UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
   10-K
 
 [X]
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
fiscal year ended December 31,
2008
 
 [   ]           TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
transition period from _________________________ to
_________________________
 
 
 DYNARESOURCE,
INC.
 
 (Exact
name of Registrant as specified in its charter)
 
 Delaware
              
              94-1589426(State
      of Incorporation)
              
              (Employer
      Identification No.)
 
 222
      W. Las Colinas Blvd., Suite 744 East Tower; Irving, Texas
              
              75039(Address
      of principal offices)
              
              (Zip
      Code)
 
 Registrant’s telephone
number:   Phone:  (972) 868-9066;  Fax:  (972)
868-9067
 
 
 Securities
to be registered pursuant to Section 12(b) of the Act:
 None
 
 Securities
to be registered pursuant to Section 12(g) of the Act:
 
 Common Stock;  $ .01
Par Value
 (Title of
Class)
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
 
 Yes
[X]                                No
[   ]
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
 
 Yes
[X]                                No
[   ]
 
 Indicate
by a check mark whether the Registrant is a large filer, an accredited filer,
non-accredited filer, or a smaller reporting company. See the definitions of
“large accredited filer”, “accredited filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
 
 Large
      Accelerated Filer [    ].
              
              Accelerated
      Filer    [    ].Non-Accelerated
      Filer [    ].
              
              Smaller
      Reporting Company [X]
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
 
 Yes
[   ]                                No
[X]
 
 Aggregate
market value of the voting and non-voting common equity held by non-affiliates
computed by reference to the price at which the common equity was last sold, or
the average bid and asked price of such common equity, as of the last business
day of the registrant’s most recently completed second fiscal
quarter.
 
 Number of
preferred shares outstanding at March 25,
2009                   1,000
 
 Number of
common shares outstanding at March 25,
2009                    9,073,913
 
  
  TABLE OF
CONTENTS
 
 
 PART
      I
                
                3ITEM
      1
                Description
      of Business
                3ITEM
      2.
                Description
      of Property
                17ITEM
      3.
                Legal
      Proceedings
                20ITEM
      4.
                Submission
      of Matters to a Vote of Security Holders
                20PART
      II
                
                21ITEM
      5.
                Market
      for Registrant’s Common Equity and Related Stockholders
      Matters
                21ITEM
      6.
                Selected
      Financial Data
                21ITEM
      7.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
                21ITEM
      8.
                Financial
      Statements and Supplementary Data
                30ITEM
      9.
                Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                31ITEM
      9A.
                Controls
      and Procedures
                31ITEM
      9B.
                Other
      Information
                32PART
      III
                
                33ITEM
      10.
                Directors,
      Executive Officers and Corporate Government
                33ITEM
      11.
                Executive
      Compensation
                35ITEM
      12.
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                36ITEM
      13.
                Certain
      Relationships and Related Transactions, and Director
      Independence
                37ITEM
      14.
                Principal
      Accounting Fees and Services
                38PART
      IV
                
                39ITEM
      15.
                Exhibits
      and Financial Statement Schedules
                39EXHIBIT
      INDEXExhibit
      31.1
                Certification
      of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange
      Act, as enacted by Section 302 of the Sarbanes-Oxley Act of
      2002
                39Exhibit
      31.2
                Certification
      of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange
      Act, as enacted by Section 302 of the Sarbanes-Oxley Act of
      2002
                39Exhibit
      32.1
                Certification
      of Chief Executive Officer and Chief Financial Officer, pursuant to 18
      United States Code Section 1350, as enacted by Section 906 of the
      Sarbanes-Oxley Act of 2002
                39SIGNATURES
                
                40
  2
  PART
I
 
 FORWARD-LOOKING
STATEMENTS
 
 This
annual report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, which we refer
to in this annual report as the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, which we refer to in this annual
report as the Exchange Act. Forward-looking statements are not statements of
historical fact but rather reflect our current expectations, estimates and
predictions about future results and events. These statements may use words such
as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project”
and similar expressions as they relate to us or our management. When we make
forward-looking statements, we are basing them on our management’s beliefs and
assumptions, using information currently available to us. These forward-looking
statements are subject to risks, uncertainties and assumptions, including but
not limited to, risks, uncertainties and assumptions discussed in this annual
report. Factors that can cause or contribute to these differences include those
described under the headings “Risk Factors” and “Management Discussion and
Analysis and Plan of Operation.”
 
 If one or
more of these or other risks or uncertainties materialize, or if our underlying
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 should
specifically consider the factors identified in this annual report which would
cause actual results to differ before making an investment decision. We are
under no duty to update any of the forward-looking statements after the date of
this annual report or to confirm these statements to actual results.
 
 
 Item
1.  Business
 
 Company.
 DynaResource,
Inc., the Company described herein, is a Delaware corporation, with offices
located at 222 W. Las Colinas Blvd., Suite 744 East Tower, Irving, Texas 75039.
It can be reached by phone at (972) 868-9066 and by Fax at (972)
868-9067.
 
 History.
 The
Company was incorporated in the State of California on September 28, 1937, under
the name West Coast Mines, Inc. In November 1998, the Company re-domiciled its
corporate charter from California 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 Mexico S.A. de
C.V. chartered in Mexico (“DynaMexico”).  This Company was formed to
acquire, invest in and develop resource properties in Mexico.  In
2005, the Company formed DynaResource Operaciones de San Jose De Gracia S.A. de
C.V. (“DynaOperaciones”) and acquired effective control of Mineras de
DynaResource S.A. de C.V. (formerly Minera Finesterre, S.A. de C.V.)
(“MinerasDyna”).   The Company owns 25% of MinerasDyna and
acquired effective control by acquiring the Option under Agreement to purchase
the remaining 75% of the Shares outstanding for the Company, for seventy five
pesos (approximately $5.50 USD, as of December 31, 2008).  The
Agreement with other shareholders of MinerasDyna provided that they relinquish
and forfeit any and all rights, interests and claims in and to the Corporation
and in or to any of the rights or assets owned or controlled by the
Corporation.
    3
 
 DynaMexico
holds title to all mining concessions and all assets relating to the San Jose de
Gracia mining property (“SJG”). DynaMexico has entered into an operating
agreement with MinerasDyna whereby MinerasDyna has been named the exclusive
operator of the SJG; and MinerasDyna has subsequently entered into a personnel
services agreement whereby DynaOperaciones registers and manages personnel in
Mexico.
 
 The San
Jose de Gracia mining property surrounds the area of San Jose de Gracia, Sinaloa
State, Mexico. San Jose de Gracia is located on the west side of the Sierra
Madre Mountains, approximately 100 kilometers inland from Los Mochis, Sinaloa
Mexico and approximately 200 Kilometers north of Mazatlan, Sinaloa. The SJG
property (“SJG”) is described in more detail in the Form 10 / K, under the
Section titled “PROPERTY”.
 
 SJG
reports 1,000,000 Oz. Gold historical production from a series of underground
workings.  471,000 Oz. is reported produced at the La Purisima area of
SJG, at an average grade of 66.7 g/t.;  and 215,000 Oz. is reported
produced from the La Prieta area, at an average grade of 27.6 g/t.
Mineralization at SJG has been traced on surface and underground over a 15
square kilometer area.
 
 A drill
program was conducted at SJG in 1997 - 1998 by a prior majority owner.
 Approximately 6,172 meters drilling was completed in 63 core drill holes.
Significant intercepts, including bonanza grades, outlined Down Dip potential of
the Northeast section (150 Meter NE to SW extent of the Drilling) of the Los
Hilos to Tres Amigos Trend of SJG.  Surface and underground sampling in
1999 - 2000 confirmed high grades in historic workings and surface exposures
throughout the project area.  These high grades outline the presence of ore
shoots developed within the veins.  The ore shoots appear to be controlled
by dilational jogs and/or vein intersections. A total of 544 samples were
collected in 1999-2000, and assayed an average 6.51 grams/ton gold.
 
 DynaMexico
was formed in March, 2000, in order to acquire and consolidate the SJG district
under the DynaMexico Company.  DynaMexico focused on this acquisition
and consolidation work through December, 2003, at which time DynaMexico reported
a 100 % ownership of the SJG District.
 
 DynaMexico,
conducting activities through its operating sister companies MinerasDyna and
DynaOperaciones, mined high-grade veins at the San Pablo area of SJG from mid
2003 to June 2006.  18,250 Oz. gold was produced and sold; from mined
tonnage of 42,500 tons, at an average grade of approximately 20
g/t.  Production costs were reported at approx. < $ 175. / Oz. in
this small scale, pilot production operation.
 
     4
  Mined
      Tonnage
                  42,000
      tonsProduction
      (Oz Au)
                  18,250
      OzAverage
      Grade
                  20
      g/tRecovery
      Efficiency (Plant)
                  85%Recovery
      in Concentrate (Sales)
                  90%Production
      Cost (Average, 4 Years)
                  $175
      / Oz
 
 
 
 
 The small
scale mining and production activities at SJG consisted of improvements to an
existing mill, including the installation of a gravity / flotation processing
circuit, and initial test runs with tailings were completed in 2002.
 Actual mining at the higher grade San Pablo area of the property commenced
in March 2003.  On an annual basis, The Company reported the following
results of production activities from March 2003 through June,
2006:
 
 ·
              Mined
      tonnage reported of 7,500, 13,500, 17,500 and 3,750; for years 2003, 2004,
      2005 and 2006 respectively;
 
 ·
              Average
      mined grades reported of 25 g/t, 25 g/t, 15 g/t and 12 g/t for years 2003,
      2004, 2005 and 2006 respectively;
 
 ·
              Production
      in ounces gold reported of 4,750, 7,500, 5,000 and 750 for years 2003,
      2004, 2005 and 2006 respectively;
 
 ·
              Expenses
      on an accrual basis of $ 733,626., $ 1,305,344., $ 1,485,482., and $
      494,422 for years 2003, 2004, 2005 and 2006
  respectively;
 
 ·
              Revenues
      on an accrual basis of $ 1,543,237, $ 3,259,041, $ 2,169,609 (less $
      375,110. in concentrate losses) and $ 1,647,665 for years 2003, 2004, 2005
      and 2006 respectively;
 
 ·
              Costs
      per ton reported of $ 97.81, $ 93.92, $ 87, and $ 131. for years 2003,
      2004, 2005 and 2006 respectively;
 
 ·
              Costs
      per ounce gold produced reported of $ 125, $ 125, $ 240 and $ 491. for
      years 2003, 2004, 2005 and 2006
respectfully;
 
 The
Company notes the reduced average mined grade in 2005 and 2006, resulting from
geologic faulting at San Pablo, as the reason for higher production costs per
Oz., even while the production costs per ton were reduced during
2005.  And, the increase in costs in 2006 included the costs of
suspending the production activity and costs of termination of employees.
    5
   Suspension of Production
Activities
 
 The
Company initiated the test production activity in 2003 at the time gold prices
were depressed, and when exploration funding opportunities, while available,
were deemed to be too dilutive by Company management. While the Test production
was a success (see results above), a small scale production activity was not
expected to provide the necessary capital in order to explore a project the size
of SJG.  However, The Company expects the results of the production
activity to provide significant benefits to the exploration drilling to be
conducted at San Pablo and other areas of SJG; while at the same time confirming
production grades, efficiency of recoveries, and production
costs.  The Company believes this small scale mining works have laid
the foundation for the scaling up of production at SJG in the future. The
Company further believes that overall production costs can be significantly
reduced in a larger scale operation.
  
 As gold
prices continued to appreciate into 2006, exploration financing opportunities
increased and the Company negotiated and entered into the “Earn In / Option
agreement with Goldgroup Resources, Inc., Vancouver, BC, dated September 1,
2006.  The Terms of the Earn In / Option agreement provides for $ 18
M. USD financing, and exploration expenditures at SJG, by Goldgroup to
DynaMexico, in exchange for Goldgroup’s earning of 50 % of the Shares of
DynaMexico, while also providing for the involvement of proven industry
professionals in the SJG project.  (See Earn In / Option
Agreement.)
 
 Material
Agreements
 
 Earn In / Option
Agreement.
 
 On
September 1, 2006 the Company signed a “Stock Purchase and Earn In Agreement”
(“Earn In”) between:  DynaResource, Inc. (“DynaResource”) and DynaResource
de Mexico SA. de CV.  (“DynaMexico”), (“Seller”);  and Goldgroup
Resources, Inc., of Vancouver, British Columbia (“Goldgroup”), (“Buyer”), and
Together, (“the Parties”).
 
 The Earn
In providesfor the
sale of up to fifty per cent (50 %) of the total outstanding shares of
DynaMexico, which at the time of the agreement was the wholly owned subsidiary
of DynaResource, and the owner of the San Jose de Gracia District in northern
Sinaloa, Mexico (“SJG”);  In exchange for the total cash contributions to
DynaMexico, and expenditures related to the exploration and development of the
SJG, in the amount of Eighteen Million Dollars USD. ($18,000,000.) by Goldgroup;
contributed in four (4) Phases, as set forth below:
 
 Phase
                  On
      or before
                  Amount
      of Funds to be deposited to DynaMexico (For SJG
    Expenditures)
                  Interest
      Earned (by Goldgroup in DynaMexico)
                  Cumulative
      Interest Earned (by Goldgroup in DynaMexico)1.
                  June
      15, 2007
                  $1,000,000
                  0%
                  0%;
      Completed.2.
                  March
      15, 2008
                  $2,000,000
                  15%
                  15%;
      Completed.3.
                  September
      15, 2009
                  $3,000,000
                  10%
                  25%;
      Completed.4.
                  March
      15, 2011
                  $12,000,000
                  25%
                  50%;
      In Process
 
   6
  Pursuant
to the Earn In agreement:
 
 DynaResource
attached the “SJG Title Opinion”, compiled by Urias Romero Y Asociados, Abraham
Urias, Mazatlan, Sinaloa, with attachments and schedules; describing the status
and position of DynaMexico and affiliated companies in Mexico, and confirming
the 100 % ownership and status of the Mining Concessions comprising the SJG
District in Sinaloa, Mexico;
 
 DynaResource
attached its Audited, Consolidated Financial Statement at December 31,
2005;
 
 The
Parties agreed to a revised setting of the Board of Directors of DynaMexico,
to:
 
 Two (2)
members of DynaResource; K.D. Diepholz, Chairman / CEO of DynaResource as
President; and, Charles E. Smith;  CFO of DynaResource;
 
 One (1)
Member of Goldgroup; Keith Piggott, CEO of Goldgroup;
 
 The SJG
Management Committee is formed to approve budgets and expenditures pursuant to
the Earn In.  The setting of the Management Committee is:
 
 ·
              Two
      (2) Members of Goldgroup;  Keith Piggott, CEO of Goldgroup as
      Chairman;  and, John Sutherland, CFO of
  Goldgroup;
 
 ·
              One
      (1) Member of DynaResource;  K.D. Diepholz, Chairman / CEO of
      DynaResource;
 
 Members
of the Management Committee may be changed as subsequently agreed.
 
 The
Parties agreed to cooperate to develop the SJG Property, in the best interests
of the Project.
 
 Memorandum of Understanding,
(“MOU”):
 
 In order
to clarify and confirm the operating structure at SJG, DynaResource, Inc.,
DynaResource de Mexico, and Goldgroup Resources Inc. (the Parties to the Earn In
/ Option Agreement); and together,  “the Parties”) entered into a
“Memorandum of Understanding” (the “MOU”), dated July 29, 2008.  The
MOU provides for:
 
 ·
              Mineras
      de DynaResource (“MinerasDyna”) as the exclusive operating entity at SJG,
      pursuant to the operating agreement with DynaResource de Mexico
      (“DynaMexico’);
 
 ·
              DynaMexico
      owns the SJG 100%, and all Records, Data and information pursuant thereto.
      Any information disseminated regarding SJG must be disclosed as
      originating from DynaMexico;
 
 ·
              The
      SJG Management Committee is not a legal entity and has no authority or
      ability to sign contracts or incur obligations or liabilities to
      DynaMexico, MinerasDyna, or
DynaOperaciones;
 
 ·
              The
      SJG Management Committee does not have the authority to act for or
      represent DynaMexico, MinerasDyna, DynaOperaciones, or the SJG
      Property;
    7
 
 ·
              All
      personnel or consultants related to the SJG Project must be employed or
      contracted through MinerasDyna or DynaOperaciones and must be accountable
      to the employing / contracting
entity;
 
 Since the
inception of the Earn In Agreement, and as of December 31, 2008, Goldgroup had
deposited sufficient funds to complete Phases 1, 2 and 3 of the Agreement;, and
as a result Goldgroup has received 25% of the outstanding common stock of
DynaMexico.  As of December 31, 2008 Goldgroup had deposited $
8,168,000. USD. to DynaMexico, with approximately $ 78,834,422. Mexican Pesos
reported in qualified expenditures.
 
 Phase 1, 2 and 3 of the Earn
In / Option Agreement;  Activity and Results
 
 In Phase
I of the Earn In Agreement,  approximately 3,400 meters drilling was
accomplished in 22 core drill holes (SJG 07-01 to SJG 07-22); as well as
geochemical sampling and mapping, and data consolidation into Surpac
Software.
 
 In Phase
II of the Earn In Agreement, approximately 5,500 meters was completed in 23 core
drill holes (SJG 07-23 to 07-45).
 
 In Phase
III of the Earn In Agreement, approximately 15,150 meters was completed in 56
core drill holes (SJG 08-46 to SJG 08-101).
 
 In Phase
IV of the Earn In Agreement, and at December 31, 2008, approximately 5,950.
meters were completed in 25 core drill holes (through SJG 08-126).
 
 At
December 31, 2008, a total of 30,000 meters drilling has been completed in 126
core drill holes, financed pursuant to the Earn In Agreement. (The “SJG Drill
Intercepts Summary File”, describing the intercepts of all core drill holes, and
including the previous drilling results of 1997-1998, is attached as Exhibit
99.1 to this Form 10 / K.)  Drilling Highlights by target area are
described in the Management’s Discussion and Analysis,, Item 7.
 
 These
drilling Results obtained through December 31, 2008 confirm extensions of
mineralization, down dip of historical workings at SJG, with confirmation of
high grade gold (as measured in grams per ton) which are consistent with
historical and recent production. Specifically, San Pablo, Tres Amigos, La
Purisima, and La Union areas have reported significant results, which have begun
to define an inferred resource in those areas.  Phase 4 drilling will
be targeted at Tres Amigos, La Prieta, La Union and La Purisima.  In
2009, the Company expects to commission a 43-101 compliant report of the current
“resources” defined at SJG.  (See Management’s Discussion and
Analysis, Item 7).
  In
addition to the drilling and exploration activity conducted pursuant to the Earn
In Agreement, 3 additional Mining Concessions have been claimed for the benefit
of DynaMexico.  At the time that Title of these Concessions is obtained by
DynaMexico, the 3 Concessions will extend the SJG District by approximately
95,000 Hectares (to a Total of + 99,500 Hectares).
  The
Company maintains approximately 28 employees. Three employees are corporate
officers and work in the corporate office in the United States.  Other
employees are maintained through DynaOperaciones in Mexico.  The
company also retains legal counsel in the US, legal counsel in Mexico, and it
retains as consultants a senior geologist and junior geologist in
Mexico.
   8
   Item
1A.                      Risk
Factors.
  
 Business
Risk
 
 The
Company is involved in the business of exploration and development of resource
properties, which carries the inherent risk of failure
 
 The
exploration and development of mineral deposits involve significant risks which
a combination of careful evaluation, experience and knowledge may not
eliminate.  There is no assurance that the Company’s exploration
programs will result in any discoveries of commercial ore bodies.  The
company has numerous competitors, many with greater financial, technical,
capital, and other resources.
 
 Nature
of Mineral Exploration and Mining
 
 The
Company’s future is dependent upon its exploration programs.  The
exploration and development of mineral deposits involve significant risks over
significant periods of time.  It is impossible to ensure that the
current or proposed exploration programs on the Company’s property will result
in a profitable mining operation.
 
 Whether a
mineralized deposit will be commercially viable depends on many factors, such as
size and grade of the deposit, proximity to infrastructure, financing costs,
regulations, environmental protection, commodities prices, taxes, political
risks.  The impact of these factors cannot be accurately predicted,
but the combination of factors may result in the Company’s failure to provide a
return on investment.
 
 Competitive
Business Conditions
 
 The
company competes with many larger, well capitalized companies which places the
Company at a competitive disadvantage
 
 The
Company competes with many companies in the mining business, including large,
established mining companies with substantial capabilities, personnel, and
financial resources. There is a limited supply of desirable mineral lands
available for claim-staking, lease, or acquisition in Mexico where the Company’s
activities are focused. The Company may be at a competitive disadvantage in
acquiring mineral properties, since it competes with companies which have
greater financial resources and larger technical staffs. From time to time,
specific properties or areas which would otherwise be attractive for acquisition
or exploration are unavailable due to their previous acquisition by competitors
or due to the Company’s lack of financial resources.
 
 Competition
in the industry is not limited to the acquisition of mineral properties, but
also extends to the technical expertise to find, advance, and operate such
properties; the labor to operate the properties; and the capital for the purpose
of funding such properties. Many competitors explore for and mine precious
metals, and conduct refining and marketing operations on a world-wide basis.
Such competition may result not only in the company being unable to acquire
desired properties, but also to recruit or retain qualified employees, to obtain
equipment and personnel to assist in our exploration activities, or to acquire
the capital necessary to fund our operation and advance our properties. Our
inability to compete with other companies for these resources would have a
material adverse effect on our results of operation and business.
    9
 
 Government
Regulations
 
 The
Company conducts its resource exploration and development activities in Mexico,
subject to rules and regulations for owning and maintaining mining concessions
and surface rights, environmental,  water rights, hazardous wastes,
explosives, reclamation, and others.  There can be no certainty that
the company maintains full compliance with all government
regulations
 
 Mexico.Exploration and development
of minerals in Mexico may be carried out through Mexican companies incorporated
under Mexican law by means of obtaining exploration and development
(exploitation) concessions.  The Company’s concessions are granted by
the Mexican government, or acquired from previous owners, and are filed in the
Public Registry of Mining, are scheduled to expire from 2028 through 2058.
Holders of exploration concessions may, prior to the expiration of such
concessions, apply for one or more development concessions covering all or part
of the area covered by an exploration concession.
 
 Environmental
law in Mexico provides for general environmental policies, with specific
requirements set forth under regulations of the Ministry of Environment, Natural
Resources and Fishing, which regulate all environmental matters with the
assistance of the National Institute of Ecology and the Procuraduria Federal de
Proteccion al Ambiente.
 
 The
primary laws and regulations governing environmental protection for mining in
Mexico are found in the General Law, the Ecological Technical Standards, and
also in the air, water and hazardous waste regulations, among others. In order
to comply with the environmental regulations, a concessionaire must obtain a
series of permits during the exploration stage. Generally, these permits are
issued on a timely basis after the completion of an application by a concession
holder.  The Company believes it is currently in full compliance with
the General Law and its regulations in relation to its mineral property
interests in Mexico.
 
 Commodities
Prices
 
 Any
potential economic success of the Company’s properties will depend to a large
extent to the market price of commodities;  the future price of which
is impossible to predict.
 The
current value and potential value for properties obtained by the Company is
directly related to the market price for gold.  The market price of
gold may also have a significant influence on the market price of the Company’s
common stock. If the Company obtains positive drill results and a property
progresses to a point where a commercial production decision can be made, the
decision to put a mine in production and to commit funds necessary for that
purpose would be made long before any revenue from production would be received.
A decrease in the market price of gold at any time during future exploration or
development may prevent a property from being economically mined or result in
the write-off of assets whose value is impaired as a result of lower gold
prices.
 
 The price
of gold is affected by numerous factors beyond the Company’s control, including
inflation, fluctuation of the United States dollar and foreign currencies,
global and regional demand, the purchase or sale of gold by central banks, and
the political and economic conditions of major gold producing countries
throughout the world. During the last five years, the market price of gold has
fluctuated between approximately $375 and $1,000 per ounce. The volatility of
gold prices represents a substantial risk which is impossible to fully
eliminate. In the event gold prices decline and remain low for prolonged periods
of time, the Company might be unable to explore, develop, or produce revenue
from its properties.
   10
   No
Revenue
 
 The
Company suspended its production activity in June 2006; and currently receives
no significant revenue. There is a risk that the Company would expend available
cash and funding in exploration and administration costs, and would not be able
to obtain further funding to continue its work.
 
 In June
2006, production activities at SJG were suspended, in order to focus on the
exploration of the vast SJG district.  Funds received by DynaMexico
pursuant to the Earn In Agreement are segregated for exploration and related
activities.  In addition, the Company maintains overhead in the US.
and other costs which are not reimbursed. The Company and its subsidiaries
have$2,339,561 in
cash on hand, at December 31, 2008.The Company could incur
exploration expenses and corporate expenses greater than the amount of available
cash on hand.  The Company may need to raise additional funds in order
to support its activities.   If the Company needs to raise
additional capital, its common stock would be diluted.  Further, if
the Company is unable to raise funds to meet its obligations, the value of its
common stock may decline.
 
 Substantial
Control of Chairman / Preferred Shares
 
 The
Company’s Chairman and CEO owns 100% of the Preferred A  shares which
give him the right to elect the majority of the board of directors and therefore
he will always have substantial control over our business and may make decisions
that are not in the best interest of all stockholders.
 
 K.W.
(“K.D.”)  Diepholz, the Company’s Chairman and CEO, owns 100% of the
outstanding Class A Preferred Shares which gives him the authority to elect the
majority of the Board of Directors. As a result, Mr. Diepholz will have the
ability to control substantially all the matters submitted to our stockholders
for approval, including the election and removal of directors and any merger,
consolidation or sale of all or substantially all of our assets.  Mr.
Diepholz will also control the Company’s management and affairs. Accordingly,
this concentration of control may have the effect of delaying, deferring or
preventing a change in control of the Company, impeding a merger, consolidation,
takeover or other business combination involving the Company or discouraging a
potential acquirer from making a tender offer or otherwise attempting to take
control of the Company, even if the transaction would be beneficial to other
stockholders. This in turn could cause the value of the Company’s stock to
decline.
 
 Capital
Needs
 
 The
Company may need to raise additional capital, which may not be available or may
be too costly, which, if not obtained, could cause the Company to cease
operations.
 The
Company’s capital requirements could be greater than its operating income. The
Company believes it has adequate cash on hand for the foreseeable future, but it
does not have sufficient cash to indefinitely sustain operating
losses.  The Company’s liquidity depends on its ability to raise
capital through the sale of common stock or to restart production activities.
The Company could seek additional financing through debt or equity offerings.
Additional financing may not be available, or, if available, may be on terms
unacceptable or unfavorable. If additional capital is required and not obtained,
or if the Company is not able to produce revenue from operations, or otherwise
operate at a profit, the value of investment in the Company could decline or be
lost entirely.
   11
 
 Illiquid
Market
 
 The
Company has a limited public market trading on the pink sheets, and an active
trading market may never materialize, and an investor may not be able to sell
stock.
 
 Prior to
the filing of this registration statement, there has been a limited public
market for the Company’s common stock. The Company plans to work with a market
maker who would then apply to list the Company’s securities on the OTC Bulletin
Board. In order to be quoted on the OTCBB, the Company must be sponsored by a
participating market maker who would make the application on its
behalf.  At this time, the Company is not aware of a market maker who
intends to sponsor its securities and to make a market in our stock. An active
trading market may not develop and if not the market value could decline to a
value below the amount investors paid for stock. Additionally, if the market is
not active or illiquid, investors may not be able to sell the securities of the
Company.
 
 Penny
Stock Classification
 
 If
a public trading market for the Company’s common stock materializes, it will be
classified as a ‘penny stock’ which would result in additional requirements for
trading the stock.  These additional requirements could affect the
liquidity of the stock.
 
 The U.S.
Securities and Exchange Commission treats stocks of certain companies as a
‘penny stock’. The Company is not aware of a market maker who intends to make a
market in our stock, but should the Company shares be listed for trade, the
shares would be classified as a ‘penny stock’ which results in further
requirements.  These requirements include (i) broker-dealers requiring
prospective buyers to complete a questionnaire, and (ii) broker-dealers may
decide that prospective buyers are not suitable to purchase shares of the
Company. These requirements may adversely affect the ability of both the selling
broker-dealer and the buying broker-dealer to trade securities of the Company,
as well as affect the ability of purchasers of Company securities to in turn
sell in the secondary market. These requirements may restrict or eliminate
potential buyers for the common stock and as a result the shares of the Company
could be illiquid.
 
 Title
Matters
  No
Guaranty of Title.
  The
Company has investigated title to all mineral claims, and, to the best of its
knowledge, title to all properties is in good standing.  There can be
no assurance of complete title, nor guarantee of title.  The properties may
be affected by undetected defects in title, such as the reduction in size of the
mineral claims and other third party claims affecting the Company's priority
rights.
    12
   General
Conflicts of Officers / Management
 
 The
officers of the Company could become involved in other mining properties or
companies in similar lines of business, creating a conflict of
interest.  In this event, officers could make decisions that are not
in the best interest of the shareholders of the Company.
 
 Directors
of the Company are or may become directors of other mining or resource
investment companies, or other reporting companies, or, have significant
shareholdings in other mineral resource companies. To the extent that such other
companies may participate in ventures in which the Company may participate, the
directors of the Company may have a conflict of interest in negotiating and
concluding terms respecting the extent of such participation.  The Company
and its directors attempt to minimize such conflicts.  In the event that
such a conflict of interest arises at a meeting of the directors of the Company,
a director who has such a conflict may be requested to abstain from voting. In
appropriate cases the Company may establish a special committee of independent
directors to review a matter in which several directors, or management, may have
a conflict. In determining whether or not the Company will participate in a
particular program and the interest therein to be acquired, the directors will
primarily consider the potential benefits to the Company, the degree of risk to
which the Company may be exposed and its financial position at that time.
 Other than as indicated, the Company has no other procedures or mechanisms
to deal with conflicts of interest. It is possible that they make decisions
which could adversely affect the price of the Company’s common stock and cause
the price to be less than it might have been if the conflict were
avoided.
  Dependence
upon Key Personnel
  The Company is dependent upon the
efforts and abilities of its management team.
  The loss
of any member of the management team could have a material adverse effect upon
the business and prospects of the Company.  In the event of such loss,
the Company will seek suitable competent replacements, but there is no assurance
that the Company will be able to retain such replacements.  The
company has obtained a Key Man Life Insurance program for its Chairman and CEO,
which would pay net $ 4,500,000 to the Company in the event of his
death.
  Uncertainty
of Resource Estimates
  There
can be no certainty that any resource estimate by the Company or its consultants
would ever be realized in production.
  The
current resource estimates in respect of the SJG Property are based on limited
information, such as historical data, drilling programs, the production activity
conducted by the company in 2003 – 2006, and various reports, manual
calculations and opinions.  No assurance can be given that the
anticipated tonnages and grades will be achieved or that the estimated or
indicated level of recovery will realized.  The grade of
mineralization actually recovered or produced could differ significantly from
the resource estimates.
     13
   Variance
in Future Production
  Any future production realized from
the SJG Property may differ significantly from historical or recent
production.
  Potential
reasons are:  mineralization or veins could be significantly different
from those realized from historical production, recent production, drilling
programs, and other valuations; increases in operating or mining costs could
adversely affect resources;  the grade of resources may vary
significantly from time to time as there can be no assurance that any particular
level of value or grade can be recovered;  and declines in market
prices of commodities.
  Environmental
and Regulatory Concerns.
  The Company operates in an industry
where there are significant environmental and regulatory requirements. The
inability of the Company to satisfy these requirements could cause the value of
its common stock to decline.
  The
current or future operations of the Company, including acquisition, leasing, and
sales activities; involve mineral properties which require permits from various
federal, state and local governmental authorities. Such future operations are
and will be governed by laws and regulations governing prospecting, development,
mining, production, exports, taxes, labor standards, occupational health, waste
disposal, toxic substances, land use, environmental protection, mine safety and
other matters.  Companies engaged in the development and operation of mines
and related facilities generally experience increased costs, and delays in
production and other schedules as a result of the need to comply with applicable
laws, regulations and permits. Additional permits and studies, which may include
environmental impact studies conducted before permits can be obtained, are
necessary prior to operation of properties in which the Company has interests.
 Required permits could adversely affect the Company's ability to negotiate
agreeable acquisition, lease, or sales terms and therefore adversely affect the
price of the Company’s common stock.
  Competition.
 
 Competitive
conditions affecting the Company could negatively impact our
business.
 
 The
potential value of the Company’s mining property is directly related to the
market price for gold. The price of gold may also have a significant influence
on the market price of its common stock. If the Company obtains positive drill
results and its property progresses to a point where a commercial production
decision can be made, the decision to put a mine in production and to commit
funds necessary for that purpose must be made long before any revenue is from
production would be received. A decrease in the market price of gold at any time
during future exploration and development may prevent the Company’s property
from being economically mined or could result in the write-off of assets whose
value is impaired as a result of lower gold prices. The price of gold is
affected by numerous factors beyond our control, including inflation,
fluctuation of the United States dollar and foreign currencies, global and
regional demand, the purchase or sale of gold by central banks, and the
political and economic conditions of major gold producing countries throughout
the world. During the last five years, the market price of gold has fluctuated
between approximately $375 and $1,000 per ounce. The volatility of gold prices
represents a substantial risk which no amount of planning or technical expertise
can fully eliminate. In the event gold prices decline and remain low for
prolonged periods of time, we might be unable to develop our property and
produce revenue.
    14
   Potential
Conflict with Shareholder (Goldgroup Resources Inc.)
  The
Management of the Exploration Activity at SJG is shared with Goldgroup, as
described in the Earn In / Option Agreement.  There exists potential
for conflicts over the plan of exploration and execution.
  The Earn
In Option Agreement states: (1) a committee (the “Management Committee”) shall
oversee the Expenditures and shall be comprised of 3 persons, one designated by
DynaUSA (“DynaResource, Inc.”) and two designated by Goldgroup;  (2)
The Board of DynaMexico shall oversee the keeping of DynaMexico in good standing
and proper working order, and the Management Committee shall oversee the
Expenditures and matters not related to keeping DynaMexico in good standing and
proper working order; (3) All Expenditures shall be expended in accordance with
a budget approved by the Management Committee prior to such expenditure; (4) The
Management Committee shall be responsible for delivering quarterly reports to
the Board of Directors of DynaMexico;  and (5) as soon as practicable
after execution of this Agreement, DynaUSA shall cause DynaMexico’s board of
directors to consist of three directors, two nominated by DynaUSA and one
nominated by Goldgroup, unless and until Goldgroup timely completes Phase 4 of
the Option, at which time the size of the board of directors shall be increased
to five and DynaUSA and Goldgroup shall each appoint two directors and agree on
a fifth member to be appointed.
  This
shared management has inherent risks as the parties may have different short or
long-term objectives, goals, or financial position which could cause decisions
which may not necessarily be in the best interest of our shareholders. This in
turn, could cause the value of the Company’s common stock to be adversely
affected.
  Financing
from Goldgroup Resources, Inc.
  Exploration
activity at the SJG property is financed pursuant to the Earn In / Option
Agreement with Goldgroup Resources Inc.  If Goldgroup fails to
properly fund the Earn in Agreement, or otherwise fails to complete the Earn in
Agreement, the Company would be required to obtain funding from other
sources.  If the Company raises funds from other sources, it would be
dilutive to existing shareholders.
  Funding
for the exploration activities at the SJG property is provided primarily from
Goldgroup to DynaMexico under the Earn-In / Option Agreement. There is no
certainty that this funding will continue or that the Earn-In/Option Agreement
will be completed. Should the funding by Goldgroup cease, the Company would have
to fund further exploration work through its own cash reserves, or obtain
alternative financing. Any alternative funding could result in additional
dilution to our current shareholders.
  Conflicts
between Boards of Directors of the Company, with the Board of Directors of
Goldgroup Resources Inc.
 
 Potential
for conflict exists between the Board of Directors of Goldgroup Resources Inc.,
and the Board of Directors of the Company;  and between the Board of
Directors of Goldgroup with the Boards of Directors of DynaResource de Mexico,
Mineras de DynaResource, and DynaResource Operaciones.
     15
   While the
Company believes it has negotiated and authorized proper agreements for the
financing and exploration of SJG, potential conflicts exist between the Board of
Directors of Goldgroup with the Board of Directors of DynaResource, Inc., both
companies which are shareholders of DynaResource de Mexico.  Potential
conflicts also exist between the Board of Directors of Goldgroup, with the Board
of Directors of the subsidiary companies in Mexico.  Goldgroup carries
the majority of seats on the SJG Management Committee, which is charged with
responsibility of approving the budgets and supplying technical direction to the
SJG Project.  At the Same time, DynaResource, Inc. carries a majority
of the seats on the Board of Directors of DynaResource de
Mexico.  DynaResource, Inc. also carries 100 % of the Seats on the
Boards of Mineras de DynaResource, the contracted operating entity at SJG, and
100 % of the Seats of the Board of DynaResource Operaciones, the personnel
management entity at SJG.  Mr. K.D. Diepholz, chairman and CEO of
DynaResource, Inc.  and Mr. Charles E. Smith, CFO of DynaResource,
Inc. are the President and Secretary respectively for DynaResource de Mexico,
Mineras de DynaResource, and DynaResource Operaciones.  Company
management believes the current structure of ownership and activity provides the
motivation for financing and exploration pursuant to the Earn In option
Agreement and provides protection for the 100 % ownership of the SJG Property
though DynaResource de Mexico.  However, there are risks inherent with
the structure which cannot be eliminated.  Any conflict could develop
between the Boards of Goldgroup and DynaResource, Inc; or between the Boards of
Goldgroup and DynaResource de Mexico, Mineras de DynaResource, or DynaResource
Operaciones which could result in the cessation of financing or activity
pursuant to the Earn In Agreement.  Any such conflict would be
detrimental to the SJG Property and to the Shareholders of the
Company.
   Historical production of
Gold at the San Jose de Gracia Property May Not be Indicative of Future
Production or Revenue.
 
 The SJG
Property is a high-grade mineralized system with reported historical production
of over 1 M. Oz. Gold.  The production occurred in the early 1900’s,
prior to the Mexican Revolution. Since the time, the property has seen small
scale mining operations, from small scale local owners, to the Company’s
production in 2003 – 2006.  Due to the uncertainties associated with
exploration, including variations in geology and structure, there is no
assurance that the Company’s efforts will be successful in identifying
mineralization in sufficient quantities to define resources or
reserves,  and further there is no assurance that any such resources
or reserves could be developed into a commercial operation.  Investors
in the Company’s securities should not rely on historical operations as an
indication that the SJG property will be developed into a commercial production
in the future.  The Company expects to incur losses unless and until
such time as one or more of its properties enters into commercial production and
generates sufficient revenue to fund continuing operations.
 
 50
% of the Company’s Revenue from DynaResource de Mexico May be Owned by Goldgroup
Resources Inc.
 
 As of the
Date of this Form 10 / K, Goldgroup Resources Inc. has completed Phases I, II,
and III of the Earn In / Option Agreement, and as a result has been transferred
25 % of the Shares and ownership of DynaResource de Mexico.  Should
Goldgroup complete Phase IV of the Earn In / Option Agreement (through the
contribution and expenditure of an additional $ 12 M USD.); Goldgroup would
receive an additional 25 % of the shares and ownership of DynaResource de Mexico
(Total of 50 %).  In such case DynaResource, Inc. and its shareholders
will only retain 50 % of the shares and ownership of DynaResource de
Mexico.  Investors in the Company’s shares should be aware that any
benefits to be derived from the ownership of DynaResource de Mexico would be
shared 50 % with Goldgroup Resources.
 
   16
   Item
1B.                      Unresolved
Staff Comments.
 
 Not
applicable to small reporting companies.
 
 
 Item
2.     Properties.
 
 Executive
Offices
 
 The
Company maintains its executive offices of approximately 2,100 sq. ft., at 222
W. Las Colinas Blvd., Suite 744 East Tower, Irving, Texas 75039, at rates
ranging from $3,700 to $3,900 per month, plus utilized services. The Company
entered into a 37 month lease commencing September, 2008.
 
 San Jose de Gracia Mineral
Property
  DynaMexico
owns 100 % of the mineral concessions at the San Jose de Gracia Property,
located in Sinaloa State, Mexico, which is the only property in which DynaMexico
retains an interest.  DynaMexico, which is currently owned 75 % by the
Company, is comprised of 34 concessions covering approximately 99,500 hectares;
with no outstanding royalty or other interests.
  The
property is located in and around San Jose de Gracia, Sinaloa State, Mexico
which is approximately 100 km northeast of Guamuchil, near the west coast of
Mexico. A small airstrip is located near San Jose de Gracia, and can be accessed
by a small airplane or alternatively, by dirt mountain road. Several roads on
the property are accessible throughout the year, with the possible exception of
July - September when the rainy season sometimes causes flooding and runoff to
make the roads difficult to navigate.
 
 SJG
History
 
 SJG
reports 1,000,000 Oz. Gold historical production from a series of underground
workings.  471,000 Oz. is reported produced at the La Purisima area of
SJG, at an average grade of 66.7 g/t.; and 215,000 Oz. is reported produced from
the La Prieta area, at an average grade of 27.6 g/t. Mineralization at SJG has
been traced on surface and underground over a 15 square kilometer
area.
 
 Drilling
programs at SJG were conducted by a prior partner in 1997 – 1998, primarily at
the Tres Amigos area; which outlined some of the down dip potential in this
area.  Approximately 6,172 meters drilling was completed in 63 drill
holes.
 
 DynaMexico
was formed in March 2000, for the purpose of acquiring the concessions
comprising the SJG District; and to consolidate all ownership of SJG under
DynaMexico.  DynaMexico focused on acquisition and consolidation work
through 2003, at which time it reports a clear title and ownership to the
district.
   17
 
 DynaMexico
mined high-grade veins at the San Pablo area of SJG from mid 2003 to June 2006,
in a Pilot Production operation.  18,250 Oz Gold was produced and
sold, from mined tonnage of 42,500 tons; at an average grade of 20 g/t. Average
production costs during the production period were reported as $ 175 /
Oz.
 
 Earn In / Option
Agreement
 
 On
September 1, 2006 the Company signed a “Stock Purchase and Earn In Agreement”
(“Earn In”) between:  DynaResource, Inc. (“DynaResource”) and DynaResource
de Mexico SA. de CV.  (“DynaMexico”), (“Seller”);  and Goldgroup
Resources, Inc., of Vancouver, British Columbia (“Goldgroup”), (“Buyer”), and
Together, (“the Parties”).
 
 The Earn
In providesfor the
sale of up to fifty per cent (50 %) of the total outstanding shares of
DynaMexico, which at the time of the agreement was the wholly owned subsidiary
of DynaResource, and the owner of the San Jose de Gracia District in northern
Sinaloa, Mexico (“SJG”);  In exchange for the total cash contributions to
DynaMexico, and expenditures related to the exploration and development of the
SJG, in the amount of Eighteen Million Dollars USD. ($18,000,000.) by Goldgroup;
contributed in four (4) Phases, as set forth below:
 Phase
                  On
      or before
                  Amount
      of Funds to be deposited to DynaMexico (For SJG
    Expenditures)
                  Interest
      Earned (by Goldgroup in DynaMexico)
                  Cumulative
      Interest Earned (by Goldgroup in DynaMexico)1.
                  June
      15, 2007
                  $1,000,000
                  0%
                  0%;
      Completed.2.
                  March
      15, 2008
                  $2,000,000
                  15%
                  15%;
      Completed.3.
                  September
      15, 2009
                  $3,000,000
                  10%
                  25%;
      Completed.4.
                  March
      15, 2011
                  $12,000,000
                  25%
                  50%;
      In Process
 
 
 Since the
inception of the Earn In Agreement, and as of December 31, 2008 Goldgroup had
deposited sufficient funds to complete Phases 1, 2 and 3 of the Agreement; and
as a result Goldgroup has received 25% of the outstanding common stock of
DynaMexico.  As of December 31, 2008 Goldgroup had deposited $
8,168,000. USD to DynaMexico, with approximately $ 78,834,422. Mexican Pesos
reported in qualified expenditures under the Earn In Agreement.
 
 Approximately
30,000 Meters drilling has been completed in 2007 – 2008.  (Results of
the drilling activity, including the results of previous drilling in 1997-’98,
is attached in an “SJG Drill Intercepts Summary File”,  as Exhibit
99.1;  and the file is also reported on the Company’s web site at
www.dynaresource.com.)
 
 DynaMexico
continues to conduct exploration programs at SJG for the purpose of defining a
mineable resource.  (See Management’s Discussion and Analysis, Item
7).
 
 SJG Geology
Report
 
 The
geologic summary of SJG below is taken from a foundational report, written in
2000-01, subsequent to the drilling activity of 1997 – 1998; but prior to the
production activity of 2003 - 2006; and prior to the drilling activity of 2007 -
2008.  This report provides the basis for the exploration programs
currently being conducted.
    18
  
 Regional Geology &
Mineral Deposits
 
 San José
de Gracia lies within the Sierra Madre Occidental Gold-Silver Belt, in a
second-order graben directly east of the regional-scale Grete Graben.  The
basement to the Sierra Madre Occidental consists of deformed Paleozoic
sedimentary strata, which are non-conformably overlain by Tertiary mafic to
felsic volcanic and volcaniclastic strata known as the Lower Volcanic Series
(“LVS”).  Strata of the LVS are recognized as being spatially related to
gold and silver mineralization in the region.  Volcanic and sedimentary
strata are capped by a thick sequence of non-deformed Late Tertiary ignimbrites,
known as the Upper Volcanic Series (“UVS”).
 
 The
Sierra Madre Occidental Gold-Silver Belt is host to a number of major epithermal
precious metal camps, including the San Dimas and Batopilas Districts.  The
San Dimas District, located some 220 kilometers southeast of San José de Gracia,
has produced in excess of 9.65 million ounces of gold and 400 million ounces of
silver from high-grade, structurally hosted veins, including those at the
Tayoltita Mine.  In contrast, the Batopilas district, located some 100
kilometers east of San José de Gracia, has historic production of more than 5.4
million ounces of silver from high-grade veins.
 
 Property
Geology
 
 The
oldest rocks exposed at San José de Gracia are deformed Paleozoic shale,
sandstone, conglomerate and minor limestone, which are non-conformably overlain
by andesite and rhyodacite flows and tuffs of the LVS.  Volcanic and
sedimentary strata are cut by quartz-feldspar porphyry, porphyritic diorite
bodies and fine-grained mafic dykes, which may be cotemporal with the LVS.
 Ignimbrites of the UVS are exposed at higher elevations on the property
and are thought to act as a post mineralization cap rock, thereby indicating an
Early to Mid Tertiary (Paleocene to Eocene) age for gold mineralization at San
José de Gracia.
 
 Geologic
Structure
 
 Detailed
mapping within the project area has defined several stages of deformation,
beginning with compression during the Laramide Orogeny which affected the
Paleozoic basement and formed flat-lying reverse faults, which have been
reactivated as conduits for gold-bearing fluids in the La Prieta trend (Table
2).  Extension in Tertiary time lead to the development of second order
south, southwest and southeast trending structures, which formed the major
structural orientations for mineralization at San José de Gracia.  The
latest phase of deformation is characterized by late-stage extension and
southwest tilting.
 
 Mineralization &
Alteration
 
 High
grade gold mineralization at San José de Gracia is hosted within andesite and
rhyodacite of the LVS and underlying Paleozoic sediments as fault breccia veins
and crackle breccias that exhibit multiple stages of reactivation and fluid
flow, as evidenced by crustiform/colloform textures and cross cutting veins.
 Locally, veins exhibit sharp, clay gouge hangingwall and footwall contacts
with slickensides, indicating reactivation of structurally-hosted veins
subsequent to mineralization.  Gold grades can also be carried within the
mineralized halo adjacent to the principal veins as quartz-chlorite stockwork.
 In addition to vein-hosted mineralization, broad zones of un-mineralized
clay alteration, developed southwest of the main mineralized trends, may overlie
lower-grade, disseminated gold mineralization at depth.
    19
 
 Alteration
at San José de Gracia is laterally and vertically zoned from discrete zones of
silicification to broad zones of illite to clay alteration with increasing
elevation and/or distance from the main feeder structures.  Faulting and
tilting of the mineralization system has affected the surface distribution of
alteration and in general has exposed deeper portions of the system in the
northeast and exposed shallower, more distal portions of the hydrothermal system
in the southwest part of the property.
 
 Six
principal mineralized trends have been identified at San José de Gracia, from
south to north these consist of the:
 
 1.
              La Purisima Ridge
      trend;
 2.
              Palos Chinos
      trend;
 3.
              La Parilla to Veta Tierra
      trend (La Union);
 4.
              San Pablo
      trend;
 5.
              La Prieta trend,
      and
 6.
              Los Hilos to Tres Amigos
      trend.
 
 Recent
Activity
 
 Additional
information regarding the San Jose de Gracia property, and all results of recent
drilling activity can be viewed at the company’s website at www.dynaresource.com.
Mineralized Intercepts of the core drilling is reported in an “SJG Drill
Intercepts Summary File”, and attached to the Company’s Form 10 / K. As Exhibit
99.1   Highlights of drilling activity by target area is
described in Item 7, Management’s Discussion and Analysis.
 
 Lab
 
 A field
laboratory is maintained within the camp facility.  The Company
utilized the lab for Assaying services during its production
activities.  Assays were performed by company personnel for mined ore,
feed ore, gravity and flotation concentrates, and tailings.  The
current status of the lab and equipment is care and maintenance.  The
Company anticipates utilizing the lab facility in the future for providing quick
check assays to support the exploration works.
 
 Item
3.   Legal Proceedings
 
 The
Company is not involved in any legal proceedings.
 
 Item
4.  Submission of Matters to a Vote of Security Holders
 
 On June
20, 2008, at the annual meeting of the shareholders, the following directors of
the corporation were re-elected though 2011, in coordination with the provisions
of the Earn In Agreement:
 
 K.D.
Diepholz - Chairman / CEO;  Charles Smith - Chief Financial
Officer;
 Melvin
Tidwell - Director;
  20
  PART
II
 
 Item
5.   Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
 
 The
Company is organized under the laws of Delaware, and its common stock is traded
on the “pink sheets” under the symbol "DYNR".  The following table sets
forth, for the periods indicated, the high and low bid quotations which set
forth reflect inter-dealer prices, without retail mark-up or mark-down and
without commissions; and may not reflect actual transactions.  No cash
dividends on the Company common stock have been declared or paid since the
Company's inception and no dividends are anticipated in the future. The Company
had approximately 550 shareholders at December 31, 2008.
 
 
 Calendar
      Quarter Ending
                High
                LowMarch
      31, 2007
                0.05
                0.25June
      30, 2007
                2.05
                1.50September
      30, 2007
                3.60
                2.40December
      31, 2007
                2.90
                0.60March
      31, 2008
                3.75
                3.00June
      30, 2008
                3.80
                3.00September
      30, 2008
                3.50
                2.75December
      31, 2008
                3.00
                2.30
 
 Item
6.   Selected Financial Data
 
 Not
required for smaller reporting companies.
 
 
 Item
      7.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
 
 FORWARD-LOOKING
STATEMENTS
 
 This
annual report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, which we refer
to in this annual report as the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, which we refer to in this annual
report as the Exchange Act. Forward-looking statements are not statements of
historical fact but rather reflect our current expectations, estimates and
predictions about future results and events. These statements may use words such
as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project”
and similar expressions as they relate to us or our management. When we make
forward-looking statements, we are basing them on our management’s beliefs and
assumptions, using information currently available to us. These forward-looking
statements are subject to risks, uncertainties and assumptions, including but
not limited to, risks, uncertainties and assumptions discussed in this annual
report. Factors that can cause or contribute to these differences include those
described under the headings “Risk Factors” and “Management Discussion and
Analysis and Plan of Operation.”
 
 If
one or more of these or other risks or uncertainties materialize, or if our
underlying 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 should specifically consider the factors identified in this
annual report which would cause actual results to differ before making an
investment decision. We are under no duty to update any of the forward-looking
statements after the date of this annual report or to confirm these statements
to actual results.
 
   21
 
 During
the next twelve months, the Company will continue to explore the San Jose de
Gracia Property, through DynaMexico and operating subsidiaries in Mexico;
primarily through continued drilling programs in selected areas of the property.
Funds for exploration and drilling programs are expected to be contributed by
Goldgroup to DynaMexico, pursuant to the Earn In Agreement; and then expended in
accordance with approved plans and budget.  Corporate Costs and
overhead will be paid with funds on hand in Company accounts. The Company
believes it has sufficient cash on hand to pay expenses for the next two
years.
  
 Phase 1, II, III, and IV of
the Earn In / Option Agreement;   Activity and
Results
 
 In the
following summary, activity is described as phases of the Earn In Agreement,
Phases I, II, III and IV; and the phases do not correlate with the calendar
quarters.
 
 In Phase
I of the Earn In Agreement,   approximately 3,400 meters drilling were
completed in 22 core drill holes (SJG 07-01 to SJG 07-22) ; as well as
geochemical sampling and mapping, and data consolidation into Surpac
Software.
 
 In Phase
II of the Earn In Agreement, approximately 5,500 meters were completed in 23
core drill holes (SJG 07-23 to 07-45).
 
 In Phase
III of the Earn In Agreement, approximately 15,150 meters were completed in 56
core drill holes (SJG 08-46 to SJG 08-101).
 
 In Phase
IV, at December 31, 2008, approximately 5,950. meters were completed in 25 core
drill holes (through SJG 08-126).
 
 At
December 31, 2008, a total of 30,000 meters drilling were completed in 126 core
drill holes, financed pursuant to the Earn In Agreement. The “SJG Drill
Intercepts Summary File describes the intercepts of all core drill holes, and
including the previous drilling results of 1997-1998, attached hereto as Exhibit
99.1
 
 Drilling Highlights by
specific target area of SJG:
 
 San
Pablo:
 
 ·
              DDH
      07-07:  5 M. of 9.25 g/t., Including 2 M. of 22.5 g/t.; With
      Credits;  Extending recent Mining works at San Pablo by
      approximately 200 Meters South;
 
 ·
              DDH
      07-08:  7.2 M. of 2.64 g/t., Including 3.8 M. of 4.77 g/t.,
      Including 2.3 M. of 7.258g/t.;  in the vicinity of recent Mining
      works and Down Dip;
 
 ·
                DDH
      07-09:  2.1 M. of 7.2 g/t.;  And, Deeper Zone of 5.50
      M. of 4.94 g/t., Including 3.15 M. of 8.33 g/t.;  Extending
      recent Mining works approximately 110 Meters South, and Down Dip; with New
      Zone in Sediments;
 ·
              DDH
      07-12:  7.1 M. of 6.28 g/t., Including 4.2 M. of 10.19 g/t.,
      And, Including 1.1 M. of 15.63 g/t.; And, Including 1.6 M. of 11.292
      g/t.;  Extending recent Mining Works approximately 100 Meters
      Southeast, and Up Dip;
    22
  
 ·
              Drill
      Hole (DDH) 07-23 (70 M. South of 07-07), - 60 Degree Hole;  7 M.
      of 2.27 g/t., Including 1.4 M. of 9.963 g/t., with Copper
      Credits;
 
 ·
              DDH
      07-26 (60 M. North, 30 M. East of 07-07),  60 Degree
      Hole;  3.7 M. of 2.45 g/t. (3.55 g/t. AU Equivalent), Including
      1.9 M of 4.054 g/t.;  And, 8.4 M. of 8.43 g/t., Including 4.1 M.
      of 16.82 g/t., with Copper Credits, And, Including 1.9 M. of 34.433
      g/t.;
 
 ·
              DDH
      07-27 (130 M. West of 07-26), Vertical Hole;  6.1 M. of 13.16
      g/t. (15.40 g/t. AU Equivalent), Including 3.8 M. of 19.25 g/t., And
      Including 1.95 M. of 21.789 g/t., Including 1.8 M. of 17.646
      g/t.;
 
 ·
              DDH
      07-28 (50 M. North of 07-27);  - 60 Degree Hole;  5.3
      M. of 1.93 g/t. (2.29 g/t. AU Equivalent), Including 2.3 M. of 3.902 g/t.,
      with Zinc Credits, Including 1.1 M. of 4.839
  g/t.;
 
 ·
              DDH
      07-29 (Same Location as 07-28, Vertical Hole);  1.2 M. of
      6.331g/t., with Copper Credits; 1.7 M. of 26.235 g/t., with Copper
      Credits;  And, 1.4 M. of 2.707
g/t.;
 
 ·
              DDH
      07-30 (70 M. South, 20 M. West of 07-27, Vertical Hole)  1.6 M.
      of 5.94 g/t. (6.50 g/t AU Equivalent), with Copper and Zinc
      Credits;  .9 M. of 4.26 g/t. (6.35 g/t. AU Equivalent), with
      Copper Credits;
 
 ·
              DDH
      07-31 (Same Location as 07-30; - 60 Degree Hole);  8.30 M. of
      48.24 g/t., Or, 7.5 M. of 53.98 g/t., with Copper and Zinc
      Credits;  Including 5.35 M. of 75.695 g/t., with Copper and Zinc
      Credits;  Including 3.8 M. of 104.01 g/t., with Copper and Zinc
      Credits;  Including 1.5 M. of 233.613 g/t., with Copper and Zinc
      Credits;
 
 ·
              DDH
      07-34 (Same Location as 07-04;  50 M. North, 10 M. East of 07-09
      and 10);  Appears to be the North Limit of SP Ore Shoot;
      Vertical Hole);  2.2 M. of 1.028
g/t.;
 
 ·
              DDH
      08-48 (Approx. 30 M. S., 125 M. W. of 08-27);  13.60 M. of 3.19
      g/t., Or, 11.04 M. of 3.840 g/t.; Including 3.68 M. of 6.490 g/t.; and
      Including 3.68 M. of 6.80 g/t.; And Including 1.84 M. of 7.758
      g/t.;  with Copper
Credits;
 
 ·
              DDH
      08-51 (Approx. 100 M. West, 10 M. South of 07-30/31);  14.20 M.
      of 14.79 g/t., Including 10.78 M. of 19.44 g/t.; Or Including 9.05 M. of
      22.95 g/t.;  And, Including 3.50 M. of 42.32
      g/t;  with Copper
Credits;
 
 ·
              DDH
      08-60 (Approx. 20 M. N., 85 M. W. of 08-51);  9 M. of 5.02 g/t.,
      Including 7.1 M. of 6.27 g/t., And, Including 2.2 M. of 17.315 g/t and
      Including 1 M. of 26.8 g/t.;  with Copper
    Credits;
 
 ·
              DDH
      08-89 (Approx. 115 M. W., 15 M. S. of 07-09);  3.8 M. of 2.64
      g/t., Including 1.3 M. of 4.520
g/t;
    23
 
 ·
              DDH
      08-90 (Approx. 15 M. W., 55 M. S. of 08-89);  6.7 M. of 3.564
      g/t, Including .6 M. of 17.870 g/t; Including .6 M of 7.210
      g/t;  With Credits;
 
 ·
              DDH
      08-91 (Approx. 15 M. W., 55 M. S. of 08-90);  .2 M. of 17.530
      g/t.;
 
 ·
              DDH
      08-92 (Same Location as 08-51;  75 Degree
      Hole;  Approx. 15 M. W., 55 M. S. of 08-91);  2.3 M.
      of 2.1 g/t.;  And, 4.9 M. of 3.14 g/t., Including .4 M. of 31.94
      g/t;  And, .5 M. of 14.719
g/t.;
 
 ·
              DDH
      08-93 (Same Location as 08-56; 60 Degree Hole;  Approx. 15 M.
      W., 55 M. S. of 08-92);  5.8 M., Including .4 M of 35.770
      g/t.;
 
 ·
              DDH
      08-96 (Approx. 25 M. N., 70 M. W. of 08-60);  2.1 M. of 2.22
      g/t., Including .55 M. of 4.750
g/t;
 
 ·
              DDH
      08-97;  (Approx. 175 M. W. of 08-51, 60 Degree
      Hole);  4.3 M. of 7.71 g/t. (8.89 g/t. AU Equivalent), Including
      2.78 M. of 12.927 g/t., Including .6 M. of 18.724 g/t;  and
      Including .9 M. of 15.2817 g/t.;  with Copper and Zinc
      Credits;
 
 ·
              DDH
      08-98 (Approx. 165 M. W. of 08-56;  75 Degree
      Hole);  .5 M. of 2.165
g/t.;
 
 Company
Management believes the recent drilling at San Pablo has defined a sizeable
Inferred Resource, using a Cut Off grade of 2 g/t., with an average grade of 10
g/t.; which is expected to be further defined into a mineable
resource.  Infill drilling and further extensions to San Pablo area
are projected for 2009 – 2010.  A 43-101 compliant Technical Report
and estimate of Resource is expected in 2009.
 
 Northwest Down Dip of Tres
Amigos
 
 ·
              DDH
      08-110 (Approx. 15 M. S., 130 M. W. of  1997 Drill Hole “97-13”
      – Which Reported 27.5 M. of 9.94 g/t., Including 4.5 M. of 54.26 g/t.,
      And, Including 2 M. of 85.72 g/t.); Vertical Hole; 3.40 M. of 1.72
      g/t.;  1.40 M. of 1.829 g/t.;  2.80 M. of 2.34 g/t.
      (2.68 AU Equivalent); Including .70 M. of 8.6 g/t.; And, 1.8 M. of 2.63
      g/t. (2.95 g/t. AU Equivalent);
 
 ·
              DDH
      08-111(Same Location as Hole 08-110);  75 Degree Hole; 1.50 M.
      of 1.008 g/t. (1.10 g/t. AU Equivalent);  And, 4.8 M. of 1.89
      g/t. (2.56 g/t. AU Equivalent); Including .90 M. of 5.86
    g/t.;
 
 ·
              DDH
      08-112 (Same Location as Hole 08-111); 75 Degree Hole; 2.80 M. of 1.61
      g/t. (2.06 g/t. AU Equivalent);  And, .70 M. of .752 g/t. (1.62
      g/t. AU Equivalent).;
 
 ·
              DDH
      08-113 (Approx. 45 M. S., 30 M. E. of Hole 08-112); Vertical Hole; 1.60 M.
      of 13.66 g/t. (14.17 g/t. AU Equivalent); And, 6.30 M. of 1.99 g/t. (2.19
      g/t. AU Equivalent); Including 3.10 M. of 3.45
  g/t.;
 
 ·
              DDH
      08 -114 (Same Location as Hole 08-113); 75 Degree Hole; 5.3 M. of 2.91
      g/t. (3.13 g/t. AU Equivalent); including 1.7 M. of 8.32
    g/t.;
    24
  
 ·
              DDH
      08-115 (Approx. 15 M. S., 20 M. E. of Hole 08-114; Vertical Hole; 1.5 M.
      of 3.75 g/t (4.60 AU Equivalent);  And, 9.40 M. of 4.07 g/t.
      (4.33 g/t. AU Equivalent); Including 5.7 M of 6.59 g/t.; And, Including
      2.1 M. of 9.48 g/t.;
 
 ·
              DDH
      08-116 (Same Location as Hole 08-115); 75 Degree Hole; 2.1 M of 2.96 g/t.
      (3.79 g/t. AU Equivalent);  And, 9.80 M. of 7.74 g/t. (8.02 g/t.
      AU Equivalent);  Including 3.3 M. of 21.28 g/t.; And, Including
      1.6 M. of 33.859 g/t.;
 
 Southwest Tres Amigos
towards La Cecena;  Extending Tres Amigos SW towards LA
Cecena:
 
 ·
              DDH
      08-117 (Approx. 10 M. S., 30 M. W. of  1997 Drill Hole
      “97-07”;  Which reported 10 M. of 3.4 g/t.; Including 2.1 M. of
      6.823 g/t.;  And, 14.3 M. of 2.41 g/t.;  Including 2.3
      M. of 8.669 g/t.);  (And, Approx. 100 M. S. of Hole
      08-116);  (And, approximately 175 M. S., and 90 M. W. of Drill
      Hole 97-13); 60 Degree Hole; 1.7 M. of 4.674 G/T. (5.23 g/t. AU
      Equivalent); And, 3.70 M. of 2.63 g/t. (3.01 g/t. AU
      Equivalent);
 
 ·
              DDH
      08-118 (Approx. 45 M. S., 10 M. W. of Hole 08-117);  75 Degree
      Hole; 5.46 M. of 4.25 g/t. (7.85 g/t. AU Equivalent);  Including
      2. M of 7.20 g/t., And Including 1. M. of 9.6 g/t;  And, .83 M.
      of 1.169 g/t. (1.87 g/t. AU Equivalent);  And, 3.13 M. of 4.97
      g/t. (6.33 g/t. AU Equivalent);  Including 1.08 M. of 13.415
      g/t.;  And, 1.2 M. of 2.214
g/t.;
 
 1997 – 1998 Drilling at Tres
Amigos:
 
 ·
              ’97-01:  7
      M. of 3.66 g/t., Including 2.5 M. of 7.15 g/t., and Including 1 M. of
      11.09 g/t.,;
 ·
              ’97-02:  18.5
      M. of 2.31 g/t., Including 10 M. of 3.86 g/t., and Including 3.5 M. of
      6.85 g/t., and Including 1.5 M. of 12.23
g/t.;
 ·
              ’97-03:  4.
      M. of 4.13 g/t., Including 2 M. of 7.22
g/t.;
 ·
              ’97-05:  1.9
      M. of 3.51 g/t.;
 ·
              ’97-06:  1.85
      M. of 6.47 g/t.;
 ·
              ’97-07:  10
      M. of 3.42 g/t., Including 2.15 M. of 6.82 g/t.;  2.34 M. of
      8.67 g/t.;
 ·
              ’97-09:  1.5
      M. of 4.15 g/t.; And, 2 M. of 13.53
g/t.;
 ·
              ’97-10:  7.6
      M. of 2.36 g/t., Including 1.5 M. of 10.28
g/t.;
 ·
              ’97-11:  9.5
      M. of 2.83 g/t., Including 1.5 M. of 15
g/t.;
 ·
              ’97-12:  3.5
      M. of 4.75 g/t., Including 1.7 M. of 8.58 g/t.;  And, 3.5 M. of
      2.44 g/t.;
 ·
              ’97-13:  27.5
      M. of 9.66 g/t.; Including 4.5 M. of 54.26 g/t., and Including 2. M. of
      85.72 g/t.;
 ·
              ’97-14:  1.2
      M. of 3.59 g/t.;
 ·
              ’97-35:  16.5
      M. of 2.11 g/t., Including 6. M. of 8.84 g/t., and Including 2 M. of 14.42
      g/t.;
 ·
              ’97-36:  2
      M. of 3.28 g/t.; 3.6 M. of 4.04 g/t., Including 2 M. of 6.41
      g/t.;
 ·
              ’97-37:  1.3
      M. of 11.97 g/t.;  And, 2. M. of 10.43
  g/t.;
 ·
              ’97-39:  6.8
      M. of 13.2 g/t., Including 3 M. of 29.5 g/t., Including 1.5 M. of 51.47
      g/t.;
 ·
              ’97-40:  2.
      M. of 14.88 g/t.;  2 M. of 10.81 g/t.;  4 M. of 5.92
      g/t.;  4 M. of 7.21 g/t.;
 ·
              ’97-41:  6
      M. of 3.88 g/t., Including 2 M. of 5.15
g/t.;
 ·
              ’97-42:  2.
      M. of 5.17 g/t.;  28.8 M. of 2.11 g/t., Including 4.5 M. of 5.06
      g/t.;
 ·
              ’97-43:  1.3
      M. of 4.23 g/t.;
 ·
              ’97-44:  2.
      M. of 7.78 g/t.;  2 M. of 5.18 g/t.;  1.3 M. of 7.06
      g/t.;
 ·
              ’97-45:  2
      M. of 31.35 g/t.;  2 M. of 12.32
g/t.;
 ·
              ’97-47:  7.06
      M. of 7.51 g/t., Including 1.89 M. of 6.66 g/t., and Including 1.55 M. of
      23.10 g/t.;
 ·
              ’97-50
      (La Cecena):  2 M. of 5.02g/t.;  5 M. of 3.92 g/t.,
      Including 2. M. of 8.53 g/t.;
    25
  
 Company
Management believes the 1997 – 1998 Drilling at Tres Amigos, and the recent
drilling in 2008, has defined an sizeable Inferred Resource at Tres Amigos which
will be further defined into a mineable resource.  Infill drilling and
further extensions to Tres Amigos are projected for 2009 – 2010.
 
 La Cecena (Approximately 250
Meters Southwest of the NE Tres Amigos Area):
 
 ·
              DDH
      08-102 ( Approx. 28 M. South, 36 M. East of Drill Hole 97-50; Which
      reported 11 M. of 2.78 g/t. (3.32 g/t. AU Equivalent); Including 2 M. of
      5.019 g/t., And, Including 2 M. of 8.526 g/t.);  60 Degree
      Hole;  7.87 M. of 2.75 g/t. (3.02 g/t. AU
      equivalent);  Including 2.54 M. of 6.49 g/t.;  And,
      Including .58 M. of 11.527 g/t.;   And, 3.25 M. of 3.91 g/t
      (4.16 AU Equivalent); Including 1.50 M of 7.927
  g/t.;
 
 ·
              DDH
      08-103 (Approx. 21 M. S., 42 M. W. of Drill Hole 08-102); Vertical Hole;
      1.2 M. of 4.911 g/t.; And, 1.1 M of 2.564
  g/t.;
 
 ·
              DDH
      08-104 (Approx. 49 M. S., 13 M. W. of Hole 08-103); Vertical Hole; 2.8 M
      of 13.70 g/t. (16.24 g/t. AU Equivalent);  Including 1.4 M. of
      26.96 g/t.;
 
 Company
Management believes the La Cecena will be further defined as the continuation of
the NE Tres Amigos, thereby extending NE Tres Amigos 250 Meters to the
southwest.
 
 La
Purisima:
 
 ·
              Drill
      Hole (DDH) 07-21: 8 M. of 20.67 g/t., Including 6 M. of 26.89 g/t.,
      Including 2.1 M. of 76.33 g/t.;  extending the La Purisima
      (between the Anglo and Rosario Mines) Down Dip by approximately 50
      Meters;
 
 ·
              DDH
      07-35 (60 M. East, 180 M. South of 07-21); Vertical Hole;  4.4
      M. of 1.54 g/t., Including 2.2 M. of 2.736 g/t.;  And, 1.75 M.
      of 1.74 g/t;
 
 ·
              DDH
      07-36 (Same Location as 07-37);  -75 Degree
      Hole;  1.42 M. of 4.319
g/t.;
 
 ·
              DDH
      07-37 (20 M. East, 70 M. South of 07-21); Vertical Hole;  4.45
      M. of 3.07 g/t., Including 2.2 M. of 5.004 g/t.;  Drill Hole
      Stopped in 5.004 g/t. Mineral;
 
 ·
              DDH
      07-39 (160 M. East of 07-21);  Vertical Hole; 2.05 M. of 2.479
      g/t.;  And, 4.2 M. of 8.55 g/t., Including 3.25 M. of 10.89
      g/t.; And, Including 1.90 M. of 16.675
g/t.;
 
 ·
              DDH
      07-40 (60 M. North, 10 M. West of 07-21);  -75 Degree
      Hole;  .8 M. of 2.43
g/t.;
 And,
      1.8 M. of 1.763 g/t.;
 
 ·
              DDH
      07-42 (150 M. North, 10 M. West of 07-21);  Vertical
      Hole;  5.9 M. of 1.85 g/t., Including 2.2 M. of 3.316
      g/t.;  And, 1.1 M. of 3.475
g/t.;
 
 ·
              DDH
      08-63 (Approx. 55 M. E., 470 M. S. of 07-21);  .4 M. of 11.694
      g/t.;
    26
 
 ·
              DDH
      08-68 (Same Location as 07-35;  60 Degree Hole;  And,
      Approx. 60 M. E., 180 M. S. of 07-21);  1.6 M. of 21.849 g/t.,
      Including  1 M. of 29.644
g/t;
 
 ·
              DDH
      08-70 (40 M. E., 45 M. S. of 07-36);  11.1 M. of 1.83 g/t.,
      Including 2.3 M. of 5.190 g/t., And, Including 1.10 M. of 9.434 g/t.; And,
      1.50 M. of 4.15 g/t., Including .25 M. of 16.274 g/t.;  And, .2
      M. of 4.292 g/t.,  Including Zinc
  Credits;
 
 ·
              DDH
      08-82 (Approx. 40 M. W., 160 M. S. of 07-21);  1.70 M. of 18.218
      g/t.;
 
 ·
              DDH
      08-84 (Approx. 55 M. E., 155 M S. of 08-82);  .36 M. of 40.059
      g/t.;   .17 M. of Zinc
Credits;
 
 La
Union:
 
 ·
              DDH
      08-61 (Approx. 30 M. E., 360 M. S. of 08-51 (San
      Pablo);  Approx. 75 M. W., 380 M. S. of 08-31 (San
      Pablo);  60 Degree Hole;  4.5 M. of 1.66 g/t. (2.85
      g/t AU Equivalent), Including 1.10 M. of 2.446 g/t.;  And,
      Including 1.3 M. of 3.183 g/t.; And, Including .4 M. of 8.774
      g/t;  And, 1.5 M. of 2.131 g/t;  Including Copper
      Credits;
 
 ·
              DDH
      08-72 (Same Location as 08-61;  Vertical Hole);  4.3
      M. of 1.13 g/t. (1.68 g/t. AU Equivalent), Including 1.10 M. of 2.475 g/t.
      and Including 1 M. of 1.635 g/t.;
 
 ·
              DDH
      08-76 (Approx. 45 M. S., 65 M. W.  of 08-61);  4.8 M.
      of 16.02 g/t. (17.44 g/t. AU Equivalent), Including 2.8 M. of 27.180 g/t.,
      or Including 2 M. of 37.60 g/t., And Including 1.40 M. of 51.340 g/t., and
      Including .7 M. of 75.560 g/t;  With Copper and Zinc
      Credits;  And, 2.7 M. of 1.69 g/t. (2.08 g/t. AU Equivalent),
      Including .3 M. of 7.875 g/t.;
 
 ·
              DDH
      08-80 (Approx.. 115 W., 110 M. S. of 08-76);  3.10 M. of 4.801
      g/t., Including 1.50 M. of 7.372 g/t.;  And, 1.10 M. of 3.169
      g/t.;
 
 ·
              DDH
      08-120 (Approx. 60 M. N. of Drill Hole 08-76; Note Intercepts below); 60
      Degree Hole; 1.65 M. of 2.179 g/t.; And, .42 M. of 1.93
    g/t.;
 
 ·
              DDH
      08-122 (Approx. 10 M. S., 128 M. W. of Hole 08-76);  (Approx. 70
      M. S., 85 M. W. of Hole 08-120;  60 Degree Hole; .50 M. of 2.076
      g/t.; And, .50 M. of 24.06 g/t. (25.07 g/t. AU
      Equivalent);  And, .95 M. of 1.94
  g/t.;
 
 Palos
Chinos:
 
 ·
              DDH
      07-02:  .75 M. (3/4 of 1. M) of 16.5 g/t.;  Extending
      Historic Workings approximately 100 Meters South and Down
      Dip;  and approximately 50 meters south of Prior Drill Hole
      ’97-63;
 
 ·
              DDH
      07-16:  7.7 M. of 1.86 g/t., Including 4.35 M. of 3.09 g/t.,
      Including 2.15 M. of 5.2 g/t.;  Drilled from Within 50 Meters of
      prior Drill Hole ’97-63 (17.30 M. of 2.81 g/t., Including 2.7 M. of 8.454
      g/t., And Including .7 M. of 9.255
g/t.;);
 
 These
drilling Results obtained through Phases I, II, III, and continuing in Phase IV
confirm extensions of mineralization, down dip of historical workings at SJG,
with confirmation of high grade gold (as measured in grams per ton) which are
consistent with historical and recent production. Specifically, San Pablo, La
Purisima, Tres Amigos, La Cecena, and La Union areas have reported significant
results. (See description of drilling highlights by target area
above).  Further Phase 4 drilling will be targeted at Tres Amigos, La
Prieta, La Union, La Purisima, and San Pablo. In 2009, the Company expects to
commission a 43-101 compliant report of the “Inferred Resources” defined at
SJG.
    27
 
 Current Activity and Future
Plans
 
 The
Company expects to retain Zonge Engineering and Research, Tucson, Az., to
conduct Magnetic and IP Survey work in the first quarter 2009 at
SJG.  Subsequently, further drilling in expected to continue to
further increase and define inferred resources.
 
 Concessions Area of
District
 
 In
addition to the drilling and exploration activity, 3 additional Mining
Concessions have been claimed, with title applications filed.  At the time
that Title of these Concessions is obtained by DynaMexico, the 3 Concessions
acquisitions will extend the SJG District by approximately 95,000 Hectares (to a
Total of + 99,500 Hectares).
 
 Employees and
Consultants
 
 The
Company maintains approximately 28 employees. Three employees are corporate
officers and work in the corporate office in the United States.  Other
employees are maintained through DynaOperaciones in Mexico.  The
company also retains legal counsel in the US, legal counsel in Mexico, and it
retains as consultants a senior geologist and junior geologist in
Mexico.
  Fourth
Quarter
  In the
fourth quarter of 2008, drill holes #110 – 126 were drilled for a total of 3,938
meters. In the year ended December 31, 2008, approximately $2,650,000 was spent
on drilling compared with approximately $690,000 in the year ended December 31,
2007.
 
  Revenues and
Expenses:
  The
Company conducted a mining and milling operation from March 2003 through June,
2006. This activity was suspended in order to focus efforts on the exploration
of the vast SJG District. The Company reported no revenue in 2008 and 2007. The
Company does not expect any revenues from mining and production in
2009.
  The
Company’s production and exploration costs were $4,490,898 and $2,097,378 for
the years ended December 31, 2008 and 2007 respectively. The increase in
expenses in 2008 was a result of the increased exploration work financed by the
Earn In / Option Agreement.
   The
Company's operating expenses included two categories, a) depreciation and
amortization, and b) general and administrative expenses. The general and
administrative expense was $1,685,998 for the year ended December 31, 2008
compared to $1,122,903 for the year ended December 31, 2007. Included in these
amounts was depreciation and amortization of $161,006 and $146,391 in 2008 and
2007 respectively and common stock issued for services of $430,101 and $109,587
in 2008 and 2007 respectively. The increase was predominantly due to common
stock issued for services.
    28
   Other
income and expenses included interest income for the year ended December 31,
2008 of $3,066 compared with $6,627 for the year ended December 31, 2007.
Additionally, we had other income of $2,104 in 2008 compared to zero in
2007.
  Minority Earnings in
Subsidiary.
  Under the
terms of the Earn-In Agreement, Goldgroup Resources, Inc. (Goldgroup), as of
December 31, 2008, has earned a 25% interest in DynaResource de Mexico, S.A. de
C.V. (DynaMexico). Since Goldgroup owned both 15% and 25% of DynaMexico
throughout 2008, the applicable portion of the earnings or loss is attributable
to Goldgroup. In the year ended December 31, 2008 the portion of the loss
attributable to Goldgroup was $ 934,734.  In 2007, Goldgroup earned
the initial 15% interest in DynaMexico at the end of December so no loss was
attributed to Goldgroup in the year ended December 31, 2007.
 
 Currency Translation Income
/ Loss
 
 The
currency translation loss was $1,825,230 and $7,825 in the years ended December
31, 2008 and 2007 respectively. This charge is caused by the fluctuation of the
exchange rate between the United States dollar and the Mexican peso. It was
significant in the year 2008 since the Mexican peso lost a lot of value against
the dollar in 2008.
  The
Company’s net loss for the year ended December 31, 2008 and 2007 respectively.
The increase in the loss is attributed to the increase in exploration activities
and costs.
  Plan of
Operation
  The Plan
of operation for the next twelve months includes the continuation of the
drilling and exploration programs at San Jose de Gracia.  Under the
Earn In agreement, Phase IV exploration activities continue, with a Budget of
approximately $ 12 M. USD to be expended over the next 24
months.  Financing from the Earn In Agreement provides for 100% of the
current exploration and related costs at SJG.  The Company is required
to fund its general and administrative expenses in the US.
  The
Company does not currently generate revenue.  Its only sources of
capital are (1) exploration and related funds provided by Goldgroup to
DynaMexico under the Earn In Agreement; (2) cash on hand; and (3) any funds
available through financings. The Company believes that cash on hand is adequate
to fund our ongoing general and administrative expenses through 2010. The funds
contributed by Goldgroup to DynaMexico are expected to finance the exploration
activities at SJG through 2010.  The Company may seek additional
capital funding during 2010 or beyond depending on market conditions, results of
drilling activities, plans for production or continuing exploration activities,
and other circumstances.
  Capital
expenditures
  The
Company’s primary activities relate to the exploration of SJG
property.  100% of the exploration and related costs are provided by
Goldgroup Resources, Inc. to DynaMexico pursuant to the Earn In / Option
Agreement. Exploration drilling continues at SJG in order to further define
mineralization and ore bodies and resources.  Drilling services are
contracted by MinerasDyna, the operating entity, to drilling contractors. The
Company does not foresee significant capital purchases in 2009.  Any
capital purchases necessary for the exploration activity are the responsibility
of DynaMexico, with costs accounted to the segregated exploration account and
financed by Goldgroup.  Miscellaneous costs could be paid from funds
on hand of DynaMexico, MinerasDyna, DynaOperaciones, or DynaResource,
Inc.
    29
   Liquidity and Capital
Resources
  As of
December 31, 2008, the Company maintained working capital of $ 2,588,745,
comprised of current assets of $ 2,691,848 and current liabilities of $103,103.
This represents an increase of $331,251 from the working capital maintained by
the Company of $ 2,257,494 at December 31, 2007.
  Net cash
used in operations for the year ended December 31, 2008 increased to $5,610,756
from $5,035,204 for the year ended December 31, 2007 The increase was due to the
increase in expenses for exploration, which includes drilling and all support
services.
  Cash used
for purchase of fixed assets was $130,170 and $82,132 for the years ended
December 31, 2008 and 2007 respectively.
  Cash
provided by financing activities for the year ended December 31, 2008 was
$7,845,052 compared to $4,303,389 for the year ended December 31, 2007. The main
category changes include Goldgroup deposits under the Earn In / Option Agreement
of $4,800,000 and $3,043,004 for 2008 and 2007 respectively and comprehensive
income of $1,533,082 and $122,571 for 2008 and 2007 respectively.
  Sampling
Process
 
 The
geological data contained in this report was verified by an appropriate quality
control person using industry standard quality controls and quality assurance
protocols utilized in exploration activities. Standard reference samples and
various duplicates are inserted in each batch of assays. Drill core samples are
cut by saw on site and samples splits are prepared for shipment, sealed and then
shipped for assaying. Samples are sent to a certified assayer (International
Plasma Laboratory, Vancouver, BC.) and analyzed for gold by fire assay and for
silver and 34 other trace and major elements in accordance with standard
industry practices.
 
 
 Item
7A.   Quantitative and Qualitative Disclosures About Market
Risk
 
 Not
required for smaller reporting companies.
 
 
 Item
8. Financial Statements and Supplementary Data
 
 Incorporated
into and forming an integral part of this Form 10-K are the audited financial
statements for the Company for the years ended December 31, 2008 and 2007. The
financial statements as of December 31, 2008 and 2007, of the Company included
in this Form 10-K have been audited by The Hall Group, CPAs, independent
registered public accountants, as set forth in their report. The financial
statements have been included in reliance upon the authority of them as experts
in accounting and auditing.
  Financial
Statements:
  Report of
Independent Registered Public Accounting Firm
    30
   Consolidated
Balance Sheets as of December 31, 2008 and 2007.
 
 Consolidated
Statements of Operations for the Years Ended December 31, 2008 and 2007 and
Cumulative Since Reentering the Exploration Stage (January 1, 2007) through
December 31, 2008.
 
 Consolidated
Statement of Changes in Stockholders’ Equity for the Years Ended December 31,
2008 and 2007 and Cumulative Since Reentering the Exploration Stage (January 1,
2007) through December 31, 2008.
 
 Consolidated
Statements of Cash Flows for the Years Ended December 31, 2008 and 2007 and
Cumulative Since Reentering the Exploration Stage (January 1, 2007) through
December 31, 2008.
 
 Notes to
the Consolidated Financial Statements for the Years Ended December 31, 2008 and
2007.
 
 
 Item
9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
 
 None.
 
 
 Item
9A.  Controls and Procedures
 
 Evaluation
of Disclosure on Controls and Procedures
 
 We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of December 31, 2008.  This
evaluation was accomplished under the supervision and with the participation of
our chief executive officer / principal executive officer, and chief financial
officer / principal financial officer who concluded that our disclosure controls
and procedures are effective to ensure that all material information required to
be filed in the annual report on Form 10-K has been made known to
them.
 
 For
purposes of this section, the term disclosure controls and procedures means
controls and other procedures of an issuer that are designed to ensure that
information required to be disclosed by the issuer in the reports that it files
or submits under the Act (15 U.S.C. 78a et seg.) is recorded, processed,
summarized and reported, within the time periods specified in the Commission’s
rules and forms.  Disclosure, controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed in our reports filed under the Securities Exchange Act of 1934,
as amended (the "Act") is accumulated and communicated to the issuer's
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
 
 Based
upon an evaluation conducted for the period ended December 31, 2008, our Chief
Executive and Chief Financial Officer as of December 31, 2008 and as of the date
of this Report, has concluded that as of the end of the periods covered by this
report, we have identified no material weakness in our internal
control.
    31
 
 Management’s Annual Report
on Internal Control Over Financial Reporting
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control
system was designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes, in accordance with generally accepted accounting principles in the
United States of America.  Our internal control over financial
reporting includes those policies and procedures that (i) pertain to the
maintenance records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management of the Company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the Company’s assets that could have a material effect on
the financial statements.
 
 Because
of inherent limitations, a system of internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate due to change in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
 
 Our
management conducted an evaluation of the effectiveness of our internal control
over financial reporting using the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control—Integrated Framework at December 31, 2008.   Based on its
evaluation, our management concluded that, as of December 31, 2008, our internal
control over financial reporting was effective and contained no material
weaknesses.  A material weakness is a deficiency, or a combination of
control deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of the Company’s
annual or interim financial statements will not be prevented or detected on a
timely basis.
 
 This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to the attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only management’s report in this annual
report.
 
 Changes in Internal Controls
over Financial Reporting
 We have
not yet made any changes in our internal controls over financial reporting that
occurred during the period covered by this report on Form 10-K that has
materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
  
 Item
9A(T).  Controls and Procedures
 
 Not
required for smaller reporting companies.
 
 Item
9B.  Other Information
 
 None.
 
  32
  PART
III
 
 Item
10.     Directors, Executive Officers and Corporate
Governance
 
 The
following table lists the names and ages of the executive officers, directors
and key consultants of the Company.  The directors will continue to serve
until the next annual shareholders meeting, or until their successors are
elected and qualified.  Mr. Diepholz, Mr. Smith, and Mr. Tidwell have
been elected to serve through 2011, in conjunction with the terms and schedule
of the Earn In / Option Agreement.  All officers serve at the
discretion of the President, Chairman of the Board of Directors, and members of
the Board of Directors.
  Name
                
                Age
                
                Position
                
                Held
      SinceK.
      W. (K.D.) Diepholz
                  1303
      Regency Court
                  Southlake,
      Texas 76092
                
                51
                
                Chairman
      of The Board,
                  CEO,
      Treasurer
                
                May
      1995
                  May
      1997Charles
      Smith
                  709-B
      West Rusk #580
                  Rockwall,
      Texas 75087
                
                51
                
                Chief
      Financial Officer, Secretary and Director
                
                May
      2005Melvin
      E. Tidwell
                  4804
      Piccadilly Place
                  Tyler,
      Texas 75703
                
                63
                
                Director
                
                May
      1994Bradford
      J. Saulter
                  7618
      Straits Lane
                  Rowlett,
      Texas 75088
                
                47
                
                Vice
      President – Investor Relations
                
                May
      1998
  K.W. Diepholz -
Graduated Lake Land College, Southern Illinois University; Communications and
Business Emphasis; Regional Director - Fidelity Union Insurance and Investment,
Dallas, Texas (1980 -1983); President - KWD Properties Corporation, Mattoon,
Illinois (1983 - 1989); a privately-held Oil & Gas Exploration and
Development Company involved in all phases of The Oil & Gas Business, and
Various Types of Partnerships; Vice President - American Investment Retirement
Corporation, Phoenix, Arizona (1990 - 1991), Involved in Program Structuring for
Pension Accounts;  Vice President - Ideal Securities, Inc., Dallas, Texas
(1992);  Program Structuring and Marketing Management;  President - DP
Phoenix, a Real Estate Investment Company, Phoenix, Arizona (1991 -1992);
 Investment Program Structuring, Real Estate Acquisitions, General
Management;   Director:  Farm Partners, Inc., Dallas, Texas (1992
- Present);  General Management of this General Partner to Precious Metals
Limited Partnership; DP Group Ltd., Dallas, Texas (1993 - Present);
 President of this independent Marketing firm; Dynacap Group Ltd., Dallas,
Texas (1992 - Present);  President of this Consulting and Management firm,
directing the management of certain Limited Liability Investment Companies;
DynaResource, Inc. (f/k/a: West Coast Mines, Inc.), Dallas, Texas (1994 -
Present);  Chairman, President, Treasurer, and Director. Special skills in
the areas of Business Development, Project Planning, Corporate Financing,
Acquisition Analysis, Investment Program Interpretation and Structuring.
    33
 
 Charles Smith.
    Mr. Smith graduated from Boston University, Boston,
Massachusetts in 1979 and since that time has been a Certified Public Accountant
involved in all phases of business including audit and tax matters. He is a
consultant to various companies.  Mr. Smith’s business affiliations the
past five years follow:  Chief Financial Officer of DynaResource, Inc. –
May 2005 to present. Chairman of Dynacap Group, Ltd. - a consulting and
management firm - 1992 to the present. Sole proprietor as a Certified Public
Accountant - 1983 to the present. Sole officer and Director - MC Cambridge, Inc.
- a financial consulting firm - 1997 to present.
 
 Melvin E. Tidwell,
P.E. - Professional Engineer, registered in California in 1977; Control
Systems Engineer; Instrument Engineer on over 80 Projects Worldwide; Instrument
Startup Engineer on over 50 Projects Worldwide; Affiliated / Associated with
following Companies over the past 25 years: Weyerhaeuser Company, Howe-Baker
Engineers, LaGloria Oil & Gas Co., IWATANI Electronics (Japan), EQM
(Mexico), Kyodo Oxygen Co., Ltd. (Japan), Chin Yang Fine Chemical Co. (South
Korea), Hankuk Glass Mfg. Co. (South Korea), Hunt Oil Co., Liquid Carbonics Co.,
Celanese Mexicana (Mexico), Grain Power Tucumcari Ltd., Jetco Chemical Inc.,
Claiborne Gasoline Co., Conoco, Chevron, Metano Gas (now Exxon), Union Oil,
Texaco Angola, Petrofac, Alfurat (Syrian Oil Co.), Arco, Chevron / Placer Cego,
Tidwell & Associates;  with  Engineering / Management Experience
in the following Project Areas:  Startup & Engineering - $ 160 Million
Linerboard Paper Mill; Chief Instrument Engineer - chemical division;  DEA
Gas Treating & Sulfur Recovery Plant;  One Part / million H2 Plant;
 Startup Hydrogen Plants;  H2 / CO Cosorb Plant;  Startup H2 / CO
synthesis Gas Plant & Cold Box;  Startup Ethanol Plant;
 Specialties Chemicals Expansion - Foxboro 200 instruments;  Startup
& Calibration 75,000 BPD Crude Distillation Facility;  Instrument
Engineer - 1st Oxygen Enrichment Cope Unit;  Instrument Engineer, Startup
& checkout - 30 TPD Selectox SRU;  Instrument Engineer - Offshore Oil
& Gas Production Facility;  Lead Instrument Engineer - 60,000 BPD Oil
Production Facility;  Instrument Checkout, Calibration, and Inspection
prior to startup - Selectox Sulfur Units (Honeywell TDC 3000 DCS) (Foxboro 760
Electronics Controllers);  Startup Amine Plant and Sulfur Plant, and System
Engineering (Foxboro and Westinghouse PLC);  Instrument Engineer, Field
Startup and Checkout - CCR, HDS, MTBE, Hydrogen and Cryogenic Plants.
 Founder, President - Tidwell & Associates, a private engineering
consulting Firm (1993 to Present); Director – DynaResource, Inc. (f/k/a: West
Coast Mines, Inc.), Dallas, (1994 to present).
 
 Bradford J. Saulter -
Attended University of Texas, Austin, Texas; Marketing Department of Metagram,
Inc., a Dallas National Marketing Company; Regional Manager for Lugar, Lynch,
& Associates, A Dallas Financial Services Company, Involved in Sales &
Marketing of Various Investment Products; Independent Marketing Consultant;
Series 22 & 63 Securities License; Vice President / Marketing - Dynacap
Group Ltd. (1992 - Present); Director: Farm Partners, Inc. (1992 - Present),
Vice President – Investor Relations - DynaResource, Inc., Dallas, Texas (1995 to
present).
 
 To the
knowledge of the Company, no present or former director, executive officer, or
person nominated to become a director or executive of the Company, or
consultants to the Company has ever:
 
 1.)           Filed
a bankruptcy petition by or against any business of which such person was a
general partner or executive officer whether at the time of the bankruptcy or
with two years prior to that time;
    34
 
 2.)           Had
any conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses);
 
 3.)           Been
subject to any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities or banking activities; and,
 
 4.)           Been
found by a court of competent jurisdiction (in a civil action), the Commission
or the Commodity Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been reversed suspended
or vacated.
 
 
 Item
11.  Executive Compensation
 
 The
following officers received the following compensation for the years ended
December 31, 2008 and 2007. These officers do not have employment contracts with
the company.
 
 Name and principal position
                Year
                Salary
                Bonus
                Stock Awards
                Option Awards
                Nonequity incentive plan
      compensation
                Nonqualified deferred
      compensation
                All other compensation
                  *K.W.
      Diepholz
                  CEO,
      President
                2008
                  2007
                $180,000
                  $150,000
                None
                  None
                None
                  None
                None
                  None
                None
                  None
                None
                  None
                $167,500
                  $112,500Charles
      Smith
                  CFO,
      Secretary
                2008
                  2007
                $48,000
                  $24,000
                None
                  None
                None
                  None
                None
                  None
                None
                  None
                None
                  None
                None
                  $   2,500Bradford
      J. Saulter
                  VP
      – Investor Relations
                2008
                  2007
                $61,737
                  $60,000
                None
                  None
                None
                  None
                None
                  None
                None
                  None
                None
                  None
                $2,136.
                  $2,500.
 
 * The
Company paid consulting fees to Dynacap Group, Ltd. As disclosed in the
financial statements.  This remuneration was paid from the funds
received by Dynacap.
    35
 
 Option Awards
                  Stock AwardsName and principal position
                  Number of Securities Underlying Unexercised
      options (#) exercisable
                  Number of Securities Underlying Unexercised
      options (#) unexercisable
                  Equity incentive plan
awards
                  Option exercise price
                  Option expiration date
                  Number of  share awards that have not
      vestedK.W.
      Diepholz
                    CEO,
      President
                  250,000
                  None
                  None
                  $2.50
                  11/15/2009
                  NoneCharles
      Smith
                    CFO,
      Secretary
                  50,000
                  None
                  None
                  $2.50
                  11/15/2009
                  NoneMelvin
      Tidwell
                    Director
                  50,000
                  None
                  None
                  $2.50
                  11/15/2009
                  NoneBradford
      J. Saulter
                    VP
      – Investor Relations
                  25,000
                  None
                  None
                  $2.50
                  11/15/2009
                  None
 
 
 Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
 
 The
following table sets forth the amount and nature of beneficial ownership of each
of the executive officers and directors of the Company and each person known to
be a beneficial owner of more than five percent of the issued and outstanding
shares of the Company as of December 31, 2008.  The following table sets
forth the information based on 9,073,913 common shares issued and outstanding as
of December 31, 2008.
 
 COMMON
      STOCK
                                    Beneficial Owner
                                    Address
                                    Common Shares
                                    PercentOwnershipCommon
      Stock
                                    K.W.
      (“K.D.”) Diepholz
                                      Chairman
      / CEO
                                    1303
      Regency Court
                                      Southlake,
      Texas 76092
                                    1,437,500
                                    15.84
      %Common
      Stock
                                    Charles
      Smith
                                      CFO;
      Secretary;
                                      Director
                                    709-B
      West Rusk #580
                                      Rockwall,
      Texas 75087
                                    218,750
                                    2.41
      %Common
      Stock
                                    Charles
      Smith, through
                                      Smith
      Family LP.;
                                      CFO;
      Secretary;
                                      Director
                                    4246
      Clairmont
                                      Birmingham,
      AL 35222
                                    231,250
                                    2.55
      %
    36
    Common
      Stock
                Melvin
      E. Tidwell
                  Director;
                4804
      Picadilly Place
                  Tyler,
      Texas 75703
                69,079
                0.76
      %Common
      Stock
                Bradford
      J. Saulter
                  VP.,
      Investor Relations
                7618
      Straits Lane
                  Rowlett,
      Texas 75088
                86,833
                .957
      %Common
      Stock
                Dale
      Langenderfer
                  Shareholder;
                3407
      Oak Alley Court #402
                  Toledo,
      Ohio 43606
                479,030
                5.28
      %All
      Officers, Directors And Beneficial owners
                  as
      a Group (5 Persons)
                
                2,522,442
                27.80
      %
 None of
the Shares described above are subject to options which are either (a) vested,
or, (b) will vest within 60 days.
 
 
 The
officers and directors and those 5 % beneficial owners held the following
options as of December 31, 2008:
 
 Common
Stock Options:
 Option Holder
                # of options
                Strike Price
                ExpirationK.W.
      Diepholz
                250,000
                $2.50
                11/15/2009Charles
      Smith
                50,000
                $2.50
                11/15/2009Bradford
      J. Saulter
                50,000
                $2.50
                11/15/2009
 
 
 Item
13.     Certain Relationships and Related Transactions, and
Director Independence
 
 The
Company has paid cash remuneration for services to Dynacap Group Ltd., a private
consulting firm.   Mr. K.W. Diepholz - Chairman and CEO of the Company
and Mr. Charles Smith, Chief Financial Officer, are the Managers of Dynacap
Group, Ltd.
    37
 
 The
Company has paid cash compensation as follows, to related parties or officers
during the years ended December 31, 2008 and 2007:
 
 In 2008,
the Company paid $170,000 to Dynacap Group, Ltd. for consulting and other
fees;
 
 In 2007,
the Company paid $185,305 to Dynacap Group, Ltd. for consulting and other
fees.
 
 No shares
were issued to officers and/or directors in 2007 or 2008.
 
 The
Company is not aware of any other material relationships or related transactions
between the Company and any officers, directors or holders of more than five
percent of any class of outstanding securities of the issuer.
 
 
 Item  14.   Principal
Accounting Fees and Services
 
  (1) Audit
Fees
  The
aggregate fees billed for professional services rendered by our auditors, for
the audit of the registrant's annual financial statements and review of the
financial statements included in the registrant's Form 10-K or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements for fiscal years 2008 and 2007 was $30,600 and $7,500,
respectively.
  (2) Audit
Related Fees
  None
  (3) Tax
Fees
  None
  (4) All
Other Fees
  None
  (5) Audit
Committee Policies and Procedures
  The
Company does not have an audit committee.
  (6) If
greater than 50 percent, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent
employees.
   Not
applicable.
   38
  PART
IV
 
 Item
15.   Exhibits, Financial Statement Schedules
 
  
 No.
                  Description31.1
                  Certification
      of the Company’s Principal Executive Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200231.2
                  Certification
      of the Company’s Principal Financial Officer pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200232.1
                  Certification
      of the Company’s Principal Executive Officer and Principal Financial
      Officer pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of
      the Sarbanes-Oxley Act of 2002.99.1
                  SJG
      Drill Intercepts Summary
File
  
    39
  SIGNATURES
  
 In
accordance with the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets the
requirements for filing on Form 10-K and authorized this Registration Statement
to be signed on its behalf by the undersigned, in the City of Irving, State of
Texas, on March 30, 2009.
 
 
 DynaResource,
Inc.
 
 By:
 /s/  K.W.
(“K.D.”) Diepholz
 K.W.
Diepholz, President
 
 
 In
accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, in the
capacities and on the dates stated.
 Signature
              
              Title
              
              Date/s/
       K.W.  (“K.D.” Diepholz
              
              President
      and
              
              March
      30, 2009K.W.
      (“K.D.”) Diepholz
              
              Chairman
      of the Board/s/
       K.W. (“K.D.”) Diepholz
              
              Chief
      Executive Officer
              
              March
      30, 2009K.W.
      (“K.D.”) Diepholz/s/
       Charles Smith
              
              Chief
      Financial Officer
              
              March
      30, 2009Charles
      Smith/s/
       Charles Smith
              
              Chief
      Accounting Officer
              
              March
      30, 2009Charles
      Smith
  
  
  40


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors and Management of
 DynaResource,
Inc.
 Irving,
Texas
 
 We have
audited the accompanying consolidated balance sheets of DynaResource, Inc. and
subsidiaries as of December 31, 2008 and 2007 and the related consolidated
statements of operations, cash flows and stockholders’ equity for the years
ended December 31, 2008 and 2007 and for the period since reentering the
Exploration Stage (January 1, 2007) through December 31, 2008.  These
consolidated financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.
 
 We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United
States).  Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.
 
 We were
not engaged to examine management’s assertion about the effectiveness of
DynaResource, Inc.’s internal control over financial reporting as of December
31, 2008 and 2007 and, accordingly, we do not express an opinion
thereon.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of DynaResource, Inc. and
subsidiaries as of December 31, 2008 and 2007, and the results of its operations
and its cash flows for the years ended December 31, 2008 and 2007 and for the
period since reentering the Exploration Stage (January 1, 2007) through December
31, 2008 in conformity with accounting principles generally accepted in the
United States of America.
 
 As
discussed in Note 10 of the consolidated financial statements, the Company
corrected an error and restated previously issued financial
statements.
 
 
 /s/  The Hall
Group, CPAs
 
 The Hall
Group, CPAs
 Dallas,
Texas
 
 March 11,
2009








41






DYNARESOURCE,
      INC.(An Exploration Stage Company)Consolidated
      Balance SheetsDecember 31, 2008 and 20072008
                          
                          
                          2007(restated)ASSETSCurrent
      AssetsCash
      and Cash Equivalents
                          
                          $
                          2,339,561
                          
                          
                          $
                          2,060,665Accounts
      Receivable (Net of Allowance of $0 and $0)
                          
                          
                          0
                          
                          
                          
                          13,079Foreign
      Tax Receivable
                          
                          
                          163,289
                          
                          
                          
                          151,852Accounts
      Receivable - Related Party
                          
                          
                          50,225
                          
                          
                          
                          0Other
      Current Assets
                          
                          
                          138,773
                          
                          
                          
                          72,063Total
      Current Assets
                          
                          
                          2,691,848
                          
                          
                          
                          2,297,659Fixed
      AssetsMining
      Camp Equipment and Fixtures (Net of AccumulatedDepreciation
      of $430,110 and $325,507)
                          
                          
                          386,075
                          
                          
                          
                          389,731Mining
      Properties (Net of Accumulated Amortization of $343,696 and
      $288,510)
                          
                          
                          4,359,671
                          
                          
                          
                          4,414,857Total
      Fixed Assets
                          
                          
                          4,745,746
                          
                          
                          
                          4,804,588Other
      AssetsDeposits
                          
                          
                          5,788
                          
                          
                          
                          0TOTAL
      ASSETS
                          
                          $
                          7,443,382
                          
                          
                          $
                          7,102,247LIABILITIES,
      MINORITY INTEREST AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      Payable
                          
                          $
                          96,970
                          
                          
                          $
                          0Accrued
      Expenses
                          
                          
                          6,133
                          
                          
                          
                          40,165Total
      Current Liabilities
                          
                          
                          103,103
                          
                          
                          
                          40,165Long-Term
      Liabilities
                          
                          
                          0
                          
                          
                          
                          0Minority
      Interest
                          
                          
                          (589,754
                          )
                          
                          
                          344,980Stockholders'
      EquityPreferred
      Stock ($1.00 par value, 10,000 shares authorized,1,000
      and 1,000 shares issued and outstanding)
                          
                          
                          1,000
                          
                          
                          
                          1,000Common
      Stock ($.01 par value, 12,500,000 shares authorized,9,073,913
      and 8,276,824 shares issued and outstanding)
                          
                          
                          90,739
                          
                          
                          
                          82,768Preferred
      Rights
                          
                          
                          40,000
                          
                          
                          
                          40,000Additional
      Paid-In Capital
                          
                          
                          22,774,071
                          
                          
                          
                          15,874,681Treasury
      Stock
                          
                          
                          (47,790
                          )
                          
                          
                          (7,500
                          )Common
      Stock Subscription Receivable
                          
                          
                          (125,000
                          )
                          
                          
                          0Other
      Comprehensive Income
                          
                          
                          1,574,793
                          
                          
                          
                          41,711Accumulated
      Deficit
                          
                          
                          (6,002,516
                          )
                          
                          
                          (6,002,516
                          )Accumulated
      Deficit Since Reentering the Exploration Stage
                          
                          
                          (10,375,264
                          )
                          
                          
                          (3,313,042
                          )Total
      Stockholders' Equity
                          
                          
                          7,930,033
                          
                          
                          
                          6,717,102TOTAL
      LIABILITIES, MINORITY INTEREST ANDSTOCKHOLDERS'
      EQUITY
                          
                          $
                          7,443,382
                          
                          
                          $
                          7,102,247














42






DYNARESOURCE, INC.(An Exploration Stage Company)Consolidated Statements of OperationsFor the Years Ended December 31, 2008 and 2007and
      Cumulative Since Reentering the Exploration Stage (January 1, 2007)
      through December 31, 2008Cumulative
      SinceReentering
      theExploration
      Stage(January
      1, 2007)through2008
                              
                              
                              2007
                              
                              
                              December
      31, 2008REVENUES
                              
                              $
                              0
                              
                              
                              $
                              0
                              
                              
                              $
                              0PRODUCTION
      AND EXPLORATION COSTS(exclusive
      of depreciation and amortizationshown
      separately below)
                              
                              
                              4,490,898
                              
                              
                              
                              2,097,378
                              
                              
                              
                              6,588,276GROSS
      PROFIT (DEFICIT)
                              
                              
                              (4,490,898
                              )
                              
                              
                              (2,097,378
                              )
                              
                              
                              (6,588,276
                              )OPERATING
      EXPENSESDepreciation
      and Amortization
                              
                              
                              161,006
                              
                              
                              
                              146,391
                              
                              
                              
                              307,397Common
      Stock Issued for Services
                              
                              
                              430,101
                              
                              
                              
                              109,587
                              
                              
                              
                              539,688Payroll
      Expenses
                              
                              
                              287,237
                              
                              
                              
                              235,750
                              
                              
                              
                              522,987Professional
      Fees
                              
                              
                              96,674
                              
                              
                              
                              37,083
                              
                              
                              
                              133,757State
      Filings and Development
                              
                              
                              107,051
                              
                              
                              
                              18,067
                              
                              
                              
                              125,118Meetings
      and Travel
                              
                              
                              99,218
                              
                              
                              
                              53,506
                              
                              
                              
                              152,724Other
      General and Administrative
                              
                              
                              504,711
                              
                              
                              
                              522,519
                              
                              
                              
                              1,027,230TOTAL
      OPERATING EXPENSES
                              
                              
                              1,685,998
                              
                              
                              
                              1,122,903
                              
                              
                              
                              2,808,901NET
      OPERATING INCOME (LOSS)
                              
                              
                              (6,176,896
                              )
                              
                              
                              (3,220,281
                              )
                              
                              
                              (9,397,177
                              )OTHER
      INCOME (EXPENSE)Portfolio
      Income
                              
                              
                              3,066
                              
                              
                              
                              6,627
                              
                              
                              
                              9,693Other
      Income
                              
                              
                              2,104
                              
                              
                              
                              0
                              
                              
                              
                              2,104TOTAL
      OTHER INCOME (EXPENSE)
                              
                              
                              5,170
                              
                              
                              
                              6,627
                              
                              
                              
                              11,797NET
      INCOME (LOSS) BEFORE INCOME TAXES
                              
                              
                              (6,171,726
                              )
                              
                              
                              (3,213,654
                              )
                              
                              
                              (9,385,380
                              )Provision
      for Income Taxes (Expense) Benefit
                              
                              
                              0
                              
                              
                              
                              38,259
                              
                              
                              
                              38,259Minority
      Earnings (Loss) in Subsidiary
                              
                              
                              934,734
                              
                              
                              
                              0
                              
                              
                              
                              934,734NET
      INCOME (LOSS)
                              
                              $
                              (5,236,992
                              )
                              
                              $
                              (3,175,395
                              )
                              
                              $
                              (8,412,387
                              )Currency
      Translation Gain (Loss)
                              
                              
                              (1,825,230
                              )
                              
                              
                              (7,825
                              )
                              
                              
                              (1,833,055
                              )COMPREHENSIVE
      LOSS
                              
                              $
                              (7,062,222
                              )
                              
                              $
                              (3,183,220
                              )
                              
                              $
                              (10,245,442
                              )EARNINGS
      PER SHARE, Basic and DilutedWeighted
      Average of Outstanding Shares, Basic
                              
                              
                              9,073,913
                              
                              
                              
                              7,945,319
                              
                              
                              
                              7,945,319Income
      (Loss) per Common Share, Basic
                              
                              $
                              (0.58
                              )
                              
                              $
                              (0.40
                              )
                              
                              $
                              (1.06
                              )Weighted
      Average of Outstanding Shares, Diluted
                              
                              
                              9,073,913
                              
                              
                              
                              9,669,902Income
      (Loss) per Common Share, Diluted
                              
                              $
                              (0.58
                              )
                              
                              $
                              (0.33
                              )






43




DYNARESOURCE, INC.


(An
Exploration Stage Company)


Consolidated
Statement of Changes in Stockholders' Equity
 For
the Years Ended December 31, 2008 and 2007




AccumulatedDeficit
      SinceAdditional
                                  
                                  
                                  
                                  
                                  
                                  Common
                                    Stock
                                  
                                  
                                  Other
                                  
                                  
                                  
                                  
                                  
                                  Reentering
      thePreferred
                                  
                                  
                                  Common
                                  
                                  
                                  Preferred
                                  
                                  
                                  Paid
      In
                                  
                                  
                                  Treasury
                                  
                                  
                                  Subscription
                                  
                                  
                                  Comprehensive
                                  
                                  
                                  Accumulated
                                  
                                  
                                  ExplorationShares
                                  
                                  Amount
                                  
                                  
                                  Shares
                                  
                                  
                                  Amount
                                  
                                  
                                  Rights
                                  
                                  
                                  Capital
                                  
                                  
                                  Stock
                                  
                                  
                                  Receivable
                                  
                                  
                                  Income
                                  
                                  
                                  Deficit
                                  
                                  
                                  Stage
                                  
                                  
                                  TotalsStockholders'
      Equity, January 1, 2007
                                  
                                  
                                  0
                                  
                                  
                                  $
                                  0
                                  
                                  
                                  
                                  7,875,000
                                  
                                  
                                  $
                                  78,750
                                  
                                  
                                  $
                                  40,000
                                  
                                  
                                  $
                                  11,925,774
                                  
                                  
                                  $
                                  0
                                  
                                  
                                  $
                                  0
                                  
                                  
                                  $
                                  (80,860
                                  )
                                  
                                  $
                                  (6,002,516
                                  )
                                  
                                  $
                                  0
                                  
                                  
                                  $
                                  5,961,148Sale
      of Common Shares
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  365,295
                                  
                                  
                                  
                                  3,653
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,141,661
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,145,314Issuance
      of Common Shares for Services
                                  
                                  
                                  
                                  36,529
                                  
                                  
                                  
                                  365
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  109,222
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  109,587Issuance
      of Preferred Shares
                                  
                                  
                                  1,000
                                  
                                  
                                  
                                  1,000
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,000Treasury
      Stock Purchased
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (7,500
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (7,500
                                  )Other
      Comprehensive Income
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  122,571
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  122,571Dyna
      Mexico Earn In
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  3,043,004
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  3,043,004Transfer
      Earn In to Minority Interest
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (344,980
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (344,980
                                  )Dividends
      - Property
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (129,822
                                  )
                                  
                                  
                                  (129,822
                                  )Net
      (Loss)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (3,183,220
                                  )
                                  
                                  
                                  (3,183,220
                                  )Stockholders'
      Equity, December 31, 2007 (Restated)
                                  
                                  
                                  1,000
                                  
                                  
                                  $
                                  1,000
                                  
                                  
                                  
                                  8,276,824
                                  
                                  
                                  $
                                  82,768
                                  
                                  
                                  
                                  40,000
                                  
                                  
                                  $
                                  15,874,681
                                  
                                  
                                  $
                                  (7,500
                                  )
                                  
                                  $
                                  0
                                  
                                  
                                  $
                                  41,711
                                  
                                  
                                  $
                                  (6,002,516
                                  )
                                  
                                  $
                                  (3,313,042
                                  )
                                  
                                  $
                                  6,717,102Sale
      of Common Shares
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  647,024
                                  
                                  
                                  
                                  6,470
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,680,790
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,687,260Issuance
      of Common Shares for Services
                                  
                                  
                                  
                                  150,065
                                  
                                  
                                  
                                  1,501
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  428,600
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  430,101Repurchase
      of Common Stock Options
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (10,000
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (10,000
                                  )Treasury
      Stock Purchased
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (40,290
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (40,290
                                  )Receivable
      from Shareholder
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (125,000
                                  )
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (125,000
                                  )Other
      Comprehensive Income
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,533,082
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  1,533,082Dyna
      Mexico Earn In
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  4,800,000
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  4,800,000Net
      (Loss)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (7,062,222
                                  )
                                  
                                  
                                  (7,062,222
                                  )Stockholders'
      Equity, December 31, 2008
                                  
                                  
                                  1,000
                                  
                                  
                                  
                                  1,000
                                  
                                  
                                  
                                  9,073,913
                                  
                                  
                                  
                                  90,739
                                  
                                  
                                  
                                  40,000
                                  
                                  
                                  
                                  22,774,071
                                  
                                  
                                  
                                  (47,790
                                  )
                                  
                                  
                                  (125,000
                                  )
                                  
                                  
                                  1,574,793
                                  
                                  
                                  
                                  (6,002,516
                                  )
                                  
                                  
                                  (10,375,264
                                  )
                                  
                                  
                                  7,930,033








44






DYNARESOURCE, INC.(An Exploration Stage Company)Consolidated Statements of Cash FlowsFor the Years Ended December 31, 2008 and 2007and
      Cumulative Since Reentering the Exploration Stage (January 1, 2007)
      through December 31, 2008Cumulative
      SinceReentering
      theExploration
      Stage(January
      1, 2007)through2008
                            
                            
                            2007
                            
                            
                            December
      31, 2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Income (Loss)
                            
                            $
                            (5,236,992
                            )
                            
                            $
                            (3,175,395
                            )
                            
                            $
                            (8,412,387
                            )Adjustments
      to reconcile net loss to net cashprovided
      by operating activities:Issuance
      of Common Shares for Services
                            
                            
                            430,101
                            
                            
                            
                            109,587
                            
                            
                            
                            539,688Issuance
      of Preferred Shares for Services
                            
                            
                            0
                            
                            
                            
                            1,000
                            
                            
                            
                            1,000Depreciation
      and Amortization
                            
                            
                            161,006
                            
                            
                            
                            146,391
                            
                            
                            
                            307,397Loss
      on Disposition of Fixed Assets
                            
                            
                            28,006
                            
                            
                            
                            0
                            
                            
                            
                            28,006Minority
      Interest in Net (Loss)
                            
                            
                            (934,734
                            )
                            
                            
                            0
                            
                            
                            
                            (934,734
                            )Changes
      in Operating Assets and Liabilities:Decrease
      in Accounts Receivable
                            
                            
                            13,079
                            
                            
                            
                            186,064
                            
                            
                            
                            199,143(Increase)
      in Foreign Tax Receivable
                            
                            
                            (11,437
                            )
                            
                            
                            (102,648
                            )
                            
                            
                            (114,085
                            )(Increase)
      in Accounts Receivable - Related Party
                            
                            
                            (50,225
                            )
                            
                            
                            0
                            
                            
                            
                            (50,225
                            )(Increase)
      Decrease in Other Current Assets
                            
                            
                            (66,710
                            )
                            
                            
                            5,028
                            
                            
                            
                            (61,682
                            )(Increase)
      in Deposits
                            
                            
                            (5,788
                            )
                            
                            
                            0
                            
                            
                            
                            (5,788
                            )Increase
      (Decrease) in Accounts Payable
                            
                            
                            96,970
                            
                            
                            
                            (41,404
                            )
                            
                            
                            55,566(Decrease)
      in Accrued Expenses
                            
                            
                            (34,032
                            )
                            
                            
                            (63,971
                            )
                            
                            
                            (98,003
                            )(Decrease)
      in Deferred Tax Liability
                            
                            
                            0
                            
                            
                            
                            (38,259
                            )
                            
                            
                            (38,259
                            )Net
      Cash (Used) by Operating Activities
                            
                            
                            (5,610,756
                            )
                            
                            
                            (5,035,204
                            )
                            
                            
                            (8,584,363
                            )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of Fixed Assets
                            
                            
                            (130,170
                            )
                            
                            
                            (82,132
                            )
                            
                            
                            (212,302
                            )Net
      Cash (Used) by Investing Activities
                            
                            
                            (130,170
                            )
                            
                            
                            (82,132
                            )
                            
                            
                            (212,302
                            )CASH
      FLOWS FROM FINANCING ACTIVITIESSale
      of Common Shares for Cash
                            
                            
                            1,687,260
                            
                            
                            
                            1,145,314
                            
                            
                            
                            2,832,574Repurchase
      of Common Stock Options
                            
                            
                            (10,000
                            )
                            
                            
                            0
                            
                            
                            
                            (10,000
                            )Proceeds
      from Dyna Mexico Earn-In
                            
                            
                            4,800,000
                            
                            
                            
                            3,043,004
                            
                            
                            
                            7,843,004Common
      Stock Subscription Receivable
                            
                            
                            (125,000
                            )
                            
                            
                            0
                            
                            
                            
                            (125,000
                            )Other
      Comprehensive Income
                            
                            
                            1,533,082
                            
                            
                            
                            122,571
                            
                            
                            
                            1,655,653Purchase
      of Treasury Shares
                            
                            
                            (40,290
                            )
                            
                            
                            (7,500
                            )
                            
                            
                            (47,790
                            )Net
      Cash Provided by Financing Activities
                            
                            
                            7,845,052
                            
                            
                            
                            4,303,389
                            
                            
                            
                            12,148,441Effect
      of exchange rate on cash
                            
                            
                            (1,825,230
                            )
                            
                            
                            (7,825
                            )
                            
                            
                            (1,833,055
                            )NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                            
                            
                            278,896
                            
                            
                            
                            1,239,825
                            
                            
                            
                            1,518,721CASH
      AND CASH EQUIVALENTS AT BEGINNING OF YEAR
                            
                            
                            2,060,665
                            
                            
                            
                            820,840
                            
                            
                            
                            820,840CASH
      AND CASH EQUIVALENTS AT END OF YEAR
                            
                            $
                            2,339,561
                            
                            
                            $
                            2,060,665
                            
                            
                            $
                            2,339,561SUPPLEMENTAL
      DISCLOSURESNon-Cash
      Issuance of Common Shares for Services
                            
                            $
                            430,101
                            
                            
                            $
                            109,587
                            
                            
                            $
                            539,688Non-Cash
      Issuance of Preferred Shares for Services
                            
                            $
                            0
                            
                            
                            $
                            1,000
                            
                            
                            $
                            1,000Cash
      Paid During the Year for Interest Expense
                            
                            $
                            0
                            
                            
                            $
                            0
                            
                            
                            $
                            0Non-Cash
      Dividend of Property
                            
                            $
                            0
                            
                            
                            $
                            129,822
                            
                            
                            $
                            129,822






45






DYNARESOURCE,
INC.
 (An
Exploration Stage Company)
 Notes
to the Consolidated Financial Statements
 December
31, 2008 and 2007
 
 
 NOTE 1 – NATURE OF
ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
 
 Nature of Activities,
History and Organization:
 
 DynaResource,
Inc. (The “Company” or “DynaResource”) was organized September 28, 1937, as a
California corporation under the name of West Coast Mines, Inc.  In
1998, the Company re-domiciled to Delaware and changed its name to DynaResource,
Inc.  The Company is in the business of acquiring, investing in, and
developing precious metal properties, and the production of precious
metals.
 
 In 2000,
the Company formed a wholly owned subsidiary, DynaResource de Mexico S.A. de
C.V. chartered in Mexico (“DynaMexico”).  This Company was formed to
acquire, invest in and develop resource properties in Mexico.  In
2005, the Company formed DynaResource Operaciones de San Jose De Gracia S.A. de
C.V. (“DynaOperaciones”) and acquired effective control of Mineras de
DynaResource S.A. de C.V. (formerly Minera Finesterre, S.A. de C.V.)
(“MinerasDyna”).  The Company owns 25% of Mineras and acquired
effective control of Mineras by acquiring the option to purchase the remaining
75% of the Shares of Mineras for seventy five pesos (approximately $5.50 in
United States dollars as of December 31, 2008).  The Agreement also
provides that the other shareholders relinquish and forfeit any and all rights,
interests and claims in and to the Company and in or to any of the rights or
assets owned or controlled by the Company.  The Option expires on
January 6, 2010.  The results of MinerasDyna are consolidated with
those of the Company.   As discussed in Note 9, the Company
elected to exercise the Option during March 2009.
 
 In
January 2008, the Company transferred 15% of the ownership of DynaMexico to
Goldgroup Resources Inc. (“Goldgroup”), in exchange for $3,000,000 cash
contribution and exploration expenditures at the San Jose de Gracia property
(“SJG”), and in August 2008, the Company transferred an additional 10% of the
ownership of DynaMexico to Goldgroup in exchange for an additional $3,000,000
cash and exploration expenditures (See Note 5 below).  Through
December 31, 2008, Goldgroup has contributed $8,168,009 to DynaMexico, and it
currently owns 25% of DynaMexico.
 
  The
Company produced approximately $7,000,000 in revenues from production activities
during the years ended December 31, 2003 through 2006, and suspended this
activity voluntarily to concentrate its efforts on exploration and
development.  In accordance with that decision, as of January 1, 2007,
the Company reentered the Exploration Stage and has presented its cumulative
results since reentering the Exploration Stage, in accordance with Statement of
Financial Accounting Standard (“SFAS”) No. 7, “Accounting and Reporting by
Development Stage Enterprises” (“SFAS No. 7”), and will continue this
presentation until it again has revenues from operations.
     46
  
 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
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  being
presented.
 
 Basis of
Presentation:
 
 The
Company prepares its financials 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 Mexico, S.A. de C.V., DynaResource Operaciones S.A. de C.V. and
Mineras de DynaResource S.A. de C.V.  All significant inter-company
transactions have been eliminated.  All amounts are presented in U.S.
Dollars unless otherwise stated.
 
 Minority
Interest:
 
 Minority
interest is recognized in connection with the Stock Purchase and Earn In
Agreement (“Earn In”) described above and in Note 5.  Minority
interest was created in December 2007 upon the completion of contributions
required underthe
Earn In. Minority interest is subsequently adjusted for additional
contributions, distributions to minority holders and the minority holders’
proportionate share of the net earnings or losses of the respective
entity.
 
 Foreign Currency
Translation:
 
 The
subsidiary’s functional currency is the Mexican peso.  As a result, the
financial statements of the subsidiary have been re-measured from Mexican pesos
into U.S. dollars using (i) current exchange rates for monetary asset and
liability accounts, (ii) historical exchange rates for nonmonetary asset and
liability accounts, (iii) historical exchange rates for revenues and expenses
associated with nonmonetary assets and liabilities and (iv) the weighted average
exchange rate of the reporting period for all other revenues and expenses.
 In addition, foreign currency transaction gains and losses resulting from
U.S. dollar denominated transactions are eliminated.  The resulting
re-measured gain or loss is reported as a separate component of stockholders’
equity (comprehensive income (loss)).
    47
  
 The
financial statements of the subsidiary 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
subsidiary are as follows for the years ended December 31, 2008 and 2007
(Mexican pesos per one U.S. dollar):
 
 
 December 31, 2008Current
      exchange rate:
                      Pesos
                      13.78Weighted
      average exchange rate
                        for
      the period ended:
                      Pesos
                      11.17
 
 December 31, 2007Current
      exchange rate:
                  Pesos
                  10.92Weighted
      average exchange rate
                    for
      the period ended:
                  Pesos
                  10.94
 
 
 Cash and Cash
Equivalents:
 
 The
Company considers all highly liquid debt instruments with a maturity of three
months or less to be cash equivalents.  At times, cash balances may be
in excess of the FDIC insurance limits.  The carrying amount
approximates fair market value.
 
 Accounts Receivable and
Allowance for Doubtful Accounts:
 
 The
allowance reserve for accounts receivable is recorded when receivables are
considered to be doubtful of collection.  No allowance has been
established as all receivables were deemed to be fully collectible.
 
  48
   Foreign Tax
Receivable:
 
 Foreign
Tax Receivable (IVA) is comprised of recoverable value-added taxes 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 amount of IVA receivable as
of December 31, 2008 and 2007 are $163,289 and $151, 852,
respectively.
 
 Inventory:
 
 As the
Company ceased mining production in 2006, there is no inventory as of December
31, 2008 and 2007.
 
 Fixed
Assets:
 
 Fixed
assets are carried at cost.  Depreciation is provided over each
asset’s estimated useful life.  Upon retirement and disposal, the
asset cost and related accumulated deprecation are removed from the accounts and
any resulting gain or loss is included in the determination of the net
income.  Expenditures for geological and engineering studies,
maintenance and claim renewals are charged to expense when
incurred.  Additions and significant improvements are capitalized and
depreciated.
 
 Mining
Properties:
 
  The
Company is an ‘Exploration Stage’ company as defined in “SEC Industry Guide
7”.  Mining properties consist of 34 concessions at the San
Jose de Gracia property, the basis of which are deferred until the properties
are brought into production, at which time they will be amortized on the unit of
production method based on estimated recoverable reserves.  The
Company has elected to expense a minimal amount of amortization due to the
effects of exploration activities on the recoverable reserves.  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
deferred costs are recorded do not necessarily reflect present or future
values.
   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 December 31, 2008, no indications of impairment
existed.
   49
   Exploration
Costs:
  Exploration
costs not directly associated with proven reserves on the mining concessions are
charged to operations as incurred.
  Advertising
Costs:
  The
Company incurred $0 and $0 advertising costs for the years ended December 31,
2008 and 2007, respectively.
  Income
Taxes:
 
 Income
      from the corporation is taxed at regular corporate rates per the Internal
      Revenue Code.  There are no provisions for current taxes due to
      net available operating losses.
 
 Segment
Reporting:
 
 The
Company operates in one reportable segment under the SFAS No. 131, Disclosuresabout Segments of an Enterprise and
Related Information(“SFAS No. 131”).
 
 Comprehensive
Income:
 
 SFAS No.
130 “Reporting Comprehensive
Income” (“SFAS No. 130”), establishes standards for reporting and display
of comprehensive income and its components in a full set of general purpose
financial statements.  For the years ended December 31, 2008 and 2007,
the Company’s only component of comprehensive income was foreign currency
translation adjustments.
 
 Revenue
Recognition:
 
 The
Company recognizes revenue from the sale of products in accordance with the
Securities and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial
Statements” ("SAB 104"). Revenue will be recognized only when all of the
following criteria have been met:
 
 ·
              Persuasive
      evidence of an arrangement exists;
 ·
              Ownership
      and all risks of loss have been transferred to buyer, which is generally
      upon shipment;
 ·
              The
      price is fixed and determinable;
and
 ·
              Collectability
      is reasonably assured.
 
 Revenues
earned from the sale of precious metal concentrates are recognized as the title
to the material is passed to the buyer upon delivery.
 
  50
 
 Earnings (Loss) per Common
Share:
 
 Earnings
(loss) attributable to common stock is based on the weighted average number of
shares of common stock and common stock equivalents outstanding during the
year.   Diluted loss per share is computed using the weighted
average number of shares and the potentially dilutive common shares outstanding
that are assumed to be exercised.   There were no potentially
dilutive common stock equivalents as of December 31, 2008, therefore basic
earnings per share equals diluted earnings per share for the year ended December
31, 2008.
 
 Recent Accounting
Pronouncements:
 
 The
Company  does not
expect  the  adoption  of  recently  issued  accounting
pronouncements  to have a significant  impact on the
Company’s  results of  operations, financial position or
cash flow.  See Note 12 for a discussion of new accounting
pronouncements.
 
 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.
 
 
 NOTE 2 – FIXED
ASSETS
 
 Fixed
assets consist of the following at December 31, 2008 and 2007:
 
 2008
                    
                    
                    2007Mining
      camp equipment and fixtures
                    
                    $
                    454,273
                    
                    
                    $
                    454,473Transportation
      equipment
                    
                    
                    149,986
                    
                    
                    
                    155,084Lab
      equipment
                    
                    
                    14,306
                    
                    
                    
                    14,306Machinery
      and equipment
                    
                    
                    53,761
                    
                    
                    
                    33,211Office
      furniture and fixtures
                    
                    
                    69,853
                    
                    
                    
                    22,376Office
      equipment
                    
                    
                    3,448
                    
                    
                    
                    3,448Computer
      equipment
                    
                    
                    32,250
                    
                    
                    
                    32,250Sub-total
                    
                    
                    816,185
                    
                    
                    
                    715,238Less:
      Accumulated depreciation
                    
                    
                    (430,110
                    )
                    
                    
                    (325,507
                    )Total
                    
                    $
                    386,075
                    
                    
                    $
                    389,731
 
 Depreciation
has been provided over each asset’s estimated useful
life.  Depreciation expense was $105,820 and $87,794for the years ended
December 31, 2008 and 2007, respectively.
   51
  
 NOTE 3 – MINING
PROPERTIES
 
 Mining
properties consist of the following as of December 31, 2008 and
2007:
  2008
                                  
                                  
                                  2007San
      Jose de Gracia (“SJG”):Mining
      Concessio
                                  
                                  $
                                  4,703,367
                                  
                                  
                                  $
                                  4,703,367Less: 
      Accumulated amortization
                                  
                                  
                                  (343,696
                                  )
                                  
                                  
                                  (288,510
                                  )Total
      Mining Properties
                                  
                                  $
                                  4,359,671
                                  
                                  
                                  $
                                  4,414,857
 Amortization
expense was $55,186 and $58,597 for the years ended December 31, 2008 and
2007.
 
 
 NOTE 4 – INCOME
TAXES
 
 During
the year ended December 31, 2007, the Company adopted Financial Accounting
Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes” (“FIN 48”), which supplements SFAS No. 109, “Accounting for Income
Taxes”, (“SFAS No. 109”) by defining the confidence level that a tax
position must meet in order to be recognized in the financial
statements.   The Interpretation requires that the tax effects of
a position be recognized only it if is “more-likely-than-not” to be sustained
based solely on its technical merits as of the reporting date.  The
more-likely-than-not threshold represents a positive assertion by management
that a company is entitled to the economic benefits of a tax
position.  If a tax position is not considered more-likely-than-not to
be sustained based solely on its technical merits, no benefits of the tax
position are to be recognized.  Moreover, the more-likely-than-not
threshold must continue to be met in each reporting period to support continued
recognition of a benefit.  With the adoption of FIN 48, companies are
required to adjust their financial statements to reflect only those tax
positions that are more-likely-than-not to be sustained.  Any
necessary adjustment would be recorded directly to retained earnings and
reported as a change in accounting principle.
 
 The
Company’s deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax reporting purposes, and
(b) net operating loss carry forwards.  For Federal income tax
purposes, the Company uses the cash basis of accounting, whereas the accrual
basis is used for financial reporting purposes.  In addition, certain
assets are charged to expense when acquired under Section 179 of the Internal
Revenue Code for income tax purposes.
 
 The
Company provided a full valuation allowance on the net deferred tax asset,
consisting primarily of net operating loss carry forwards, because management
has determined that it is more-likely-than-not that the Company will not earn
income sufficient to realize the deferred tax assets during the carry forward
period.
    52
  
 The
cumulative tax effect at the expected tax rate of 34% (blended for U.S. and
Mexico) of significant items comprising the Company’s net deferred tax amounts
as of December 31, 2008 are as follows:
   2008Net
      deferred tax assets attributable to:Prior
      years
                                              
                                              $
                                              132,621Tax
      benefit (liability) for current year
                                              
                                              
                                              2,131,356Total
      Deferred Tax Benefit
                                              
                                              
                                              2,263,977Valuation
      Allowance
                                              
                                              
                                              (2,263,977
                                              )Net
      Deferred Tax Benefit
                                              
                                              $
                                              0
  Components
of the current provision (benefit) for taxes on income for the current year are
as follows:
   2008Income
      tax before extraordinary item:Tax
      (benefit) liability on current year operations
                          
                          $
                          2,098,386Future
      tax benefit from timing differences
                          
                          
                          32,9702,131,356Valuation
      Reserve
                          
                          
                          (2,131,356
                          )Net
      Provision (Benefit)
                          
                          $
                          0
 
 The
realization of deferred tax benefits is contingent upon future earnings and is
fully reserved at December 31, 2008.
 
 
 NOTE 5 – MATERIAL
AGREEMENTS
 
 Concessions and Interest
related to the San Jose de Gracia Property (“SJG”):
 
 In March
2000, The Company entered into agreements to complete the acquisition and
consolidation of 100% of the San Jose de Gracia Property and related mining
interests.  Pursuant to these agreements, the Mining Concessions and
related interests comprising the San Jose de Gracia property were transferred to
“DynaMexico”, at the time the wholly owned subsidiary of the
Company.
 
 In March
2005, the Company issued 115,000 common shares; received a cash payment of
$15,000; and accepted a mutual release from the vending parties to complete the
acquisition agreements.
    53
 
 Financing/Sale of
Stock:
 
 On
September 1, 2006 the Company signed a “Stock Purchase and Earn In Agreement”
(“Earn In”) between:  DynaResource and DynaMexico, (“Seller”); and
Goldgroup Resources, Inc., of Vancouver, British Columbia (“Goldgroup”),
(“Buyer”), and Together, (“the Parties”).
 
 The Earn
In provides for the sale of up to fifty per cent (50%) of the total outstanding
shares of DynaMexico, the wholly owned subsidiary of DynaResource, and the owner
of the San Jose de Gracia District in northern Sinaloa Mexico
(“SJG”);  in exchange for the total cash contributions to DynaMexico,
and expenditures related to the development of the SJG, in the amount of
$18,000,000 by Goldgroup; contributed in four (4) phases, as set forth
below:
 
 
 Phase
                        On
      or before
                        Amount
      of Funds to be deposited to DynaMexico (For SJG
    Expenditures)
                        Interest
      Earned (by Goldgroup in DynaMexico)
                        Cumulative
      Interest Earned (by Goldgroup in DynaMexico)1.
                        June
      15, 2007
                        $1,000,000
                        0%
                        0%2.
                        March
      15, 2008
                        $2,000,000
                        15%
                        15%3.
                        September
      15, 2009
                        $3,000,000
                        10%
                        25%4.
                        March
      15, 2011
                        $12,000,000
                        25%
                        50%
  Pursuant
to the Earn In Agreement:
 
 DynaResource
attached the “SJG Title Opinion”, compiled by its legal counsel in Mazatlan,
Sinaloa Mexico, with attachments and schedules; describing the status and
position of DynaMexico and affiliates in Mexico, and confirming the ownership
and status of the Mining Concessions comprising the SJG District in Sinaloa,
Mexico;
 
 DynaResource
attached its audited, consolidated financial statements at December 31,
2005;
 
 The
Parties agreed to a revised setting of the Board of Directors of DynaMexico,
to:
 
 a.
                Two
      (2) members of DynaResource; K.D. Diepholz, Chairman/CEO of DynaResource
      as President; and, Charles E. Smith; CFO of
  DynaResource;b.
                One
      (1) member of Goldgroup; Keith Piggott, CEO of
  Goldgroup.
  A
Management Committee was formed to approve budgets and expenditures pursuant to
the Earn In.  The setting of the Management Committee is:
 
 a.
              Two
      (2) members of Goldgroup; Keith Piggott, CEO of Goldgroup as
      Chairman;  and, John Sutherland, CFO of
    Goldgroup;
 b.
              One
      (1) member of DynaResource; K.D. Diepholz, Chairman/CEO of
      DynaResource;c.
              Members
      of the Management Committee may be changed as subsequently
      agreed.
   54
  
 The
Parties agree to cooperate to develop the SJG Property, in the best interests of
the Project.
 
 Phase 1, 2 and 3 of Earn In
Completed:
 
 Activities
related to the exploration and development of SJG are being conducted by
DynaMexico, through contract to the operating subsidiary MinerasDyna; with the
management of personnel being contracted by MinerasDyna through to the personnel
management subsidiary, DynaOperaciones.
 
 On
December 28, 2007, Goldgroup completed Phase 2 of the Earn In Agreement, through
the contributions of Capital of $3,368,088 (USD) to DynaMexico and the
expenditures related to the exploration of SJG of $27,063,453 Mexican pesos,
with the remainder held in cash in DynaMexico, In January 2008, 15% of the
Shares of DynaMexico were transferred to Goldgroup.
 
 On July
16, 2008, the Goldgroup completed Phase 3 of the Earn In Agreement through total
contributions of capital under the Earn In Agreement of $6,118,009 (USD) with
total expenditures related to the exploration of SJG of $57,252,898 Mexican
pesos, with the remainder held in cash in DynaMexico.    In
August 2008, an additional 10% of the Shares of DynaMexico were transferred to
Goldgroup, so that Goldgroup owns 25% of DynaMexico as of December 31,
2008.
 
 Continuing
with Phase 3 exploration activities, the Company reported total deposits to
DynaMexico by Goldgroup in excess of $8,100,000 USD, with total expenditures
through DynaMexico of $ 78,834,422  Mexican pesos at December 31,
2008.
 
 As
discussed in Note 9, the Company received $800,000 from Goldgroup in January and
March 2009 pursuant to the Earn In Agreement.
 
 Material
Agreement  (MOU):
 
 In order
to clarify and confirm the operating structure at SJG, DynaResource, DynaMexico,
and Goldgroup (the Parties to the Earn In/Option Agreement;  and “the
Parties”) entered into a “Memorandum of Understanding”, (the “MOU”), dated July
29, 2008 . The MOU provides for:
 
 ·
              MinerasDyna
      is the exclusive operating entity at SJG, pursuant to the operating
      agreement with DynaMexico;
 
 ·
              DynaMexico
      owns the SJG 100%, and all data and information pursuant
      thereto;  any information disseminated regarding SJG must be
      disclosed as from DynaMexico;
 
 ·
              The
      SJG Management Committee is not a legal entity and has no authority or
      ability to sign contracts or incur obligations or liabilities to
      DynaMexico, MinerasDyna, or
DynaOperaciones;
    55
 
 ·
              The
      SJG Management Committee does not have the authority to act for or
      represent DynaMexico, MinerasDyna, DynaOperaciones, or the SJG
      Property;
 
 ·
              All
      personnel must be employed or contracted through MinerasDyna or
      DynaOperaciones and be accountable to the employing/contracting
      entity.
 
 
 NOTE 6 – RELATED PARTY
TRANSACTIONS
 
 The
Company paid $170,000 and $185,305 to Dynacap Group, Ltd. (an entity controlled
by officers of the Company) for consulting and other fees in 2008 and 2007,
respectively.
 
 In 2007,
the Company issued 1,000 shares of Preferred Stock - Series A to its
CEO.  The shares carry the right to elect a majority of the Board of
Directors of the Corporation.
 
 In
addition, the Company has issued its stock to the following related
parties:
  2008
                                          
                                          
                                          2007Consultants
                                          
                                          $
                                          238,442
                                          
                                          
                                          $
                                          109,587Totals
                                          
                                          $
                                          238,442
                                          
                                          
                                          $
                                          109,587
   The above
stock transactions were expensed as compensation in the financial
statements.
 
 NOTE 7 – STOCKHOLDERS’
EQUITY
  Preferred
Stock
  The
Company is authorized to issue 10,000 preferred shares at a par value of $1.00
per share.  These shares have full voting rights.  In October 2007,
the Company issued 1,000 shares of Preferred A shares to its CEO.  These
shares have the right to elect a majority of the Board of Directors.  There
were 1,000 shares outstanding at both December 31, 2008 and 2007.
  Common
Stock
  The
Company is authorized to issue 12,500,000 common share stocks at a par value of
$0.01 per share.  These shares have full voting rights.  At December
31, 2008 and 2007, there were 9,073,913 and 8,276,824 shares outstanding,
respectively.     During 2007, the Company paid $129,822
dividends to its shareholders in the form of property.   No dividends
were paid in 2008.
  
  56
  
 Preferred
Rights
  The
Company issued “Preferred Rights” and received $158,500 in 2003 and $626,250 in
2002, for the rights to percentages of revenues generated from the San Jose de
Gracia Pilot Production Plant.  This has been reflected as “Preferred
Rights” in stockholders’ equity.  As of December 31, 2004, $558,312 was
repaid and as of December 31, 2005, $186,188 has been repaid, leaving a current
balance of $40,000 and $40,000 as of December 31, 2008 and 2007,
respectively.
  StockIssuances
 
 During
2007, the Company issued 299,386 common shares for cash to purchasers for $3.00
per share and issued 65,909 common shares for cash to purchasers for $3.75 per
share.  Also during 2007, 36,529 common shares were issued for
$109,587 of consulting services.
  During
2008, the Company issued 21,880 common shares for cash to purchasers for $5.00
per share.    The Company also issued 150,065 shares for $430,101
of consulting services.
  Treasury
Stock
  Treasury
stock is accounted for by the cost method.  The Company may from time to
time purchase and resell its own common stock.  Treasury stock activity is
presented in the consolidated statement of stockholders’ equity.
  Common Stock Subscription
Receivable
  As of
December 31, 2008, the Company has $125,000 due from a shareholder for the
exercise of $2.50 options which expired at the end of 2008.  The
notice from the shareholder indicating their intent to exercise the options was
received prior to the expiration of the option period, and the payment was
received in January 2009.
  Options and
Warrants
  The
Company has issued stock options to employees and shareholders for the purchase
of up to 1,809,432 shares of stock.   During 2008, the Company issued
options in three different grants.  These options immediately vested
and expire on November 15, 2009.    Based on the analysis below,
the expense component was less than $3,000.  The Company elected not
to expense the value of the options, as it was not considered
material.
 
 The fair
value of each option award is estimated on the date of grant using the
Black-Scholes option valuation model that uses the assumptions noted in the
following table. Expected volatilities are based on volatilities from the
Company’s traded common stock.   The expected term of options granted
is equal to the contractual term as noted in the individual option
agreements and represents the period of time that options granted are expected
to be outstanding.  The risk-free rate for the periods within the
contractual life of the option is based on the U.S. Treasury bond rate in effect
at the time of grant for bonds with maturity dates at the estimated term of the
options.
    57
    2008 Grant
      #1
                2008 Grant
      #2
                2008 Grant
      #3Expected
      volatility
                120.17%
                108.32%
                108.32%Weighted-average
      volatility
                120.17%
                108.32%
                108.32%Expected
      dividends
                0
                0
                0Expected
      term (in years)
                1.6
                1.3
                1.3Risk-free
      rate
                .87%
                .87%
                .87%
   There are
1,809,244 options outstanding at December 31, 2008 which consists of the
following:
  As of
December 31, 2007, there were 1,074,583 options outstanding which entitle the
holder to purchase one share of the Company’s common stock at a price of $2.50
per share.  On August 31, 2007 the expiration date was extended from
November 15, 2007 to November 15, 2008.  During the year ended December 31,
2008, 625,144 of these options were exercised, and the remaining 449,439
expired.
 
 529,152  options
entitle the holder to purchase one share of the Company’s common stock at a
price of $3.75 per share.  On August 31, 2007 the expiration date was
extended from November 15, 2007 to November 15, 2009.  During the year
ended December 31, 2008, 12,000 options were exercised.
  240,917
Options entitle the holder to purchase one share of the Company’s common stock
at a price of $5.00 per share.  On August 31, 2007 the expiration date
was extended from July 1, 2008 to November 15, 2009.  No options have been
exercised or cancelled since issuance.
  150,000
options entitle the holder to purchase one share of the Company’s common stock
at a price of $2.50 per share.  On August 31, 2007 the expiration date
was extended from February 1, 2009 to November 15, 2009.  No options were
exercised or cancelled since issuance.
  500,000
options entitle the holder to purchase one share of the Company’s common stock
at a price of $2.50 per share.  On August 31, 2007 the expiration date was
extended from February 1, 2009 to November 15, 2009.  No options were
exercised or cancelled since issuance.
  365,295
options entitle the holder to purchase one share of the Company’s common stock
at a price of $5.00 per share.  The options expire on November 15,
2009.  No options were exercised or cancelled since
issuance.
  23,880  options
entitle the holder to purchase one share of the Company’s common stock at a
price of $10.00 per share.   The options expire on November 15,
2009.   All of these options were granted during
2008.
    58
 
 The
Company’s stock price was $2.30 at December 31, 2008, therefore all of the
Company’s options are anti-dilutive and are not included in the diluted earnings
per share calculation.
 
 NOTE 8 – EMPLOYEE BENEFIT
PLANS
 
 During
the years ended December 31, 2008 and 2007, there were no qualified or
non-qualified employee pension, profit sharing, stock option, or other plans
authorized for any class of employees.
 
 
 NOTE 9 – SUBSEQUENT
EVENTS
 
 Subsequent
to December 31, 2008, Goldgroup deposited an additional $800,000 pursuant to the
Earn In Agreement, which is discussed in Note 5.
 
 In March
2009, the Company exercised its Option to acquire the remaining outstanding
shares and interest in Mineras de DynaResource as described in Note
1.  The Company expects to complete the acquisition documentation and
filings in the 2nd quarter
of 2009.
 
 In March
2009, the Company invested $ 300,000 in DynaResource Nevada, Inc., a Nevada
Corporation, with one operating subsidiary in Mexico, DynaNevada de Mexico, SA
de CV.  The terms of the investment provide for a “Convertible Loan”,
repayable at 5 % interest over a 3 year period, and convertible at the Company’s
option into Common Stock of DynaResource Nevada, Inc. at $ .50 /
Share.  DynaResource Nevada, Inc. is a related entity, and through its
subsidiary in Mexico, has entered into an Option agreement with Grupo Mexico
(IMMSA) in Mexico, for the exploration and development of approximately 3,000
hectares in the State of San Luis Potosi.
 
 
 NOTE 10 –
RESTATEMENT
 
 Subsequent
to the issuance of the Company’s financial statements for the year ended
December 31, 2007, it was determined that the 15% equity interest in DynaMexico
by Goldgroup was not properly accounted for.  The Company has restated
its financial statements as of December 31, 2007 to properly account for the
minority interest.
 
 As
discussed in Note 1, the Company determined they had reentered the Exploration
Stage as of December 31, 2006.   As a result, the Company has
broken out their Accumulated Deficit to reflect the Accumulated Deficit Since
Reentering the Exploration Stage, as required by SFAS No. 7.
 
 
 
 
 59
 
 
 
 The
effect of the change is as follows:
  As
      Previously Stated
                                        
                                        
                                        As
      Restated
                                        
                                        
                                        Net
      Effect of AdjustmentsCurrent
      Assets
                                        
                                        $
                                        2,297,659
                                        
                                        
                                        $
                                        2,297,659
                                        
                                        
                                        $
                                        0Fixed
      Assets
                                        
                                        
                                        4,804,588
                                        
                                        
                                        
                                        4,804,588
                                        
                                        
                                        
                                        0Total
      Assets
                                        
                                        $
                                        7,102,247
                                        
                                        
                                        $
                                        7,102,247
                                        
                                        
                                        $
                                        0Current
      Liabilities
                                        
                                        $
                                        40,165
                                        
                                        
                                        $
                                        40,165
                                        
                                        
                                        
                                        0Long-Term
      Liabilities
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0
                                        
                                        
                                        
                                        0Minority
      Interest
                                        
                                        
                                        3,000,000
                                        
                                        
                                        
                                        344,980
                                        
                                        
                                        
                                        (2,655,020
                                        )Preferred
      Stock
                                        
                                        
                                        1,000
                                        
                                        
                                        
                                        1,000
                                        
                                        
                                        
                                        0Common
      Stock
                                        
                                        
                                        82,768
                                        
                                        
                                        
                                        82,768
                                        
                                        
                                        
                                        0Preferred
      Rights
                                        
                                        
                                        40,000
                                        
                                        
                                        
                                        40,000
                                        
                                        
                                        
                                        0Additional
      Paid-In-Capital
                                        
                                        
                                        13,219,661
                                        
                                        
                                        
                                        15,874,681
                                        
                                        
                                        
                                        2,655,020Treasury
      Stock
                                        
                                        
                                        (7,500
                                        )
                                        
                                        
                                        (7,500
                                        )
                                        
                                        
                                        0Other
      Comprehensive Income
                                        
                                        
                                        41,711
                                        
                                        
                                        
                                        41,711
                                        
                                        
                                        
                                        0Accumulated
      Deficit
                                        
                                        
                                        (9,315,558
                                        )
                                        
                                        
                                        (6,002,516
                                        )
                                        
                                        
                                        3,313,042Accumulated
      Deficit since Reentering
      the Exploration Phase
                                        
                                        
                                        0
                                        
                                        
                                        
                                        (3,313,042
                                        )
                                        
                                        
                                        (3,313,042
                                        )Total
      Stockholders’ Equity
                                        
                                        
                                        4,062,082
                                        
                                        
                                        
                                        6,717,102
                                        
                                        
                                        
                                        0Total
      Liabilities and Stockholders’ Equity
                                        
                                        $
                                        7,102,247
                                        
                                        
                                        $
                                        7,102,247
                                        
                                        
                                        
                                        0
   NOTE 11 – COMMITMENTS AND
CONTINGENGIES
 
 Three (3)
additional mining concessions in Mexico were applied for, and at the time that
title of these concessions are completed to DynaMexico, would extend the SJG
District by approximately 95,000 Hectares.
 
 For all
concessions, the Company is required to pay taxes in order to maintain the
concessions.  In 2008, the Company paid $933,684 Mexican pesos
(approximately $83,589 in US dollars) in taxes for all mining concessions
held.  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.   For the year ended December 31, 2007, the
minimum expenditure was $2,921,236 pesos (approximately $267,500 in US dollars);
and the total expenditures that can be carried forward was $92,022,517 Mexican
pesos (approximately $6,677,977 US dollars).  For 2008, the Company
incurred expenditures of $48,953,168 Mexican pesos which will increase the
estimated amount   the Company may carry forward to approximately
$138,104,700 Mexican Pesos (approximately $10,022,112 US dollars) as of December
31, 2008.  The minimum expenditure for 2009 has not yet been
determined, but is anticipated to be consistent with 2008, as adjusted for
inflation.   Based on Management’s business plans, they do not
anticipate any issues in meeting the minimum annual expenditures for the
concessions, and it retains sufficient carry forward amounts to cover over 20
years of the minimum expenditure (as calculated at the 2008 minimum, adjusted
for annual inflation of 4%).
    60
  
 In
September 2008, the Company entered into a 37 month lease agreement for its
corporate office..   The Company paid rent expense of $15,133
related to this lease for the year ended December 31, 2008.
 
 The
following is a schedule of minimum lease payments required under the existing
lease as of December 31, 2008:
  Year
      Ended December 31
                                  
                                  
                                  Amount2009
                                  
                                  
                                  $
                                  45,6302010
                                  
                                  
                                  
                                  46,5572011
                                  
                                  
                                  
                                  35,438$
                                  127,625
   NOTE 12 – RECENT ACCOUNTING
PRONOUCEMENTS
 
 In June
2003, the Securities and Exchange Commission (“SEC”) adopted final rules under
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404 (b)”), as amended by
SEC Release No. 33-8760 on December 15, 2006.  Commencing with the
Company’s Annual Report for the year ending December 31, 2008, the Company is
required to include a report of management on the Company’s internal control
over financial reporting.  The internal control report must include a
statement of management’s responsibility for establishing and maintaining
adequate internal control over financial reporting for the Company; of
management’s assessment of the effectiveness of the Company’s internal control
over financial reporting as of its year-end and of the framework used by
management to evaluate the effectiveness of the Company’s internal control over
financial reporting.
 
 In June
2008, the SEC approved a one year extension of the compliance data for smaller
public companies to meet the Section 404 (b) auditor attestation requirement of
the Sarbanes-Oxley Act regarding the Company’s internal control over financial
reporting on whether it believes that the Company has maintained, in all
material respects, effective internal control over financial
reporting.
    61
   In 2007,
the Financial Accounting Standards Board (“FASB”) issued the following
guidance:
 
 -
              SFAS
      No. 141: (Revised 2007), “Business
Combinations”
 
 -
              SFAS
      No. 159:  “The Fair Value Option for Financial Assets and
      Financial Liabilities”
 
 -
              SFAS
      No. 60:  “Noncontrolling Interest in Consolidated Financial
      Statements”
 
 In 2008,
the FASB issued the following guidance:
 
 -
              SFAS
      No. 161: “Disclosures about Derivative Instruments and Hedging
      Activities”
 
 -
              SFAS
      No. 162:  “The Hierarchy of Generally Accepted Accounting
      Principles”
 
 -
              SFAS
      No. 163:  “Accounting for Financial Guarantee Insurance
      Contracts”
 
 Management
has reviewed these new standards and believes that they will have no material
impact on the financial statements of the Company.
 
 
 NOTE 13 – FAIR VALUE
      OF FINANCIAL
INSTRUMENTS
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement”.
(“SFAS No. 157”).  SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements.  SFAS No. 157
was effective for financial assets and liabilities on January 1,
2008.  The FASB delayed the effective date of SFAS No. 157 for all
non-financial assets and non-financial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually) to fiscal years beginning after November 15,
2008.  The adoption of SFAS No. 157 did not have a significant impact
on the Company’s financial statements.
 
 SFAS No.
157’s valuation techniques are based on observable and unobservable inputs.
Observable inputs reflect readily obtainable data from independent sources,
while unobservable inputs reflect our market assumptions.  The
Standard classifies these inputs into the following hierarchy:
 
 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.
   62
 
 As of
December 31, 2008, the Company had no financial instruments with Level 1, Level
2 or Level 3 Inputs.
  In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement
No. 11”(“SFAS No. 159”).  SFAS No. 159 permits
entities to choose to measure eligible items at fair value at specified election
dates and report unrealized gains and losses on items for which the fair value
option has been elected in earnings at each subsequent reporting
date.  SFAS No. 159 was effective for the Company on January 1,
2008. However, the Company has not elected to apply the provisions of SFAS 159
to any of our financial assets and financial liabilities, as permitted by the
Statement.
 
 In
February 2008, the FASB issued FASB Staff Position 157-2 “Partial Deferral of the Effective
Date of Statement 157” (“FSP FAS 157-2”).  FSP FAS 157-2
delays the effective date of SFAS No. 157 to fiscal years beginning after
November 15, 2008 for all nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). The Company has adopted
SFAS No. 157 as of January 1, 2008 related to financial assets and
financial liabilities.  The Company is currently evaluating the impact of
SFAS No. 157 related to nonfinancial assets and nonfinancial liabilities on
the Company’s financial position, results of operations and cash
flows.
 
 In
October 2008, the Company adopted FASB Staff Position No. 157-3,
“Determining the Fair Value of
a Financial Asset when the Market for That Asset Is Not Active”(“FSP FAS
No. 157-3”).  FSP FAS No. 157-3 clarifies the methods employed in
determining the fair value for financial assets when a market for such assets is
not active.  FSP FAS No. 157-3 was effective
immediately.  The adoption of FSP FAS No. 157-3 did not have a
significant impact on the Company’s financial statements.
 
        63