accumulated			Non Controlling
	Shares			Amount	Shares		Amount		Rights		Amount		Capital			Shares			Amount			Income			Deficit			Interests		Totals
Balance, March 31, 2020		1,000	$	1		17,722,825	$	177,228		1	$	40,000	$	51,056,738			778,980		$	(2,223,891	)	$	1,471,814		$	(55,697,616	)	$	0	$	(5,175,726	)
Treasury Stock Issued for Services														(363,917	)		(162,500	)		463,917											100,000
Other Comprehensive Income (Loss)																							10,683								10,683
(Loss)																										(3,448,460	)				(3,448,460	)
Balance, June 30, 2020		1,000	$	1		17,722,825	$	177,228		1	$	40,000	$	50,692,821			616,480		$	(1,759,974	)	$	1,482,497		$	(59,146,076	)	$	0	$	(8,513,503	)
Balance, March 31, 2021		1,000	$	1		17,722,825	$	177,228		1	$	40,000	$	50,407,333			516,480		$	(1,474,486	)	$	730,463		$	(58,967,119	)	$	0	$	(9,086,580	)
Other Comprehensive Income (Loss)																							(663,778	)							(663,778	)
Net Income																										4,462,745					4,462,745
Balance, June 30, 2021		1,000	$	1		17,722,825	$	177,228		1	$	40,000	$	50,407,333			516,480		$	(1,474,486	)	$	66,685		$	(54,504,374	)	$	0	$	(5,287,613	)

Balance, December 31, 2019	1,000	$	1	17,722,825	$	177,228	1	$	40,000	$	56,622,159		778,980		$	(2,223,891	)	$	325,841		$	(53,952,594	)	$	(5,723,663	)	$	(4,734,919	)
Treasury Stock Issued for Services											(363,917	)	(162,500	)		463,917												100,000
Other Comprehensive Income (Loss)																			1,156,656						(11,669	)		1,144,987
Net (Loss)																						(5,193,482	)		(61,589	)		(5,255,071	)
Elimination of Non-Controlling Interest											(5,565,421	)													5,796,921			231,500
Balance, June 30, 2020	1,000	$	1	17,722,825	$	177,228	1	$	40,000	$	50,692,821		616,480		$	(1,759,974	)	$	1,471,814		$	(59,146,076	)	$	0		$	(8,513,503	)
Balance, December 31, 2020	1,000	$	1	17,722,825	$	177,228	1	$	40,000	$	50,407,333		516,480		$	(1,474,486	)	$	438,092		$	(59,256,828	)	$	0		$	(9,668,660	)
Other Comprehensive Income (Loss)																			(371,407	)								(371,407	)
Net Income																						4,752,454						4,752,454
Balance, June 30, 2021	1,000	$	1	17,722,825	$	177,228	1	$	40,000	$	50,407,333		516,480		$	(1,474,486	)	$	66,685		$	(54,504,374	)	$	0		$	(5,287,613	)

The accompanying notes are an integral part of these consolidated financial statements.

5

DYNARESOURCE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(UNAUDITED)

	2021			2020
CASH FLOWS FROM OPERATING ACTIVITES:
Net income (Loss)	$	4,752,454		$	(5,255,071	)
Adjustments to reconcile net loss to cash used in operating activities
Change in Derivatives		185,116			689,275
Depreciation		1,625			1,625
Amortization of Loan Discount		274,623			68,656
Stock issued for Services		-			100,000
Non-Dilution Stock Issuance		-			4,427
Change in Operating Assets and Liabilities
Accounts Receivable		(2,988,252	)		718,487
Inventories		(760,869	)		523,089
Foreign Tax Receivable		(1,024,312	)		139,260
Appeal Bond		1,111,111			-
Operating Lease Assets		42,331			37,887
Other Assets		(135,992	)		(41,059	)
Accounts Payable		(910,394	)		(598,917	)
Accrued Expenses		1,019,905			220,056
Customer Advances		6,750,000			-
Lease Liabilities		(46,140	)		(37,659	)
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES		8,271,206			(3,429,944	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from Stockholders					45,000
Proceeds from Borrowing		-			3,275,000
Payments of Convertible Notes		-			(112,500	)
Payments of Long-Term Debt		(36,460	)		(29,315	)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		(36,460	)		3,178,185
Effects of Foreign Exchange		(373,802	)		728,966
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVILANTS		7,860,944			477,207
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,504,016			354,572
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	9,364,960		$	831,779
SUPPLEMENTAL DISCLOSURES
Cash Paid for Interest	$	243,979		$	47,875
Cash Paid for Income Taxes	$	-		$	-
NON-CASH TRANSACTION Accrued Interest Rolled into Notes Payable	$	-		$	23,934

The accompanying notes are an integral part of these consolidated financial statements.

6

DYNARESOURCE, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021 AND 2020

NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Activities, History and Organization

DynaResource, Inc. (The “Company”, “DynaResource”, or “DynaUSA”) was organized September 28, 1937, as a California corporation under the name of West Coast Mines, Inc. In 1998, the Company re-domiciled to Delaware and changed its name to DynaResource, Inc. The Company is in the business of acquiring, investing in, and developing precious metal properties, and the production of precious metals.

In 2000, the Company formed a wholly owned subsidiary, DynaResource de México S.A. de C.V., chartered in México (“DynaMéxico”). This Company was formed to acquire, invest in and develop resource properties in México. DynaMéxico owns a portfolio of mining concessions that currently includes its interests in the San José de Gracía Project (“SJG”) in northern Sinaloa State, México. The SJG District covers 9,920 hectares (24,513 acres) on the west side of the Sierra Madre mountain range. The Company currently owns 100% of the outstanding capital of DynaMéxico. A 20% minority interest in Dyna México was held by Goldgroup Resources Inc., a wholly owned subsidiary of Goldgroup Mining Inc. Vancouver BC (“Goldgroup”) until February 24, 2020.

In 2005, the Company formed DynaResource Operaciones de San Jose De Gracía S.A. de C.V. (“DynaOperaciones”), and acquired control of Mineras de DynaResource, S.A. de C.V. (formerly Minera Finesterre S.A. de C.V., “DynaMineras”). The Company owns 100% of Dyna Mineras.

The Company elected to become a voluntary reporting issuer in Canada in order to avail itself of Canadian regulations regarding reporting for mining properties and, more specifically, National Instrument 43-101 (“NI 43-101”). This regulation sets forth standards for reporting resources in a mineral property and is a standard recognized in the mining industry.

Reclassifications and Adjustments

Certain financial statement reclassifications have been made to prior period balances to reflect the current period’s presentation format; such reclassifications had no impact on the Company’s consolidated statements of income or consolidated statements of cash flows and had no material impact on the Company’s consolidated balance sheets.

Significant Accounting Policies

The Company’s management selects accounting principles generally accepted in the United States of America and adopts methods for their application. The application of accounting principles requires the estimating, matching and timing of revenues and expenses. The accounting policies used conform to generally accepted accounting principles which have been consistently applied in the preparation of these financial statements.

The financial statements and notes are representations of the Company’s management which is responsible for their integrity and objectivity. Management 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. (100% ownership), DynaResource Operaciones S.A. de C.V. (100% ownership) and Mineras de DynaResource S.A. de C.V. (100% ownership). All significant inter-company transactions have been eliminated. All amounts are presented in U.S. Dollars unless otherwise stated.

7

Non-Controlling Interest

The Company’s subsidiary, DynaResource de México S.A. de C.V, was 20% owned by Goldgroup Resources, Inc. until February 24, 2020 when the Company recovered the shares as partial satisfaction of a legal judgement. See Note 10 for further details.

The Company accounted for this outside interest as “non-controlling interest” through February 2020. A 20% share of operating income (loss) and comprehensive income (loss) was allocated to the non-controlling interest through the date of the recovery of the shares.

Investments in Affiliates

The Company owns a 19.95% 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 basis. The Company has significant influence over DynaNevada, but not control, due to the lack of a majority voting interest in the entity. DynaNevada has been dormant for several years. DynaUSA has no plan or intention of future funding with DynaNevada nor are any other transactions with DynaNevada contemplated at this time. The Company therefore accounts for this investment using the cost basis. The investment was $70,000 and $70,000 at June 30, 2021 and December 31, 2020, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. At times, cash balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. As of June 30, 2021, the Company had $9,507,800 of deposits in U.S. Banks in excess of the FDIC limit.

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 June 30, 2021 and December 31, 2020, 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 June 30, 2021 and December 31, 2020 are $3,204,226 and $2,179,914, 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 $1,364,836 and $603,967 as of June 30, 2021 and December 31, 2020, respectively.

Proven and Probable Reserves (No Known Reserves)

The definition of proven and probable reserves is set forth in SEC Industry Guide 7 (“Industry Guide 7”). Proven reserves for which (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, grade and/or quality are computed from the results of detailed sampling and (2) the sites for inspection, sampling and measurement are spaced so closely and the geological character is so well defined that size, shape, depth and mineral content of the reserves are well-established. Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observations.

As June 30, 2021 of the Company's properties contain resources that satisfy the definition of proven and probable reserves. The Company classifies the development of its properties, including the San Jose de Gracía Property, as exploration stage projects since no proven or probable reserves have been established under Industry Guide 7.

8

Property

Substantially all mine development costs, including design, engineering, mine construction, and installation of equipment are expensed as incurred as the Company has not established proven and probable reserves on any of its properties. Only certain types of mining equipment which has alternative uses or significant salvage value, may be capitalized without proven and probable reserves. Depreciation is computed using the straight-line method. Office furniture and equipment are being depreciated on a straight-line method over estimated economic lives ranging from 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.

Design, Construction, and Development Costs: Mine development costs include engineering and metallurgical studies, drilling and other related costs to delineate an ore body, the removal of overburden to initially expose an ore body at open pit surface mines and the building of access ways, shafts, lateral access, drifts, ramps and other infrastructure at underground mines.

When proven and probable reserves as defined by 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.

Mineral Properties Interests

Mineral property interests include acquired interests in development and exploration stage properties, which are considered tangible assets. The amount capitalized relating to a mineral property interest represents its fair value at the time of acquisition. When a property does not contain mineralized material that satisfies the definition of proven and probable reserves, such as with the San Jose de Gracía Property, capitalized costs and mineral property interests are amortized using the straight-line method once production begins. As of June 30, 2021, the mining interests have been in the pilot production stage and therefore, no amortization has been expensed. Mining properties consist of 33 mining concessions covering approximately 9,920 hectares at the San Jose de Gracía property (“SJG”), the basis of which are amortized on the unit of production method based on estimated recoverable resources. If it is determined that the deferred costs related to a property are not recoverable over its productive life, those costs will be written down to fair value as a charge to operations in the period in which the determination is made. The amounts at which mineral properties and the related costs are recorded do not necessarily reflect present or future values.

Impairment of Assets: The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Mineral properties are monitored for impairment based on factors such as mineral prices, government regulation and taxation, the Company's continued right to explore the area, exploration reports, assays, technical reports, drill results and its continued plans to fund exploration programs on the property.

For operating mines, recoverability is measured by comparing the undiscounted future net cash flows to the net book value. When the net book value exceeds future net undiscounted cash flows, an impairment loss is measured and recorded based on the excess of the net book value over fair value. Fair value for operating mines is determined using a combined approach, which uses a discounted cash flow model for the existing operations and a market approach for the fair value assessment of exploration land claims. Future cash flows are estimated based on quantities of recoverable mineralized material, expected gold and silver prices (considering current and historical prices, trends and related factors), production levels, operating costs, capital requirements and reclamation costs, all based on life-of-mine plans. The term "recoverable mineralized material" refers to the estimated amount of gold or other commodities that will be obtained after considering losses during processing and treatment of mineralized material. In estimating future cash flows, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of future cash flows from other asset groups. The Company's estimates of future cash flows are based on numerous assumptions and it is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold, silver and other commodity prices, production levels and costs and capital are each subject to significant risks and uncertainties.

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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 June 30, 2021 and December 31, 2020, no indications of impairment existed.

Asset Retirement Obligation

As the Company is not obligated to remediate the mining properties, no Asset Retirement Obligation (“ARO”) has been established. Changes in regulations or laws, any instances of non-compliance with laws or regulations that result in fines, or any unforeseen environmental contamination could result in a material impact to the amounts charged to operations for reclamation and remediation. Significant judgments and estimates are made when estimating the fair value of AROs. Expected cash flows relating to AROs could occur over long periods of time and the assessment of the extent of environmental remediation work is highly subjective. Considering all of these factors that go into the determination of an ARO, the fair value of the AROs can materially change over time.

Property Holding Costs

Holding costs to maintain a property on a care and maintenance basis are expensed in the period they are incurred. These costs include security and maintenance expenses, lease and claim fees and payments, and environmental monitoring and reporting costs.

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.

Transactions in and Translations of Foreign Currency

The functional currency for the subsidiaries of the Company is the Mexican Peso. As a result, the financial statements of the subsidiaries have been translated from Mexican Pesos into U.S. dollars using (i) yearend exchange rates for balance sheet accounts, and (ii) the weighted average exchange rate of the reporting period for all income statement accounts. Foreign currency translation gains and losses are reported as a separate component of stockholders’ equity and comprehensive income (loss).

The financial statements of the subsidiaries should not be construed as representations that Mexican Pesos have been, could have been or may in the future be converted into U.S. dollars at such rates or any other rates.

Relevant exchange rates used in the preparation of the financial statements for the subsidiaries are as follows for the periods ended June 30, 2021 and December 31, 2020 (Mexican Pesos per one U.S. dollar):

	June 30, 2021		Dec 31, 2020
Exchange Rate at Period End Pesos		19.94		19.91

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 June 30, 2021 and June 30, 2020 (Mexican Pesos per one U.S. dollar):

	June 30, 2021		June 30, 2020
Weighted Average Exchange Rate for the Six Months Ended Pesos		20.19		21.65

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The Company recorded currency transaction gains (losses) of $136,281 and $(339,685) for the six months ended June 30, 2021 and 2020, respectively.

Income Taxes

The Company accounts for income taxes under ASC 740 “Income Taxes” using the liability method, recognizing certain temporary differences between the financial reporting basis of liabilities and assets and the related income tax basis for such liabilities and assets. This method generates either a net deferred income tax liability or asset for the Company, as measured by the statutory tax rates in effect. The Company derives the deferred income tax charge or benefit by recording the change in either the net deferred income tax liability or asset balance for the year. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred income tax asset will not be realized.

Income from the Company’s subsidiaries in México are taxed at applicable Mexican tax law.

Use of Estimates

In order to prepare financial statements in conformity with accounting principles generally accepted in the United States, management must make estimates, judgments and assumptions that affect the amounts reported in the 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” establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The Company’s comprehensive income consists of net income and other comprehensive income (loss), consisting of unrealized net gains and losses on the translation of the assets and liabilities of its foreign operations.

Revenue Recognition

The Company follows ASC 606 “Revenue from contracts with customers”. The Company generates revenue by selling gold and silver produce from its mining operations. The Company recognizes revenue for gold and silver concentrate production, net of treatment and refining costs, when it satisfies the performance obligation of transferring control of the concentrate to the customer. This is generally when the material is delivered to the customer facility for treatment and processing as the customer has the ability to direct the use of and obtain substantially all the remaining benefits from the material and the customer has the risk of loss.

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.

As of June 30, 2021 there are $9,250,000 in customer deposit liabilities for payments received in advance expected to be settled in 2021.

During the periods ended June 30, 2021 and 2020 there was $0 and $0 of revenue recognized during the period from customer deposit liabilities (deferred contract revenue) from prior periods, and $0 of customer deposits refunded to the customer on order cancellation.

As of and for the periods ended June 30, 2021 and December 31, 2020, there are no contract costs or commissions deferred.

We have elected to account for shipping and handling costs as fulfillment costs after the customer obtains control of the goods.

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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.

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 weighted average number of common shares outstanding during each period is used to compute basic earnings (loss) per share. Diluted earnings per share are computed using the weighted average number of shares and potentially dilutive common shares outstanding. Potentially dilutive common shares are additional common shares assumed to be exercised. Potentially dilutive common shares consist of stock warrants, convertible preferred shares and convertible notes and are excluded from the diluted earnings per share computation in periods where the Company has incurred a net loss or where the average stock price was below the exercise price of the respective potentially dilutive common share, as their effect would be considered anti-dilutive.

The Company had 3,391,835 warrants outstanding at June 30, 2021 which upon exercise, would result in the issuance of 3,391,835 shares of common stock. Of these warrants 2,166,527 were exercisable at $2.05 per share and1,225,308 were exercisable at $.01 per share. The Company also had convertible debt instruments as of June 31, 2021 which, upon conversion at valuations from $2.00 to $2.50 per share, would result in the issuance of 2,227,312 shares of stock.

The Company had 3,391,835 warrants outstanding at December 31, 2020 which upon exercise, would result in the issuance of 3,391,835 shares of common stock. Of these warrants 2,166,527 were exercisable at $2.05 per share and 1,225,308 were exercisable at $.01 per share. The Company also had convertible debt instruments as of December 31, 2020 which, upon conversion at valuations from $2.00 to $2.50 per share, would result in the issuance of 2,227,312 shares of stock.

	Three Month Ended June 30, 2021		Three Month Ended June 30, 2020			Six Month Ended June 30, 2021		Six Month Ended June 30, 2020
Net loss attributable to common shareholders	$	4,419,370	$	(3,491,790	)	$	4,665,704	$	(5,280,142	)
Weighted average number of common shares outstanding, Basic		17,722,825		17,722,825			17,722,825		17,722,825
Diluted weighted average number of common shares outstanding,		18,945,827		17,722,825			18,945,827		17,722,825
Basic earnings (loss) per share	$	0.25	$	(0.20	)	$	0.26	$	(0.30	)
Diluted earnings (loss) per share	$	0.24	$	(0.19	)	$	0.25	$	(0.30	)

At June 30, 2021 2,166,527 shares of potentially dilutive common stock related to outstanding stock warrants and 2,227,312 shares of potentially dilutive common stock related to convertible debt were excluded from the diluted earnings per share calculation because the exercise and conversion prices exceeded the average stock price and therefore their effect would be anti-dilutive.

At June 30, 2020 potentially dilutive common shares related to stock warrants and convertible debt were excluded from the diluted earning per share computation because the Company incurred a net loss and therefore their effect would be anti-dilutive.

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.

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NOTE 2 – INVENTORIES

Inventories are carried at the lower of cost or fair value and consist of mined tonnage, gravity-flotation concentrates, and gravity tailings (or, flotation feed material). Inventory balances of June 30, 2021 and December 31, 2020, respectively, were as follows:

	2021		2020
Mined Tonnage	$	1,218,021	$	555,608
Gold-Silver Concentrates		146,815		48,359
Total Inventories	$	1,364,836	$	603,967

NOTE 3 – PROPERTY

Property consists of the following at June 30, 2021 and December 31, 2020:

	2021			2020
Leasehold improvements	$	9,340		$	9,340
Office equipment		31,012			31,012
Office furniture and fixtures		78,802			78,802
Sub-total		119,154			119,154
Less: Accumulated depreciation		(114,801	)		(113,176	)
Total Property	$	4,353		$	5,978

Depreciation has been provided over each asset’s estimated useful life. Depreciation expense was $1,625 and $1,625 for the periods ended June 30, 2021 and 2020 respectively.

NOTE 4 – MINING CONCESSIONS

Mining properties consist of the San Jose de Gracía (“SJG”) concessions. Mining Concessions were $4,132,678 and $4,132,678 at June 30, 2021 and December 31, 2020, respectively.  

Depletion expense was $0 and $0 for the periods ended June 20, 2021 and 2020, respectively.

NOTE 5 – INVESTMENT IN AFFILIATE/RECEIVABLES FROM AFFILIATE/OTHER ASSETS

The Company owns 19.95% 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”). 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”).

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On December 31, 2010, the Company received 3,223,040 shares, which represents approximately 19.95% of the outstanding shares of DynaNevada. At the time of the exchange, DynaNevada’s net book value was approximately $695,000, consisting of $30,000 of cash and the remainder being unproven mining properties. Subsequent to the exchange management determined the investment to be impaired due to a lack of development of the properties and incurred a charge to the income statement. Management estimated the value of the Company’s DynaNevada shares as of June 30, 2021 and December 31, 2020 to be $70,000 and $70,000, respectively.

At June 30, 2021 and December 31, 2020, the Company had a receivable from DynaNevada de México of $71,379 and $71,465, respectively for working capital advances. These amounts are included in Other Assets in the accompanying consolidated balance sheets.

NOTE 6 – 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 Gracía. 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. As of December 31, 2018, seven of the Series I Notes totaling $646,875 had subsequently been extended to December 30, 2019. On December 31, 2019, the Company entered into agreements to extend seven outstanding notes totaling $646,875 plus accrued interest totaling $34,277 for new total notes of $681,152 until December 31, 2020.

On March 31, 2020 the Company entered into agreements to extend the seven outstanding notes totaling $691,152 plus accrued interest totaling $21,286 for a new total of $702,438 until June 30, 2022. At December 31, 2020 one note for $246,533 was paid off leaving six Series I Notes remaining outstanding with a total balance of $455,905.

At June 30, 2021 six Series I Notes remained outstanding with a total balance of $455,905. The Company has the right to prepay the Series I Notes with a ten percent (10%) penalty.

The Series I Note holder retains the option, at any time prior to maturity or prepayment, to convert any unpaid principal and accrued interest into Common Stock at $2.50 per share. If the Series I Note is converted into Common Stock, at the time of conversion, the holder would also receive warrants, in the same number as the number of common shares received upon conversion, to purchase additional common shares of the Company for $7.50 per share, with such warrants expiring one year from their conversion date.

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 Gracía. 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 II Notes.

The Notes originally matured on December 31, 2015. On December 31, 2019 the Company entered into agreements to extend the two notes totaling $78,750 plus accrued interest of $5,977 for total new notes of $84,757 to December 31, 2020. One note for $112,500 was not extended and was past due as of December 31, 2019. At December 31, 2019 three Series II notes remained outstanding for $197,226.

On March 31, 2020 the Company entered into agreements to extend the two notes totaling $84,726 plus accrued interest of $2,648 for total new notes of $87,374 to June 30, 2022. One note for $112,500 was not extended and was paid off in May 2020. At December 31, 2020 two Series II notes remained outstanding for $87,374.

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At June 30, 2021, two Series II notes remained outstanding for $87,374. 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 $2.50 per share. At the time of conversion, the holder would receive a warrant to purchase additional common shares of the Company for $7.50 per share, such warrant expiring one year from their conversion date.

NOTE 7 – INCOME TAXES

The Company has adopted ASC 740-10, “Income Taxes”, which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit (deferred tax asset). Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The cumulative tax effect at the expected statutory tax rate of 21% of significant items comprising the Company’s net deferred tax amounts as of June 30, 2021 and December 31, 2020 are as follows:

Deferred Tax Asset Related to:

	June 30, 2021			December 31, 2020
Prior Year	$	13,473,000		$	13,780,490
Tax (Expense) Benefit for Current Year		(1,421,781	)		953,120
Expiration of NOL Carryforward Period		-			(1,260,610	)
Total Deferred Tax Asset		12,051,219			13,473,000
Less Valuation Allowance		(12,051,219	)		(13,473,000	)
Net Deferred Tax Asset	$	-		$	-

For Financial Reporting Purposes Income (Loss) Before Taxes for the Six Months ended June 30, 2021 and 2020 includes the Following Components:

	2021			2020
United States	$	(4,841,452	)	$	(1,862,612	)
Foreign		9,593,906			(3,392,459	)
	$	4,752,454		$	(5,255,071	)

The Expense (Benefit) for Taxes for the Six Months Ended June 30, 2021 and 2020 Consist of the Following:

Current
Federal	$	-		$	-
State		-			-
Foreign		-			-
	$	-		$	-
Deferred and Other
Federal	$	(920,960	)	$	(285,487	)
State		-			-
Foreign		2,342,741			(848,115	)
		1,421,781			(1,133,602	)
Total Tax Expense (Benefit)		1,421,781			(1,133,602	)
Change in Valuation Allowance		(1,421,781	)		1,133,602
Net Tax Expense (Benefit)	$	-		$	-

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The Company's Income Tax Expense (Benefit)for the six months ending June 30, 2021 and 2020 differs from the Statutory Rate of 21% due to the following:

	2021			2020
Tax Expense (Benefit) at Statutory Rate	$	998,015		$	(1,103,565	)
Foreign Tax Rate Differential		863,450			(210,203	)
Permanent Differences
Stock Issued for Services		-			21,000
Change in Derivative Liability		38,874			144,748
Amortization of Loan Discount		57,671			14,418
Timing Differences
Depreciation & Capitalized Assets		(15,283	)
Sales & Accounts Receivable		(321,479	)
Inventory and COGS		(198,667	)
Other		(800	)
Change in Valuation Allowance		(1,421,781	)		1,133,602
Provision for Income Tax Expense (Benefit)	$	-		$	-

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 $49,800,000 at June 30, 2021 and will expire as follows:

United States Expiring 2029 through	$	18,500,000
United States indefinite limited to 80% of NOL		11,300,000
Foreign expiring from 2021 to 2030		20,000,000
Total	$	49,800,000

NOTE 8 – STOCKHOLDERS’ EQUITY

Authorized Capital. The total number of shares of all classes of capital stock which the corporation shall have the authority to issue is 60,001,000 shares, consisting of (i) twenty million and one thousand (20,001,000) shares of Preferred Stock, par value $0.0001 per share (“Preferred Stock”), of which one thousand (1,000) shares shall be designated as Series A Preferred Stock, 1,734,992 are designated as Series C Preferred Stock, and 3,000,000 shares are designated as Series D Preferred Stock and (ii) forty million (40,000,000) shares of Common Stock, par value $0.01 per share (“Common Stock”). As of June 30, 2021, 15,265,008 of Preferred stock remain undesignated.

Series A Preferred Stock

The Company has designated 1,000 shares of its Preferred Stock as Series A, having a par value of $0.0001 per share. Holders of the Series A Preferred Stock have the right to elect a majority of the Board of Directors of the Company. The Company issued 1,000 shares of Series A Preferred Stock to its CEO. At June 30, 2021 and December 31, 2020, there were 1,000 shares of Series A Preferred Stock outstanding.

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 were convertible to common shares at $2.50 per share, through June 30, 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 $4,337,480 payable annually on June 30. At June 30, 2021 dividends for the years 2017 to 2021 totaling $866,940 were in arrears.

Financing Agreement with Golden Post Rail, LLC, a Texas Limited Liability Company

1. 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:

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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. The expiration of the Golden Post Warrant was extended on May 14, 2020, pursuant to an additional financing agreement with Golden Post.

2. 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.

Additional Financing Agreement with Golden Post Rail, LLC, a Texas Limited Liability Company, and with Shareholders of DynaResource, Inc.

On May 14, 2020, the Company closed an additional financing agreement with Golden Post, and with certain individual shareholders of DynaUSA (“DynaUSA Shareholders”), and related agreements. A summary of the transactions and related agreements are set forth below:

1. Pursuant to the May 14, 2020 Note Purchase Agreement (the “NPA”) among the Company, Golden Post Rail, LLC (the “Lead Purchaser”), and the other parties listed on Exhibit A thereto (the “Remaining Purchasers”):

· Golden Post acquired the following securities:

(a)

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

(b)

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

· The Remaining Purchasers acquired the following securities:

(a)	Convertible promissory notes (the “Remaining Notes”) in the aggregate principal amount of $1,400,000, bearing interest at 10%, and maturing two years from the date of issuance. The Remaining Notes have been fully funded. The Remaining Notes are convertible, at the option of each individual Remaining Purchaser, into shares of Series D Preferred at a conversion price of $2.00 per share; and
(b)	Common stock purchase warrants (the “Remaining Purchasers Warrants”) for the purchase of an aggregate of 439,026 shares of the Company’s common stock, at an exercise price of $0.01 per share, and maturing on the 10-year anniversary of the date of issuance. The Remaining Purchasers Warrants contain anti-dilution provisions.

2. Also pursuant to the NPA, the Company and the Lead Purchaser have agreed to amend the common stock purchase warrant dated June 30, 2015 (the “2015 Warrant”), issued to the Lead Purchaser in connection with that certain Securities Purchase Agreement dated as of May 6, 2015. The 2015 Warrant contemplates the purchase, upon exercise, of 2,166,527 shares (subject to adjustment) of the Company’s common stock and matured June 30, 2020 (the “Termination Date”). The amendment to the 2015 Warrant provides that, following the expiration of the 2015 Warrant pursuant to its terms, the Company will issue to the Lead Purchaser a new warrant (the “New Warrant”), substantially in the same form of the 2015 Warrant, for the number of shares of the Company’s common stock that went unexercised on the Termination Date, if any. The New Warrant has a maturity date of June 30, 2022.

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

4.	Pursuant to the transaction contemplated by the NPA, the Company agreed to call a special meeting of Company stockholders, to be held not later than July 14, 2020, to solicit stockholder approval of (a) an amendment of the Company’s certificate of incorporation to increase the number of authorized shares of common stock from 25,000,000 shares to 40,000,000 shares, and (b) an amendment of the Certificate of Designations of the Series C Preferred, in order to (a) extend the maturity date of the Series C Preferred by an additional two (2) years, (ii) add an equity cap in respect of the conversion of Series C Preferred into common stock of the Company, and (iii) add certain restrictions on the ability of the Company to issue Series C Preferred. The special meeting was properly called and held on July 13, 2020, whereby Company stockholders confirmed approval for each item referenced in item 4 above.
4.	Compensatory Issuances. On May 13, 2020, one business day prior to the NPA, the Company issued to the Lead Purchaser the following: (i) a common stock purchase warrant for 2,306 shares, at an exercise price of $0.01 per share, and maturing on the 7-year anniversary of the date of issuance (the “Compensatory Warrant”); and (ii) 1,771 shares of Series C Preferred Shares. These issuances were occasioned by the Company’s obligations under the Securities Purchase Agreement dated as of May 6, 2015.
6.	In order to accommodate the issuance of the additional 1,771 shares of Series C Preferred, on May 13, 2020 the Company filed with the Secretary of State of Delaware a Certificate of Increase of Series C Senior Convertible Preferred Stock, to increase the number of shares of preferred stock designated as Series C Preferred from 1,733,221 shares to 1,734,992 shares (“Certificate of Increase”).

(1) Also, on May 13, 2020, the Company filed with the Secretary of State of Delaware a Certificate of Designations of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions thereof of Series D Senior Convertible Preferred Stock, contemplating the authorization of 3,000,000 shares of Series D Preferred (“Certificate of Designation”).

The sale of the Golden Post Note, the Remaining Notes, the 2020 Warrant, the Remaining Purchasers Warrants, the Compensatory Warrant, and the Series C Preferred was made pursuant to a privately negotiated transaction that did not involve a public offering of securities and, accordingly, the Company believes that the transaction was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof. Each investor represented that it (A) is an “accredited investor” and (B) has such knowledge and experience in financial and business matters that the investor is capable of evaluating the merits and risks of acquiring the securities acquired by such investor. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.

Due to underlying anti-dilutive provisions contained in the Series C Preferred Shares and the Golden Post Warrant, the Company incurred derivative liabilities. On May 14, 2020 in connection with the Series D Convertible Note financing, the expiration date for the Series C Preferred Shares and the Golden Post warrants were extended to June 30, 2022. In addition, a new derivative liability was incurred due to the issuance of warrants for kicker shares. At June 30, 2021 the total derivative liability was $2,556,676 which included $626,579 for the Series C Preferred Shares, and $830,432 in connection with the Golden Post Warrants and $1,099,665 in connection with the Series D Convertible Note Kicker Warrants. At December 31, 2020 the total derivative liability was $2,371,560 which included $601,313 for the Series C Preferred Shares, and $817,613 in connection with the Golden Post Warrants and $952,634 in connection with the Series D Convertible Note Kicker Warrants. The deemed dividend for the periods ending June 30, 2021 and June 30, 2020 were $86,750 and $86,660. respectively. As the Company has not declared these dividends, it is required only as an item “below” the net income (loss) amount on the accompanying consolidated statements of income (loss).

Due to the nature of this transaction as mandatorily redeemable, the Series C preferred shares are classified as “temporary equity” on the balance sheet.

	Preferred Series C
Carrying Value, December 31, 2019	$	4,333,053
Issuances at Fair Value, Net of Issuance Costs		-
Bifurcation of Derivative Liability		-
Relative Fair Value of Warrants – Preferred Stock Discount		4,427
Accretion of Preferred Stock to Redemption Value		-
Carrying Value, December 31, 2020		4,337,480
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, June 30, 2021	$	4,337,480

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Preferred Stock (Undesignated)

In addition to the 1,000 shares designated as Series A Preferred Stock and the 1,734,992 shares designated as Series C Preferred Shares and the 3,000,000 shares designated as Series D Preferred Stock, the Company is authorized to issue an additional 15,265,008 shares of Preferred Stock, having a par value of $0.0001 per share. The Board of Directors of the Company has authority to issue the Preferred Stock from time to time in one or more series, and with respect to each series of the Preferred Stock, to fix and state by the resolution the terms attached to the Preferred Stock. At June 30, 2021 and December 31, 2020, there were no other shares of Preferred Stock outstanding.

Separate Series; Increase or Decrease in Authorized Shares. The shares of each series of Preferred Stock may vary from the shares of any other series thereof in any or all of the foregoing respects and in any other manner. The Board of Directors may increase the number of shares of Preferred Stock designated for any existing series by a resolution adding to such series authorized and unissued shares of Preferred Stock not designated for any other series. Unless otherwise provided in the Preferred Stock Designation, the Board of Directors may decrease the number of shares of Preferred Stock designated for any existing series by a resolution subtracting from such series authorized and unissued shares of Preferred Stock designated for such existing series, and the shares so subtracted shall become authorized, unissued and undesignated shares of Preferred Stock.

Common Stock

The Company is authorized to issue 40,000,000 common shares at a par value of $0.01 per share. These shares have full voting rights. At June 30, 2021 and December 31, 2020, there were 17,722,825 and 17,722,825 shares outstanding, respectively. No dividends were paid for the periods ended June 30, 2021 and 2020, respectively.

Preferred Rights

The Company issued “Preferred Rights” for the rights to percentages of revenues generated from the San Jose de Gracía Pilot Production Plant and received $784,500 for these rights. This has been reflected as “Preferred Rights” in stockholders’ equity. As of June 30, 2021, $744,500 had been repaid, leaving a current balance of $40,000 and $40,000 as of June 30, 2021 and December 31, 2020, respectively

Stock Issuances

There were no issuances of common stock during the periods ending June 30, 2021 and December 31, 2020.

Treasury Stock

During the year ending December 31, 2020, 262,500 treasury shares were transferred for services provided to the Company.

No treasury stock was issued during the period ended June 30, 2021

Outstanding treasury shares total 516,980 at both June 30, 2021 and December 31, 2020.

Warrants

2021 activity

The Company had 3,391,835 warrants outstanding at June 30, 2021. There were no warrants issued or exercised in 2021 and no warrants expired in 2021.

2020 Activity

On May 13, 2020, the Company issued 2,306 warrants to purchase shares of common stock with an exercise price of $.01per share related to anti-dilution provisions of the Series C preferred stock. These warrants expire on May 13, 2027.

On May 14, 2020, the Company issued 1,223,002 warrants to purchase shares of common stock with an exercise price of $.01 per share as kicker shares as part of the Series D note agreements. These warrants expire on May 14, 2030.

On June 30, 2020, as part of the Series D note agreement the Company issued 2,166,527 warrants to purchase shares of common stock with an exercise price of $2.05 per share to replace the 2,166,527 warrants previously outstanding which expired on that date. These warrants expire on June 30, 2022.

At December 2020, the Company had a total of 3,391,835 warrants outstanding.

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The Company recorded no expense related to the issuance of these warrants since these warrants were issued in common stock for cash sales and note conversions.

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Intrinsic Value
Balance at December 31, 2019		2,166,527	$	2.45		0.51	$	-
Granted		3,391,815	$	1.31		4.89	$	-
Exercised		-	$	-			$	-
Forfeited		2,166,527	$	-			$	-
Balance at December 31, 2020		3,391,815	$	1.31		4.34	$	-
Granted		-	$	-			$	-
Exercised		-	$	-			$	-
Forfeited		-	$	-			$	-
Balance at June 30, 2021		3,391,815	$	1.31		3.84	$	-
Exercisable at June 30, 2021		3,391,815	$	1.31		3.84	$	-

NOTE 9 – RELATED PARTY TRANSACTIONS

Dynacap Group Ltd.

The Company paid $87,500 and $37,500 to Dynacap Group, Ltd. (“Dynacap”, an entity controlled by the CEO of the Company) for consulting and other fees during the periods ended June 30, 2021 and 2020, respectively.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Concession Taxes

The Company is required to pay taxes in México in order to maintain mining concessions owned by DynaMéxico. Additionally, the Company is required to incur a minimum amount of expenditures each year for all concessions held. The minimum expenditures are calculated based upon the land area, as well as the age of the concessions. Amounts spent in excess of the minimum may be carried forward indefinitely over the life of the concessions and are adjusted annually for inflation. Based on Management’s recent business activities and current and forward plans and considering expenditures on mining concessions since 2002-2017 and continuing expenditures in current and forward activities, the Company does not anticipate that DynaMéxico will have any difficulties meeting the minimum annual expenditures for the concessions ($388 – $2,400 Mexican Pesos per hectare). DynaMéxico retains sufficient carry-forward amounts to cover over 10 years of the minimum expenditure (as calculated at the 2017 minimum, adjusted for annual inflation of 4%).

Leases

In addition to the surface rights held by DynaMéxico pursuant to the Mining Act of México and its Regulations (Ley Minera y su Reglamento), DynaMineras maintains access and surface rights to the SJG Project pursuant to the 20-year Land Lease Agreement. The 20 Year Land Lease Agreement with the Santa Maria Ejido Community surrounding San Jose de Gracía 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 each year by DynaMineras of $1,359,443 Pesos (approx. $72,000 USD), commencing in 2014. The Land Lease Agreement provides DynaMineras with surface access to the core resource areas of SJG (4,399 hectares), and allows for all permitted mining and exploration activities from the owners of the surface rights (Santa Maria Ejido community).

The Company leases office space for its corporate headquarters in Irving, Texas. In September 2017, 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 of each month.

Effective January 1, 2019, the Company adopted ASC 842, which requires recognition of a right-of-use asset and lease liability for all leases at the commencement date based on the present value of lease payments over the lease term. Additional qualitative and quantitative disclosures regarding the Company's leasing arrangements are also required. The Company adopted ASC 842 prospectively and elected the package of transition practical expedients that does not require reassessment of (1) whether any existing or expired contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company has elected other available practical expedients to not separate lease and non-lease components, which consist principally of common area maintenance charges, for all classes of underlying assets and to exclude leases with an initial term of 12 months or less.

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The Company determines if a contract is or contains a lease at inception. As of June 30, 2021, the Company has two operating leases - a six and one-half year lease for office space with a remaining term of eighteen months and a twenty-year ground lease in association with its México mining operations with a remaining term of thirteen years. Variable lease costs consist primarily of variable common area maintenance, storage parking and utilities. The Company’s leases do not have any residual value guarantees or restrictive covenants.

As the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated using the Company's interest rate of promissory notes.

The Company’s components of lease cost are as follows:

	Period Ended June 30, 2021
Operating Lease – Office Lease	$	42,742
Operating Lease – Ground Lease		44,337
Short Term Lease Costs		6,279
Variable Lease Costs		-
TOTAL	$	93,358

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	%

Estimated future minimum lease obligations are as follow for the years ending June 30:

YEAR
2022	$	179,474
2023		145,896
2024		96,896
2025		99,803
2026		102,797
Thereafter		684,885
Total	$	1,308,751
Less Imputed Interest		(586,207	)
OPERATING LEASE PAYABLE	$	722,544

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.

Arbitration filed by Goldgroup / DynaMéxico Complaint against Goldgroup

On March 14, 2014, Goldgroup filed for arbitration in the United States with the American Arbitration Association ("AAA"), citing the Earn In Agreement dated September 1, 2006 as the basis for the arbitration filing. The Company filed an answer on April 10, 2014, disputing that any issues exist which provide for arbitration.

DynaResource de Mexico filed Civil Claims again Goldgroup Mining Inc., and Goldgroup Resources Inc. requesting Damages of $50M USD

On December 9, 2014, DynaMéxico filed an Ordinary commercial lawsuit (Civil Claims) against Goldgroup Mining Inc., its parent company Goldgroup Resources Inc., and the AAA, in the Thirty Sixth Civil Court in the Federal District of México, under file 1120 number / 2014 ("the DynaMéxico Trial"). The DynaMéxico Trial sought to terminate the U.S.-based arbitration proceedings, as DynaMéxico believes there is no legal basis for arbitration, and to nullify the arbitration proceedings since Goldgroup previously sought recourse in Mexican courts. In the DynaMéxico Trial, DynaMéxico also requests that substantial damages (in the amount of US $50 million) be awarded to DynaMéxico against Goldgroup for:

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a)	Wrongfully using and disseminating confidential information and data belonging to DynaMéxico;
b)	Asserting that Goldgroup owns any interest in the San Jose de Gracía Project in northern Sinaloa, México, rather than accurately disclosing that Goldgroup owns a common shares equity interest (shareholder’s interest) in DynaMéxico;
c)	Improperly disclosing the percentage of common shares equity interest (shareholder’s interest) owned by Goldgroup in DynaMéxico;
d)	Improperly disclosing or implying that Goldgroup is the operator of the San Jose de Gracía Project;
e)	Attempting to delay, stop, or otherwise impair the financing of, and further development of, the SJG Project;
f)	Making numerous threats against DynaMéxico management and officers;
g)	Failing to properly disclose that broad powers of attorney for acting on behalf of DynaMéxico are held by an individual not affiliated with Goldgroup.

On October 5, 2015, 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 declared, among other resolutions, that:

a)	The AAA must “cease and desist” from the arbitration proceeding;
b)	The AAA does not have jurisdiction to hear any conflict and/or interpretation arising from the Earn In/Option Agreement, dated September 1, 2006; and
c)	The AAA does not have jurisdiction to hear disputes arising between shareholders of DynaMexico, which disputes do not arise directly and immediately from the Earn In/Option Agreement, dated September 1, 2006.

$48M Damages Awarded to DynaMéxico

Also on October 5, 2015, DynaMéxico was awarded in excess of US $48 million in damages from Goldgroup Resources, Inc. 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 damages award and the additional Resolutions are referred to as, the “Oct. 5, 2015 Resolution”).

A concise translation to English of the Oct. 5, 2015 Resolution (the resolution portion of the Definitive Sentence) is set forth below:

FIRST:	The action and litigation based on commercial law filed by DynaMéxico is valid and enforceable, and where Goldgroup and the American Arbitration Association were found to be in default, was proper.
SECOND:	Goldgroup is declared in breach of its corporate duties, for failure to refrain from claiming direct ownership of 50% of the San José de Gracía Mining Project.
THIRD:	Goldgroup is condemned and ordered to pay to DynaMéxico the amount of USD $20,000,000 (Twenty Million Dollars) in damages caused by Goldgroup to DynaMéxico, deriving from its breach of obligations in refraining from claiming direct ownership of 50% of the San Jose de Gracía Mining Project; which amount should be paid within five days upon execution of this order and resolution.
FOURTH:	Goldgroup is condemned and ordered to pay to DynaMéxico the amount of USD $28,280,808.34 (Twenty Eight Million Two Hundred and Eighty Thousand Eight Hundred and Eight and 34/100 Dollars), for breach of its corporate duty and covenants with regards to the San Jose de Gracía mining project, as a result of depriving profits from DynaMéxico which DynaMéxico could have earned for the sale of gold produced and extracted during the years 2013 and 2014; amounts that should be paid within five days upon execution of this order and resolution.
FIFTH:	Goldgroup is condemned and ordered to pay losses and damages to DynaMéxico, which Goldgroup continues to cause, until full payment of the above-mentioned amounts has been made, which damages, and losses shall be calculated by an expert opinion in a corresponding legal procedure related to this litigation.
SIXTH:	Pursuant to Article 1424 of the Commercial Code of México, the arbitration provision established under clause 8.16 of the Earn In/Option Agreement, dated as of September 1, 2006, is ineffective and impossible to execute.
SEVENTH:	This court declares that any controversy arising from the Ear In/Option Agreement must be brought and resolved under Mexican Law and by competent Mexican Courts with proper jurisdiction, in recognition of the waiver and exclusion of the arbitration clause (contained in the Earn In/Option Agreement) by both parties.
EIGHTH:	This Court declares that the American Arbitration Association must abstain from hearing arbitration procedure number 50 501 T 00226 14, or any other ongoing and/or future arbitration proceeding already filed or that may be filed by the co-defendant Goldgroup against DynaResource.
NINTH:	This Court declares that the American Arbitration Association does not have jurisdiction to hear any conflict and/or interpretation arising from the Earn In/Option Agreement, dated September 1, 2006.
TENTH:	This Court declares that the American Arbitration Association does not have jurisdiction to hear disputes arising between shareholders of DynaMéxico, which disputes do not arise directly and immediately from the Earn In/Option Agreement, dated September 1, 2006.
ELEVENTH:	This Court declares that the American Arbitration Association does not have jurisdiction to hear any matters where Koy Wilber Diepholz, who is the President of the Board of Directors of DynaMéxico and has been personally sued in relation to the arbitration clause established under clause 8.16 of the Earn In/Option Agreement, dated September 1, 2006, since he signed the mentioned instrument in representation of the Company and not in his personal capacity.
TWELFTH:	The expenses and costs associated with these proceedings are hereby waived.
THIRTEENTH:	LET IT SO BE PUBLISHED. A Copy of this order and Sentence shall be found in the corresponding records.

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ORDERED, adjudged and decreed by the Thirty Sixth Civil Judge of the Superior Court of the Federal District, Mr. JULIO GABRIEL IGLESIAS GOMEZ.

The October 5, 2015 Resolution constitutes a public record which may be viewed through the Courts in México City.

México City Court Approves Lien on Shares of DynaMéxico owned by Minority Interest Holder

On October 5, 2016, the Thirty-Sixth Civil Court of the Superior Court of Justice of the Federal District of México (Tribunal Superior de Justicia del Distrito Federal) approved a Lien (referred to by the court as an “Embargo”), in favor of DynaMéxico, upon Stock Certificates in the name of Goldgroup Resources Inc. (“Goldgroup”). The Stock Certificates subject to the Lien (“Embargo”) constitute Shares of DynaMéxico (“the Goldgroup DynaMéxico Shares”).

The Goldgroup DynaMéxico Shares were seized as a partial recovery of assets by DynaMéxico after DynaMéxico was awarded more than $48M USD (Forty-Eight Million Dollars) in damages against Goldgroup (the “Damages against Goldgroup”) on October 05, 2015, as described in a Sentencia Definitiva (the “Definitive Sentence”) issued by the same court, the Thirty Sixth Civil Court of the Superior Court of Justice of the Federal District of México, File number 1120/2014. Excerpts from the Definitive Sentence appear below. In addition to the Damages against Goldgroup, the Definitive Sentence also included additional Resolutions ordered in favor of DynaMéxico (the Damages against Goldgroup and the additional Resolutions are together referred to as the “Oct. 5, 2015 Resolution”).

Denial of Amparo Appeal

On August 24, 2017 a Federal Amparo Judge (“Juzgado de Distrito”) in the State of Vera Cruz, México, dismissed Goldgroup Resources Inc’s Amparo Trial Challenge to the $48 M USD damages award previously granted in favor of DynaMéxico. Pursuant to the dismissal ruling, the $48M USD damages award, previously granted to DynaMéxico by the Thirty-Sixth Civil Court of the Superior Court of Justice of the Federal District of México on October 5, 2015, was effectively confirmed.

México Circuit Court of Appeals – Notice of Intent for Final Ruling in Favor of DynaResource de México

On May 27, 2019, The Eleventh Collegiate Court in Civil Matters of the First Circuit (“México Circuit Court”, and the Court of Final Appeal for Goldgroup Resources Inc.) issued a written notice confirming it was ruling against the Amparo Appeal filed by Goldgroup Resources Inc. and in Favor of DynaResource de México, S.A. de C.V. In an effort to stay the issuance of the Ruling by the México Circuit Court, Goldgroup Resources Inc. filed a request to The Supreme Court of México to review the Amparo Appeal decision.

Rejection of Goldgroup Resources Inc. request to the Supreme Court of México

On July 3, 2019 an Official Ruling from The Supreme Court of México was issued to Reject the Request of Goldgroup Resources Inc. (the “México Supreme Court Rejection to Goldgroup”). The Justices of the First Chamber of the Supreme Court of Justice of México issued a Rejection Notice to Goldgroup Resources Inc., “due to the lack of legitimacy presented by Goldgroup”; and in issuing the Rejection Notice to Goldgroup, the Supreme court thereby reverted the Amparo Appeal back to the México Circuit Court where the Official and Final Ruling from the México Circuit Court is expected to be issued.

Final Legal Ruling in México (DynaMéxico Final Legal Ruling)

On December 6, 2019 the 11^th Federal Circuit Collegiate Court in México issued its Final Ruling (“the DynaMéxico Final Legal Ruling”).

The DynaMéxico Final Legal Ruling is Favorable to DynaMéxico, and denies the Amparo challenge of Goldgroup Resources Inc., the subsidiary of Goldgroup Mining Inc. (“GGA.TO”). The DynaMéxico Final Legal Ruling constitutes the Final Appeal of Goldgroup Resources Inc.; and is Not subject to further appeal or protest.

The DynaMéxico Final Legal Ruling is the result and culmination of 7 years of legal action performed by DynaMéxico and is the Final Ruling of the 11^th Federal Circuit Collegiate Court. With this DynaMéxico Final Legal Ruling issued, all matters before the Court in México with respect to DynaMéxico and Goldgroup Resources Inc. are fully resolved and are no longer subject to appeal or reconsideration.

Legal Summary - Consequence of the México Final Legal Ruling:

1.	The $48,280,808.34 USD damages award (dated October 05, 2015) in favor of DynaMéxico and against Goldgroup Resources Inc. is now Final. Goldgroup Resources’ challenge(s) to that award have been fully denied and the damages award is Final.
2.	The Lien against the Shares of DynaMéxico owned by Goldgroup Resources Inc. (established October 5, 2016, the “Lien against Goldgroup Shares”) is now fully confirmed, Final, and enforceable.
3.	Ownership of the shares of DynaMéxico currently held by Goldgroup Resources (currently representing 20% of the outstanding shares of DynaMéxico) are subject to the Lien against Goldgroup Shares.

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DynaMéxico Recovery of 100% of Goldgroup Shares

On February 20, 2020, a México City court issued its Final Judgment, effectively foreclosing on all shares of DynaMéxico formerly held by Goldgroup Resources Inc. and awarding those shares to DynaMéxico (the “DynaMéxico Foreclosure Judgment”).

The DynaMéxico Foreclosure Judgment awarded to DynaMéxico 100% of the Shares of DynaMéxico previously owned by Goldgroup Resources Inc. (a Subsidiary Company in México owned 100% by Goldgroup Mining Inc., Vancouver, BC., “GGA.TO”). Prior to the DynaMéxico Foreclosure Judgment, Goldgroup Resources Inc. owned shares of DynaMéxico constituting 20% of the total outstanding shares of DynaMéxico (the “Goldgroup Shares of DynaMéxico”). The Goldgroup Shares of DynaMéxico were held under Lien by DynaMéxico since October 2016. DynaUSA previously owned 80% of the outstanding shares of DynaMéxico.

DynaUSA and DynaMéxico filed an Original Petition for Recognition of the $48M USD Foreign Judgment in US. District Court, 134^th Judicial District in Dallas County, Texas

· On December 5, 2020, DynaUSA and DynaMéxico filed an Original Petition for Recognition of the $48M USD Foreign Judgment in US. District Court in Dallas County Texas.

· On February 4, 2021, DynaUSA and DynaMéxico filed a First Amended Petition for Recognition of the $48M USD Foreign Judgment in US. District Court, 134^th Judicial District, Dallas County, Texas.

· On May 12, 2021, The US District Court for Dallas County issued a ruling stating the Court was not obligated to recognize the $48M Judgment in the US.; but found the $48M Judgment to be final, conclusive and enforceable under Mexican Law.

DynaUSA and DynaMéxico Appeal of the US. District Court Ruling

On May 14, 2021, DynaUSA and DynaMéxico filed a Notice of Appeal of the US District Court Ruling.

Arbitration Ruling

In direct contradiction to the October 5, 2015, Definitive Sentence issued by court in México, on August 25, 2016, the American Arbitration Association - International Centre for Dispute Resolution, Denver office (the “AAA”) issued an Arbitration Ruling (the “Arbitration Ruling”) in favor of Goldgroup Resources Inc. against DynaMéxico and DynaResource, Inc. The Arbitration Ruling was the result of a proceeding in which neither DynaMéxico nor DynaResource participated, since the Definitive Sentence issued by the court in México effectively prohibited their participation in the Arbitration proceeding and should have prohibited Goldgroup Resources Inc. participation.

The Arbitration Ruling provides the following: (i) the Earn In/Option Agreement is still in force, and consequently Goldgroup may appoint two directors to the DynaMéxico board, and may participate in the appointment of a fifth director; (ii) the DynaMéxico Management Committee is reinstated, and must approve all budgets and expenditures; (iii) amounts expended by DynaMéxico that were not approved by the Management Committee are subject to repayment by DynaResource; (iv) the issuance of additional shares by DynaMéxico (and consequent dilution of Goldgroup’s equity interest) was in violation of the Earn In/Option Agreement; and (v) DynaResource and DynaMéxico are responsible for Goldgroup’s costs and professional fees associated with the Arbitration Ruling.

Unlike most arbitration proceedings in the U.S., the Arbitration Ruling is not final. Since the Arbitration Ruling is subject to international rules, the ruling may be vacated by U.S. courts, or simply not recognized by U.S. courts, on several grounds. Accordingly, both DynaMéxico and DynaResource have timely requested relief from the United States Federal District Court in Colorado, via the filing of a Petition for Nonrecognition of Foreign Arbitral Award and/or Motion to Vacate Arbitration Award (the “Petition for Nonrecognition”), and a supporting brief. The Petition for Nonrecognition relies heavily upon the Mexican court’s Definitive Sentence, key excerpts of which appear immediately below.

The Mexican court has already ruled that “any controversy arising from the Earn In/Option Agreement must be brought and resolved under Mexican Law and by competent Mexican Courts with proper jurisdiction.” Consequently, the monetary awards against DynaResource – which are based upon a finding that the Earn In/Option Agreement is still in force – will not be enforceable if the Mexican court rules that the Earn In/Option Agreement is terminated. The Company believes that the potential for the assessment of a material monetary judgment against DynaResource is remote.

(a)	The Arbitration Ruling contains an acknowledgement by the AAA that the AAA was named as a defendant in the legal demand filed by DynaMéxico in the Thirty Sixth Civil Court of the Superior Court of Justice of the Federal District of México (the “DynaMéxico Legal Demand”). The Arbitration Ruling also contains a statement that the AAA was not properly served notice of the DynaMéxico Legal Demand;
(b)	DynaMéxico obeyed the October 5, 2015 Court Order and did not attend the Arbitration hearing;
(c)	DynaMéxico will pursue all legal remedies in order to obtain a full dismissal of the Arbitration Ruling;
(d)	The Arbitration Ruling contains an acknowledgement by the AAA that the AAA was named as a defendant in the legal demand filed by DynaMéxico in the Thirty Sixth Civil Court of the Superior Court of Justice of the Federal District of México (the “DynaMéxico Legal Demand”). The Arbitration Ruling also contains a statement that the AAA was not properly served notice of the DynaMéxico Legal Demand;

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DynaUSA and DynaMéxico filed Motion to Vacate Arbitration Ruling

On November 17, 2016, DynaUSA and DynaMéxico filed a Motion to Vacate the Arbitration Ruling in United States District Court, District of Colorado.

Recommendation to Vacate Arbitration Ruling issued by United States Magistrate Judge

On February 13, 2018 a Recommendation to Vacate the Arbitration Ruling was issued by a United States Magistrate Judge of the United States District Court, District of Colorado.

Arbitration Award against DynaResource, Inc. and DynaResource de México, S.A. de C.V.

On May 9, 2019, the United States District Court for the District of Colorado confirmed the August 2016 Arbitration award against DynaResource, Inc. and DynaResource de México, 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 México, S.A. de C.V. intends to exercise all its rights, as appropriate, including an appeal.

DynaResource Entities Filings in US District Court in Response to Arbitration Ruling

·	DynaUSA and DynaMéxico filed Motion to Alter Judgment
	On June 6, 2019, DynaUSA and DynaMéxico file a Motion to Alter Judgment.
·	DynaUSA and DynaMéxico filed Motion for Stay of Judgment Pending Appeal and to Waive Bond
	On June 7, 2019, DynaUSA and DynaMéxico filed A Motion for Stay of Judgment Pending Appeal and to Waive Bond.
·	DynaUSA and DynaMéxico filed Motion for Leave to Supplement the Record
	On July 13, 2019, DynaUSA and DynaMéxico filed A Motion for Leave to Supplement the Record with the following information:
·	“Rejection of Goldgroup Resources Inc. request to the Supreme Court of México”
	On July 3, 2019, an Official Ruling from The Supreme Court of México was issued to Reject the Request of Goldgroup Resources Inc. (the “México Supreme Court Rejection to Goldgroup”). The Justices of the First Chamber of the Supreme Court of Justice of México issued a Rejection Notice to Goldgroup Resources Inc., “due to the lack of legitimacy presented by Goldgroup”; and in issuing the Rejection Notice to Goldgroup, the Supreme court thereby reverted the Amparo Appeal back to the México Circuit Court where the Official and Final Ruling from the México Circuit Court is expected to be issued.
·	DynaUSA and DynaMéxico filed Reply in Support of Motion to Alter Judgment.
	On July 23, 2019, DynaUSA and DynaMéxico filed a Reply in Support of Motion to Alter Judgment. Goldgroup Resources was confirmed to be misleading the US District Court with inaccurate reports of the ruling of the México Supreme Court Rejection.
·	Final Legal Ruling in México (DynaMéxico Final México Legal Ruling)
	On December 6, 2019, the 11th Federal Circuit Collegiate Court in México issued its Final Ruling (“the DynaMéxico Final México Legal Ruling”).
	The DynaMéxico Final México Legal Ruling is Favorable to DynaMéxico, and denies the Amparo challenge of Goldgroup Resources Inc., the subsidiary of Goldgroup Mining Inc. (“GGA.TO”). The DynaMéxico Final México Legal Ruling constitutes the Final Appeal of Goldgroup Resources Inc.; and is Not subject to further appeal or protest.
	The DynaMéxico Final Legal Ruling is the result and culmination of 7 years of legal action performed by DynaMéxico and is the Final Ruling of the 11th Federal Circuit Collegiate Court. With this DynaMéxico Final Legal Ruling issued, all matters before the Court in México with respect to DynaMéxico and Goldgroup Resources Inc. in México are fully resolved and are no longer subject to appeal or reconsideration.
·	Legal Summary - Consequence of the México Final Legal Ruling:

o The $48,280,808.34 USD damages award (dated October 05, 2015) in favor of DynaMéxico and against Goldgroup Resources Inc. is now Final. Goldgroup Resources’ challenge(s) to that award have been fully denied and the damages award is Final.

o The Lien against the Shares of DynaMéxico owned by Goldgroup Resources Inc. (established October 5, 2016, the “Lien against Goldgroup Shares”) is now fully confirmed, Final, and enforceable.

o Ownership of the shares of DynaMéxico currently held by Goldgroup Resources (currently representing 20% of the outstanding shares of DynaMéxico) are subject to the Lien against Goldgroup Shares.”

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	·	DynaMéxico Recovery of 100% of Goldgroup Shares
		On February 20, 2020, a México City court issued its Final Judgment, effectively foreclosing on all shares of DynaMéxico formerly held by Goldgroup Resources Inc. and awarding those shares to DynaMéxico (the “DynaMéxico Foreclosure Judgment”).
		The DynaMéxico Foreclosure Judgment awarded to DynaMéxico 100% of the Shares of DynaMéxico previously owned by Goldgroup Resources Inc. (a Subsidiary Company in México owned 100% by Goldgroup Mining Inc., Vancouver, BC., “GGA.TO”). Prior to the DynaMéxico Foreclosure Judgment, Goldgroup Resources Inc. owned shares of DynaMéxico constituting 20% of the total outstanding shares of DynaMéxico (the “Goldgroup Shares of DynaMéxico”). The Goldgroup Shares of DynaMéxico were held under Lien by DynaMéxico since October 2016. DynaUSA previously owned 80% of the outstanding shares of DynaMéxico.
Confirmation of Arbitration Award in U.S. District Court – District of Colorado
On March 25, 2020 The U.S. District Court, District of Colorado affirmed the August 24, 2016 Arbitration Award in favor of Goldgroup Resources Inc.
DynaUSA and DynaMéxico filed Appeal of Arbitration Affirmation to U.S. District Court - 10th Circuit Court of Appeals
	·	On July 17, 2020, DynaUSA and DynaMéxico filed an Appeal of the Affirmation of the Arbitration Award to the U.S. District Court – 10th Circuit Court of Appeals.
	·	On July 17, 2020, DynaUSA and DynaMéxico posted supersedeas bond with the U.S. District Court, District of Colorado, in the amount of $1.111M USD.; and DynaUSA and DynaMéxico filed a motion for Stay of Judgment pending Appeal.
U.S. Court of Appeals - 10th Circuit Court of Appeals Denial of DynaUSA and DynaMéxico Appeal
On April 16, 2021, the U.S. Court of Appeals for the 10th Circuit Court issued a Ruling which denied the DynaUSA and DynaMéxico Appeal of the August 24, 2016 Arbitration Award in favor of Goldgroup Resources, Inc. In denying the Appeal of DynaUSA and DynaMéxico, the Arbitration Award in favor of Goldgroup was affirmed.
	·	On July 17, 2020, DynaUSA and DynaMéxico posted supersedeas bond with the U.S. District Court, District of Colorado, in the Amount of $1.111M USD, in order to fully bond the Monetary portion of the Arbitration Award.
	·	On August 24, 2020, DynaMéxico conducted an Extraordinary Shareholder’s Meeting of DynaMéxico, wherein all Non-Monetary portions of the Arbitration Award were fully performed and executed.
Full Performance of Arbitration Award by DynaUSA and DynaMéxico / Closure of the Arbitration Case by US. District Court
	·	On August 24, 2020, DynaMéxico conducted an Extraordinary Shareholder’s Meeting of DynaMéxico, wherein all Non-Monetary portions of the Arbitration Award were fully performed and executed.
	·	On May 20, 2021, DynaUSA and DynaMéxico agreed to release the $1.111 M USD supersedeas bond and paid an addition amount of $4,054.59 in interest calculated to June 2, 2021; in full performance and satisfaction of the monetary portion of the Arbitration Award.

Goldgroup Resources Inc. Filed Motion for Contempt of Court Sanctions against DynaUSA and DynaMéxico

On June 11, 2021, Goldgroup Resources Inc. filed a Motion for Civil Contempt Sanctions against DynaUSA and DynaMéxico. The Motion for Contempt Sanctions is pending.

DynaUSA and DynaMéxico file Motion for Relief of Judgment Pursuant to Federal Rule of Civil Procedure 60(b)

On July 1, 2021, DynaUSA and DynaMéxico filed a Motion for Relief of Judgment Pursuant to Federal Rule of Civil Procedure 60(b). The Motion for Relief of Judgment is pending.

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Complaint filed by Goldgroup against the May 17, 2013, Shareholders’ Meeting of DynaMéxico

On February 2nd, 2014, Goldgroup Resources Inc. filed a petition with the Judge of the Tenth District Mazatlán, according to record 08/2014, in the ordinary commercial action, against DynaResource Inc., and DynaResource de México, S.A. de CV. (“DynaMéxico”). In the Petition, Goldgroup complains against the results of the shareholders meeting of DynaMéxico of May 17, 2013, and petitions for the nullification of the meeting itself and for the nullification of the additional shares of the outstanding capital of DynaMéxico issued to DynaResource, Inc. in satisfaction of debts owed to DynaResource.

DynaResource and DynaMéxico filed a response on January 9, 2016. DynaMéxico will vigorously defend against all such complaints by Goldgroup, as there exists no legal basis for the complaint by Goldgroup against the May 17, 2013 shareholders meeting of DynaMéxico.

On October 31, 2018, the Judge of the Tenth District declared the Expiration of the Trial, due to inactivity of Goldgroup in the process, and the Judge decreed the Trial as a concluded and filed trial. As a result, the shareholders' meeting of May 17, 2013 remains valid.

On November 16, 2018, Goldgroup appealed the declaration of Expiration of the Trial.

On February 12, 2019, the Court of Appeals (Segundo Tribunal Unitario de Circuito in Mazatlán) confirmed the resolution issued October 31, 2018 by the Judge of Tenth District and declared and confirmed the Expiration of the Trial, due to the inactivity of Goldgroup to the process, and therefore the Court of Appeals decreed the matter as a concluded and filed trial. As a result, the shareholders' meeting of May 17, 2013 remains valid.

Goldgroup has filed a writ of amparo against the resolution of the Court of Appeals that confirmed the declaration of expiration of the trial. This Amparo Trial is pending resolution.

Litigation(s) in México – Company as Plaintiff

The Company, and DynaMéxico have filed several legal actions in México against Goldgroup Mining Inc. and Goldgroup Resources Inc., and certain individuals retained as agents of Goldgroup Mining Inc., or Goldgroup Resources. The Company and DynaMéxico are plaintiffs in the actions filed in México and the outcomes are pending.

The Company believes that no material adverse change will occur as a result of the 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. For purposes of confidentiality, the Company does not provide more specific disclosure in this Form 10-Q.

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 an adverse 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.

Coronavirus Pandemic

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughout the United States of America. Efforts implemented by local and national governments, as well as businesses, including temporary closures, are expected to have adverse impacts on local, national and the global economies. Although the disruption is currently expected to be temporary, there is uncertainty around the duration and the related economic impact. Therefore, while we expect this matter to have an impact our business, the impact to our results of operations and financial position cannot be reasonably estimated at this time.

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NOTE 11 – 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”, to nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). To measure fair value, the Company incorporates assumptions that market participants would use in pricing the asset or liability and utilizes market data to the maximum extent possible.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation model to determine the value of conversion feature of the Series C Preferred Stock based on the assumptions below:

	2021			2020
Annual volatility rate		167	%		156	%
Risk free rate		0.25	%		0.13	%
Remaining Term	1.00 years			1.50 years
Fair Value of common stock	$	0.90		$	0.78

For the periods ended June 30, 2021 and December 31, 2020, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.

The below table represents the change in the fair value of the derivative liability during the periods ended June 30, 2021 and December 31, 2020.

Period Ended	2021		2020
Fair value of derivative (stock), beginning of period	$	601,313	$	37,038
Change in fair value of derivative		25,266		276,547
Fair value of derivative on the date of issuance		-		287,728
Fair value of derivative (stock), end of period	$	626,579	$	601,313

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”, to nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). To measure fair value, the Company incorporates assumptions that market participants would use in pricing the asset or liability and utilizes market data to the maximum extent possible.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation model to determine the value of conversion feature of the Warrants based on the assumptions below:

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	2021			2020
Annual volatility rate		167	%		156	%
Risk free rate		0.25	%		0.13	%
Remaining Term	1.00 years			1.5 years
Fair Value of common stock	$	0.90		$	0.78

For the periods ended June 30, 2021 and December 31, 2020, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.

The below table represents the change in the fair value of the derivative liability during the periods ended June 30, 2021 and December 31, 2020.

Period Ended	2021		2020
Fair value of derivative (warrants), beginning of period	$	817,613	$	49,066
Change in fair value of derivative		12,819		367,781
Fair value of derivative on the date of issuance		-		400,766
Fair value of derivative(warrants), end of period	$	830,432	$	817,613

Series D Notes Kicker Warrants

As discussed in Note 8, the Company analyzed the conversion features of the Series D Notes and determined that the Warrants qualified as a derivative liability. The fair value was required to be allocated among the notes, conversion features, and the warrants, and then remeasured at each reporting date. The Company performed a valuation of the conversion feature. In performing the valuation, the Company applied the guidance in ASC 820, “Fair Value Measurements”, to nonfinancial assets and liabilities that are recognized or disclosed at fair value on a nonrecurring basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). To measure fair value, the Company incorporates assumptions that market participants would use in pricing the asset or liability and utilizes market data to the maximum extent possible.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company considered the inputs in this valuation to be level 3 in the fair value hierarchy under ASC 820 and used an equity simulation model to determine the value of conversion feature of the Series D Warrants based on the assumptions below:

	2021			2020
Annual volatility rate		167	%		156	%
Risk free rate		0.25	%		0.13	%
Remaining Term	8.88 years			10 years
Fair Value of common stock	$	0.90		$	0.78

For the periods ended June 30, 2021 and December 31, 2020, an active market for the Company’s common stock did not exist. Accordingly, the fair value of the Company’s common stock was estimated using a valuation model with level 3 inputs.

The below table represents the change in the fair value of the derivative liability during the periods ended June 30, 2021 and December 31, 2020.

Period Ended	2021		2020
Fair value of derivative (warrants), beginning of period	$	952,634	$	-
Fair value of derivative on the date of issuance		-		409,998
Change in fair value of derivative		147,032		542,636
Fair value of derivative(warrants), end of period	$	1,099,665	$	952,634

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NOTE 12 – NON-CONTROLLING INTEREST

The Company’s Non-Controlling Interest recorded in the consolidated financial statements relates to an interest in DynaResource de México, S.A. de C.V. of 50% through May 13, 2013, and 20% until February 24, 2020 when the minority interest was eliminated. Changes in Non-Controlling Interest for the year ended December 31, 2020 was as follows:

	2020
Beginning balance	$	(5,723,663	)
Operating income (loss)		(61,589	)
Share of Other Comprehensive Income (loss)		(11,669	)
Elimination of Non-Controlling Interest		5,796,921
Ending balance	$	-

NOTE 13 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The ASC guidance for fair value measurements and disclosure establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 Inputs –	Quoted prices for identical instruments in active markets.
Level 2 Inputs –	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3 Inputs –	Instruments with primarily unobservable value drivers.

As of June 30, 2021, and December 31, 2020, 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.

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Fair Value Measurement at June 30, 2021 Using:			Quoted Prices in Active Markets For Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant  Unobservable  Inputs (Level 3)
Liabilities:
Derivative Liabilities	$	2,556,676		-		-		2,556,676
Totals	$	2,556,676	$	-	$	-	$	2,556,676
Fair Value Measurement at December 31, 2020
Liabilities:
Derivative Liabilities	$	2,371,560		-		-		2,371,560
Totals	$	2,371,560	$	-	$	-	$	2,371,560

NOTE 14 – REVENUE CONCENTRATION

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:

For each of the six months ended June 30, 2021 and 2020, three and two customers accounted for 100% of revenue, respectively.

At June 30, 2021 and December 31, 2020, three and four customer accounted for 100% of accounts receivable, respectively.

NOTE 15 – NOTES PAYABLE

In June 2017, the Company entered into financing agreements for unpaid mining concession taxes on the Francisco Arturo mining concession 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 on the Francisco Arturo mining concession 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 on the Francisco Arturo mining concession for the year ended December 31, 2017 and the period ending June 30, 2018 in the amount of $1,739,392. The Company paid an initial 20% payment of $347,826 and financed the balance over 36 months at 21.84%

In February 2019, the Company entered into a financing agreement for unpaid mining concession taxes on the Francisco Arturo mining concession for the year ended December 31, 2018 in the amount of $335,350. The Company paid an initial 20% payment of $67,070 and financed the balance over 36 months at an interest rate of 21%.

In June 2018, the Company applied for a reduction of the Francisco Arturo mining concession, from 69,121 hectares to 3,280 hectares. On July 31, 2018, the application for reduction was approved and the Company paid an initial amount of 985,116 MNP (Pesos), for the second semester 2018 mining concessions taxes on the reduced Francisco Arturo mining concession. The Company continues to accrue an amount of $22,500 (USD) per semester on the reduced Francisco Arturo mining concession.

As of June 2019, the Company ceased making monthly payments on the above noted Francisco Arturo concession notes and has petitioned the Hacienda for a reduction in the liability equal to the reduction in the Francisco Arturo concession above. For financial reporting purposes the Company continues to carry all notes at unpaid principal amount and accrues interest on a monthly basis. At June 30, 2021 $879,240 of accrued interest on the notes was included in accrued liabilities on the consolidated balance sheet.

In October 2019, the Company entered into a financing agreement for unpaid mining concession taxes on the core mining concessions in the amount of $299,474. The Company paid an initial 20% payment of $59,895 and financed the balance over 36 months at an interest rate of 22%.

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The following is a summary of the transaction during the periods ended June 30, 2021 and December 31, 2020:
Balance December 31, 2019		2,272,431
Exchange Rate Adjustment		(124,352	)
2020 Principal Payments		(66,644	)
Balance December 31, 2020		2,081,435
Exchange Rate Adjustment		(2,395	)
2021 Principal Payments		(36,460	)
Balance June 30, 2021	$	2,042,580
At June 30, 2021 future maturities of notes payable are as follows:
Year Ending June 30:
2022	$	2,009,461
2023		33,119
	$	2,042,580

NOTE 16 – REVOLVING CREDIT LINE FACILITY

On February 4, 2021 Mineras de DynaResource SA de CV (“Seller”) entered into a Revolving Credit Line Facility and Commercial Offtake Agreement (the “RCL"), with a commercial buyer. Under the terms of the RCL:

· The Company will deliver 100% of its produced concentrates to the buyer and provider of the RCL, through December 31, 2022; unless extended by the Company;

· An initial RCL was established by buyer in the amount of $3.75M USD;

· At May 1, 2021, the RCL increased to an amount equal to 80% of prior 3 month’s revenue;

· Each successive month, the RCL shall be adjusted according to the company’s prior 3 month’s revenue;

· The RCL shall never be less than $3.75M USD;

· The RCL will be interest free for 45 days;

· The RCL is to be repaid through deliveries of Concentrates or Cash within 120 days;

Deposits under Revolving Credit Line Facility

Under the terms of the RCL, Mineras de DynaResource received the following advances from the buyer:

(1)	$2.5M advance on February 4, 2021. Settled on March 26, 2021.
(2)	$3.75M advance on March 30, 2021. Settled on May 12, 2021.
(3)	$3.75M advance on May 12, 2021. Settled on June 16, 2021.
(4)	$6.75M advance on June 18, 2021.

NOTE 17 – SUBSEQUENT EVENTS

The Company has evaluated events from June 30, 2021, through the date whereupon the financial statements were issued, and has determined the below described events subsequent to the end of the period.

Revolving credit line activity:

At August 1, 2021, the amount of the RCL was increased to $8.89M USD.

On August 4, 2021, Mineras de Dyna Resource S.A. de C.V. completed settlement of an advance in the amount of $6.75M USD from the Buyer of Concentrate products through a combination of product delivery and cash payment.

On August 9, 2021, Mineras de DynaResource S.A. de C.V. received an advance from the Buyer of Concentrate Products produced from San Jose de Gracía in the amount of $8.25M USD.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to in this annual report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to in this annual report as the Exchange Act. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project” and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management’s beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this annual report. Factors that can cause or contribute to these differences include those described under the heading “Management Discussion and Analysis and Plan of Operation.”

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statement you read in this annual report reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this annual report. The Company expressly disclaims any obligation to release publicly any updates or revisions to these forward-looking statements to reflect any change in its views or expectations. The Company can give no assurances that such forward-looking statements will prove to be correct.

CAUTIONARY NOTE TO UNITED STATES INVESTORS—INFORMATION CONCERNING PREPARATION OF RESOURCE AND RESERVE ESTIMATES

The Company is an “OTC Reporting Issuer” as that term is defined in BC Multilateral Instrument 51-105, Issuers Quoted in the U.S. Over-the-Counter Markets, promulgated by the British Columbia Securities Commission.

In Canada, an issuer is required to provide technical information with respect to mineralization, including reserves and resources, if any, on its mineral exploration properties in accordance with Canadian requirements, which differ significantly from the requirements of the United States Securities and Exchange Commission (the “SEC”) applicable to registration statements and reports filed by United States companies pursuant to the Securities Act or the Exchange Act. As such, certain disclosures of mineralization under Canadian standards may not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements of the SEC and not subject to Canadian securities legislation.

While these terms are recognized and required by Canadian securities legislation (under National Instrument 43-101 (“NI 43-101”), entitled Standards of Disclosure for Mineral Projects), the SEC does not recognize these terms. Investors in the United States are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted to reserves. In addition, inferred mineral resources have a great amount of uncertainty as to their existence and economic and legal feasibility. It cannot be assumed that all or any part of a measured mineral resource, indicated mineral resource or inferred mineral resource will ever be upgraded to a higher category. Under Canadian securities legislation, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, although they may form, in certain circumstances, the basis of a “preliminary economic assessment” as that term is defined in NI 43-101. U.S. investors are cautioned not to assume that any part or all of any reported measured, indicated, or inferred mineral resource estimates referred to in the DynaMéxico NI 43-101 Technical Report and DynaMéxico 43-101 Mineral Resource Estimate (compiled for DynaResource de Mexico SA de CV) are economically or legally mineable.

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Under U.S. standards, as set forth in SEC Industry Guide 7, mineralization may not be classified as a “reserve” unless a determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The SJG Property as described in this Annual Report on Form 10-K is without known reserves. Mineral resources which are not classified as mineral reserves do not have “demonstrated economic viability.” The quantity of resources and the quality (grade) of resources reported as “Indicated” and “Inferred” mineral resources in the DynaM&#