SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q





(Mark One)



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



For the quarterly period ended June 30, 2011



OR



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



From the transition period ___________ to ____________.



Commission File
Number0-53237



DYNARESOURCE,
INC.

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



Delaware 94-1589426

(State or other jurisdiction of incorporation
or organization) (IRS Employer Identification No.)



222 W Las Colinas
Blvd., Suite 744 East Tower, Irving, Texas 75039

(Address of principal executive offices)



(972) 868-9066

(Issuer's telephone number)



N/A

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



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



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



Large Accelerated Filer	[ ]	Accelerated
Filer	[ ]

|
|

Non-Accelerated
Filer[ ]	Smaller Reporting Company	 [X]





Indicate by a check mark whether the company is a shell company
(as defined by Rule 12b-2 of the Exchange Act: Yes [ ] No [ X ].



As of August 18, 2011, there were 9,958,815 shares of Common Stock
of the issuer outstanding.





1







|                                                                  |                               | TABLE OF CONTENTS |        | 
|----------------------------------------------------------------- | ----------------------------- | ----------------- | ------ | 
|                                                                  |                               |                   |        | 
|PART I FINANCIAL STATEMENTS                                       |                               |                  
|                                                                  |                               |                   |        | 
|Item 1  Financial Statements                                      |                               |                   | 3     
|                                                                  |                               |                   |        | 
|                                                                  | Notes to Financial Statements |                   | 7 - 18
|                                                                  |                               |                   |        | 
|Item 2  Management's Discussion and Analysis or Plan of Operation | 19 - 37                      
|                                                                  |                               |                   |        | 
|Item 4                                                            | Controls and Procedures       |                   | 38    
|                                                                  |                               |                   |        | 
|PART II OTHER INFORMATION                                         |                               |                  
|                                                                  |                               |                   |        | 
|Item 1     Legal Proceedings                                      | 39                           
|Item 2     Changes in Securities                                  | 39                           
|Item 3     Default upon Senior Securities                         | 39                           
|Item 4     Submission of Matters to a Vote of Security Holders    |                               |                   | 39    
|Item 5     Other Information                                      | 39                           
|Item 6     Exhibits and Reports on Form 8-K                       | 39                           
|                                                                  |                               |                   |        | 
|                                                                  |                               |                   |        | 



2





DYNARESOURCE, INC.

(An Exploration Stage Company)

Consolidated Balance Sheets

June 30, 2011 and December 31, 2010



|                                                                                                  |  | 2011 |             | 2010
|------------------------------------------------------------------------------------------------- |  | ---- | ----------- | ----
|                                                                                                  |  |      |             |     
|ASSETS                                                                                            |  |      |             |     
|Current Assets:                                                                                   |  |      |             |     
|Cash and Cash Equivalents                                                                         |  | $    | 2,410,467   |     
|Foreign Tax Receivable                                                                            |  |      | 53,654      |     
|Other Current Assets                                                                              |  |      | 280,445     |     
|Total Current Assets                                                                              |  |      | 2,744,566   |     
|                                                                                                  |  |      |             |     
|Fixed Assets:                                                                                     |  |      |             |     
|Mining Camp Equipment and Fixtures (Net of Accumulated     Depreciation of $661,159 and $617,645) |  |      | 1,004,502   |     
|                                                                                                  |  |      |             |     
|Mining Properties (Net of Accumulated Amortization of $470,686 and $440,686)                      |  |      | 4,232,681   |     
|Total Fixed Assets                                                                                |  |      | 5,237,183   |     
|                                                                                                  |  |      |             |     
|                                                                                                  |  |      |             |     
|Other Assets:                                                                                     |  |      |             |     
|Note Receivable from Affiliate                                                                    |  |      | 70,000      |     
|Deposits                                                                                          |  |      | 5,788       |     
|Total Other Assets                                                                                |  |      | 75,788      |     
|                                                                                                  |  |      |             |     
|TOTAL ASSETS                                                                                      |  | $    | 8,057,537   |     
|                                                                                                  |  |      |             |     
|LIABILITIES AND EQUITY                                                                            |  |      |             |     
|                                                                                                  |  |      |             |     
|Current Liabilities:                                                                              |  |      |             |     
|Accounts Payable                                                                                  |  | $    | 11,974      |     
|Accrued Expenses                                                                                  |  |      | 47,555      |     
|Total Liabilities                                                                                 |  |      | 59,529      |     
|                                                                                                  |  |      |             |     
|Long-Term Liabilities                                                                             |  |      | 0           |     
|                                                                                                  |  |      |             |     
|Equity:                                                                                           |  |      |             |     
|Preferred Stock, $1.00 par value, 10,000 shares authorized                                        |  |      |             |     
|1,000 and 1,000 shares issued and outstanding                                                     |  |      | 1,000       |     
|Common Stock, $0.01 par value, 12,500,000 shares authorized                                       |  |      |             |     
|9,958,815 and 9,763,220 shares issued and outstanding                                             |  |      | 99,588      |     
|Preferred Rights                                                                                  |  |      | 40,000      |     
|Additional Paid In Capital                                                                        |  |      | 35,800,854  |     
|Treasury Stock                                                                                    |  |      | 0           |     
|Other Comprehensive Income                                                                        |  |      | 122,760     |     
|Accumulated Deficit                                                                               |  |      | (6,002,516  | )   
|Accumulated Deficit Since Reentering the Development Stage                                        |  |      | (19,070,610 | )   
|Total DynaResource, Inc. Stockholders’ Equity                                                     |  |      | 10,991,076  |     
|Noncontrolling Interest                                                                           |  |      | (2,993,068  | )   
|TOTAL EQUITY                                                                                      |  |      | 7,998,008   |     
|                                                                                                  |  |      |             |     
|TOTAL LIABILITIES AND EQUITY                                                                      |  | $    | 8,057,537   |     



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

3







DYNARESOURCE, INC.

(An Exploration Stage Company)

Consolidated Statement of Operations

For the Three and Six Months Ended June 30,
2011 and 2010

And Cumulative Since Re-entering the Development
Stage (January 1, 2007)

(Unaudited)



|                                                                          |  |                    |            |                  |  | Cumulative Since Re-Entering Development Stage (Jan. 1, 2007)
|------------------------------------------------------------------------- |  | ------------------ | ---------- | ---------------- |  | -------------------------------------------------------------
|                                                                          |  | Three Months Ended |            | Six Months Ended |  |                                                              
|                                                                          |  | June 30, 2011      |            | June 30, 2010    |  | June 30, 2011                                                
|                                                                          |  |                    |            |                  |  |                                                              
|REVENUES                                                                  |  | $                  | 0          |                  |  | $                                                            
|COST OF SALES                                                             |  |                    |            |                  |  |                                                              
|Exploration Costs                                                         |  |                    | 732,388    |                  |  |                                                              
|GROSS PROFIT (DEFICIT)                                                    |  |                    | (732,388   | )                |  |                                                              
|                                                                          |  |                    |            |                  |  |                                                              
|OPERATING EXPENSES:                                                       |  |                    |            |                  |  |                                                              
|Depreciation and Amortization                                             |  |                    | 38,282     |                  |  |                                                              
|General and Administrative                                                |  |                    | 362,333    |                  |  |                                                              
|TOTAL OPERATING EXPENSES                                                  |  |                    | 400,615    |                  |  |                                                              
|                                                                          |  |                    |            |                  |  |                                                              
|NET OPERATING INCOME (LOSS)                                               |  |                    | (1,133,002 | )                |  |                                                              
|                                                                          |  |                    |            |                  |  |                                                              
|OTHER INCOME (EXPENSE)                                                    |  |                    |            |                  |  |                                                              
|Portfolio Income                                                          |  |                    | 300        |                  |  |                                                              
|Other income                                                              |  |                    | 0          |                  |  |                                                              
|TOTAL OTHER INCOME (EXPENSE)                                              |  |                    | 300        |                  |  |                                                              
|                                                                          |  |                    |            |                  |  |                                                              
|NET INCOME (LOSS) BEFORE INCOME TAXES                                     |  |                    | (1,132,702 | )                |  |                                                              
|                                                                          |  |                    |            |                  |  |                                                              
|Provision for Income Taxes (Expense)  Benefit                             |  |                    | 0          |                  |  |                                                              
|NET LOSS                                                                  |  |                    | (1,132,702 | )                |  |                                                              
|Net Loss Attributable to Non-Controlling Interest                         |  |                    |            |                  |  |                                                              
|                                                                          |  |                    | 493,552    |                  |  |                                                              
|NET LOSS ATTRIBUTABLE TO DYNARESOURCE, INC. COMMON SHAREHOLDERS           |  |                    |            |                  |  |                                                              
|                                                                          |  |                    | (639,150   | )                |  |                                                              
|                                                                          |  |                    |            |                  |  |                                                              
|COMPREHENSIVE INCOME (LOSS):                                              |  |                    |            |                  |  |                                                              
|Unrealized Loss on Securities Held for Sale                               |  |                    |            |                  |  |                                                              
|Currency Translation Gain (Loss)                                          |  |                    | (148,979   | )                |  |                                                              
|COMPREHENSIVE LOSS BEFORE NON-CONTROLLING INTEREST                        |  |                    |            |                  |  |                                                              
|                                                                          |  |                    | (788,129   | )                |  |                                                              
|Comprehensive Loss (Income) Attributable to Non-Controlling Interest      |  |                    | (37,519    | )                |  |                                                              
|                                                                          |  |                    | (148,014   | )                |  |                                                              
|COMPREHENSIVE LOSS ATTRIBUTABLE TO DYNARESOURCE, INC. COMMON SHAREHOLDERS |  | $                  | (825,649   | )                |  | $                                                            
|                                                                          |  |                    |            |                  |  |                                                              
|                                                                          |  |                    |            |                  |  |                                                              
|                                                                          |  |                    |            |                  |  |                                                              
|EARNINGS PER SHARE, Basic and Diluted                                     |  |                    |            |                  |  |                                                              
|Weighted Average Shares Outstanding,  Basic and Diluted                   |  |                    | 9,932,217  |                  |  |                                                              
|Income (Loss) per Common Share, Basic and Diluted                         |  |                    | (0.08      | )                |  |                                                              







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

4





DYNARESOURCE, INC.

(An Exploration Stage Company)

Consolidated Statement of Changes in Stockholders’
Equity

For the Year Ended December 31, 2010 and

For the Six Months Ended June 30, 2011



|                                        |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          |                |         |  
|--------------------------------------- |  |  | --------- |  |  | ------ | ------ |  |  | ------ | --------- | ---------- | ------ | - | ------- | ----- | ------ | - | -------- | -------------- | ------- | -
|                                        |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          | Deficit Since  |         |  
|                                        |  |  |           |  |  |        |        |  |  |        |           | Additional |        |   |         | Other |        |   |          | Reentering the |         |  
|                                        |  |  | Preferred |  |  |        | Common |  |  |        | Preferred |            |        |   | Paid In |       |        |   | Treasury |                |         |  
|                                        |  |  | Shares    |  |  | Amount |        |  |  | Shares |           |            | Amount |   |         |       | Rights |   |          |                | Capital |  
|Stockholders’ Equity, January 1, 2010   |  |  | 1,000     |  |  | $      | 1,000  |  |  |        | 9,374,303 |            |        | $ | 93,743  |       |        | $ | 40,000   |                |         | $
|                                        |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          |                |         |  
|Sale of Common Shares                   |  |  |           |  |  |        |        |  |  |        | 124,244   |            |        |   | 1,242   |       |        |   |          |                |         |  
|Issuance of Common Shares for Services  |  |  |           |  |  |        |        |  |  |        | 264,673   |            |        |   | 2,647   |       |        |   |          |                |         |  
|Treasury Stock Purchased                |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          |                |         |  
|Treasury Stock Sold                     |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          |                |         |  
|Other Comprehensive Income              |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          |                |         |  
|DynaMexico Earn In                      |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          |                |         |  
|Net   Income (Loss)                     |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          |                |         |  
|Stockholders’ Equity, December 31, 2010 |  |  | 1,000     |  |  | $      | 1,000  |  |  |        | 9,763,220 |            |        | $ | 97,632  |       |        | $ | 40,000   |                |         | $
|                                        |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          |                |         |  
|Sale of Common Shares                   |  |  |           |  |  |        |        |  |  |        | 165,978   |            |        |   | 1,660   |       |        |   |          |                |         |  
|Issuance of Common Shares for Services  |  |  |           |  |  |        |        |  |  |        | 29,617    |            |        |   | 296     |       |        |   |          |                |         |  
|Other Comprehensive Income              |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          |                |         |  
|DynaMexico Earn In                      |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          |                |         |  
|Net   Income (Loss)                     |  |  |           |  |  |        |        |  |  |        |           |            |        |   |         |       |        |   |          |                |         |  
|Stockholders’ Equity,   June 30, 2011   |  |  | 1,000     |  |  | $      | 1,000  |  |  |        | 9,958,815 |            |        | $ | 99,588  |       |        | $ | 40,000   |                |         | $

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

5





DYNARESOURCE, INC.

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2011 and
2010

And Cumulative Since Re-entering the Development
Stage (January 1, 2007)

through June 30, 2011



|                                                                        |  |      |            |      |  | Cumulative Since Reentering the Development Stage (January 1, 2007) through June 30
|----------------------------------------------------------------------- |  | ---- | ---------- | ---- |  | -----------------------------------------------------------------------------------
|                                                                        |  | 2011 |            | 2010 |  | 2011                                                                               
|                                                                        |  |      |            |      |  |                                                                                    
|CASH FLOWS FROM OPERATING ACTIVITIES                                    |  |      |            |      |  |                                                                                    
|Net Income (Loss)                                                       |  | $    | (3,242,116 | )    |  | $                                                                                  
|Adjustments to reconcile net loss to cash used by operating activities: |  |      |            |      |  |                                                                                    
|Issuance of Common Stock for Services                                   |  |      | 132,681    |      |  |                                                                                    
|Issuance of Preferred Stock for Services                                |  |      | 0          |      |  |                                                                                    
|Depreciation and Amortization                                           |  |      | 73,514     |      |  |                                                                                    
|Loss on Disposition of Assets                                           |  |      | 0          |      |  |                                                                                    
|Change in Operating Assets and Liabilities:                             |  |      |            |      |  |                                                                                    
|Decrease in Accounts Receivable                                         |  |      | 0          |      |  |                                                                                    
|(Increase) Decrease in Foreign Tax Receivable                           |  |      | 201,730    |      |  |                                                                                    
|(Increase) in Other Current Assets                                      |  |      | (10,927    | )    |  |                                                                                    
|(Increase) in Deposits                                                  |  |      | 0          |      |  |                                                                                    
|Increase (Decrease) in Accounts Payable                                 |  |      | (20,251    | )    |  |                                                                                    
|Increase (Decrease) Increase in Accrued Expenses                        |  |      | (17,217    | )    |  |                                                                                    
|(Decrease) in Deferred Tax Liability                                    |  |      | 0          |      |  |                                                                                    
|CASH FLOWS (USED IN) OPERATING ACTIVITIES                               |  |      | (2,882,586 | )    |  |                                                                                    
|                                                                        |  |      |            |      |  |                                                                                    
|CASH FLOWS FROM INVESTING ACTIVITIES                                    |  |      |            |      |  |                                                                                    
|Purchase of Fixed Assets                                                |  |      | (685,135   | )    |  |                                                                                    
|Retirement of Fixed Assets                                              |  |      | 0          |      |  |                                                                                    
|Conversion of Note Receivable to Equity                                 |  |      | 0          |      |  |                                                                                    
|Investment in Affiliate                                                 |  |      | 0          |      |  |                                                                                    
|Note Receivable to Affiliate                                            |  |      | 0          |      |  |                                                                                    
|CASH FLOWS (USED IN) INVESTING ACTIVITIES                               |  |      | (685,135   | )    |  |                                                                                    
|                                                                        |  |      |            |      |  |                                                                                    
|CASH FLOWS FROM FINANCING ACTIVITIES                                    |  |      |            |      |  |                                                                                    
|Proceeds from DynaMexico Earn In                                        |  |      | 4,000,000  |      |  |                                                                                    
|Proceeds from Sale of Common Stock                                      |  |      | 658,657    |      |  |                                                                                    
|Repurchase of Common Stock Options                                      |  |      | 0          |      |  |                                                                                    
|Other Comprehensive Income (Loss)                                       |  |      | (283,188   | )    |  |                                                                                    
|-Purchase of Treasury Stock                                             |  |      | 0          |      |  |                                                                                    
|Sale of Treasury Stock                                                  |  |      | 0          |      |  |                                                                                    
|CASH FLOWS PROVIDED BY FINANCING ACTIVITIES                             |  |      | 4,375,469  |      |  |                                                                                    
|Effect of Exchange Rate on Cash                                         |  |      | 325,654    |      |  |                                                                                    
|NET INCREASE (DECREASE) IN CASH                                         |  |      | 1,133,402  |      |  |                                                                                    
|                                                                        |  |      |            |      |  |                                                                                    
|CASH AT BEGINNING OF PERIOD                                             |  |      | 1,277,065  |      |  |                                                                                    
|CASH AT END OF PERIOD                                                   |  | $    | 2,410,467  |      |  | $                                                                                  
|                                                                        |  |      |            |      |  |                                                                                    
|                                                                        |  |      |            |      |  |                                                                                    
|SUPPLEMENTAL DISCLOSURES                                                |  |      |            |      |  |                                                                                    
|Non-Cash Issuance of Common Shares for Services                         |  | $    | 132,681    |      |  | $                                                                                  
|Non-Cash Issuance of Preferred Shares for Services                      |  | $    | 0          |      |  | $                                                                                  
|Cash Paid During the Year for Interest Expense                          |  | $    | 0          |      |  | $                                                                                  
|Non-Cash Dividend of Property                                           |  | $    | 0          |      |  | $                                                                                  





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







6







|DYNARESOURCE, INC.
        (An Exploration Stage Company)
        Notes to the Consolidated Financial Statements
        June 30, 2011
        (Unaudited)
|----------------------------------------------------------------------------------------------------------------------------------------------------------







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”).  DynaMexico was formed
to acquire, invest in and develop resource properties in Mexico.  In March 2000, DynaResource and DynaMexico entered
into agreements to acquire the San Jose de Gracia Mining District in Northern Sinaloa, Mexico (“SJG”). In December
2003, DynaMexico reported the complete and 100 % acquisition, consolidation and ownership of the entire SJG District. 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.) (“Mineras”).   The
Company owned 25% of Mineras and acquired effective control of Mineras by acquiring the option to purchase the remaining 75% of
the Shares of Mineras. The Company finalized the option and acquisition of Mineras in January 2010, and now owns 100% of Mineras.   The
results of Mineras are consolidated with those of the Company.



In January 2008, the Company transferred 15%
of the shares of DynaMexico to Goldgroup Mining Inc. (“Goldgroup”), in exchange for $3,000,000 USD cash contributed
to DynaMexico and used for exploration and related expenditures at the San Jose de Gracia property (“SJG”). In August
2008, the Company transferred an additional 10% of the shares of DynaMexico to Goldgroup in exchange for an additional $3,000,000
USD cash contributed to DynaMexico and used for exploration and related expenditures at SJG, and in March 2011, the Company transferred
an additional 25% of the shares of DynaMexico to Goldgroup in exchange for an additional $12,000,000 USD cash contributed to DynaMexico
and used for exploration and related expenditures at SJG (See Note 6 below).  Through March 31, 2011, Goldgroup has contributed
$18,000,000 USD to DynaMexico, and it currently holds owns 50% of the outstanding shares of DynaMexico.



The Company produced approximately $7,637,150
in revenues from production activities conducted 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 Accounting Standards Codification (“ASC”) 915 “Development Stage Entities”
(formerly 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.



Significant Accounting Policies:



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





7









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 financial statements
on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States.



Principles of Consolidation:



The financial statements include the accounts
of DynaResource, Inc. as well as DynaResource de 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.



Foreign Currency Translation:



The functional currency for the subsidiaries
of the Company 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)).



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 six months ended June 30, 2011 and 2010 (Mexican pesos per
one U.S. dollar):





|                                                         | June
    30, 2011 | 
|-------------------------------------------------------- | ----------------- | 
|Current exchange rate:                                   | Pesos             | 
|                                                         |                   | 
|Weighted average exchange rate for the six months ended: | Pesos             | 





|                                                         | June
    30, 2010 | 
|-------------------------------------------------------- | ----------------- | 
|Current exchange rate:                                   | Pesos             | 
|                                                         |                   | 
|Weighted average exchange rate for the six months ended: | Pesos             | 



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.





8









Accounts Receivable and Allowances for Doubtful Accounts:



The allowance 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 collectable.



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 the IVA receivable as of June 30, 2011 and December 31, 2010 are $53,654 and
$255,384, respectively.



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 depreciation 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 33 concessions covering
approximately 69,133 hectares, 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 June
30, 2011, no indications of impairment existed.



Exploration Costs:



Exploration costs not directly associated with
proven reserves on the mining concessions are charged to operations as incurred.  Exploration, development, direct field
costs and administrative costs are expensed in the period incurred.



The carrying amounts of the mining concessions
are reviewed at each calendar year end to determine whether there is any indication of impairment.



As of December 31, 2010, no indications of impairment existed.





9











Advertising Costs:



The Company incurred no advertising costs for the six months ended
June 30, 2011 and 2010.



Income Taxes:



Income from the corporation is taxed at regular
corporate rates per the Internal Revenue Code.  Although the Company has tax loss carry-forwards (see Note 5), there is uncertainty
as to utilization prior to their expiration.  Accordingly, the future income tax asset amounts have been fully offset by a
valuation allowance.



Use of Estimates:



In order to prepare financial statement in
conformity with accounting principles generally accepted in the United States, management must make estimates, judgments and assumptions
that affect the amounts reported in the financial statements and determines whether contingent assets and liabilities, if any,
are disclosed in the financial statements.  The ultimate resolution of issues requiring these estimates and assumptions
could differ significantly from resolution currently anticipated by management and on which the financial statements are based.



Comprehensive Income:



ASC 220 “Comprehensive Income”,
(formerly SFAS No. 130 “Reporting Comprehensive Income”), establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose financial statements.    The Company’s
comprehensive income consists of net income and other comprehensive income (loss), consisting of unrealized net gains and losses
on the translation of the assets and liabilities of its foreign operations.   For the six months ended June 30,
2011 and 2010, the Company’s only component of comprehensive income was foreign currency translation adjustments.



Revenue Recognition:



The Company recognizes revenue in accordance
with ASC 605-10, "Revenue Recognition in Financial Statements", (formerly Staff Accounting Bulletin No. 104 (“SAB
104”).   Revenue is recognized when persuasive evidence of an arrangement exists, delivery or service has
occurred, the sale price is fixed or determinable and receipt of payment is probable.



Revenues earned from the sale of precious metal
concentrates are recognized as the title to the material is passed to the buyer upon delivery.



Earnings per Common Share:



Earnings (loss) per share are calculated in
accordance with ASC 260 “Earnings per Share” (formerly SFAS No. 128, “Earnings per Share”).  
The weighted average number of common shares outstanding during each period is used to compute basic earnings (loss) per share.  Diluted
earnings per share are computed using the weighted average number of shares and potentially dilutive common shares outstanding.   Dilutive
potential common shares are additional common shares assumed to be exercised.     Potentially dilutive
common shares consist of stock options and are excluded from the diluted earnings per share computation in periods where the Company
has incurred a net loss, as their effect would be considered anti-dilutive.



There were no potentially dilutive common stock
equivalents as of June 30, 2011, therefore basic earnings per share equals diluted earnings per share for the six months ended
June 30, 2011. The Company had no options outstanding at June 30, 2011.



Recently Issued 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.







10









NOTE 2 – FIXED ASSETS



Fixed assets consist of the following at June 30, 2011 and December
31, 2010:



|                                   |  | 2011 |           | 2010
|---------------------------------- |  | ---- | --------- | ----
|                                   |  |      |           |     
|Mining camp equipment and fixtures |  | $    | 1,224,539 |     
|Transportation equipment           |  |      | 268,253   |     
|Lab equipment                      |  |      | 14,306    |     
|Machinery and equipment            |  |      | 30,514    |     
|Office furniture and fixtures      |  |      | 76,895    |     
|Office equipment                   |  |      | 18,904    |     
|Computer equipment                 |  |      | 32,250    |     
|Sub-total                          |  |      | 1,665,661 |     
|Less: Accumulated depreciation     |  |      | (661,159  | )   
|Total                              |  | $    | 1,004,502 |     



Depreciation has been provided over each asset’s
estimated useful life.  Depreciation expense was $43,514 and $13,887 for the six months ended June 30, 2011 and
2010, respectively.





NOTE 3 – MINING PROPERTIES



Mining properties consist of the following at June 30, 2011 and
December 31, 2010:



|                               |  | 2011 |           |   | 2010 |  
|------------------------------ |  | ---- | --------- | - | ---- | -
|San Jose de Gracia (“SJG”):    |  |      |           |   |      |  
|Mining Concessions             |  | $    | 4,703,367 |   |      | $
|Less: Accumulated Amortization |  |      | (470,686  | ) |      |  
|                               |  |      |           |   |      |  
|Total Mining Properties        |  | $    | 4,232,681 |   |      | $



Amortization expense was $30,000 and $23,454 for the six months
ended June 30, 2011 and 2010, respectively.





NOTE 4 – NOTE RECEIVABLE FROM AFFILIATE



Through December 31, 2010, the Company loaned
a total of $805,760 USD to DynaResource Nevada, Inc. (“DynaNevada”), a Nevada Corporation, with one operating subsidiary
in Mexico, DynaNevada de Mexico, SA de CV., (“DynaNevada de Mexico”).  The terms of the Note Receivable provided
for a “Convertible Loan”, repayable at 5 % interest over a 3 year period, and convertible at the Company’s option
into common stock of DynaNevada at $.25 / Share.



On December 31, 2010, the Company exercised
its option to convert the note receivable and other receivable from DynaNevada into shares of common stock at a rate of $.25 per
share.  The Company received 3,223,040 shares, which represents approximately 19.95%  of the outstanding shares
of DynaNevada.   At the time of the exchange, the net book value of DynaNevada was approximately $695,000, consisting
of $30,000 cash and unproven mining properties.   DynaNevada has a contingent liability arising from the purchase
of one of the mining properties, which Management of the Company believes has no merit.   Based upon the above,
Company Management estimated the value of the DynaNevada shares as of December 31, 2010 to be $70,000.  Company Management
believes the impairment is temporary, and therefore an unrealized loss of $735,760 has been recorded in other comprehensive income.







11











DynaNevada is a related entity (affiliate),
and through its subsidiary DynaNevada de Mexico, 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 (“The Santa Gertrudis Property”).  DynaNevada
de Mexico completed the Option with IMMSA in March 2010, so that DynaNevada de Mexico now owns 100 % of the Santa Gertrudis Property.  In
June, 2010, DynaNevada de Mexico acquired an additional 6,000 hectares in the State of Sinaloa (the “San Juan Property”).



NOTE 5 – INCOME TAXES



The Company has adopted ASC 740-10, “Income
Taxes”, (formerly SFAS No. 109, “Accounting for Income Taxes”), which requires the use of the liability
method in the computation of income tax expense and the current and deferred income taxes payable (deferred tax liability) or benefit
(deferred tax asset).   Valuation allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.



The cumulative tax effect at the expected tax
rate of 34% (blended for U.S. and Mexico) of significant items comprising the Company’s net deferred tax amounts as of June
30, 2011 and December 31, 2010 are as follows:



Deferred Tax Asset Related to:

|                             |  | June 30, 2011 |            |   | December 31, 2010 |  
|---------------------------- |  | ------------- | ---------- | - | ----------------- | -
|Prior Year                   |  | $             | 5,147,021  |   |                   |  
|Tax Benefit for Current Year |  |               | 1,102,320  |   |                   |  
|Total Deferred Tax Asset     |  |               | 6,249,341  |   |                   |  
|Less: Valuation Allowance    |  |               | (6,249,341 | ) |                   |  
|Net Deferred Tax Asset       |  | $             | 0          |   |                   | $



The net deferred tax asset and benefit for the current year is generated
primarily from the cumulative net operating loss carry-forward which is approximately $25,000,000 at June 30, 2011, and will expire
in the years 2025 through 2029.



The realization of deferred tax benefits is contingent upon future
earnings and is fully reserved at June 30, 2011.





NOTE 6 – MATERIAL AGREEMENTS



Concessions and Interest related to DynaResource de Mexico and
the San Jose de Gracia Property (“SJG”):



In March 2000, the Company and DynaMexico entered
into agreements to complete the acquisition and consolidation of 100% of the Mining Concessions to the San Jose de Gracia Property
(“SJG”) and related interests.  Pursuant to these agreements, the Mining Concessions and related interests
comprising the SJG were transferred to “DynaResource de Mexico, SA de CV.”, 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.



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 Mining Inc., of Vancouver, British Columbia (“Goldgroup”), (“Buyer”), and Together, (“the
Parties”).





12











The Earn In provided for the sale of up to
fifty per cent (50%) of the total outstanding shares of DynaMexico, then the wholly owned subsidiary of DynaResource, and the 100
% owner of the San Jose de Gracia District in northern Sinaloa Mexico (“SJG”) in exchange for the total cash contributions
to DynaMexico to be used for exploration 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.                                         



The Parties agree to cooperate to develop the SJG Property, in the
best interests of the Project.



Earn In Activities:



Activities related to the exploration and development
of SJG are being conducted by DynaMexico, through contract to the operating subsidiary of DynaResource, Inc. in Mexico, Mineras
de DynaResource SA de CV.(“MinerasDyna”); with the management of personnel being contracted by MinerasDyna through
to the personnel management subsidiary, DynaResource Operaciones SA de CV., (“DynaOperaciones”). Management and administrative
fees are charged by Mineras Dyna and DynaOperaciones, which are eliminated in consolidation.



On December 28, 2007, DynaMexico reported that
Goldgroup had funded Phase II 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.





13











On July 16, 2008, DynaMexico reported that
Goldgroup had funded Phase III 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 held 25% of the total outstanding shares of DynaMexico as of December 31, 2008.



At March 15, 2011, DynaMexico reported that
Goldgroup had funded its total contributions of Capital pursuant to the Earn In Agreement of $18,000,000. In March 2011, an additional
25 % of the Shares of DynaMexico were transferred to Goldgroup so that Goldgroup holds a total of 50 % of the outstanding shares
of DynaMexico.



DynaMexico received $4,000,000 from Goldgroup
during the three months ended March 31, 2011 pursuant to the last phase of 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:



|· | Mineras de DynaResource “(Mineras Dyna”) is the exclusive operating entity at San Jose de Gracia (“SJG”), pursuant to the operating agreement with DynaResource de Mexico (“DynaMexico”);
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|· | DynaMexico owns the SJG Property and Concessions 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 DynaResource Operaciones (“DynaOperaciones”);
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|· | 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 7 – RELATED PARTY TRANSACTIONS



The Company paid $30,000 and $50,000 to Dynacap
Group, Ltd. (an entity controlled by officers of the Company) for consulting and other fees in the six months ended June 30, 2011
and 2010, respectively.



In addition, the Company has issued its stock
to the following directors and consultants for the six months ended June 30, 2011 and 2010, respectively:





|            |  | 2011 |        |  | 2010 |  
|----------- |  | ---- | ------ |  | ---- | -
|            |  |      |        |  |      |  
|Directors   |  | $    | 19,750 |  |      | $
|            |  |      |        |  |      |  
|Consultants |  |      | 0      |  |      |  
|            |  |      |        |  |      |  
|Totals      |  | $    | 19,750 |  |      | $





The above stock transactions were expensed as compensation in the
financial statements.





14









During the six months ended June 30, 2011 and
2010, the Company’s revenue was earned from exploration services performed for a related party.





NOTE 8 – STOCKHOLDERS’ EQUITY



Preferred Stock:



The Company is authorized to issue
10,000 preferred shares at a par value of $1.00 per share.  These preferred shares have full voting rights.  In
October 2007, the Company issued 1,000 shares of Preferred A shares to its CEO. These preferred shares have the right to
elect a majority of the Board of Directors. There were 1,000 shares outstanding at June 30, 2011 and December 31, 2010,
respectively.



Common Stock:



The Company is authorized to issue 12,500,000
common shares at a par value of $0.01 per share.  These shares have full voting rights.  At June 30, 2011 and December
31, 2010, there were 9,958,815 and 9,763,220 shares outstanding, respectively.    No dividends were paid in 2011
or 2010.



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, an additional $186,188 has been repaid, leaving a current
balance of $40,000 and $40,000 as of June 30, 2011 and 2010, respectively.



Stock Issuances:



During the six months ended June 30, 2011,
the Company issued 136,066 common shares for cash at $3.75 per share and 29,912 for cash at $5.00 per share.



During the six months ended June 30, 2011,
the Company issued 29,617 common shares for services for $132,681 of consulting or legal services. 5,000 of these were issued to
Directors of the Company.



During 2010, the Company issued 124,244 common shares for cash for
$3.50 per share.



During 2010, the Company also issued 252,173
shares for $854,562 of consulting services. The Company also issued 12,500 shares to directors for $46,875 in services.



Treasury Stock:



During the six months ended June 30, 2011, the Company did not purchase
or sell any treasury shares.



Treasury stock is accounted for by the cost
method.  During 2010, the Company repurchased 60,085 shares for $141,689 and resold 60,085 shares for $215,861.



Options and Warrants:



The Company has no options or warrants outstanding at June 30, 2011.



During 2010, 630,092 options  were not exercised or reissued
and expired.





NOTE 9 – EMPLOYEE BENEFIT PLANS



During the six months ended June 30, 2011 and
the year ended December 31, 2010, there were no qualified or non-qualified employee pension, profit sharing, stock option, or other
plans authorized for any class of employees.





15









NOTE 10 – COMMITMENTS AND CONTINGENGIES



The Company is required to pay taxes in order
to maintain their concessions.  Additionally, the Company is required to incur a minimum amount of expenditures each
year for all concessions held.  The minimum expenditures are calculated based upon the land area, as well as the age
of the concessions.  Amounts spent in excess of the minimum may be carried forward indefinitely over the life of the
concessions, and are adjusted annually for inflation.   Based on Management’s business plans, they do not
anticipate any issues in meeting the minimum annual expenditures for the concessions, and the Company retains sufficient carry
forward amounts to cover over 20 years of the minimum expenditure (as calculated at the 2010 minimum, adjusted for annual inflation
of 4%).



In September 2008, the Company entered into
a 37 month lease agreement for its corporate office.  The Company paid rent expense of $25,612 and $27,023 related to
this lease for the six months ended June 30, 2011 and 2010.



The following is a schedule of minimum lease payments required under
the existing lease as of June 30, 2011:





|Year Ended December 31 |  | Amount |      
|---------------------- |  | ------ | -----
|                       |  |        |      
|2011                   |  | $      | 7,875
|2012                   |  |        | 0    
|                       |  | $      | 7,875



NOTE 11 – NON-CONTROLLING INTEREST



The Company’s Non-controlling Interest
recorded in the consolidated financial statements relates to a 50% interest in DynaResource de México, S.A. de C.V.   Changes
in Non-controlling Interest for the six months ended June 30, 2011 follows:



|                                  |  |  | 2011 |           
|--------------------------------- |  |  | ---- | ----------
|Beginning balance                 |  |  | $    | (1,923,300
|OpeOperating income (loss)        |  |  |      | (1,217,782
|Other comprehensive income (loss) |  |  |      | 148,014   
|EndiEnding balance                |  |  | $    | (2,993,068



The Company began allocating a portion of other
comprehensive income (loss) to the non-controlling interest with the adoption of FASB 160 as of January 1, 2009.





NOTE 12 – RECENT ACCOUNTING PRONOUCEMENTS



In 2010, the FASB issued the following guidance:



On January 1, 2010, the Company adopted Accounting
Standard Update (“ASU”) 2009-16, “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial
Assets.” This ASU is intended to improve the information provided in financial statements concerning transfers of financial
assets, including the effects of transfers on financial position, financial performance and cash flows, and any continuing involvement
of the transferor with the transferred financial assets. The Company does not have a program to transfer financial assets; therefore,
this ASU had no impact on the Company’s consolidated financial statements.



On January 1, 2010, the Company adopted ASU
2009-17, “Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest
Entities,” which amended the consolidation guidance applicable to variable interest entities and required additional
disclosures concerning an enterprise’s continuing involvement with variable interest entities.   The Company
does not have variable interest entities; therefore, this ASU had no impact on the Company’s consolidated financial statements.





16









On January 1, 2010, the Company adopted ASU
2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements,”
which added disclosure requirements about transfers in and out of Levels 1 and 2 and separate disclosures about activity relating
to Level 3 measurements and clarifies existing disclosure requirements related to the level of disaggregation and input and valuation
techniques.   The adoption of this guidance did not have a material impact on the Company’s consolidated financial
statements or the related disclosures.





NOTE 13 – FAIR VALUE OF FINANCIAL INSTRUMENTS

In September 2006, the guidance for fair value measurements and disclosure was updated to define fair value, establish a framework
for measuring fair value, and expand disclosures about fair value measurements.  This guidance does not require any new
fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements.  The
provisions of the updated guidance were adopted January 1, 2008.  In February 2008, the FASB staff issued an update to
the guidance which delayed the effective date for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed
at fair value in the financial statements on a nonrecurring basis. The Company adopted the updated guidance for the Company’s
nonfinancial assets and liabilities measured at fair value on a nonrecurring basis on January 1, 2009.   The adoption
of updated guidance did not have a material impact on the Company’s financial position, results of operations or cash flows.



In October 2008, the guidance was further updated
to provide guidance on how the fair value of a financial asset is to be determined when the market for that financial asset is
inactive.  The guidance states that determining fair value in an inactive market depends on the facts and circumstances,
requires the use of significant judgment and, in some cases, observable inputs may require significant adjustment based on unobservable
data. Regardless of the valuation technique used, an entity must include appropriate risk adjustments that market participants
would make for nonperformance and liquidity risks when determining fair value of an asset in an inactive market.  The
guidance was effective upon issuance.  The Company has incorporated the principles of updated guidance in determining
the fair value of financial assets when the market for those assets is not active.



In April 2009, the guidance was further updated
to provide additional guidance on determining fair value when the volume and level of activity for the asset or liability have
significantly decreased and identifying circumstances that indicate when a transaction is not orderly.  The provisions
of this updated guidance were adopted April 1, 2009.  The adoption of the guidance did not have an impact on the Company’s
fair value measurements.



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



Level 1 Inputs – Quoted prices for identical instruments
in active markets.



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

Level 3 Inputs – Instruments with primarily unobservable
value drivers.



As of June 30, 2011, the Company’s financial
assets are measured at fair value using Level 3 inputs, with the exception of cash, which was valued using Level 1 inputs.    There
were no financial liabilities as of June 30, 2011.







17













|                          |  | Fair Value Measurement at June 30, 2011 Using: |          
|------------------------- |  | ---------------------------------------------- | ---------
|                          |  | June 30,
        2011                          |          
|Assets:                   |  |                                                |          
|Cash and Cash Equivalents |  | $                                              | 2,410,467
|Investment in Affiliate   |  |                                                | 70,000   
|                          |  | $                                              | 2,480,467





NOTE 14 – SUBSEQUENT EVENTS



In accordance with ASC 855-10, an evaluation of subsequent events
was performed through August 18, 2011, which is the date the financial statements were issued. No items requiring disclosure were
noted.









18











ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS



This report contains forward looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange
Act of 1934, as amended. The Company’s actual results could differ materially from those set forth on the forward looking
statements as a result of the risks set forth in the Company’s filings with the Securities and Exchange Commission, general
economic conditions, and changes in the assumptions used in making such forward looking statements.



General



The Company holds 50% of the outstanding shares
of DynaResource de México, S.A. de C.V. (“DynaMéxico”), which owns 100% of the mineral concessions and
related interest to the San José de Gracia mining property and district covering approximately 69,133 hectares located in
and around San José de Gracia, Sinaloa State, México (“SJG”). SJG is located on the west side of the
Sierra Madre Mountains, approximately 250 kilometers inland from the port city of Los Mochis, Sinaloa; and approximately 500 kilometers
north of Mazatlan, Sinaloa.



The SJG is a High-Grade Mineralized System
which reports historical production of + 1 M. Oz. AU, from a series of underground workings. DynaMéxico is focused on the
exploration and future exploitation of this vein-hosted, near surface, and + 400 hundred M. Down – Dip Gold Potential, that
occurs within fault breccia veins; and has been traced on surface and underground over a 15 Sq. Km. area.



Prior Drilling and Exploration Activity / SJG (1997 / 1998)

A drill program was conducted at SJG
in 1997 - 1998 by Golden Hemlock Explorations, Ltd., a prior partner at SJG. 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 La Cecena to Tres Amigos Trend.  And, Drill Hole 97-63 confirmed
down dip and extension at the Palos Chinos Area of SJG.

Surface and underground sampling in 1999 -
2000 conducted by the Company confirmed high grades in historic workings and surface exposures throughout the SJG district and
project area.  These high grades outlined 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 (g/t) gold.



Acquisition and Consolidation / SJG



In 2000, the Company formed DynaMéxico
to acquire, invest in, explore and develop mining concessions in México, and specifically to acquire the ownership and interests
related to San Jose de Gracia. In March 2000, the Company and DynaMéxico entered into agreements to acquire and consolidate
100% of the San José de Gracia Property. The Company agreed to issue 2,493,271 common shares in exchange for the complete
acquisition of the SJG and all related interest, and subject to the complete transfer of all mining concessions.



After resolving ownership and title issues
related to SJG mining concessions, the number of shares issued to the prior owners of SJG was reduced to 115,000 shares from 2,493,271.
(Note: The 115,000 shares were issued in 2006, when all matters related to the acquisition, transfer, and consolidation, of the
SJG district, were resolved).



Recent Pilot Production Activity



During the period 2003 through 2006, DynaMéxico
conducted underground mining and pilot production activities at SJG. The small scale production activities at SJG consisted of
improvements to an existing mill, including the installation of a gravity / flotation processing circuit. Initial test runs with
tailings from historical production were completed in 2002.  Actual mining at the high grade San Pablo area of the SJG property
commenced in March 2003. DynaMéxico produced 18,250 Oz. gold from Mid 2003 to June 2006; from mined tonnage of 42,500 tons,
at an average grade of approximately 20 g/t. Production costs were reported at approx. < $ 175. / Oz.







19









During the period of production at SJG, the
Company recognized it would be necessary to conduct large scale exploration activities in order to define and confirm a + 1 M.
Oz. Gold resource. And, the Company believed that ultimately SJG could host a + 3 M Oz. Gold resource.



Recent Financing Activity



As gold prices continued to appreciate into
2006, exploration financing opportunities increased and the Company and DynaMéxico negotiated and entered into the “Earn
In / Option” agreement with Goldgroup Resources, Inc. (now Goldgroup Mining Inc.), Vancouver, BC, dated September 1, 2006.
The Terms of the Earn In / Option provided for $ 18 M. USD financing from Goldgroup to DynaMéxico, over four Phases (through
March 2011), and including exploration related expenditures at SJG, in exchange for Goldgroup’s earning of 50 % of the Shares
of DynaMéxico. (See Material Agreements; Earn In / Option Agreement.)



Exploration / Drilling Activity conducted
Pursuant to the Earn In Agreement



|·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).                                                                              
|                                                                                                                                                                                                                                     
|·Continuing with Phase IV of the Earn In Agreement, in 2009 and at December 31, 2009, an additional 4,000 Meters was completed in 21 Drill Holes (through SJG 09-147.)                                                               
|                                                                                                                                                                                                                                     



At December 31, 2009, a total of 34,000 meters
drilling had been completed in 147 core drill holes, financed pursuant to the Earn In Agreement.





|·Continuing with Phase IV of the Earn In Agreement in 2010, and at March 31, 2010, an additional 6,167 Meters drilling was completed in 21 Drill Holes (SJG 2010 148 – 168). At March 31, 2010, a total of 40,167 Meters drilling had been completed in 168 core drill holes, financed pursuant to the Earn In Agreement.                                                                                                                               
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|·Continuing with Phase IV of the Earn In Agreement in 2010, and at June 30, 2010, an additional 5,382 Meters drilling was completed in 20 Drill Holes (SJG 2010 169 – 188). At June 30, 2010, a total of 45,549 Meters drilling has been completed in 188 core drill holes, financed pursuant to the Earn In Agreement.                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|For the period of July –
    September 2010, Drilling activity is suspended for the wet season.  During the quarter, Assays of drilling results are updated;
    the Block Model in Surpac is updated; and exploration plans are developed and programmed for start in October. And, the next 18,500
    meter drill program commenced in October 2010 . For the period of July - September
    2010, drilling activity is suspended for the wet season.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|·Continuing with Phase IV of the Earn In Agreement in 2010, and at December 31, 2010, an additional 10,882 Meters drilling was completed in 51 Drill Holes (SJG 2010 189 – 239).                                                                                                                                                                                                                                                                        



At December 31, 2010, a total of
56,431 Meters drilling has been completed in 239 core drill holes financed pursuant to the Earn In Agreement.







20









|·Continuing with Phase IV of the Earn In Agreement in 2011, and at March 31, 2011, an additional 12,310. Drilling was completed in 59 Drill Holes (SJG 240 – 298.) At March 31, 2011, a Total of 68,741 Meters drilling has been completed in 298 core drill holes financed pursuant to the Earn In Agreement.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                              



Magnetic and IP Surveys



Magnetic and IP surveys were conducted throughout
the SJG district in 2009; covering an area of approximately 15 Sq. Km.



IP is the primary geophysical target at SJG;
and is expected to identify pyrite-based mineralization hosting gold. Initial Survey Grid lines were located approximately perpendicular
to inferred geologic strike. The data response from these grid lines indicate one or more IP sources that dip northwest.



Additional grid lines were crossed with the
initial lines, and appear to identify two separate IP sources.



Grid lines to the South appear to indicate
an IP source at > 250 Meters.



Correlation between ground magnetic and
IP:



In general the correlation between the Magnetic
and IP response and data was excellent.



Correlation with recent Drilling Programs
and known Mineralization:



The data response of the surveys correlated
to the recent drilling programs and to the areas of known mineralization at SJG was excellent. Considering this excellent correlation
to known mineralization, additional areas of SJG showing similar data response could be indicative of additional target areas.



Identification of Additional Resource Target
Areas:



Significant survey responses were reported
for the following areas; and are projected for follow up drilling:



|San Pablo; Up Dip;                     
|---------------------------------------
|San Pablo; Displacement Zone;          
|Tres Amigos; Down Dip and Northwest;   
|Tres Amigos; Extension Northeast;      
|Orange Tree; Down Dip;                 
|La Cecena, Los Hilos, and Tepehauje;   
|Palos Chinos;                          
|La Prieta;                             
|La Purisima; Down dip at Southeast end;
|Argyllic Zone;   + 250 M. Down;        







21











Structural Geologist



Also in 2009, a structural geological consultant
experienced in México, reviewed and mapped the SJG Property with regard to Ore Controls and Structural analysis. An area
of 2.8 Km by 3.4 Km was mapped; and a review was completed of the recent (2007-2008) drill core and drill logs through drill hole
# 08-126. A Final report and mapping are being utilized in planning drilling programs at SJG. Information contained in the structural
control and analysis is described below:



Highlights of Resource Areas at SJG (August,
2009):



|San Pablo:     | (SJG 08-31):  | 8.3 M. of 48.24 g/t; Including 3.8 M. of 104.01 g/t, and Including 1.5 M. of 233.61 g/t;                              
|-------------- | ------------- | ----------------------------------------------------------------------------------------------------------------------
|               | (SJG 08-51):  | 14.2 M. of 14.79 g/t; Including 9 M. of 22.93 g/t, and Including 3.5 M. of 41.5 g/t;                                  
|               |               |                                                                                                                       
|Tres Amigos:   | (SJG 97-13):  | 27.5 M. of 9.94 g/t; Including 18.6 M. of 14.28 g/t, and including 2 M. of 85.72 g/t;                                 
|               |               |                                                                                                                       
|               | (SJG 97-45) : | 14 M. of 5.35 g/t; including 2 M. of 31.35 g/t;                                                                       
|               |               |                                                                                                                       
|Orange Tree:   | (SJG 97-39):  | 6.8 M. of 13.20 g/t; Including 3 M. of 29.5 g/t, and including 1.5 M. of 51.46 g/t;                                   
|               |               |                                                                                                                       
|               | (SJG 08-47):  | 7.1 M. of 7.63 g/t; Including 1.6 M. of 23.10 g/t;                                                                    
|               |               |                                                                                                                       
|La Cecena      |               |                                                                                                                       
|(Tres Amigos): | (SJG 97-50):  | 11 M. of 2.78 g/t; Including 2 M. of 5.02 g/t; And, Including 2 M. of 8.53 g/t;                                       
|               |               |                                                                                                                       
|               | (SJG 08-104): | 2.8 M. of 13.70 g/t; Including 1.4 M. of 26.96 g/t;                                                                   
|               |               |                                                                                                                       
|La Union:      | (SJG 08-76):  | 4.8 M. of 16.02 g/t; Including 2 M. of 37.60 g/t; And, Including .7 M. of 75.56 g/t;                                  
|               |               |                                                                                                                       
|               | (SJG 08-80):  | 3.1 M. of 4.8 g/t; Including 1.5 M. of 7.37 g/t;                                                                      
|               |               |                                                                                                                       
|Palos Chinos/  |               |                                                                                                                       
|Tajo Verde:    | (SJG 97-63):  | 27.8 M. of 2.30 g/t; Including 17.3 M. of 2.81 g/t, And Including .7 M. of 9.25 g/t, And Including 2.7 M. of 8.45 g/t;
|               |               |                                                                                                                       
|               | (SJG 07-16):  | 5 M. of 3.5 g/t; Including 3 M of 5.24 g/t;                                                                           
|               |               |                                                                                                                       
|               | (SJG 97-55):  |                                                                                                                       
|               |               |                                                                                                                       
|La Purisima:   | (SJG 07-21):  | 8 M. of 20.67 g/t; Including 6 M. of 26 g/t; And, Including 2.1 M. of 76.33 g/t;                                      
|               |               |                                                                                                                       
|               | (SJG 07-39):  | 4.2 M. of 8.55 g/t; Including 1.9 M. of 16.67 g/t;                                                                    
|               |               |                                                                                                                       



La Prieta:	Historical
Production of 215,000 Oz. Au., at average grade of 28 g/t au; Dimensions of 100 M. by 50 M.; Future resource yet to be defined;





22











Identification of New, Additional Resource
Target Areas:



San Pablo:	Geological
Mapping located a new drill target approximately 600 meters to the east – southeast of San Pablo. This area was determined
to be the northeast portion of the San Pablo Ore body; which had been displaced by a combination of post-mineral strike-slip and
normal faulting; also indicating the potential for a “Pipe Feeder”. This area will be expected to add significant resources
to the mineable ore body at San Pablo;

La Purisima /

Tajo Verde:	Transpressive
strike-slip faults that bound this area are determined to be the same faults that control the mineralization in La Purisima and
Tajo Verde. This area also coincides with gaps left from previous drilling campaigns and also a gap in the underground workings.



San Pablo /

La Union:	Gaps left from previous drilling
campaigns and also a gap in the underground workings.



Drilling Highlights by Specific Target area
of SJG (through March, 2011):



The following drilling highlights are included
by target area, and for the period through March 31, 2011:



San Pablo:



|SJG 07-07  | 5 M. of 10.07 g/t., Including 2 M. of 24.55 g/t.; With Credits;                                                                                                                                                          
|---------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|SJG 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.;                                                                                                                                       
|SJG 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.; with New
        Zone in Sediments;                                                                        
|SJG 07-12: | 7.1 M. of 6.40 g/t., Including 4.2 M. of 10.39
        g/t., And, Including 1.1 M. of 15.63 g/t.;
        And, Including
        1.6 M. of 11.292 g/t;                                                                   
|SJG 07-23: | 7 M. of 2.11 g/t., Including 1.4 M. of 9.16 g/t., with Copper Credits;                                                                                                                                                   
|SJG 07-26: | 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;                        
|SJG 07-27: | 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;                                           
|SJG 07-28: | 5.3 M. of 2.05 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 5.4 g/t                                                                    
|SJG 07-29: | 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;                                                                                  
|SJG 07-30: | 1.6 M. of 5.98 g/t. (6.50 g/t AU Equivalent),
        with Copper and Zinc Credits; .9 M. of 4.22
        g/t. (6.35 g/t. AU Equivalent),
        with Copper Credits;                                                   
|SJG 07-31: | 8.30 M. of 49.50 g/t., Or, 7.5 M. of 53.98
        g/t.; Including 5.35 M. of 75.695 g/t.;
        Including 3.8 M. of 106.77 g/t; Including 1.5
        M. of 240.61 g/t; with Copper and Zinc Credits                  
|SJG 07-34  | 2.2 M. of 1.028 g/t.;                                                                                                                                                                                                    
|SJG 08-48: | 13.60 M. of 3.09 g/t., Or, 11.04 M. of 3.840
        g/t.; Including 3.68 M. of 6.62 g/t.; And
        Including 1.84
        M. of 7.758 g/t; with Copper Credits;                                                      
|SJG 08-51: | 14.20 M. of 14.91 g/t., Including 10.78 M.
        of 19.44 g/t.; Or Including 9.05 M. of 23.12
        g/t.; And, Including 3.50 M. of 42.32 g/t;
        with Copper Credits;                                          
|SJG 08-60: | 9.1 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;                                                     
|SJG 08-89: | 3.8 M. of 2.64 g/t., Including 1.3 M. of 4.520 g/t;                                                                                                                                                                      
|SJG 08-90: | 6.7 M. of 3.564 g/t, Including 1.2 M. 0f 11.69
        g/t;, And, Including .6 M. of 16.18 g/t;
        Including .6
        M of 7.210 g/t; with Credits;                                                               
|SJG 08-91: | 2 M. of 17.530 g/t.;                                                                                                                                                                                                     
|SJG 08-92: | 4.2 M. – 6.10 g/t; Including 1 M. of
        23.314 g/t; And, 4.1 M. of 1.38 g/t; Including 2.3
        M. of 2.1 g/t; And, 4.9 M. of 3.02 g/t., Including
        .4 M. of 30.445 g/t; And, .5 M. of
        14.719 g/t;
|SJG 08-93: | 5.8 M., Including .4 M of 28.53 g/t;                                                                                                                                                                                     
|SJG 08-96: | 2.1 M. of 2.22 g/t., Including .55 M. of 4.750 g/t;                                                                                                                                                                      
|SJG 08-97: | 4.3 M. of 8.68 g/t;, Including 2.1 M. of 17.05 g/t; with Copper and Zinc Credits;                                                                                                                                        







23













|SJG 08-98:  | .5 M. of 2.165 g/t.;                                                                                                                                                             
|----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|SJG 09-131: | 1.10 M. of 28.25 g/t (29.16 AU Equivalent); 1.75 M. of 7.18 g/t (9.27 AU Equivalent);1.30 M. of 6.97 g/t (7.75 AU Equivalent);                                                   
|SJG 09-132: | 50 M. of 7.1 g/t (11.20 AU Equivalent);
        2.05 M of 4.08 g/t (4.97 AU Equivalent); .50 M.
        of 2.86 g/t (4.05
        AU Equivalent);                                
|SJG 09-133: | 6.25 M. of 6.49 g/t (6.83 Au Equivalent),
        including 1.55 M. of 24.23 g/t; 2.07 M. of 3.57
        g/t (3.78 AU Equivalent);                                              
|SJG 09-134: | .55 M. of 2.105 g/t (3.04 Au Equivalent);
        2.48 M. of 4.33 g/t (5.11 Au Equivalent); .80
        M. of 3.37 g/t
        (3.74 Au Equivalent);                             
|SJG 09-135: | 4.42 M. of 3.63 g/t (5.35 AU Equivalent), including 1 M. of 8.96 g/t.;                                                                                                           
|SJG 09-136: | 2 M. of .611 g/t (.71 AU Equivalent);                                                                                                                                            
|SJG 09-138: | 5.46 M. of 4.97 g/t (5.35 AU Equivalent), including 2.97 M. of 8.80 g/t.;                                                                                                        
|SJG 09-139: | .71 M. of 8.79 g/t; 5.50 M. of 20.51
        g/t, Including 3.12 M of 34.91 g/t; And, Including
        1.80 M. of 58.05 g/t.; And, Including
        .92 M. of 104.10 g/t;      
|SJG 09-140: | 3.32 M. of .82 g/t, including 1.66
        M. of 1.42 g/t; 5.24 M. of 2.15 g/t, including 1.14 M. of
        6.4 g/t;                                                            
|SJG 10-149: | 1.3 M. of 4.8 g/t;                                                                                                                                                               
|SJG 10-195: | .40 M. of 3.43 g/t; Including .73 M. of 2.18
        g/t; And, Including 1.83M. of 2.2 g/t; And,
        Including 1.21
        M of 3.68 g/t; And, Including 2.94 M of 3.26 g/t.
|SJG 10-197: | 1.16 M. of 2.83 g/t; And, Including 3.67 M. of 7.96 g/t; And, Including 3.30 M. of 28.38 g/t.                                                                                    
|SJG 10-199: | 1.56 M. of 9.14 g/t;                                                                                                                                                             
|SJG 10-201: | 2.10 M. of 15.78 g/t;                                                                                                                                                            
|SJG 10-203: | .70 M. of 3.23 g/t; And, Including 1.91 M. of 3.42 g/t; And, Including 5.50 M. of 332.86 g/t;                                                                                    
|SJG 10-205  | 95 M. of 6.71 g/t; And Including .45 M. of 7.73 g/t;                                                                                                                             
|SJG 10-207: | 3.05 M. of 16.74 g/t;                                                                                                                                                            
|SJG 10-210: | 4 M. of  2.58 g/t;                                                                                                                                                               
|SJG 10-212: | 4.80 M. of 5.90 g/t; And, Including 1.53 M. of 2.85 g/t;                                                                                                                         
|SJG 10-213: | 1.81 M. of 5.78 g/t;                                                                                                                                                             
|SJG 10-215: | 3.47 M. of 15.82 g/t; And, Including 1.40 M of 2.53 g/t;                                                                                                                         
|SJG 10-217: | 1.42 M. of 89.95 g/t;                                                                                                                                                            
|SJG 10-219: | 46 M. of 4.49 g/t; And Including .71 M. of
        7.92 g/t; And, Including 1.41 M. of 10.82 g/t;
        And, Including .80 M. of 2.23 g/t;                                     
|SJG 10-221: | 2.00 M. of 13.14 g/t; And, Including .54 M.
        of 3.26 g/t; And, Including .65 M. of
        22.41g/t;                                                                      
|SJG 10-224: | 2.23 M. of 5.29 g/t; And, Including 6.35 M.
        of 7.04 g/t; 3.35 M. of 11.93 g/t; And,
        Including .78 M. of 1.80
        g/t; And, Including .45 M. of 6.84 g/t;     









24









SJG 11–236 to SJG 271; San Pablo Drill
holes only reported here (See Table below):



|SAN PABLO VEIN |               
|-------------- | --------------
|Drill Hole     | Mineralization
|               | From (m)      
|               |               
|SJG-10-236     | 112.96        
|and            | 140.50        
|SJG-10-238     | 257.00        
|SJG-11-245     | 104.40        
|SJG-11-247     | 63.60         
|and            | 70.70         
|including      | 71.77         
|and            | 80.00         
|including      | 81.37         
|SJG-11-249     | 97.60         
|and            | 108.20        
|and            | 130.50        
|SJG-11-250     | 101.72        
|SJG-11-253     | 149.45        
|SJG-11-255     | 154.55        
|SJG-11-258     | 102.27        
|and            | 111.50        
|SJG-11-261     | 52.72         
|and            | 109.03        
|and            | 114.00        
|SJG-11-263     | 119.88        
|and            | 131.39        
|and            | 1.34.35       
|and            | 144.23        
|SJG -11-264    | 145.21        
|SJG -11-268    | 92.65         
|and            | 153.00        
|SJG-11-272     | 86.80         
|SJG 11-279     | 126.49        
|               |               



Company Management believes the
drilling at San Pablo through March 2011 has defined a sizeable Inferred Resource (+ 400,000 Oz. Au.), using a Cut Off grade of
2 g/t., with an average grade of + 8 g/t. Infill drilling and further extensions to San Pablo area are projected in further drilling.
A 43-101 compliant Technical Report is expected to be commissioned by DynaMéxico in 3rd Quarter 2011, and which
is expected to confirm the Company’s Resource estimates.



Tres Amigos / La Cecena:



1997 – 1998:





|’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;
|------- | ----------------------------------------------------------------------------------
|        |                                                                                   
|’97-03: | 4. M. of 4.13 g/t., Including 2 M. of 7.22 g/t.;                                  
|        |                                                                                   
|’97-05: | 1.9 M. of 3.62 g/t.;                                                              
|        |                                                                                   
|’97-06: | 1.85 M. of 6.47 g/t.;                                                             



25







|’97-07:                           | 10 M. of 3.42 g/t., Including 2.15 M. of 6.82 g/t.;  And, 14.3 M. of 2.41 g/t; Including 2.34 M. of 8.67 g/t;                                                                                                                                                      
|--------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                  |                                                                                                                                                                                                                                                                    
|’97-09:                           | 2.7 M. of 2.76 g/t; Including 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 4.6 M. of 3.81 g/t;  and, 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 9.94 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.; And, 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.; ;                                                                                                                                                                                                                                            
|                                  |                                                                                                                                                                                                                                                                    
|’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.;  And, 6 M. of 4.16 g/t; Including 2 M. of 10.81 g/t.;  And, 8 M. of 3.86 g/t;  Including 6 M. of 5.02 g/t;  And, Including 4 M. of 7.21  g/t.;  And, Including 2M. of 8.95 g/t                                                                
|                                  |                                                                                                                                                                                                                                                                    
|’97-41:                           | 10 M. of 2.56 g/t;  Including 4 M. of 4.4  g/t., Including 2 M. of 5.15 g/t.;                                                                                                                                                                                      
|                                  |                                                                                                                                                                                                                                                                    
|’97-42:                           | 4 M. of 3.04 g/t; Including 2. M. of 5.17 g/t.; And, 18. M. of 1.88 g/t; Including 2.3 M.of 3.43 g/t;  and, Including 2 M. of 3.8 g/t; and Including 2 M. of 3.36 g/t;  And, 12 M. of 2.46 g/t;  Including  4.5 M. of 5.06 g/t.;  and, Including 1.5 M of 6.69 g/t;
|                                  |                                                                                                                                                                                                                                                                    
|’97-43:                           | 1.3 M. of 4.23 g/t.;                                                                                                                                                                                                                                               
|                                  |                                                                                                                                                                                                                                                                    
|’97-44:                           | 6 M. of 2.91 g/t; Including 2. M. of 7.78 g/t.; And, 12 M. of 1.71 g/t;  Including 2 M. of 5.18 g/t.; And, 14.8 M. of 1.47 g/t; Including 1.3 M. of 7.06 g/t;                                                                                                      
|                                  |                                                                                                                                                                                                                                                                    
|’97-45:                           | 14 M. of 5.35 g/t; Including 2 M. of 31.35 g/t; And, 14 M. of 2.38 g/t; Including 2 M.of 12.32 g/t;                                                                                                                                                                
|                                  |                                                                                                                                                                                                                                                                    
|’97-47:                           | 7.06 M. of 7.63 g/t., Including 1.55 M. of 23.10 g/t.;                                                                                                                                                                                                             
|                                  |                                                                                                                                                                                                                                                                    
|’97-50:                           | 2 M. of 5.02g/t; 5 M. of 3.92 g/t., Including 2. M. of 8.53 g/t.;                                                                                                                                                                                                  
|(La Cecena)                       |                                                                                                                                                                                                                                                                    
|                                  |                                                                                                                                                                                                                                                                    
|Tres Amigos Recent (2007 – 2011):
|                                  |                                                                                                                                                                                                                                                                    
|SJG 08-102:                       | 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;                                                            





26









|SJG 08-103: | 1.2 M. of 4.911 g/t.;And, 1.1 M of 2.564 g/t.;                                                                                                                                                                                                                                    
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                                                                                                                                                   
|SJG 08-104: | 2.8 M of 13.32 g/t. (16.24 g/t. AU Equivalent);  Including 1.4 M. of 26.20 g/t.;                                                                                                                                                                                                  
|            |                                                                                                                                                                                                                                                                                   
|SJG 08-110: | 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);                                                                                                       
|            |                                                                                                                                                                                                                                                                                   
|SJG 08-111: | 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;                                                                                                                                               
|            |                                                                                                                                                                                                                                                                                   
|SJG 08-112: | 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);                                                                                                                                                                              
|            |                                                                                                                                                                                                                                                                                   
|SJG 08-113: | 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;                                                                                                                                             
|            |                                                                                                                                                                                                                                                                                   
|SJG 08-114: | 5.3 M. of 2.91 g/t. (3.13 g/t. AU Equivalent); including 1.7 M. of 8.32 g/t.;                                                                                                                                                                                                     
|            |                                                                                                                                                                                                                                                                                   
|SJG 08-115: | 1.5 M. of 3.40 g/t (4.60 AU Equivalent);  And, 9.40 M. of 5.15 g/t.; Including 5.7 M of 8.37 g/t.; And, Including 2.1 M. of 9.48 g/t.; And, Including 1.7 M. of 12.96 g/t;                                                                                                        
|            |                                                                                                                                                                                                                                                                                   
|SJG 08-116: | 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;                                                                                                          
|            |                                                                                                                                                                                                                                                                                   
|SJG 08-117: | 1.7 M. of 4.674 G/T. (5.23 g/t. AU Equivalent); And, 3.70 M. of 2.44g/t. (3.01 g/t. AU Equivalent);                                                                                                                                                                               
|            |                                                                                                                                                                                                                                                                                   
|SJG 08-118: | 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;
|            |                                                                                                                                                                                                                                                                                   
|SJG 10-150: | 4.39 M. – 7.34 g/t; Including 2.88 M. – 10.9 g/t;  And, Including 1.71 M. – 17.78 g/t; And, Including .87 M. – 25 g/t; And 11.91 M. – 3.10 g/t; Including 2.38 M. – 11.77 g/t;  And, Including 1.17 M. – 14.23 g/t;                                                               
|            |                                                                                                                                                                                                                                                                                   
|SJG 10-151: | 11.95 M. – 14.66 g/t; Including 7.82 M. – 22.18 g/t;  And, Including 2.63 M. – 62.05  g/t; And, Including 1.88 M. – 82.31 g/t; And, Including .92 M. – 137.60 g/t;                                                                                                                
|            |                                                                                                                                                                                                                                                                                   
|SJG 10-152: | 9.27 M. – 1.65 g/t; Including 1.13 M. – 9.85 g/t;  And, Including .63 M. – 15.90 g/t;                                                                                                                                                                                             
|SJG 10-153: | 7.11 M. – 2.91 g/t; Including 3.63 M. – 5.36 g/t; And, Including 1.73 M. – 6.70 g/t; And, Including .55 M. – 6.97 g/t; (“La Cecena”)                                                                                                                                              
|            |                                                                                                                                                                                                                                                                                   
|SJG 10-154: | 2.25 M. – 17.18 g/t; Including 1.75 M. – 21.89 g/t;  (“La Cecena”)                                                                                                                                                                                                                
|SJG 10-165: | 8.26 M. – 5.40 g/t; Including 4.55 M. – 8.23 g/t;  And, Including 1 M. – 6.30 g/t; (“La Cecena / Tepehauje")                                                                                                                                                                      
|SJG 10-175: | 9.3 M. – 1.81 g/t; Including: 1.09 M. – 4.973 g/t;  And, Including .99 M. – 8.102.g/t; And 1.17 M-2.054 g/t; And, including  2,56 M - 3.116 g/t;                                                                                                                                  
|            |                                                                                                                                                                                                                                                                                   
|SJG 10-176: | .59 M. – 1.343 g/t; And, 15.31 M. – 1.09 g/t; Including .65 M. – 5.294 g/t;                                                                                                                                                                                                       
|            |                                                                                                                                                                                                                                                                                   
|SJG 10-177: | 5.27 M – 19.8 g/t;  And, Including 2.92 M. – 33.7 g/t;  And, Including 1.05 M. – 52.11 And, 9.28 M  - 7.88 g/t Including  1.43 - 32.38 g/t; And, Including .78 M-50.153 g/t;                                                                                                      
|            |                                                                                                                                                                                                                                                                                   





27







|SJG 10-178: | .8 M. – 3.831 g/t And, 1.95 M. – 1.884 g/t; And, 5.3 M. – 1.01 g/t; Including 1.7 M. – 1.953 g/t; And, 12.85 M. – 3.62 g/t; Including 3.52 M. – 5.56 g/t; And, Including 1.76 M. – 6.13 g/t; And, Including 1.05 M. – 5.50 g/t; And, 2.23 M. – 2.56 g/t; Including .6 M. – 8.84 g/t;
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-179: | 1.76 M. – 1.585 g/t;  And, 1.72 M. – 105.51 g/t; And, 4.678 M. – 5.70 g/t; Including 2.65 M. – 8.23 g/t; And, 2.30 M. – 4.79 g/t; Including 1.15 M. – 7.00 g/t;                                                                                                                     
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-181: | 3.03 M. – 1.73 g/t;  Including 1.5 M. – 2.885 g/t;                                                                                                                                                                                                                                  
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-182: | .62 M. – 3.348 g/t;  And, 1.01 M. – 2.85 g/t; And, .47 M. – 2.292 g/t;                                                                                                                                                                                                              
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-182: | .62 M. – 3.348 g/t;  And, 1.01 M. – 2.85 g/t;                                                                                                                                                                                                                                       
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-225: | .40 M. of 3.63 g/t;                                                                                                                                                                                                                                                                 
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-226: | 8.04 M. of 18.47 g/t; Including 4.10 M. of 34.36 g/t;                                                                                                                                                                                                                               
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-227: | 9.80 M. of 8.42 g/t; Including .40 M. of 113.95 g/t;                                                                                                                                                                                                                                
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-228: | 1.83 M. of 3.88 g/t;  And, 2.98 M. of 3.73 g/t;                                                                                                                                                                                                                                     
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-229: | 1.64 M. of 2.41 g/t;  And, 1.55 M. of 5.46 g/t;                                                                                                                                                                                                                                     
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-230: | 4.54 M. of 18.09 g/t;  Including 2.54 M. of 31.52 g/t;                                                                                                                                                                                                                              
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-231: | .52 M. of 2.62 g/t; And, 2.75 M. of 8.99 g/t; And, 1.7 M. of 2.34 g/t;                                                                                                                                                                                                              
|            |                                                                                                                                                                                                                                                                                     
|SJG 10-232: | 1.87 M. of 3.15 g/t;                                                                                                                                                                                                                                                                
|            |                                                                                                                                                                                                                                                                                     



·        
SJG 11-233 to 11-280; Only Tres Amigos Drill Holes reported here (See Table below):



|TRES AMIGOS VEIN
|----------------
|Drill Hole      
|                
|                
|SJG-10-233      
|SJG-10-234      
|and             
|SJG-10-235      
|SJG-10-237      
|SJG-10-239      
|SJG-11-242      
|and             
|SJG-11-246      
|SJG-11-251      
|SJG-11-257      
|and             
|and             
|SJG-11-261      
|including       
|SJG-11-262      
|SJG-11-265      
|including       
|Including       
|SJG-11-267      
|SJG-11-271      
|and             
|including       
|Including       
|SJG-11-278      
|and             
|SJG-11-280      
|and             
|                





28









Company Management believes the
1997 – 1998 Drilling at Tres Amigos, and the recent drilling through March 31, 2011 has defined a sizeable Inferred Resource
at Tres Amigos of + 400,000 Oz. Infill drilling and further extensions to Tres Amigos are projected for further drilling programs.
A 43-101 compliant Technical Report is expected to be commissioned by DynaMéxico in 3rd Quarter, 2011, and which
is expected to confirm the Company’s estimates.



La Purisima:



|SJG 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.;                                                                                                                         
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                                                                           
|SJG 07-35;  | 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;                                                                                                                           
|            |                                                                                                                                                                                                           
|SJG 07-36;  | 1.42 M. of 4.319 g/t.;                                                                                                                                                                                    
|            |                                                                                                                                                                                                           
|SJG 07-37;  | 4.45 M. of 3.07 g/t., Including 2.2 M. of 5.004 g/t.;                                                                                                                                                     
|            |                                                                                                                                                                                                           
|SJG 07-39;  | 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;                                                                                  
|            |                                                                                                                                                                                                           
|SJG 07-40;  | .8 M. of 2.43 g/t.;  And, 1.8 M. of 1.763 g/t.;                                                                                                                                                           
|            |                                                                                                                                                                                                           
|SJG 07-42;  | 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.;                                                                                                                          
|            |                                                                                                                                                                                                           
|SJG 08-63;  | .4 M. of 11.694 g/t.;                                                                                                                                                                                     
|            |                                                                                                                                                                                                           
|SJG 08-68;  | 1.6 M. of 18.26 g/t., Including  1 M. of 23.9t;                                                                                                                                                           
|            |                                                                                                                                                                                                           
|SJG 08-70;  | 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;
|            |                                                                                                                                                                                                           
|SJG 08-82;  | 1.70 M. of 18.218 g/t.;                                                                                                                                                                                   
|            |                                                                                                                                                                                                           
|SJG 08-84;  | .36 M. of 39.5 g/t.;   .17 M. of Zinc Credits;                                                                                                                                                            
|            |                                                                                                                                                                                                           
|SJG 10-161; | 7.6 M. – 4.64 g/t; Including 1.6 M. – 18.88 g/t;                                                                                                                                                          
|SJG 10-186; | 1 M. – 2.579 g/t; And, 8.15 M. – 2.79 g/t;  Including .6 M. – 30.57 g/t;                                                                                                                                  



29









|SJG 10-191; | 1.28 M. of 2.08 g/t;  And, 1.17 M. of 2.08 g/t;                                                                              
|----------- | -----------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                              
|SJG 10-193; | 5.60 M. of 3.96 g/t;                                                                                                         
|            |                                                                                                                              
|SJG 10-198; | 1.53 M. of 13.64 g/t;                                                                                                        
|            |                                                                                                                              
|SJG 10-202; | 1.15 M. of 5.36 g/t;                                                                                                         
|            |                                                                                                                              
|SJG 10-204; | 1.05 M. of 3.85 g/t; And, 3.10 M. of 2.19 g/t;  And, 3.84 M. of 4.06 g/t;  And, 1.43 M. of 7.21 g/t; And, .77 M. of 9.91 g/t;
|            |                                                                                                                              
|SJG 10-206; | 2.31 M. of 14.63 g/t;                                                                                                        





|LA PURISIMA VEIN
|----------------
|Drill Hole      
|                
|SJG11-281       
|SJG11-282       
|including       
|SJG11-282       
|including       
|and             
|and             
|and             
|SJG11-285       
|and             
|and             
|SJG11-287       
|SJG11-289       
|SJG11-295       



Company Management believes the
recent drilling at La Purisima in 2007- 11, has defined a sizeable Inferred Resource at La Purisima (+ 200,000 Oz. Au.). Infill
drilling and further extensions to La Purisima are projected for further drilling programs.. A 43-101 compliant Technical Report
is planned for commission by DynaMéxico in 3rd Quarter, 2011, and which is expected to confirm the company’s
estimates.





30













La Union (’92
and ’97):



|’92-27: | 1 M. of 9 g/t;                                                                  
|------- | --------------------------------------------------------------------------------
|        |                                                                                 
|“97-29: | 3.1 M. of 4.53 g/t;                                                             
|        |                                                                                 
|’97-30: | .5 M. of 12.92 g/t;  And, 10.1 M. of 1.68 g/t, and Including 1.5 M. of 6.04 g/t;
|’97-31: | 6.8 M. of 1.94 g/t;  Including 4 M. of 2.85 g/t;                                
|        |                                                                                 
|’97-33: | 4 M. of 1.9 g/t;  And, 4.3 M. of 1.3 g/t;                                       
|        |                                                                                 
|’97-34: | 2 M. of 8.9 g/t;                                                                



La Union (Recent – ’07
– 2011):



|SJG 08-61:  | 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, .4 M. of 9.38 g/t; Including Copper Credits;                                                                                                
|----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                                                                                                                                       
|SJG 08-72:  | 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;                                                                                                                                                       
|            |                                                                                                                                                                                                                                                                       
|SJG 08-76:  | 4.8 M. of 16.23 g/t. (17.44 g/t. AU Equivalent), Including  2 M. of 38.100  g/t., And Including 1.40 M. of 51.340 g/t, and Including .7 M. of 77. 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;
|            |                                                                                                                                                                                                                                                                       
|SJG 08-80:  | 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.;                                                                                                                                                                                  
|            |                                                                                                                                                                                                                                                                       
|SJG 08-120: | 1.65 M. of 2.179 g/t.; And, .42 M. of 1.93 g/t.;                                                                                                                                                                                                                      
|            |                                                                                                                                                                                                                                                                       
|SJG 08-122: | .50 M. of 2.076 g/t.; And, .50 M. of 25.75 g/t;  And, .95 M. of 1.94 g/t.;                                                                                                                                                                                            
|            |                                                                                                                                                                                                                                                                       
|SJG 09-143: | 1.4 M. M. of 12.08 g/t;                                                                                                                                                                                                                                               
|            |                                                                                                                                                                                                                                                                       
|SJG 09-144: | 3.78 M. of 1.63 g/t, Including 1.35 M. of 2 g/t;                                                                                                                                                                                                                      
|            |                                                                                                                                                                                                                                                                       
|SJG 10-208: | 2.06 M. of 6.60 g/t;                                                                                                                                                                                                                                                  
|            |                                                                                                                                                                                                                                                                       
|SJG 10-216: | 1.77 M. of 5.45 g/t;  And, 2.96 M. of 12.36 g/t;                                                                                                                                                                                                                      
|            |                                                                                                                                                                                                                                                                       
|SJG 10-218: | .40 M. of 2.53 g/t;  And, 1.29 M. of 8.42 g/t;                                                                                                                                                                                                                        
|            |                                                                                                                                                                                                                                                                       
|SJG 10-220: | .40 M. of 2.83 g/t;                                                                                                                                                                                                                                                   
|            |                                                                                                                                                                                                                                                                       
|SJG 10-223: | 1.25 M. of 2.28 g/t;  And, 1.62 M. of 9.90 g/t;  And, 3.15 M. of 2.33 g/t;  And, 3.52 M. of 10.24 g/t; And, 3.05 M. of 2.18 g/t;                                                                                                                                      
|            |                                                                                                                                                                                                                                                                       





- SJG 11–244 to 292; La
Union Area Holes only reported here (See Table below, and including Veta Tierra DDH 252, 256 and 259):





31











|LA UNION VEIN
|-------------
|Drill Hole   
|             
|             
|SJG-11-244   
|SJG-11-252   
|and          
|including    
|SJG-11-256   
|and          
|SJG-11-259   
|SJG-11-292   
|             



Company Management believes the recent drilling
at La Union in 2007- March 2011, has defined a sizeable Inferred Resource at La Union (+ 150,000 Oz. Au). Infill drilling and further
extensions to La Union are projected for further drilling programs.. A 43-101 compliant Technical Report is expected to be commissioned
by DynaMéxico in 3rd Quarter, 2011, which is expected to confirm the company’s estimates.



Palos Chinos:



|’97-63:     | 27.8 M of 2.3 g/t;  Including 17.30 M. of 2.81 g/t;  And, Including .7 M. of 9.25 g/t;  And, Including 2.7 M. of 8.45 g/t;
|----------- | --------------------------------------------------------------------------------------------------------------------------
|SJG 07-02:  | .75 M.  of 17.5  g/t.;                                                                                                    
|SJG 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.;                                       
|SJG 10-161: | 7.6 M. – 4.64 g/t; Including 1.6 M. – 18.88 g/t;                                                                          
|SJG 10-186: | And, 8.15 M. – 2.79 g/t;  Including  .6 M. – 30.57 g/t;                                                                   



La Prieta / Rosario / Rudolpho:

|SJG 10-169: | .35 M. – 1.37 g/t;  And, 8.42 M. – 3.80 g/t; Including 3.38 M. – 9.11 g/t;  And,  Including 1.7 M. – 11.61 g/t; And 1.85 M. – 1.56 g/t;
|----------- | ---------------------------------------------------------------------------------------------------------------------------------------
|SJG 10-171: | .6 M. – 2.9 g/t;                                                                                                                       
|SJG 10-172: | 2.1 M. – 2.52 g/t; Including 1.1 M. – 4.47 g/t;                                                                                        
|SJG 10-173: | 1.3 M. – 1.302 g/t; And, 1.3 M. – 2.486 g/t;                                                                                           
|SJG 10-174: | M. – 4.699 g/t; And, 11.69 M. – 1.08 g/t; Including 5.56 M. – 1.96 g/t; And, Including .86 M. – 3.754 g/t;                             



Target Areas at SJG remain virtually unexplored:



·La Prieta; Historical + 200,000 Oz. Au production at average grade of + 28 g/t;



·Rudolpho / Rosario;



·Northeast Tres Amigos;



·Orange Tree;



·Argillic Zone;







32











These drilling Results obtained through Phase
4 of the Earn In Agreement and at March 31, 2011 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). The Company believes that sizeable inferred resources have been defined at San
Pablo, Tres Amigos, La Union and La Purisima. Further drilling will be targeted at these main target areas. In 3rd Quarter
2011, the Company expects DynaMéxico to commission a 43-101 compliant technical report in order to define the Resources
indicated by recent drilling at SJG.



An SJG Drill Intercepts Summary File, describing
the mineralized intercepts of all core drill holes, including the drilling results of 1997, and including the recent drilling of
2007 – March 31, 2011 are attached as an exhibit to this 10 Q.



DynaMéxico Summary of Drilling Results



The drilling results obtained from San Jose
de Gracia through March 31, 2011 (through DDH SJG 10-298) confirm the extensions of mineralization, down dip of historical workings,
with confirmation of high grade gold (+ 10 g/t), and including bonanza grades shoots which are consistent with historical and recent
production grades. Specifically, San Pablo, Tres Amigos, La Purisima, and La Union areas have reported significant results. (Note
Drill Summary file referred to above.) Further drilling will be targeted at Tres Amigos, San Pablo, La Union and La Purisima, and
at Rosario / Rudolpho, Northeast Tres Amigos, La Prieta and Veta Tierra. Numerous additional anomalies at SJG remain virtually
unexplored and undrilled.



Company Interpretations and Estimates



In some areas of SJG, topography has prevented
the drilling of holes on conventional 50 M. Spacing. In some areas, specifically at Tres Amigos, the distance between drilled holes
is + 100 M. In these areas, DynaMéxico is considering the blasting and building of new roads in order to complete in-fill
drill holes and conduct additional development work. Nonetheless, the Company has interpreted the results of drilling activity,
and considering the recent production activity as well; and it has calculated manually an estimate of the resource at SJG. This
manually calculated estimate includes Oz. Au at the areas of: San Pablo, Tres Amigos, Palos Chinos, La Union, and La Purisima;
by assuming grade and width averaging between drill holes. DynaMéxico expects to confirm the amount of Au resource at SJG
under the guidelines and description of a commissioned 43-101 technical report in 3rd Quarter 2011.



Block Model in Surpac



While the company has compiled its manual calculation
and internal interpretation of the resource at SJG defined by drilling and production to date; the company also is in process of
building the block model of resources defined and inferred at SJG using Surpac, (Gemcom) software. The current block model at SJG
confirms inferred resources at San Pablo, Tres Amigos, La Union, Palos Chinos, and La Purisima; with portions of the inferred resource
in a high grade category, and including measured and indicated resources at San Pablo and Tres Amigos. The Company will continue
this Surpac modeling work as additional drill programs are planned and completed.



Current Resources and Potential



San Jose de Gracia is commonly referred to
as “potentially a + 3 Million Gold Oz. Resource”. The current inferred resource defined by drilling through March 2011
is estimated by the company to be 1.375 M. Gold Equivalent Oz.



And, In consideration of the historical 1 M.
Oz. gold production from SJG, the results from the 2003-2006 pilot production operation, the results of recent drilling programs,
the Company’s internal block modeling work in Surpac, and the Gold resources anticipated to be reported in the DynaMexico
43-101; upon ramp up to full production the Company currently projects a potential 100,000 Oz. per year gold production from the
SJG Project, from which the Company would be the beneficiary as a 50 % shareholder of DynaMexico (see Earn In Agreement). The Company
has planned and structured itself for this potential revenue position as a shareholder of DynaMexico, and will consider distributions
of a percentage of its retained earnings as a dividend to Shareholders.





33











Technical Report of Resources



In 3rd Quarter 2011, the Company
expects DynaMéxico to commission a 43-101 compliant report of the Measured & Indicated and the Inferred Resources defined
by drilling at SJG. The Company expects this 43-101 technical report to confirm its internal work with the Block model in Surpac
at SJG, and also to confirm consistency with the company’s interpretation and estimates of resources. However, additional
drilling and in-fill drill holes may be necessary in order to confirm consistency of grade and width between drill holes as of
March 31, 2011.



Economic Assessment Report / Feasibility
Study



After DynaMexico receives the updated 43-101
technical report confirming the Estimated Resource at SJG as defined by recent drilling programs; the Company will expect DynaMexico
to commission a Preliminary Economic Assessment Report (“PEA”). Considering the success and efficiency of the Pilot
Production program conducted by DynaMexico during the period 2003 – 2006; the company expects the upcoming PEA study to reflect
a “scaling up” of the recent pilot production operation. Thereafter, the Company expects DynaMexico to arrange for
the competitive financing and subsequent installation of full scale mining and production facilities; with the expected target
for annual production of 100,000 Oz. Au.



Structure of Company / Operations



Activities in México are conducted by
DynaMéxico, through operating agreement to the operating subsidiary of DynaResource, Inc., Mineras de DynaResource SA de
CV. (“MinerasDyna”); with the management of personnel being contracted by MinerasDyna through to the personnel management
subsidiary, DynaResource Operaciones, SA de CV (“DynaOperaciones”). DynaResource, Inc. management and consultants continue
to manage the 3 subsidiaries in México; while Chairman / CEO K.D. Diepholz is the President of each of the 3 companies.
Management and administrative fees are charged by MinerasDyna and DynaOperaciones, which are eliminated in consolidation.



Competitive Advantage



The Company, through its subsidiaries, has
been conducting business in México since March 2000. During this period the Company believes it has structured its subsidiaries
properly and strategically, and during which time the Company has retained key personnel and developed key relationships and support.
The Company believes its experience and accomplishments in México gives it a competitive advantage, even though many competitors
may be larger and have more capital resources.



Drilling Programs



Drilling programs at SJG are expected to continue,
and are being planned considering the results of the magnetic and IP surveys, and in consideration of the recent analysis of the
structure and ore controls at SJG, and in consideration of the updated 43-101 to be received in 3rd Quarter 2011. A
15,000 Meter drill program was carried out and completed at June 30, 2010. Subsequently, the next 18,500 meters drilling at SJG
was completed in spring 2011. Approximately 68,000 meters drilling was completed pursuant to the Earn In Agreement, and paid from
the $ 18 M. USD. funding received from Goldgroup. The Company expects continued drilling in order to expand resources at San Pablo,
Tres Amigos, La Cecena, Palos Chinos, La Union, La Purisima, and La Prieta. And, the company expects extensions to mineralization
in all directions and down dip from the main target areas.



Capital Contributions and Expenditures to
Earn In



Goldgroup contributed $4,000,000 USD to DynaMéxico,
in the quarter ending March 31, 2011, pursuant to the last phase of the Earn-In. The total capital contributed by Goldgroup to
DynaMéxico at March 31, 2011 $ 18 M. USD.





34









Competition



DynaMéxico retains 100% of the rights
to concessions over the area of the San José de Gracia property and currently sees no competition for mining on the lands
covered by those concessions. If DynaMéxico were to re-start production activities, the sale of gold and any bi-products
would be subject to global market prices; which prices fluctuate daily. The Company was successful in selling gold concentrates
produced from SJG in prior years; and the Company expects willing buyers for its produced products in the future. Actual prices
received by DynaMéxico would depend upon these global market prices, less processing charges and any deductions.



POTENTIAL RISKS



Funding from Goldgroup Mining Inc.:



Funding for the exploration activity at SJG
is primarily due to the capital contributions to DynaMéxico from Goldgroup Mining Inc. At March 15, 2011 Goldgroup deposited
funds to bring its total deposits under the Earn In / Option Agreement to $ 18 M. USD. There is no certainty that additional funding
from Goldgroup will continue or otherwise be available to the Company. Should the funding of Goldgroup cease, the Company would
be required to fund further exploration work through its own capital reserves, or to obtain alternate financing sources. Any alternate
funding sources could result in additional dilution to shareholders.



Potential Conflicts with Shareholder of DynaMéxico (Non-Controlling
Interest Holder):



While the Company believes it
has negotiated and authorized proper agreements to provide for the financing and exploration of SJG, there exists potential
for conflicts with Goldgroup Mining Inc. Concurrently, MinerasDyna has been named the exclusive operator of the SJG Project;
and MinerasDyna is managed by officers K.D. Diepholz, President and Chales E. Smith, Secretary, whom are officers of
DynaResource. Also, DynaResource is managed by K.D. Diepolz, President, and holding the powers of attorney for DynaMexico;
and DynaResource carries 50% of the seats on the Board of Directors of DynaMexico. DynaResource also carries 100% of the Seats on the Boards of MinerasDyna
and 100% of the Seats of the Board of DynaOperaciones. 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 DynaMéxico, MinerasDyna,
and DynaOperaciones. Inherent in the structure of Ownership and Operation of the SJG Project is the potential for conflicts
that could materially affect operations.



Mineable Resource:



There is no certainty that the exploration
activity at SJG would result in the definition of a mineable resource at SJG. While the company believes there is already in place
an approximate + 1 M. Oz. Au inferred Gold resource at SJG; there is no certainty that the Company’s opinion will be proven
correct, or than any proven, probable, measured or indicated or inferred resource would be commercially producible. If a commercial
mineable resource is not confirmed at SJG, the Company’s investment at SJG could be at risk.



Company Interpretations and Estimates



The Company currently estimates the
inferred resource at SJG to be approximately 1.5 M. Au Equivalent Oz. There can be no assurance that the company’s interpretations
or estimates will be proven correct, or that future results will be consistent with past results.

Feasibility Study / Economic Assessment
Report



There can be no assurance that DynaMéxico
will be able to complete a successful feasibility or economic assessment at the SJG project. If DynaMéxico is not successful
in its plan to complete the feasibility or economic assessment, the company’s investment at SJG could be at risk. Further,
if the company is not able to complete a commercial feasibility study or positive economic assessment, it may not be successful
in obtaining funding for production activities.



35











50% of the Interest In and Revenue from
DynaResource de México May be Owned by Goldgroup Mining Inc.:



At March 15, 2011 Goldgroup deposited Funds
to DynaMexico which brought its total amount of funds contributed under the Earn In to $ 18 M. USD. As a result, Goldgroup received
an additional Stock Certificate in DynaMexico so that Goldgroup now holds 50% of the outstanding shares of DynaMexico. As a result,
DynaResource, Inc. and its shareholders retain only 50% of the shares and ownership of DynaResource de México. Investors
in the Company’s shares should be aware that any benefits to be derived from the ownership of DynaResource de México
would be shared 50% with Goldgroup.



Employees



The Company has four employees in its corporate
office in Dallas, Texas, three of which are officers, and it employs approximately thirty persons through its subsidiaries in México.



Governmental Regulation and Environmental Matters



Environmental laws that impact our operations
include those relating to air quality, solid waste management and water quality. These laws are complex and subject to frequent
change. They impose strict liability in some cases without regard to negligence or fault. Sanctions for noncompliance may include
revocation of permits, corrective action orders, administrative or civil penalties and criminal prosecution. Some environmental
laws provide for joint and several strict liabilities for remediation of spills and releases of hazardous substances. In addition,
businesses may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances,
as well as damage to natural resources. These laws also may expose us to liability for the conduct of or conditions caused by others,
or for acts that complied with all applicable laws when performed. However, we have and continue to maintain excellent relations
with the government authorities by compliance with the laws and communication with them concerning environmental matters.



RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011



REVENUE. Revenue for the three months ended
June 30, 2011 and 2010 was $0 and $125,242, respectively and revenue for the six months ended June 30, 2011 and 2010 was $0 and
$219,786, respectively. This income was produced by providing exploration work for a related entity. The company ceased its own
production activities in 2006 in order to focus its efforts on exploration and drilling activity, for the purpose of defining commercial
ore resources. The funds for current exploration activity are contributed by Goldgroup Resources, Inc., pursuant to the Earn In
Agreement, as described in this 10-Q (See Earn In and Option Agreement / Material Agreements).



COST OF EXPLORATION. Exploration costs were
$732,388 and $1,057,026 for the three months ended June 30, 2011 and 2010 respectively, and $2,395,424 and $1,788,818for the six months ended June 30, 2011 and 2010, respectively. The increase in costs was due to the increase in exploration
and drilling activity from one year to the next.



OPERATING EXPENSES. Operating expenses for
the three months ended June 30, 2011 and 2010 were $400,615 and $393,112 respectively and $847,390 and $765,991 for the six months
ended June 30, 2011 and 2010 respectively. The above expenses include depreciation and amortization amounts of $38,282 and $37,339
for the three months ended June 30, 2011 and 2010, respectively and $73,514 and $74,680 for the six months ended June 30, 2011
and 2010 respectively.



OTHER INCOME (EXPENSE). Other income, exclusive
of currency translation gain or (loss) was $300 and $764 for the three months ended June 30, 2011and 2010, respectively and $597
and $1,762 for the six months ended June 30, 2011 and 2010 respectively. Currency translation gain or (loss) was $(148,979) and
$64,878 for the three months ended June 30, 2011 and 2010, respectively and $325,654 and $291,367 for the six months ended June
30, 2011 and 2010 respectively.



NON-CONTROLLING INTEREST. The non-controlling
interest portion of our net loss for the three months ended June 30, 2011 and 2010 was $493,552 and $254,686 respectively and the
non-controlling interest portion of our net loss for the six months ended June 30, 2011 and 2010 was $1,217,782 and $417,120 respectively.
This is due to the Company reporting a greater year over year loss and due to Goldgroup owning 50% at June 30, 2011 versus 25%
at June 30, 2010.





36











COMPREHENSIVE (LOSS). Comprehensive loss includes
the company’s net loss plus the currency translation gain (loss) for the period which was a loss of $825,649 and a loss of
$975,908 for the three months ended June 30, 2011 and 2010, respectively and a loss of $1,846,695 and a loss of $1,646,168 for
the six months ended June 30, 2011 and 2010 respectively.



LIQUIDITY AND CAPITAL RESOURCES. The Company
has sufficient capital on hand to fund overhead operations for the next two years.



PLAN OF OPERATION



Future Capital Contributions and Expenditures



Pursuant to the terms of the Earn In
/ Option Agreement, Goldgroup was to contribute and expend a total of $ 18 M. USD, to DynaMéxico, on or before March
15, 2011. As of March 31, 2011, Goldgroup had contributed $18,000,000 USD to DynaMexico, and at March 31, 2011, a total of
50% of the outstanding shares of DynaMexico had been issued to Goldgroup.



Mineable “Resource” at San José de Gracia



The Company believes that DynaMéxico
has outlined significant mineable Gold deposits from drilling activity; at San Pablo, Tres Amigos, Palos Chinos, La Union, and
La Purisima areas of SJG. Further drilling is expected to outline additional mineable ore at these target areas, while mineable
ore deposits are also expected to be defined at La Prieta and the area Northeast of Tres Amigos. Other areas at SJG indicate clear
potential to develop commercial ore deposits as well.



Technical Report of Resources



In 3rd Quarter 2011, the Company
expects DynaMéxico to commission a 43-101 compliant report of the ore “resources” defined by drilling at SJG.
The Company expects this 43-101 technical report to confirm its internal work with the Block model in Surpac at SJG, and also to
confirm consistency with the company’s interpretation and estimates of resource. However, additional drilling and in-fill
drill holes may be necessary in order to confirm consistency of grade and width between drill holes as of March 31, 2011.



Future Feasibility Study / Economic Assessment



Considering the historic production reported
from SJG and the results of the recent production operation, and the results of the drilling activity to date; and considering
the Block model in Surpac being developed; and considering the Company’s manual estimate of resource at SJG; the Company
recognizes the potential for a + 100,000 Oz. gold per year production operation at SJG. At the completion of the drilling programs
funded pursuant to the Terms of the Earn In Agreement, the Company expects DynaMéxico to complete a Feasibility Study or
Economic Assessment Report to confirm and define the full scale production plans at SJG.





37









ITEM
4. Controls and Procedures



Evaluation of Disclosure Controls and Procedures



The company carried out an evaluation of the
effectiveness of the design and operation of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of June 30, 2011. 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 the
company’s disclosure controls and procedures are effective to ensure that all material information required to be filed in
the quarterly report on Form 10-Q 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 by
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 June 30, 2011, our Chief Executive Officer and Chief Financial Officer as of June 30, 2011, and as of the date of
this Report, have concluded that as of the end of the period covered by this report, we have identified no material weakness in
our internal controls.



Corporate expenditures are processed and paid
by officers of the Company. However, the current number of transactions incurred by the Company does not justify additional accounting
staff to be retained.



Management’s Report on Internal Control Over Financial
Reporting



Management of the Company 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.



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 June 30, 2011. Based on its evaluation,
our management concluded that, as of June 30, 2011, our internal control over financial reporting was effective.



This quarterly 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 quarterly report.





Changes in Internal Controls over Financial Reporting



The Company has not made any changes in its
internal controls over financial reporting that occurred during the period covered by this report on Form 10-Q that has materially
affected, or is reasonably likely to materially affect, its internal control over financial reporting.





38









PART
II



Item No. 1, - Not Applicable.



Item 2. 	None



Items No. 3, 4, 5 - Not Applicable.



Item No. 6 - Exhibits and Reports on Form 8-K



(a) None



(b) Exhibits





Exhibit Number; Name of Exhibit



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.



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.



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.







SIGNATURES



In accordance with the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.



DynaResource, Inc.



By /s/ K.W. (“K.D.”) Diepholz



K.W. (“K.D.”) Diepholz, Chairman / CEO



Date: August 19, 2011





39