NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2020 AND 2019
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 69,121 hectares (170,802 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 effective 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 in Canada 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 revenue
and expense. The accounting policies used conform to generally accepted accounting principles which have been consistently applied
in the preparation of these financial statements.
The
financial statements and notes are representations of the Company’s management which is responsible for their integrity
and objectivity. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing
and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items that: 1) recorded transactions are valid; 2)
valid transactions are recorded; and 3) transactions are recorded in the proper period in a
timely manner to produce financial statements which present fairly the financial condition, results of operations and
cash flows of the Company for the respective periods presented.
Basis
of Presentation
The
Company prepares its financial statements on the accrual basis of accounting in conformity with accounting principles generally
accepted in the United States.
Principles
of Consolidation
The
financial statements include the accounts of DynaResource, Inc., as well as DynaResource de México, S.A. de C.V. (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.
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) is 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 September 30,
2020 and December 31, 2019, respectively.
Cash
and Cash Equivalents
The
Company considers all highly liquid financial instruments with an original maturity of three months or less to be cash equivalents. At
times, cash balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
Accounts
Receivable and Allowances for Doubtful Accounts
The
allowance for accounts receivable is recorded when receivables are considered to be doubtful of collection. As of September 30,
2020 and December 31, 2019, 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 September 30, 2020 and December 31, 2019 are $1,539,095 and $1,297,387, 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 $76,332 and $523,089 as of September 30, 2020 and December
31, 2019, respectively.
Proven
and Probable Reserves (No Known Reserves)
The
definition of proven and probable reserves is set forth in SEC Industry Guide 7 (“Industry Guide 7”). Proven reserves
for which (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes, grade and/or quality
are computed from the results of detailed sampling and (2) the sites for inspection, sampling and measurement are spaced
so closely and the geological character is so well defined that size, shape, depth and mineral content of the reserves are well-established.
Probable reserves are reserves for which quantity and grade and/or quality are computed from information similar to that used
for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less
adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume
continuity between points of observations.
As
of September 30, 2020, none of the Company's properties contain resources that satisfy the definition of proven and probable
reserves. The Company classifies the development of its properties, including the San Jose de Gracía Property, as exploration
stage projects since no proven or probable reserves have been established under Industry Guide 7.
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, 2020, 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 9,919 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.
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 September 30, 2020 and December 31, 2019, 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 September
30, 2020 and December 31, 2019 (Mexican Pesos per one U.S. dollar):
|
|
|
Sept
30, 2020
|
Dec
31, 2019
|
|
Exchange
Rate at Period End
|
Pesos
|
22.07
|
18.86
|
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, 2020 and June 30, 2019 (Mexican Pesos per one U.S. dollar):
|
|
|
Sept
30, 2020
|
Sept
30, 2019
|
|
Weighted
Average Exchange Rate for the Nine Months Ended
|
Pesos
|
21.79
|
19.25
|
The
Company recorded currency transaction gains (losses) of $(1,025,194) and $(108,126) for the nine months ended September 30, 2020
and 2019, respectively and $(685,509) and $(401,826) for the three months ended September 30, 2020 and 2019, 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 under 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 September 30, 2020, there are $1,000,000 in customer deposit liabilities for payments received in advance expected to be settled
in 2020.
During
the periods ended September 30, 2020 and 2019 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 September 30, 2020 and December 31, 2019, 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.
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, accrued expenses and long-term debt. The carrying
amount of cash, receivables 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, as their effect would be considered anti-dilutive.
The
Company had 3,391,835 warrants outstanding at September 30, 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 September 30, 2020 which, upon conversion at a valuations from
$2.00 to $2.50 per share, would result in the issuance of 2,325,925 shares of stock.
The
Company had 2,166,527 warrants outstanding at December 31, 2019 exercisable at $2.50 per share, which upon exercise, would result
in the issuance of 2,166,527 shares of common stock. The Company also had convertible debt instruments as of December 31, 2019
which would result in the issuance of 351,352 shares of stock.
|
|
|
Three
Month
Ended
Sept
30, 2020
|
|
Three
Month
Ended
Sept
30, 2019
|
|
Nine
Month
Ended
Sept
30, 2020
|
|
Nine
Month
Ended
Sept
30, 2019
|
|
Net loss attributable
to common shareholders
|
|
$
|
(1,451,897
|
)
|
|
$
|
(740,657
|
)
|
|
$
|
(6,732,039
|
)
|
|
$
|
(2,099,201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
17,722,825
|
|
|
|
17,722,825
|
|
|
|
17,722,825
|
|
|
|
17,722,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(0.08
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
(0.08
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.12
|
)
|
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.
NOTE
2 – INVENTORIES
The
Company commenced underground test mining and pilot milling activities (“pilot production”) in the 2nd quarter of
2014. Rehabilitation of the San Pablo Mine and refurbishing of the Pilot Mill Facility and construction of the adjacent tailings
pond continued through 2016. Inventories are carried at the lower of cost or fair value and consist of mined tonnage, gravity-flotation
concentrates, and gravity tailings (or, flotation feed material). Inventory balances of September 30, 2020 and December 31, 2019,
respectively, were as follows:
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Mined Tonnage, Gold-Silver Concentrates, and/or Gravity Tailings (Flotation Feed Material)
|
|
$
|
76,332
|
|
|
$
|
523,089
|
|
|
Total Inventories
|
|
$
|
76,332
|
|
|
$
|
523,089
|
|
NOTE
3 – PROPERTY AND EQUIPMENT
Property
consists of the following at September 30, 2020 and December 31, 2019:
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
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
|
|
|
(112,364
|
)
|
|
|
(109,927
|
)
|
|
Total Property
|
|
$
|
6,790
|
|
|
$
|
9,227
|
|
Depreciation
has been provided over each asset’s estimated useful life. Depreciation expense was $2,437 and $2,442 for the
nine months ended September 30, 2020 and 2019 respectively and $812 and $812 for the three months ended September 30, 2020 and
2019, respectively.
NOTE
4 – MINING CONCESSIONS
Mining
properties consist of the following at September 30, 2020 and December 31, 2019:
|
|
|
2020
|
|
2019
|
|
San Jose de Gracia (“SJG”):
|
|
$
|
4,132,678
|
|
|
$
|
4,132,678
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mining Concessions
|
|
$
|
4,132,678
|
|
|
$
|
4,132,678
|
|
|
|
|
|
|
|
|
|
|
|
There
was no depletion expense the periods ended September 30, 2020 and 2019, respectively.
NOTE
5 – INVESTMENT IN AFFILIATE
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”).
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 cash and the
remainder unproven mining properties. Based upon the above, Management estimated the value of the Company’s DynaNevada shares
as of September 30, 2020 and December 31, 2019 to be $70,000 and $70,000, respectively.
At
September 30, 2020 and December 31, 2019, the Company had a receivable from DynaNevada de México of $65,954 and $73,976,
respectively for working capital advances which is included in other assets on the accompanying balance sheet.
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. 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. At December
31, 2019 seven Series I Notes remained outstanding with a total balance of $681,152.
On
March 31, 2020, the Company entered into agreements to extend the seven outstanding notes totaling $681,152 plus accrued interest
totaling $21,286 for a new total of $702,438 until June 30, 2022. At September 30, 2020 seven Series I Notes remaining outstanding
with a total balance of $702,438
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 issuance 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. At December 31, 2018 three of the Series II notes totaling $191,250 had been extended
to December 30, 2019. On December 31, 2019 the Company entered into agreements to extend two of the three notes totaling $78,750
plus accrued interest of $5,976 for total new notes of $84,726 to December 31, 2020. The other 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, 2019 the Company entered into agreements to extend two of the three notes totaling $84,726 plus accrued interest of
$2,648 for total new notes of $87,374 to June 30, 2022. The other note for $112,500 was not extended and was paid off in May 2020.
At September 30, 2020 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. These warrant would expire one year from their issuance date.
At
December 31, 2019 the principal and capitalized interest balance on the remaining Series I Notes was $681,152, and the principal
and capitalized interest on the Series II Notes was $197,227, for a total Note balance of $878,379.
At
September 30, 2020, the principal and capitalize interest balance on the remaining Series I Notes was $702,438, and the principal
and capitalized interest on the Series II Notes was $87,374, for a total Note balance of $789,813.
Notes
Payable – Series D
On
May 14, 2020, DynaUSA (the “Company”) closed a financing agreement with Golden Post Rail, LLC, a Texas limited liability
company and certain individual investors. A summary of the transaction is 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 (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. $1,250,000 of the principal amount of Golden Post
Note, was funded at closing in accordance with an agreed-upon draw summary and budget. The balance of the principal amount
was 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 $1,520,000, 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.
|
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 tax rate of 25% (blended for U.S. and México) of significant items comprising the Company’s
net deferred tax amounts as of September 30, 2020 and December 31, 2019 are as follows:
|
Deferred Tax Asset Related to:
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Prior Year
|
|
$
|
13,780,490
|
|
|
$
|
13,343,134
|
|
|
Tax Benefit for Current Year
|
|
|
950,226
|
|
|
|
437,356
|
|
|
Total Deferred Tax Asset
|
|
|
14,730,716
|
|
|
|
13,780,490
|
|
|
Less: Valuation Allowance
|
|
|
(14,730,716
|
)
|
|
|
(13,780,490
|
)
|
|
Net Deferred Tax Asset
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax provision for the Company as of September 30, 2020 and 2019 differ from those computed using the statutory rates of 25% due to the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
Tax Expense (Benefit) at Statutory Rates
|
|
$
|
(1,665,910
|
)
|
|
$
|
(533,509
|
)
|
|
Other Permanent Differences
|
|
|
715,684
|
|
|
|
(207,779
|
)
|
|
Change in Valuation Allowance
|
|
|
950,226
|
|
|
|
741,288
|
|
|
Provision for (Benefit from) Income Taxes, Net
|
|
$
|
—
|
|
|
$
|
—
|
|
The
net deferred tax asset and benefit for the current year is generated primarily from the cumulative net operating loss carry-forward
which is approximately $58,500,000 at September 30, 2020 and will expire in the years 2028 through 2034.
The
realization of deferred tax benefits is contingent upon future earnings and is fully reserved at September 30, 2020.
On
December 11, 2013, the Mexican government enacted a tax reform that increased the effective tax rate applicable to the Company's
Mexican operations. The law, effective January 1, 2014, increased the future corporate income tax rate to 30%, created a
10% withholding tax on dividends paid to non-resident shareholders and created a new Extraordinary Mining duty which is equal
to 0.5% of gross revenues from the sale of gold, silver and platinum. Furthermore, the reform introduced a Special Mining Duty
of 7.5%. The Special Mining Duty is deductible for income tax purposes. The Special Mining Duty is generally applicable to earnings
before income tax, depreciation, depletion, amortization and interest. There will be no deductions related to development type
costs, but exploration and prospecting costs are deductible when incurred. Certain non-deducted exploration expenditures incurred
prior to January 1, 2014 are also deductible in the calculation of the Special Mining Duty. For the years ended December 31,
2019 and 2018, the Company had no taxes payable under the 7.5% Special Mining Duty.
The
Company or its subsidiaries file income tax returns in the United States and México. These tax returns are subject to examination
by local taxation authorities provided the tax years remain open to audit under the relevant statute of limitations. The following
summarizes the open tax years by major jurisdiction:
United
States: 2016 to 2019
México:
2015 to 2019
The
Company does not have any other material items of temporary or permanent differences, which give rise to deferred tax assets or
liabilities.
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 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 September 30,
2020 15,264,010 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 September 30, 2020 and December 31, 2019, 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.
On May 13, 2020 the Company issued an additional 1,771 shares of Series C Preferred Stock related to the anti-dilution provision
bringing the total shares outstanding to 1,734,992. These Series C Preferred Shares are convertible to common shares at $2.50
per share, through June 30, 2022. The Series C Preferred Shares may receive a 4% per annum dividend, payable if available, and
in arrears. A description of the transaction which included the issuance of the Series C Preferred Shares is included below. The
dividend is calculated at 4.0% of $4,333,053 and is payable annually on June 30 of each year. At September 30, 2020, dividends
for the years 2017 to 2020 totaling $693,280 were in arrears.
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”).
Series
D Preferred Stock
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”).
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:
|
|
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 $2.05 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 which expires June 30, 2022. The anti-dilution protections contained
in the terms of the Series C Preferred are essentially replicated in the Golden Post Warrant.
|
|
|
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.
|
|
|
|
|
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 insurance of warrants for kicker shares at December 31, 2019 the total derivative liability was $24,854
which included $10,787 for the Series C Preferred shares, and $14,068 in connection with the Golden Post Warrants. At September
30, 2020 the total derivative liability was $3,741,363 which included $1,203,559 for the Series C Preferred Shares, and $1,315,816
in connection with the Golden Post Warrants and $1,221,988 in connection with the Series D Convertible Note Kicker Warrants. The
deemed dividend for the nine months ending September 30, 2020 and September 30, 2019 was $129,990, and $129,990 respectively.
As the Company has not declared these dividends, it is required only as an item “below” the net income (loss) amount.
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, 2018
|
|
$
|
4,333,053
|
|
|
Issuances at Fair Value, Net of Issuance Costs
|
|
|
—
|
|
|
Bifurcation of Derivative Liability
|
|
|
—
|
|
|
Relative Fair Value of Warrants – Preferred Stock Discount
|
|
|
—
|
|
|
Accretion of Preferred Stock to Redemption Value
|
|
|
—
|
|
|
Carrying Value, December 31, 2019
|
|
|
4,333,053
|
|
|
|
|
|
|
|
|
Issuances of 1,771 shares at Fair Value for anti-dilution
|
|
|
—
|
|
|
Bifurcation of Derivative Liability
|
|
|
4,427
|
|
|
Relative Fair Value of Warrants – Preferred Stock Discount
|
|
|
—
|
|
|
Accretion of Preferred Stock to Redemption Value
|
|
|
—
|
|
|
Carrying Value, September 30, 2020
|
|
$
|
4,337,480
|
|
Preferred
Stock (Undesignated)
In
addition to the 1,000 shares designated as Series A Preferred Stock, the 1,734,992 shares designated as Series C Preferred Shares
and the 3,000,000 shares designated as Series D Preferred Stock, the Company is authorized to issue an additional 13,266,779 shares
of preferred stock, having a par value of $0.0001 per share. The Board of Directors of the Company has authority to issue the
preferred stock from time to time in one or more series, and with respect to each series of the Preferred Stock, to fix and state
by the resolution, the terms attached to the preferred stock. At September 30, 2020 and December 31, 2019, 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 September 30, 2020 and December 31, 2019, there were 17,722,825 and 17,722,825 shares outstanding, respectively. No dividends
were paid for the periods ended September 30, 2020 and 2019, 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. This has been reflected as “Preferred Rights” in stockholders’
equity. As of September 30, 2020, $744,500 had been repaid, leaving a current balance of $40,000 and $40,000 as of September 30,
2020 and December 31, 2019, respectively.
Stock
Issuances
There
were no issuances of common stock during the periods ending September 30, 2020 and December 31, 2019.
Treasury
Stock
No
treasury shares were issued or acquired during the year ended December 31, 2019. At December 31 2019, 778,980 treasury shares
were outstanding.
During
the period ending September 30, 2020, 162,500 treasury shares were issued for services provided to the Company. At September 30,
2020, 616,480 treasury shares remained outstanding.
Warrants
2020
activity
On
May 13, 2020 the Company issued 2,306 warrants to purchase shares of common stock at $.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 at $.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 share of common stock
at $2.04 per share to replace the 2,166,527 warrants previously outstanding which expired on that date. These warrants expire
on June 30, 2022.
At
September 30, 2020, the Company had a total of 3,391,835 warrants outstanding.
2019
activity
The
Company had 2,166,527 warrants outstanding at December 31, 2019. There were no warrants issued or exercised in 2019 and no warrants
expired in 2019.
|
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
Intrinsic Value
|
|
|
Balance at December 31, 2018
|
|
|
|
2,166,527
|
|
|
$
|
2.45
|
|
|
|
1.51
|
|
|
$
|
—
|
|
|
|
Granted
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
|
Exercised
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
|
Forfeited
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
|
Balance at December 31, 2019
|
|
|
|
2,166,527
|
|
|
$
|
2.45
|
|
|
|
0.51
|
|
|
$
|
—
|
|
|
|
Granted
|
|
|
|
3,391,845
|
|
|
$
|
1.31
|
|
|
|
4.89
|
|
|
$
|
—
|
|
|
|
Exercised
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
|
Forfeited
|
|
|
|
2,166,527
|
|
|
$
|
2.45
|
|
|
|
|
|
|
$
|
—
|
|
|
|
Balance at September 30, 2020
|
|
|
|
3,391,845
|
|
|
$
|
1.31
|
|
|
|
4.84
|
|
|
$
|
—
|
|
|
|
Exercisable at September 30, 2020
|
|
|
|
3,391,845
|
|
|
$
|
1.31
|
|
|
|
4.84
|
|
|
$
|
—
|
|
NOTE
9 – RELATED PARTY TRANSACTIONS
Related
Party Transactions
The
Company follows FASB ASC subtopic 850-10, Related Party Disclosures, for the identification of related parties and disclosure
of related party transactions. Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for
which investments in their equity securities would be required, absent the election of the fair value option under the fair value
option subsection of Section 825–10–15, to be accounted for using the equity method by the investing entity; c) trusts
for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management;
d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party
controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting
parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence
the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties
and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully
pursuing its own separate interests.
Material
related party transactions are required to be disclosed in the consolidated financial statements, other than compensation arrangements,
expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated
in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall
include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which statements of operation are presented, and such
other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the
dollar amounts of transactions for each of the periods for which statements of operations are presented and the effects of any
change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties
as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Dynacap
Group Ltd.
The
Company paid $71,250 and $114,875 to Dynacap Group, Ltd. (“Dynacap”, an entity controlled by the CEO of the Company)
for consulting and other fees during the periods ended September 30, 2020 and 2019, respectively.
Advances
from Goldgroup Mining Inc. (“Goldgroup”) to DynaMéxico
In
2014, Goldgroup advanced $111,500 to DynaMéxico and in 2013 Goldgroup advanced $120,000 USD to DynaMéxico. This
total of $231,500 was carried by DynaMéxico as a Due to Non-Controlling Interest. This balance was removed as part of the
elimination of the non-controlling interest in February 2020. At September 30, 2020 and December 31, 2019 the balance of Due to
Non-Controlling interest was $0 and $231,500, 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
from 2002 to 2017 and continuing expenditures in current and forward activities, the Company does not anticipate that DynaMéxico
will have any difficulties meeting the minimum annual expenditures for the concessions ($388 – $2,400 Mexican Pesos per
hectare). DynaMéxico retains sufficient carry-forward amounts to cover over 10 years of the minimum 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 a 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 1st 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 1st of each month.
Effective
January 1, 2019, the Company adopted ASC 842, which requires recognition of a right-of-use asset and lease liability for all leases
at the commencement date based on the present value of lease payments over the lease term. Additional qualitative and quantitative
disclosures regarding the Company's leasing arrangements are also required. The Company adopted ASC 842 prospectively and elected
the transition practical expedients that do not require reassessment of (1) whether any existing or expired contracts are or contain
leases, (2) lease classification and (3) initial direct costs. In addition, the Company has elected other available practical
expedients to not separate lease and non-lease components, which consist principally of common area maintenance charges, for all
classes of underlying assets and to exclude leases with an initial term of 12 months or less.
The
Company determines if a contract is or contains a lease at inception. As of September 30, 2020, the Company has two operating
leases - a six- and one-half year lease for office space with a remaining term of thirty-six months and a twenty-year ground lease
in association with its México mining operations with a remaining term of fourteen years. Variable lease costs consist
primarily of variable common area maintenance, storage parking and utilities. The Company’s leases do not have any residual
value guarantees or restrictive covenants.
As
the implicit rate is not readily determinable for most of the Company’s lease agreements, the Company uses an estimated
incremental borrowing rate to determine the initial present value of lease payments. These discount rates for leases are calculated
using the Company's promissory note interest rate.
The
Company’s components of lease expense are as follows:
|
|
|
Period
Ended
Sept
30, 2020
|
|
Operating
Lease – Office Lease
|
|
$
|
63,060
|
|
|
Operating Lease –
Ground Lease
|
|
|
64,568
|
|
|
Short Term Lease
Costs
|
|
|
10,158
|
|
|
Variable
Lease Costs
|
|
|
—
|
|
|
TOTAL
|
|
$
|
137,786
|
|
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 September 30:
|
YEAR
|
|
|
|
|
2021
|
|
$
|
174,459
|
|
|
|
2022
|
|
|
178,925
|
|
|
|
2023
|
|
|
123,773
|
|
|
|
2024
|
|
|
96,896
|
|
|
|
2025
|
|
|
99,803
|
|
|
|
Thereafter
|
|
|
787,682
|
|
|
|
Total
|
|
$
|
1,461,538
|
|
|
|
Less Imputed Interest
|
|
|
(676,791
|
)
|
|
|
RIGHT OF USE
LIABILITY
|
|
$
|
784,747
|
|
Other
Contingencies
The
Company's mining and exploration activities are subject to various laws and regulations governing the protection of the environment.
These laws and regulations are continually changing and generally becoming more restrictive. The Company conducts its operations
so as to protect public health and the environment, and believes its operations are materially in compliance with all applicable
laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.
Damages
Awarded to DynaMéxico in México Litigation
On
October 5, 2015, DynaResource de México SA de C.V. (“DynaMéxico”), was awarded in excess of $48 M USD
(Forty-Eight Million Dollars) in damages from Goldgroup Resources, Inc. (the “Goldgroup Damages”) by virtue of a Sentencia
Definitiva (the “Definitive Sentence”) issued by the Thirty Sixth Civil Court of the Superior Court of Justice of
the Federal District of México (Tribunal Superior de Justicia del Distrito Federal), File number 1120/2014. The Definitive
Sentence included the considerations and resolutions by the Court, and additional Resolutions were also ordered in favor of DynaMéxico
(together the Goldgroup Damages and the additional Resolutions are referred to as, the “Oct. 5, 2015 Resolution”).
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”).
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 $48M 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.
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.
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.
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.
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 DynaMéxico Final México 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.
|
On
August 28, 2020, the Company filed in Dallas County, Texas a Petition for Recognition
of the $48M USD Foreign Judgment, to be recognized in the U.S.
|
|
|
3.
|
On
November 6, 2020, the Mexican courts ruled the $48M USD judgement could be transferred
to the U.S.
|
|
|
4.
|
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.
|
|
|
5.
|
Ownership
of the shares of DynaMéxico held by Goldgroup Resources (currently representing
20% of the outstanding shares of DynaMéxico) are subject to the Lien against Goldgroup
Shares.
|
DynaResource
Filed Appeal in US District Court – 10th Circuit
On
August 10, 2020, DynaResource filed an Appeal Brief in US District Court – 10th Circuit challenging the March
25, 2020 Ruling of the US District Court.
United
States District Court Denial of DynaUSA and DynaMéxico Motion to Alter or Amend Judgment
On
March 25, 2020, the United States District Court for the District of Colorado denied the motion to alter or amend its judgment
(confirming the August 2016 arbitration award), and denied DynaUSA and DynaMéxico’s motions for stay and judgment
pending appeal and to waive or reduce supersedes bond.
Previously,
on February 13, 2018, United States Magistrate Judge Kathleen M. Tafoya issued a thoughtful and well-reasoned formal Recommendation.
-
In
the formal Recommendation, Magistrate Judge Tafoya had recommended that the district court rule in favor of DynaResource and DynaResource
de México, and the Recommendation requested the court to vacate the arbitration award.
On
April 10, 2020, DynaUSA and DynaMéxico appealed the March 25, 2020 ruling to the Tenth Circuit Court of Appeals and in
accordance with the requirements of the appeal, posted a cash bond of $1,111,111 which is being held with the court. This amount
is included in the Current Asset section of the balance sheet.
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.
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:
|
|
2020
|
|
2019
|
|
Annual volatility
rate
|
162%
|
|
144%
|
|
Risk
free rate
|
0.13%
|
|
1.58%
|
|
Remaining
Term
|
1.75
years
|
|
0.5
years
|
|
Fair
Value of common stock
|
$1.00
|
|
$0.47
|
For
the period ended September 30, 2020 and year ended December 31, 2019, 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 period ended September 30, 2020 and
year ended December 31, 2019.
|
Period Ended
|
|
2020
|
|
|
2019
|
|
|
Fair
value of derivative (stock), beginning of period/year
|
|
$
|
37,038
|
|
|
$
|
402,909
|
|
|
Change in fair value
of derivative
|
|
|
878,793
|
|
|
|
(365,871
|
)
|
|
Fair value of derivative
on the date of extension
|
|
|
287,728
|
|
|
|
-
|
|
|
Fair value of derivative(stock),
end of period/year
|
|
$
|
1,203,559
|
|
|
$
|
37,038
|
|
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 Series C Preferred Stock based on the assumptions below:
|
|
2020
|
|
2019
|
|
Annual volatility
rate
|
162%
|
|
144%
|
|
Risk
free rate
|
0.13%
|
|
1.58%
|
|
Remaining
Term
|
1.75
years
|
|
0.5
years
|
|
Fair
Value of common stock
|
$1.00
|
|
$0.47
|
For
the period ended September 30, 2020 and year ended December 31, 2019, 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 period ended September 30, 2020
and year ended December 31, 2019. Period Ended
|
|
2020
|
|
2019
|
|
Fair
value of derivative (warrants), beginning of period/year
|
|
$
|
49,066
|
|
|
$
|
571,774
|
|
|
Change in fair value
of derivative
|
|
|
865,984
|
|
|
|
(522,708
|
)
|
|
Fair
value of derivative on the date of issuance
|
|
|
400,766
|
|
|
|
—
|
|
|
Fair
value of derivative(warrants), end of period/year
|
|
$
|
1,315,816
|
|
|
$
|
49,066
|
|
Series
D Notes Kicker Warrants
As
discussed in Note 8, the Company analyzed the embedded conversion features of the Series D Notes 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 Series C Preferred Stock based on the assumptions below:
|
|
2020
|
|
2019
|
|
Annual volatility
rate
|
162%
|
|
—
|
|
Risk
free rate
|
0.13%
|
|
—
|
|
Remaining
Term
|
9.62
years
|
|
—
|
|
Fair
Value of common stock
|
$1.00
|
|
—
|
For
the period ended September 30, 2020 and year ended December 31, 2019, 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 period ended September 30, 2020 and
year ended December 31, 2019.
|
Period Ended
|
|
2020
|
|
2019
|
|
Fair value of derivative (warrants), beginning of period/year
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Change in fair value of derivative
|
|
|
811,990
|
|
|
|
—
|
|
|
Fair value of derivative on the date of issuance
|
|
|
409,998
|
|
|
|
—
|
|
|
Fair value of derivative(warrants), end of period/year
|
|
$
|
1,221,988
|
|
|
$
|
—
|
|
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% from then until February 24, 2020 when the minority interest
was eliminated. Changes in Non-Controlling Interest for the nine months ended September 30, 2020 and year ended December 31, 2019,
respectively were as follows:
|
|
|
2020
|
|
2019
|
|
Beginning
balance
|
|
$
|
(5,723,663
|
)
|
|
$
|
(5,611,528
|
)
|
|
Operating
income (loss)
|
|
|
(61,589
|
)
|
|
|
(62,511
|
)
|
|
Share
of Other Comprehensive Income (loss)
|
|
|
(11,669
|
)
|
|
|
(49,624
|
)
|
|
Elimination
of Non-Controlling Interest
|
|
|
(5,796,921
|
)
|
|
|
—
|
|
|
Ending
balance
|
|
$
|
-
|
|
|
$
|
(5,723,663
|
)
|
|
|
|
|
|
|
|
|
|
|
|
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 September 30, 2020, and December 31, 2019, 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 and changes to the Level
3 inputs is discussed in Note 11.
|
Fair
Value Measurement at September 30, 2020 Using:
|
|
|
|
Quoted
Prices
in Active
Markets
For
Identical
Assets
(Level
1)
|
|
Significant
Other Observable Inputs
(Level
2)
|
|
Significant
Unobservable Inputs
(Level
3)
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
None
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Totals
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Liabilities
|
|
$
|
3,741,363
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,741,363
|
|
|
Totals
|
|
$
|
3,741,363
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,741,363
|
|
|
Fair
Value Measurement at December 31, 2019 Using:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Totals
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Liabilities
|
|
$
|
86,104
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
86,104
|
|
|
Totals
|
|
$
|
86,104
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
86,104
|
|
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 nine months ended September 30, 2020 and 2019, two and one customers accounted for 100% of revenue, respectively.
At
September 30, 2020 and December 31, 2019, three and two 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 for the period July 1, 2014 to December
31, 2015 in the amount of $533,580. The Company paid an initial 20% payment in the amount of $106,716 and financed the balance
over 36 months at 18% interest.
In
February 2018, the Company entered into a financing agreement for unpaid mining concessions taxes for the year ended December
31, 2016 in the amount of $552,990. The Company paid an initial payment of $110,598 and financed the balance over 36 months at
18%.
In
June 2018, the Company entered into financing agreements for the unpaid mining concession taxes for the year ended December 31,
2017 and the period ending June 30, 2018 in the amount of $1,739,392. The Company paid an initial 20% payment of $347,826 and
financed the balance over 36 months at 21.84%
In
February 2019, the Company entered into a financing agreement for unpaid mining concession taxes 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
October 2019, the Company entered into a financing agreement for unpaid mining concession taxes in the amount of $299,474. The
Company paid an initial 20% payment of $59,895 and financed the balance over 36 months at an interest rate of 22%.
|
The
following is a summary of the transaction during the period ended September 30, 2020 and year ended December 31, 2019:
|
|
|
|
|
|
|
Balance December 31, 2018
|
|
$
|
1,803,235
|
|
|
Exchange Rate Adjustment
|
|
|
73,314
|
|
|
Property Holding
Taxes - Core Concessions
|
|
|
634,824
|
|
|
20% Down Payment
|
|
|
(126,965
|
)
|
|
2019
Principal Payments
|
|
|
(111,977
|
)
|
|
Balance December 31, 2019
|
|
|
2,272,431
|
|
|
Exchange Rate Adjustment
|
|
|
(334,572
|
)
|
|
2020
Principal Payments
|
|
|
(40,085
|
)
|
|
Balance September
30, 2020
|
|
$
|
1,897,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2020 future maturities
of notes payable are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending September 30:
|
|
|
|
|
|
2021
|
|
$
|
1,766,624
|
|
|
2022
|
|
|
123,467
|
|
|
2023
|
|
|
7,683
|
|
|
|
|
$
|
1,897,774
|
|
note
16 – subsequEnt events
The
Company has evaluated events from September 30, 2020, through the date whereupon the financial statements were issued, and has
determined the below described events subsequent to the end of the period.
On
November 6, 2020, the Mexican courts ruled the $48M USD judgement could be transferred to the U.S. to support the Company’s
filing on August 28, 2020 when the Company filed a Petition for Recognition in the U.S. of the $48M USD Foreign Judgment.
